Secretive U.S. panel busy reviewing foreign business deals

WASHINGTON -- In the same year that public furor derailed a Dubai-owned company's plans to buy and run operations at major American ports, the number of foreign business deals reviewed by the Bush administration for U.S. security risks surged to nearly 100, up from 65 reviews last year.

A few anxious companies in deals pending with foreigners have sought the Bush administration's approval even for sales that do not raise obvious security questions, said lawyers and federal officials involved in these cases.

They attributed the jump largely to a busy year for international mergers and broader awareness of such reviews after the political uproar that scuttled the Dubai ports deal. The government's reviews included the $11.6 billion sale of Lucent Technologies Inc. to Alcatel SA of France; Toshiba Corp.'s $5.4 billion purchase of nuclear power-plant manufacturer Westinghouse Electric Co.; and smaller deals involving seismic surveys, a gas utility, military parts, voting machines and even anti-hacker software.

"The numbers are up. A company will file even though they don't think it's a national security concern," said Clay Lowery, an assistant secretary at the Treasury Department.

Most of the reviews this year, however, raised legitimate concerns, said Christopher Padilla, an assistant secretary at the Commerce Department. "Of the increases we've seen, only one or two cases didn't have national security issues that needed to be raised," he said. "These transactions are getting the scrutiny that's called for."

The secretive panel that conducted nearly 100 reviews also completed seven full-blown investigations this year reflecting broader concerns over proposed deals. That is equal to the combined number over the previous five years.

Foreign companies announced plans to buy 909 U.S. businesses this year for a value of $198 billion, a slight drop in sales from 2005 but up significantly from 2003 and 2004, according to Dealogic Holdings, a British company that tracks global mergers.

"There are definitely more filings by clients who feel the political environment is so uncertain that they are uncomfortable not filing," said John B. Reynolds, a Washington lawyer who regularly negotiates business deals with the U.S. panel.

Congress ended its work for the year without making promised changes to how the government reviews deals.

Lawmakers' reluctance to send a bill to President Bush contrasts markedly with their attention to the subject after the administration in February approved Dubai-based DP World's takeover of significant operations at six major U.S. seaports.

The company abandoned the effort weeks later amid intense national criticism and is nearly finished selling all $700 million worth of its U.S. port operations to an American buyer.

The political uproar over the ports deal ranked among political stories that generated the most news interest in the last two decades, according to a poll by the Pew Research Center for the People & the Press.

In oversight hearings, lawmakers complained that such deals deserved more scrutiny and they promised to rewrite government rules for considering when investments by foreigners may threaten U.S. security.

The administration said it has changed how it conducts such reviews. It has added employees to investigate deals, imposed more conditions on companies and sought approval for deals at higher levels within government agencies.

Meetings among senior officials who consider such deals were once scheduled every few months now occur weekly.

The 12-member Committee on Foreign Investment in the United States is led by the Treasury Department. It hired a new deputy to oversee reviews; tripled to six the number of people who work on such reviews; and now requires deals to be approved by one of the department's presidential appointees.

The Homeland Security Department also hired a new director to oversee reviews and increased the number of employees who work on such cases to 12. It has imposed conditions in 12 deals so far this year, such as requiring companies to keep sensitive equipment or business records inside the United States even after the sale.

"Congress started out quite determined to make a lot of changes," said Stewart Baker, the department's assistant secretary who helped negotiate approval for the Dubai ports deal. "The administration took very seriously the criticism, and we've launched a number of reforms."

In the aftermath of the ports dispute, lawmakers introduced more than 20 bills to block the Dubai sale or change how such deals are reviewed. None passed both the House and Senate.

A House bill that passed 424-0 in July would have broadened the types of deals reviewed to include those affecting homeland security and would have covered sales involving power and water plants.

It would have made it tougher for companies to withdraw proposed business deals from government scrutiny. Also, the president or members of the review panel could have reinvestigated cases if companies failed to obey conditions the government had set to approve a deal.

The Senate bill, which passed by voice vote the same day as the House version, would have required the administration to tell Congress within 10 days about each business deal it was reviewing; forced foreign governments to seek U.S. approval to buy American companies; and made it tougher for companies to withdraw from pending scrutiny.

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On the Net:

Committee on Foreign Investments in the United States: http://www.treas.gov/offices/international-affairs/exon-florio/