Bush security review changes for foreign firms panned
Lawmakers from both parties on Nov. 6 challenged the Bush administration over a draft presidential order that they say will undermine a law designed to improve security reviews of foreign companies seeking to buy U.S. firms.
Rep. Carolyn B. Maloney said the draft executive order “seems to flatly contradict the law” passed to give security concerns more weight before the Treasury Department-led Committee on Foreign Investment in the United States (CFIUS).
“Our bipartisan bill gave significant direction to the agencies, including Treasury, charged with implementing it to ensure that the voice of each agency received proper weight in the consensus process,” said Mrs. Maloney, the bill’s sponsor.
The New York Democrat’s comments came in response to the disclosure of the order by The Washington Times, which would make the Treasury secretar y the “sole authority” for CFIUS. Security officials said that limits the authority of the Justice and Homeland Security departments and the Pentagon to require security “mitigation agreements.”
Rep. Peter Hoekstra, a Michigan Republican who was active in the CFIUS reform legislation, said the draft order is “problematic” because of its lack of national-security focus.
“This doesn’t mirror or follow the law,” Mr. Hoekstra said. “While the draft order is pre- liminary, if it comes out in this final format, I think there will be considerable issues [in Congress] with what they’re proposing.”
The draft executive order will provide implementing rules for the Foreign Investment and National Security Act, a response to the failed bid last year by United Arab Emirates-based Dubai Ports World to take over operations at six major U.S. ports.
The Justice, Defense and Homeland Secur ity depar tments outlined their concerns that the draft order is not secur ity-focused, despite the requirement of the law. The three agencies listed 11 issues and recommendations to correct the draft order so it reflects national-security concerns.
In the Senate, a spokesman for Sen. Richard C. Shelby, Alabama Republican and ranking member of the banking committee, said the proposed implementing r ules are being watched closely. Jonathan Graffeo, the spokesman, said it was premature to comment on the order but noted that “we are being kept abreast of the situation and will continue to closely monitor the implementation of the law.”
A Bush administration national security official said the new order, if signed by the president in its current form, would undermine the current CFIUS review of the planned merger of 3Com and Huawei Technology. Huawei, a Chinese firm that is linked to that country’s military, had been involved in violating U.N. sanctions against Iraq.
Under the current process, Dan Price, the White House deputy national security adviser for economic affairs, would have the power to resolve all issues related to the 3Com-Huawei deal over any objections from security agencies, the official said.
The 3Com deal was submitted to CFIUS and is expected to be opposed by the Defense, Justice and Homeland Security departments and some U.S. intelligence agencies over concerns that the merger will boost Chinese military computer network attack operations, defense officials said.
Treasury Secretary Henry M. Paulson Jr. was forced to recuse himself from the CFIUS review of the merger, which also includes Bain Capital Partners, because Mr. Paulson’s former firm, Goldman Sachs, is advising 3Com.
White House spokesman Tony Fratto had no comment on Nov. 6.
Mrs. Maloney said Treasury officials have been asked to “come up to Capitol Hill and explain to me in person what is going on with the implementation of the new CFIUS law.”
“It was Congress’ intent that this law be quickly implemented,” she said. “And, if the administration is impeding that, we need to find out why.”
S. A. Miller contributed to this report.