http://www.washingtontimes.com/apps/pbcs.dll/article?AID=/20071016/NATION/110160071/1001 By Bill Gertz The Washington Times October 16, 2007 House Republicans have introduced legislation calling for the Bush administration to block the merger of a U.S. computer-security equipment company and a Chinese firm with close ties to Beijing's military and a history of illicit exports and industrial espionage. Sen. Christopher S. Bond, vice chairman of the Senate Intelligence Committee, meanwhile, said yesterday he favors the Treasury Department review of the merger, but does not want Congress to pre-empt the administration's national-security investigation of the deal. The senator's remarks and the legislation came in response to the announcement last month of the planned $2.2 billion purchase of 3Com, which sells hacker-prevention hardware to the Pentagon, by the investment company Bain Capital Partners and China's Huawei Technology. Mr. Bond, Missouri Republican, said he does not want congressional and public pressure to derail the proposed deal like the failed effort by the United Arab Emirates' firm Dubai Ports World last year to buy operational control of six U.S. ports for $8 billion. That deal was approved by the Treasury Department but later canceled over concerns that terrorists might infiltrate U.S. ports posing as Dubai company employees. A person close to the companies involved in the 3Com deal said yesterday that discussions were held recently with the Treasury Department-led Committee on Foreign Investment in the United States (CFIUS), which will review the merger and its effect on U.S. national security. A formal submission of the deal for interagency review, however, has not been made yet. Bain Capital Partners said in a statement that "Huawei will not have any access to sensitive U.S.-origin technology or U.S. government sales as a result of this transaction." Defense and intelligence officials have said China's military, which has engaged in aggressive computer hacking against Pentagon and U.S. government computers, will gain additional access to 3Com equipment used to detect such intrusions if the deal is approved by the multi-agency CFIUS. Huawei also was linked to industrial espionage against Cisco Systems and Japan's Fujitsu several years ago, the officials said. Mr. Bond said Huawei, while seeking a minority role in the merger, is "very close to the Chinese military." "After all, the deal comes in the wake of a litany of troubling events," Mr. Bond told a meeting at the Heritage Foundation yesterday. The events include Chinese cyber-attacks against the Pentagon, the surfacing of a Chinese submarine within miles of a U.S. aircraft carrier, and the test of a Chinese anti-satellite weapon. The House resolution, introduced Friday, stated that "the preponderance of publicly available evidence clearly suggests that as currently structured, the proposed transaction involving Huawei threatens the national security of the United States and should not be approved by the Committee on Foreign Investment in the United States." Rep. Ileana Ros-Lehtinen, Florida Republican and ranking member on the Foreign Affairs Committee, who is the lead sponsor of the resolution, said yesterday the deal should be blocked. "It would be a grave error for U.S. regulators to approve a deal that permits minority ownership in 3Com by one of the least transparent companies operating in China, a firm with shadowy ties to the Chinese army and intelligence services," she said. Democrats have been mostly quiet about the proposed merger. However, Sen. John Kerry, Massachusetts Democrat, said the deal should be reviewed very carefully. Mr. Kerry has urged a close review of the acquisition, noting that he is concerned the deal could "inadvertently put sensitive communications assets into the hands of a foreign military." Mr. Bond said the Defense Department is a "major client" of 3Com security products, including its computer intrusion-prevention hardware. Members of the Senate Intelligence Committee will be stepping up their investigations of the "threats from cyberspace," Mr. Bond said. Mr. Bond would not say whether he believes Chinese investment deals in the United States, like the 3Com-Huawei merger, threaten U.S. national security. However, he criticized the government's handling of Dubai Ports World, which was approved by CFIUS but later canceled after members of Congress and other critics raised concerns that terrorists might infiltrate U.S. ports. Mr. Bond said the ports deal would have helped an ally in the war on terror and enhanced U.S. security, not harmed it. "This was an opportunity to show those Muslims who agree with us that the world security, their security as well as our security, depends on working with Muslim countries and Muslim governments who are on our side, and we blew it," Mr. Bond said. China, he said, is using both legal and illegal methods to obtain U.S. technology, but the CFIUS should be permitted to conduct an objective review of Huawei before deciding if the 3Com deal poses an "unacceptable risk." Copyright 2007 The Washington Times, LLC. __________________________________________________________________ CSI 2007 is the only conference that delivers a business-focused overview of enterprise security. It will convene 1,500+ delegates, 80 exhibitors and features 100+ sessions/seminars providing a roadmap for integrating policies and procedures with new tools and techniques. Register now for savings on conference fees and/or free exhibits admission. - www.csiannual.com
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