Warren, Casten, Foster, Jayapal to Commerce: No CHIPS Funding for Stock Buyback Subsidies

July 01, 2024

Warren, Casten, Foster, Jayapal to Commerce: No CHIPS Funding for Stock Buyback Subsidies

"Commerce has not made use of its full statutory authority to fully ban CHIPS grant recipients from engaging in stock buybacks."

Text of Letter (PDF)

Washington, D.C. - U.S. Senator Elizabeth Warren (D-Mass.) and Representatives Sean Casten (D-Ill.) Bill Foster (D-Ill.), and Pramila Jayapal (D-Wash.) wrote to the Secretary of Commerce Gina Raimondo, urging the Department of Commerce (Commerce) to use its full statutory authority to ensure taxpayer dollars from the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act does not directly or indirectly fund stock buybacks and other shareholder distributions.

The CHIPS Act of 2022 provides funding to shore up the semiconductor industry in the United States, a unique opportunity to advance the United States' technological and scientific capacity, create thousands of high-skilled jobs, and secure national security interests. The bill also explicitly prohibits companies receiving funding from using CHIPS grants to repurchase their stock or pay dividends to stakeholders, although strong implementation is needed to prevent abuse.

To date, nearly $30 billion in federal CHIPS grants have been awarded, with the grants going to just eleven semiconductor producers, most with a history of billions in stock buybacks. The first CHIPS grant of $35 million went to BAE Systems (BAE) in June 2023. At the time, BAE was in the midst of a $2 billion stock buyback, with another nearly $2 billion in stock buybacks authorized. Intel, recipient of a $8.5 billion CHIPS award, the largest to date, assured investors last year that the company remained committed to delivering "very healthy" dividends to shareholders, even amid layoffs. Intel also currently has authorization from its Board of Directors to buy back a further $7.24 billion in stock.

Earlier this year, Senator Warren and Representative Casten (D-Ill.) wrote to BAE, inquiring about their stock buyback plans. BAE refused to commit to pausing stock buybacks or to not engage in future ones. BAE CEO Thomas Arsenault also did not answer whether BAE had committed not to use other fungible capital to buy back stock while receiving a taxpayer-funded CHIPS grant.

Secretary of Commerce Gina Raimondo has provided personal assurances that "CHIPS money is not a subsidy for big companies … for stock buybacks or to pad their bottom line," but Commerce's enforcement of this ban is critical. Unfortunately, Commerce's notice of funding opportunity and the taxpayer protections outlined by the National Institute of Standards and Technology (NIST) continue to leave the door open for large semiconductor companies to take millions or even billions in CHIPS grants, move some money around, and then engage in more stock buybacks and shareholder distributions.

Instead, Commerce has only stated that when awarding grants, preference will be given to companies who commit to not engage in stock buybacks and asked applicants to detail their plans for stock buybacks over five years. These applications and the subsequent preliminary agreements are not public, making it difficult to determine if grant recipients' commitments to Commerce are consistent with their buyback history and future intent to engage in buybacks.

The lawmakers are also requesting answers about Commerce's implementation and enforcement of the CHIPS Act by August 1, 2024.

Senator Warren has led fights to ensure CHIPS funding is distributed equitably and taxpayer dollars are protected from misuse:

• In February 2024, Senator Warren and Representative Casten (D-Ill) sent a letter to the President and CEO of BAE Systems, the first CHIPS Act award recipient, expressing concerns over BAE Systems' history of engaging in massive stock buyback schemes and urged BAE to refrain from engaging in stock buybacks for the duration of its CHIPS Act grant.
• In January 2024, Senator Warren and U.S. Representative Pramila Jayapal (D-Wash.) sent a letter to Secretary of Commerce Gina Raimondo, expressing concerns about the Department of Commerce's (Commerce) reliance on a small team of Wall Street financiers to help allocate $39 billion in CHIPS and Science Act taxpayer-funded manufacturing and R&D subsidies.
• In February 2023, Senators Warren, Tammy Baldwin (D-Wisc.), Bernie Sanders (I-Vt.), Ed Markey (D-Mass.), and Representatives Sean Casten (D-Ill.), Bill Foster (D-Ill.), Jayapal, and Jamaal Bowman (D-N.Y.) sent a letter to Michael Schmidt, Director of the CHIPS Program Office, calling on Commerce to use its full authority to prevent funds from CHIPS and Science Act from being used to directly or indirectly subsidize corporate stock buybacks.
• In October 2022, Senators Warren, Baldwin, Chris Van Hollen (D-Md.) and Representatives Casten, Bowman, Jayapal, and Foster sent a letter to Secretary Raimondo, urging the Commerce Department to strengthen and enforce critical protections against the abuse of funds provided CHIPS Act for stock buybacks and promising continued Congressional oversight over the Department's implementation of its commitments.
• In September 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren raised concerns about the need to protect CHIPS Act funds from being used by semiconductor companies to line the pockets of corporate executives instead of investing in strengthening supply chains, creating good union jobs, and bringing down prices for consumers.
• In June 2022, Senators Warren and Sanders and Representative Casten sent a letter to congressional conferees stressing the importance of strong guardrails to ensure that funding for the CHIPS Act is invested in workers and communities as intended, instead of enriching corporate executives.

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