U.S. Reviewing 2nd Dubai Firm

Democratic Sens. Charles E. Schumer (N.Y.), left, Frank Lautenberg (N.J.) and Hillary Rodham Clinton (N.Y.) attend a news conference concerning bipartisan legislation to review the Dubai seaport deal.
Democratic Sens. Charles E. Schumer (N.Y.), left, Frank Lautenberg (N.J.) and Hillary Rodham Clinton (N.Y.) attend a news conference concerning bipartisan legislation to review the Dubai seaport deal. (By Melina Mara -- The Washington Post)

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By Jonathan Weisman and Susan Schmidt
Washington Post Staff Writers
Thursday, March 2, 2006

The Bush administration, stung by the public outcry over the Dubai port deal, has launched a national security investigation of another Dubai-owned company set to take over plants in Georgia and Connecticut that make precision components used in engines for military aircraft and tanks.

The administration notified congressional committees this week that its secretive Committee on Foreign Investment in the United States (CFIUS) is investigating the security implications of Dubai International Capital's $1.2 billion acquisition of London-based Doncasters Group Ltd., which has subsidiaries in the United States. It is also investigating an Israeli company's plans to buy the Maryland software security firm Sourcefire, which does business with Defense Department agencies.

Administration officials are privately briefing leaders of half a dozen House and Senate committees this week about the two planned transactions, concerned that both deals could stir controversy in a political climate that remains supercharged over the Dubai port deal.

Republican and Democratic lawmakers angrily protested after learning late last month that the administration had approved a $6.8 billion deal to allow a maritime company based in the United Arab Emirates to take over significant operations at six U.S. ports without a thorough investigation and without consulting members of Congress. Last weekend, the Dubai maritime company agreed to a 45-day investigation to stem the protest and allay concerns of a possible breach of U.S. port security.

In the past, the foreign investment committee rarely told Congress of such inquiries. Wary of another misstep, administration officials decided to inform lawmakers of the two other pending transactions with national security implications for the United States.

There have been suggestions in the trade press that the publicly traded Israeli firm, Check Point Software Technologies, has been subjected to more scrutiny than Dubai Ports World, the state-owned Arab company that was initially cleared to take over operations at the six major U.S. ports with no security investigation. That inquiry was initiated only after an outcry about turning over port security to a country that has been cited for ties to terrorism. Sources familiar with the Israeli investigation said cybersecurity officials at the departments of Defense, Justice and Homeland Security all raised serious concerns about the purchase before the port controversy erupted.

Dubai International Capital's acquisition of Doncasters could present some of the same political problems created by Dubai Ports World's purchase of London-based Peninsular and Oriental Steam Navigation Co. Once again, a state-controlled Dubai company with deep pockets is purchasing a British firm with U.S. holdings. Doncasters has operations in nine U.S. locations and manufactures precision parts for defense contractors such as Boeing, Honeywell, Pratt & Whitney and General Electric.

A spokesman for Doncasters' corporate office in Connecticut said the company had no comment on the security investigation.

Although many foreign companies manufacture parts used in U.S. military equipment, in this instance CFIUS members decided to look more carefully at the Doncasters transaction. The CFIUS met last week and tentatively decided to subject that proposal to a 45-day investigation, and it finalized that decision in a conference call late Monday. The decision came on the final day of the regular 30-day review period. Aides on the Senate banking committee said the panel was notified late Monday that the CFIUS had initiated both national security inquiries.

"The CFIUS process is charged with determining if there are national security concerns in any transaction, and it takes that role very seriously," said Tony Fratto, spokesman for the Treasury Department, which leads the interagency committee. "It looks at each transaction on a case-by-case basis, and if security concerns are raised by any member of the committee at the end of an initial 30-day review, the case goes into investigation."

The 45-day investigation of the Israeli deal began in early February, several weeks before the controversy erupted over the Dubai port deal, administration officials said. The investigation of the Dubai-Doncasters deal began this week, at the height of the political turmoil over the port issue.

Yet Fratto said that neither of the new investigations were started "because of public reaction to some other transaction."


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