Video: Port-deal row reveals security gaps

updated 3/4/2006 9:21:05 PM ET 2006-03-05T02:21:05

A United Arab Emirates company formally submitted Friday to an unusual, broader security examination of its plans to assume significant operations at six major U.S. ports — a business deal it code-named “Project Thunder.”

The Bush administration said it will conduct a new, 45-day investigation of plans by Dubai-owned DP World to purchase London-based Peninsular & Oriental Steam Navigation Co. for $6.8 billion.

The Project Thunder code name refers to a Dubai-controlled subsidiary, Thunder FZE, that is participating in the complex transaction, according to documents previously submitted to the Homeland Security Department.

The new investigation — which could begin within days or weeks — is aimed at quieting the furor in Washington over the administration’s earlier approval of the deal. The British company runs major port operations in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia.

Investigation will last 45 days
The Treasury Department, which governs the review panel, is expected to conduct another preliminary scrutiny that could take up to 30 days before opening its full, 45-day investigation. DP World and Treasury officials confirmed the paperwork was submitted late Friday.

The timelines are governed by U.S. law, and lawyers for the company and administration wrestled to settle on procedures in the unprecedented request for such a security review.

U.S. lawmakers have criticized the earlier review as insufficient. They cite concerns raised by the Coast Guard in December that broad gaps in U.S. intelligence left it unable to determine whether DP World might support terrorist operations. The administration said those concerns ultimately were settled, and the Coast Guard has said it is now satisfied that the deal does not compromise security.

Lawmakers devoted the week to congressional hearings that did little to calm tensions. Rep. Duncan Hunter, R-Calif., chairman of the House Armed Services Committee, complained Thursday the new investigation would be “too little, too late.” He pledged “to do everything I can to kill the deal.”

DP World offered this week to submit to the broader investigation by the U.S. government panel that considers security risks of foreign companies buying or investing in American industry.

The Treasury Department has already said it welcomed DP World’s extraordinary offer. It said the same panel will reconsider the deal that it earlier unanimously agreed posed no national security concerns.

Meanwhile, in London, a Miami-based business partner of Peninsular & Oriental asked Britain’s Court of Appeal on Friday to consider blocking DP World’s purchase of its rival. Eller & Company Inc. complained in court papers it will become an “involuntary partner” under the sale with Dubai’s government.

A British judge approved the sale this week but agreed to stay his ruling until the appeals court decides Monday whether to hear Eller’s case.

One of only 25 such probes
DP World’s offer for an extended examination was unusual. The U.S. review panel has conducted such full-blown investigations only 25 times among the 1,600 international deals it has reviewed, although the government confirmed this week it is conducting two other such investigations.

On Tuesday, the panel opened an investigation into plans by Dubai International Capital LLC’s to buy a British precision-engineering company, Doncasters Group Ltd. The British outfit has plants in Georgia and Connecticut that make parts used in engines for military aircraft and tanks.

The review panel also is investigating plans by an Israeli software company, Check Point Software Technologies Ltd., to purchase a smaller U.S. rival.

DP World previously said during the renewed scrutiny, or until May 1, Dubai executives would not control or influence company’s business in the United States but said it was entitled to all profits during the period.

President Bush has defended his administration’s earlier approval of the deal after a routine, 30-day review.

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