[Mb-civic] U.S. Reviewing 2nd Dubai Firm - Washington Post

[William Swiggard]

U.S. Reviewing 2nd Dubai Firm
Israeli Deal Also Faces Security Check

By Jonathan Weisman and Susan Schmidt
Washington Post Staff Writers
Thursday, March 2, 2006; A01

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."

Of the 1,500 acquisitions that have been referred to the CFIUS, one has 
been rejected. But deals with security implications tend to fall through 
before the 45-day investigation. In 1989, 204 deals involving the 
purchase of a company with significant U.S. operations triggered a 
security investigation. Last year, only 65 went that far.

In the case of Check Point, the security questions were apparently 
raised early on, according to people familiar with the review. Check 
Point's proposed $225 million purchase of Laurel-based Sourcefire raised 
red flags with government cybersecurity officials.

Check Point was built by Gil Shwed, whom Forbes magazine has described 
as an Israeli billionaire who served in the electronic intelligence arm 
of the Israeli Defense Forces.

Sourcefire makes network defense and intrusion detection software for an 
array of customers, including the Defense Department. The company has 
deep roots in the National Security Agency. Its founder and chief 
technology officer, Martin Roesch, has served as an NSA contractor. Its 
vice president of engineering, Tom Ashoff, developed software for the 
secretive spy agency.

Last August, the Israeli government signed an agreement with the 
Pentagon to alert the United States before selling other countries 
technology related to national security. The United States asked for the 
agreement after learning that Israel had sold unmanned aerial vehicles 
to China in late 2004.

The CFIUS investigation is to be completed in mid-March.

Check Point officials declined to comment yesterday on the security 
investigation. In announcing that its deal would be investigated, the 
company released a statement pledging that "Check Point and Sourcefire 
are both committed to working cooperatively with the committee during 
the investigative period."

In the case of Dubai International Capital and Doncasters, an 
acquisition that ordinarily may have been whisked through the process 
without objection is now under security investigation, administration 
sources said. Dubai International Capital is the financial arm of Dubai 
Holding, an investment conglomerate that is the third-largest 
shareholder of DaimlerChrysler Corp. and is a major investor in Holiday 
Inn Express in the Middle East.

Doncasters' expertise is in forging, fabrication, machining and alloy 
production. The company owns a plant that makes aerospace turbine blades 
and components in Farmington, Conn.; a turbine and generator plant in 
Rincon, Ga.; a steel foundry in Springfield, Mass.; and a metal-rolling 
plant in Groton, Conn. The company's Web site says the Georgia and 
Connecticut plants manufacture "engine ready airfoils," for aircraft, 
helicopter and tank engines.

http://www.washingtonpost.com/wp-dyn/content/article/2006/03/01/AR2006030102192.html?nav=hcmodule
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