Enterprise

A surveillance AI firm with hidden ties to China is seeking US infrastructure contracts

Remark Holdings, whose AI-based surveillance technologies have deep but mostly hidden ties to China, already has a partnership with a Florida high-speed rail provider. Now, the company wants to pursue additional U.S. infrastructure projects.

HOUSTON, TEXAS - JULY 29: A railway is shown at the Port of Houston on July 29, 2021 in Houston, Texas. The Port of Houston has halted operations at two of its container terminals after a reported failure of computer devices. The Port of Houston is one of the world's largest ports on the Gulf Coast and ranks 6th overall for containers held. The shutdown in Houston is another strain contributing to pandemic-related disruptions as a recent surge in consumer goods has increased due to much of the countries phased reopening. (Photo by Brandon Bell/Getty Images)

CEO Kai-Shing Tao wants Remark to provide its software to U.S. states and municipalities through infrastructure projects funded by the U.S. government.

Photo: Brandon Bell/Getty Images

When he posed for a photo with Texas Governor Greg Abbott, Kai-Shing Tao wore a bright red polo shirt. He flashed a grin for another shot with Chicago Mayor Lori Lightfoot. Tao’s China-linked AI company, Remark Holdings, tweeted the images in March with captions littered with hashtags like #BorderCrisis, #Transit and #PublicSafety. The photos may have been signs to weary investors that Remark Holdings was making progress in its efforts to score U.S. government projects.

Tao is chairman and CEO of Remark Holdings, a company whose AI-based surveillance and security technologies have deep — yet mostly hidden — ties to China. Remark, which sells its AI systems for public safety purposes in transportation hubs, on school campuses and in retail stores, already has a partnership with Florida high-speed rail provider Brightline. The companies said in November that the private rail service will use Remark’s cameras and “smart safety” computer vision and analytics system to detect pedestrians or out-of-the-ordinary objects along a 67-mile stretch of railroad from Miami to West Palm Beach, Florida.

Now, Tao says he wants Remark to provide its software, which includes facial and object recognition, to U.S. states and municipalities through infrastructure projects funded by the U.S. government. But China tech and policy experts say the company is traveling in dangerous territory, and they warn that U.S. lawmakers and regulators could stop Remark in its tracks.

Remark has morphed from its original incarnation as a digital media company with links to TV celebrities Dr. Mehmet Oz and Oprah Winfrey. Now pushing a safety and security agenda powered by AI, the company reported to the SEC in March that its U.S. AI business “purchased substantially all” of its inventory and equipment from an unnamed China business partner.




Remark says its proprietary data and AI software platform was co-developed with one of its China subsidiaries, although the company appears to have computer engineers based in the U.S. and U.K. according to a LinkedIn search of its employees.

Florida Sen. Marco Rubio, a vocal critic of the Chinese Communist Party and its support for AI and emerging tech development, signaled disapproval of the use of tech originating in China for U.S. critical infrastructure such as train lines. When asked to comment on Brightline’s partnership with Remark for this story, he told Protocol, "The Chinese Communist Party is devoting significant resources to firms willing to help them develop the most invasive surveillance state in the world. Those same firms should not be allowed anywhere near critical infrastructure in America.” A private rail line such as Brightline’s is critical infrastructure, he said.

However, without clarification on who actually built Remark’s AI systems, where its equipment comes from and its data use and security practices, observers will be forced to speculate, and distinguishing between real and perceived risks will be difficult.

It is not known whether the state of Texas, the city of Chicago or any other U.S. governments have signed deals with Remark. Remark Holdings has not responded to multiple inquiries to comment for this story. Neither Governor Abbott’s office nor Mayor Lightfoot’s office have responded to requests to comment.

The software is going to get used on a railway. You are opening up your IT systems to a certain extent. That’s a cybersecurity risk.

In reference to the Brightline partnership, Xiaomeng Lu, director of the geo-technology practice at advisory firm Eurasia Group, said, “The software is going to get used on a railway. You are opening up your IT systems to a certain extent. That’s a cybersecurity risk.”

“There are lawmakers on Capitol Hill who will point to a case like [the Remark-Brightline partnership] and say, ‘What if they are collaborating with the PLA?’” Lu continued, referring to China’s military force, The People's Liberation Army.

However, comprehensive data protection laws could reduce the risk of U.S. citizen data or infrastructure data ending up on servers in China where it could be accessed by the Chinese government, said Paul Triolo, senior vice president for China and technology policy lead at advisory firm Albright Stonebridge Group.

“The lack of a comprehensive U.S. data protection law is hampering efforts to come up with workable approaches to ensuring that potentially sensitive U.S. data can be protected when companies are operating across jurisdictions, particularly between the U.S. and China,” Triolo said.

American-made rail

“Our trains are American-made and we're 100% Buy American-compliant,” states Brightline on its website, which describes its high-speed train experience as “a safe, fun, and welcoming ride for everyone aboard.”

When Brightline and Remark announced their decision to work together, the companies said Brightline would use Remark’s AI-powered cameras and software, which uses computer vision to detect intrusions and monitor for anomalies on tracks and in railyards. The Remark system alerts personnel when people or vehicles cross railways or enter tracks as a train approaches.

“One of the biggest reasons we decided to go forward with this partnership is Brightline is implementing a lot of safety throughout the corridor,” Vanessa Alfonso, director of Media Relations at Brightline, told Protocol in April. Although she could not provide details on what types of equipment from Remark would be installed, Alfonso said, “It would definitely monitor any type of unusual behavior that would happen around the railroad tracks.”

Remark has noted in SEC filings that its “Smart Sentry” railway security software was developed in conjunction with one of its subsidiaries, many of which are based in China. The company wants the system to be used in train stations in China and is “bidding for the 40 train stations to use our platform” there, Tao said during Remark’s quarterly earnings call this month. Remark also markets its AI systems for railways and transportation hubs in the U.K.

“The challenge here that we are meeting is having the ability to discern who is potentially entering the track. Our system needs to identify the difference between the staffs. If it's a railway worker, security staff, maintenance and/or cleaning individual versus actual passengers,” Tao said during the call.

It is unclear whether Brightline will use Remark’s facial recognition technology to identify people. When Protocol spoke with Alfonso, she said the two companies were still testing Remark’s system. “We probably don’t have that all nailed down yet,” she said.

Since the April interview with Alfonso, however, Brightline has not responded to multiple subsequent inquiries seeking more information.

Geopolitical and human rights concerns

When asked why Brightline chose to work with Remark, Alfonso said, “Our safety and security team has done quite a bit to find the right partners and invest in technology.”

Although partnerships between U.S. and Chinese tech companies and academic researchers continue, geopolitical forces are deterring collaboration in sectors of strategic importance such as AI and transportation infrastructure. President Joseph Biden launched a new Indo-Pacific Economic Framework on Monday while on a tour in Asia to bolster alliances in the region in part to counteract China’s sphere of influence.

“[Brightline] maybe doesn’t have the strongest awareness of the geopolitical environment they are operating in,” Lu said.

U.S. legislators and human rights advocates have pushed to ban the use of facial recognition to surveil people in the U.S. There are also bipartisan condemnations of facial recognition use by Chinese authorities to monitor and detain the ethnic minority Uyghur Muslim population in the northwest China region of Xinjiang.

Remark’s Chinese website mentions its involvement in an “Intelligent Safe Residential Area” project in Ningbo, China, which employs the KanKan AI facial recognition technology. The project appears to be “part of the [Chinese] government’s blanket video-surveillance program, Sharp Eyes,” said Rebecca Arcesati, a China tech analyst at think tank MERICS.

“These kinds of programs purport to protect public safety, but in the Chinese context preserving social stability implies keeping tabs on a wide range of acts — from traffic violations to political dissent,” she said.

In general, Arcesati said companies partnering with Remark should consider the implications of its other surveillance projects. “Even though I have not seen any evidence that [Remark’s] China operations have been involved in human rights abuses so far, its partners will want to keep a close eye on its public surveillance business, or else they might face serious reputational risks,” Arcesati said.

“This task is even more important for contracting authorities having to choose vendors in the context of publicly funded infrastructure projects.”

Project Dragon and a shell company labyrinth

Remark didn’t always sell AI-based surveillance tech. In fact, the company was 8 years old when it first began dabbling in AI through a social media app it planned for launch in China in 2014 referred to by the code name “Project Dragon.” Project Dragon eventually became known as “Project Kankan.” By 2015, while still calling itself Remark Media, the company that would later become Remark Holdings said it had begun beta testing the app it branded KanKan with “a small number of Chinese users.”

A few years later in 2020, the company — now Remark Holdings — said its KanKan AI technology had made its way into an “AI-driven pharmacy-patient terminal system” installed in thousands of pharmacies in Chinese cities, and a “taxi safety monitoring system” used in more than 2,000 taxis in the Chinese city of Xi’an. KanKan, which the company was now calling a “data intelligence platform,” would serve as a foundation for new AI-based products and services to be sold in the Asia market, it said.

Remark Media was born in 2006 as a wholly owned subsidiary of HowStuffWorks designed to develop businesses for markets in China and Brazil using HSW’s content. In 2009 it co-founded a U.S.-based health media company called ShareCare along with TV celebrity and Republican candidate for the Pennsylvania Senate, Dr. Mehmet Oz, Discovery Communications and HARPO Productions, producer of “The Oprah Winfrey Show.”

Remark Holdings, whose public ticker symbol is MARK, uses a Russian doll-like organizational structure to operate its China and U.S. businesses. Its Cayman Islands-based KanKan Holdings subsidiary owns Hong Kong-based KanKan Limited, which in turn owns Shanghai’s KanKan Technology. Remark owns 100% of the equity of a wholly foreign-owned enterprise that has contractual arrangements with variable interest entities or VIEs; those VIEs are owned by members of Remark’s management team in China and third parties.

“We use the VIE structure to address challenges resulting from laws, policies and practices that may disfavor foreign-owned entities that operate within industries deemed sensitive by the Chinese government,” noted Remark in a public filing. The company also states, “We are a holding company incorporated in Delaware and not a Chinese operating company.”

“This is a really murky gray area,” said Alex Capri, a researcher and consultant studying tech trade flows and competition who teaches at the National University of Singapore Business School. “Holding companies or shell companies could be set up to divert attention away from the actual end use or end user.”

Plus, Remark’s complex business structure reflects a trade-related imbalance, said Capri. “Here we have Chinese entities or companies that have established legal entities in China that are in fact participating in critical infrastructure building in the United States, and you don’t see these barriers to entry to specific sectors in the United States as well defined and as numerous [and] as clearly articulated in statutes as you do in China,” Capri said.

“It’s not a level playing field. There’s this ongoing, nagging issue that this access to the market is not reciprocal,” he added.

Financially, Remark has admitted its business is suffering. The company said in March that, according to its independent accounting firm, “there is substantial doubt about our ability to continue as a going concern.”

The company said it has incurred net losses and generated negative cash flow from operations resulting in an accumulated deficit of $333 million. In fact, Remark reported in March that it has $11.5 million in accounts receivable from customers in China, of which $2.6 million are past due.

Not only was the company sued in 2020 for failing to pay rent on its U.S. headquarters offices in Las Vegas, Nevada (the suit has since been dismissed), Remark’s employee count dropped significantly from 290 full-time employees in 2019 to just 74 full-time employees in March 2022.

Seeing dollar signs in U.S. Infrastructure Act projects

Despite the potential political scrutiny, Tao has been transparent about his mission to participate in federally funded infrastructure projects. “We have now increased our efforts to major cities like New York City and Chicago, and states like Texas, Nevada, California, Florida and New Jersey. A big part of this increased effort is due to the demand we are seeing from both government and private business post Infrastructure Bill,” Tao said in March.

Tao emphasized Remark’s experience operating AI-based safety and surveillance systems in China. “Simply put, the opportunities and funding allocated in the infrastructure bill here are massive, and we could have not written a better bill to reflect our core competencies and products to pursue and capture the specific growth markets allocated by the bill,” he said in November on the day the Infrastructure Investment and Jobs Act was signed into law.

“Our ability to bring our proven AI platform to the U.S. from Asia has given us the leading opportunity to capture this business where technology helps augment the effectiveness of the infrastructure bill.”

This story was updated to clarify a quote from Rebecca Arcesati.

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