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U.S. to dig deeper into ports deal

Published Feb. 27, 2006

The Bush administration said Sunday it will accept an extraordinary offer by a United Arab Emirates company to submit to a second - and broader - U.S. review of potential security risks in its deal to take over significant operations at six leading American ports. The plan averts an impending political showdown.

The Treasury Department said in a statement it will promptly begin the review once the company formally files a request for one. It said the same government panel that earlier investigated the deal but found no reason for national security concerns will reconsider it.

In six pages of documents sent earlier in the day to the White House, Dubai Ports World asked for a 45-day investigation of plans to run shipping terminals in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia.

Tampa's port could join the list of DP World-run terminals if port commissioners go ahead with plans to lease container and general cargo facilities to the British company that DP World was scheduled to acquire Thursday

The announcement means the White House likely won't face a revolt by fellow Republicans when lawmakers return Monday from a weeklong break. A united Republican Party can assert that its leaders - both in Congress and at the White House - have taken additional steps to protect national security.

In a statement Sunday, Senate Majority Leader Bill Frist, R-Tenn., said he will recommend that the Senate wait for results of the broader review before acting on legislation to delay or block the deal. Frist said he anticipates oversight hearings to continue to examine the agreement and its implications on maritime security.

DP World's offer was highly unusual. The secretive U.S. committee that considers security risks of foreign companies buying or investing in American industry has conducted such full investigations only about two dozen times among the more than 1,500 international deals it has reviewed.

The company said that during the renewed scrutiny, or until May 1, a London executive who is a British citizen would have authority over DP World's U.S. operations. It pledged that Dubai executives would not control or influence company business in the United States, but said it was entitled to all profits during the period. It also said it will appoint an American to be its chief security officer in the United States.

"We hope that voluntarily agreeing to further scrutiny demonstrates our commitment to our long-standing relationship with the United States," said Edward H. Bilkey, the company's chief operating officer.

President Bush forcefully has defended his administration's earlier approval of DP World's proposal to buy the London company Peninsular & Oriental Steam Navigation Co. It was not immediately clear whether the re-examination by U.S. officials would produce a different outcome.

"We're satisfied that there's been a complete review of the deal," Frances Fragos Townsend, the White House homeland security adviser, said on Fox News Sunday.

In the administration's earlier review, completed Jan. 17, DP World agreed to cooperate with law enforcement investigations and disclose records on demand about "foreign operational direction" of its business. The U.S. review committee unanimously approved the deal after a regular 30-day review, during which U.S. intelligence agencies reported they found no derogatory information about DP World in their files.

As part of that review, the administration did not require DP World to keep copies of business records on U.S. soil, where they would be subject to orders by American courts. It also did not require the company to designate an American citizen to accommodate U.S. government requests for information or assistance.

In the legal papers sent to the White House, DP World said it would abide by the outcome of the lengthier review but indicated it could sue if the results were any different. The administration could seek additional security measures beyond the terms already negotiated.

A chief critic of the ports deal, Rep. Peter King, R-N.Y., said the company appeared to invite the more thorough investigation sought by many lawmakers. King, chairman of the House Homeland Security Committee, said the proposal should be enough to delay any immediate effort in Congress to block the deal.

"If it is what it appears to be, to me there's no need at this time to go forward" with emergency legislation, King said.

Another critic, Sen. Charles Schumer, D-N.Y., said DP World's willingness to submit to the new review was "certainly a significant step forward, but the devil is in the details." Schumer said Congress should have a chance after the review to approve or reject the administration's decision.

"If the report is completed and kept secret and only given to the president, who has already come out for the deal, it will not reassure Americans," Schumer said.

Despite the company's offer, Schumer said he still would introduce legislation Monday to ensure a thorough investigation is done.

Frist presented the outlines of a proposal to the company and the administration late Friday. All parties, including House Speaker Dennis Hastert's office, held talks through the weekend.

Critics of the deal have cited the UAE's history as an operational and financial base for the hijackers who attacked New York and Washington in September 2001.

The U.S. government also questioned the UAE years ago about possible ties between officials there and Osama bin Laden, according to the report by the independent commission that investigated the suicide hijackings.

Critics also have complained that the UAE was one of only three countries to recognize the Taliban government in Afghanistan before the U.S. overthrow in 2001.

Information from Times files was used in this report.


OCT. 17: Representatives of DP World approach Treasury officials about its plans to purchase the British firm, Peninsular and Oriental Steam Navigation Co., that controls major operations at six U.S. ports.

NOV. 2: Homeland Security Department asks U.S. intelligence agencies for information on DP World; they produce nothing "derogatory," according to DHS officials.

DEC. 6: Staff from all agencies who sit on U.S. Committee on Foreign Investment meet with company officials to review transaction.

DEC. 16: Company files formal notice of deal with Treasury, which circulates the filing to all Committee on Foreign Investment departments and agencies, as well as the departments of Energy and Transportation.

JAN. 17: The committee does not object to the transaction after a 30-day review in which Homeland Security gets DP World to agree to open its books and keep the current U.S. ports management intact.

FEB. 11: The Associated Press reports the deal, including Dubai's ties to Sept. 11 terrorists.

WEEK OF FEB. 13: Lawmakers from both parties, including Democratic Sen. Charles Schumer and GOP Rep. John Sweeney, call on Treasury Secretary John Snow and Homeland Secretary Michael Chertoff to explain.

FEB. 16: Aides inform President Bush of controversy and that administration had approved the deal a month earlier.

FEB. 20: Senate Majority Leader Bill Frist says he will introduce legislation to delay the transaction.

FEB. 21: Bush defends the deal, saying it "will not jeopardize the security of the country," and he vows to veto any congressional effort to stop it.

FEB. 23: Senate Armed Services Committee holds hearing; Democrats charge Bush administration violated law by not conducting an additional 45-day security review and fully informing Congress. DP World later suggests it will delay the transaction.

FEB. 26: DP World agrees to a 45-day review and promises to create a U.S. subsidiary that would operate independently until May.



"The president is confident that when Congress really understands the transaction, they will conclude, as he did, that it's the right thing to do." - White House national security adviser Stephen Hadley.

"We hope that voluntarily agreeing to further scrutiny demonstrates our commitment to our long-standing relationship with the United States." - DP World chief executive Edward H. Bilkey.

"If the UAE felt that they're being mistreated, and were to pull back that support, where would it shift? We know not. Would other Arab nations, given the fact that it looks like we have a double standard here, would they step up and take that excess? I don't know." - Sen. John Warner, R-Va.

"Whatever happens in this United Arab Emirates deal, if we get more focus on port security, which some of us have been trying to do in the Congress for years, some good will come out of this." - Sen. Charles Schumer, D-N.Y.

"I think that near-hysteria about this is not warranted, particularly in light of the other major crises that we are facing throughout the world." - Sen. John McCain, R-Ariz.