[lbo-talk] more on the port deal

Doug Henwood dhenwood at panix.com
Thu Feb 23 11:16:38 PST 2006


Wall Street Journal - February 23, 2006

White House Cites Extra Safeguards in Ports Deal

Approval Process Increases Screening of Dubai Firm; Lawmakers Still Opposed

By GREG HITT

WASHINGTON - The Bush administration said it obtained extra security commitments from Dubai Ports World before clearing the firm to take control of some U.S. port operations, but the political brushfire over the deal showed no sign of abating.

With congressional leaders of both parties complaining the White House hadn't sufficiently reviewed the national-security implications, administration officials said "safeguards" had been imposed on DP World that will expose it to more intense scrutiny once the transaction goes forward.

Among other things, DP World agreed to accept mandatory security screening at port facilities in Dubai and to embrace tighter security practices along the "supply chain" operated by London-based Peninsular & Oriental Steam Navigation Co. U.S. officials also will have access to company records -- without subpoena -- and background information on DP World employees and managers working in the U.S. The assurances lock in requirements that had previously been only voluntary commitments on the part of DP World and P&O.

DP World has agreed to buy P&O for $6.8 billion. P&O's U.S. affiliate runs commercial operations at five ports on the East Coast and the Gulf of Mexico, including in New York, Baltimore and Miami, that would come under DP World's control.

"What had been voluntary is now a mandatory program," said Stewart Baker, an assistant secretary at the Department of Homeland Security. "There are more safeguards in this transaction than in any past port" deal. Another administration official said DP World understood the need to take special precautions. "They are going above what they are already doing," the official said.

But lawmakers pushing legislation to stop the deal in the name of national security haven't backed down, continuing a standoff that escalated on Tuesday, when President Bush threatened to veto such legislation. As congressional insiders speculated that opponents might even muster the two-thirds vote needed to override a veto, a House leadership aide predicted "some deal ... to avert legislation. No one wants to see it come to that."

One possibility from similar deals in the past: The purchasing company could set up a "proxy board" of prominent Americans designed to insulate the day-to-day management of the company from the parent.

The White House said yesterday that Mr. Bush wasn't involved in approving the deal, learning of the deal only after it had been cleared. That disclosure serves to distance Mr. Bush from the decision, and from any suggestion that he pressured the government's Committee on Foreign Investment in the U.S.

At the same time, Democrats moved to question the role of Treasury Secretary John Snow, whose department heads the interagency CFIUS review process. Sen. Christopher Dodd of Connecticut suggested Mr. Snow had a conflict of interest because DP World in 2004 purchased the international port operations of CSX Corp., the firm Mr. Snow headed before joining the Bush administration. Mr. Dodd requested that Mr. Snow be excluded from further administration reviews of the deal.

Separately, Sen. John Kerry of Massachusetts demanded a public accounting of all contacts between administration officials and DP World. Unless he receives it, Mr. Kerry threatened to block the president's nomination of Dave Sanborn, DP World's director of operations for Europe and Latin America, to serve as the administration's maritime administrator.

Some concerns about the ports deal had been floating about for weeks. But they crystallized and accelerated rapidly just in the past week, after the British firm's board voted on Feb. 13 to formally accept DP World's takeover offer. Three days later, seven members of Congress -- four senators and three House members -- held a press conference to express concern, and the issue rapidly escalated from there.

Administration officials continued to point to conditions set in the CFIUS review of DP World's deal. "They vetted it," Mr. Snow said yesterday. Mr. Snow's department leads the secretive 12-member investment-review panel, which includes representatives from the departments of Defense, State and Homeland Security. "They concluded this does not present a risk."

Unconvinced, New Jersey Gov. Jon Corzine said he would file a federal lawsuit as soon as tomorrow to block the handover of the Port of Newark. The Democrat joined Republican Govs. George Pataki of New York and Robert Ehrlich of Maryland and bipartisan congressional leaders in questioning the administration's conclusion that a company controlled by a Middle Eastern government posed no risk.

A DP World spokesman said it is "happy to cooperate with the appropriate government authorities to do whatever is necessary to keep American port facilities safe."



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