WASHINGTON – A new government agency created in October reviewed the Dubai Ports World deal to manage commercial operations at six U.S. ports, a senior administration official told FOX News.
But documents surfaced late Wednesday that showed approval of the transaction excluded some routine requirements.
Meanwhile, administration officials continued to defend the deal Thursday, saying it will not threaten U.S. port security and that it's not unusual for the president to not know about such deals until they are completed, unless there is an unresolved security risk. They also stress that the United Arab Emirates is a strong U.S. ally in the War on Terror.
The Intelligence Community Acquisition Risk Center (CARC), created as part of ongoing reforms in the intelligence services and overseen by Director of National Intelligence John Negroponte, now reviews foreign investments along with the U.S. Committee on Foreign Investments in the United States (CFIUS).
Last Monday, CFIUS signed off on the deal for DP World to purchase the London-based Peninsular and Oriental Steam Navigation Co., which operates terminals in the major U.S. ports of Baltimore, Miami, New Jersey, New Orleans, New York and Philadelphia.
The deal approved by CFIUS required DP World, which is wholly owned by the United Arab Emirates, to cooperate with future U.S. investigations, read documents obtained by The Associated Press. To win permission of the $6.8 billion purchase, DP World had to agree to reveal records on demand about "foreign operational direction" of its business at U.S. ports. Those records broadly include details about the design, maintenance or operation of ports and equipment.
Under the deal, the government asked DP World to operate American seaports with existing U.S. managers "to the extent possible."
However, the papers show CFIUS 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. Foreign telecommunications companies are usually required to store their business records in the United States.
The documents also say DP World must retain paperwork "in the normal course of business" but did not specify a time period or location where they need to be held, a decision that troubled outside experts who call such agreements routine
"There is a very serious question as to why the records are not going to be maintained on American soil subject to American jurisdiction," said Rep. Peter King, R-N.Y., chairman of the House Homeland Security Committee and a leading critic of the sale.
A senior U.S. official said the Bush administration considers shipping manifests less sensitive. The documents detailing the deal are marked "classified," a designation often given to information that is considered trade secrets to be protected from public release.
Another detail revealed in the documents shows the administration required DP World to designate an executive to handle requests from the U.S. government, but it did not specify citizenship of that individual. Several of the company's top executives are Americans while others are Arab, Dutch and Indian.
Outside legal experts say such obligations are routinely attached to U.S. approvals of foreign sales in other industries.
"They're not lax but they're not draconian," said James Lewis, a former U.S. official who worked on such agreements. If officials had predicted the firestorm of criticism over the deal, Lewis said, "they might have made them sound harder."
Administration: We Won't Outsource Security
Administration officials say the company has made available sensitive trade secrets, documents and other concessions as part of the deal. White House spokesman Scott McClellan repeatedly stated Wednesday that DP World was required to go the extra miles to win approval of the deal.
CARC reviewed the deal in November. DP World promised to take "all reasonable steps" to assist the Department of Homeland Security in any security questions that arose, and pledged to continue participating in security programs to stop smuggling and detect illegal shipments of nuclear materials.
Secretary of State Condoleezza Rice, on her way from Riyadh to Beirut Thursday, said while there is increased scrutiny of who the America deals with since the Sept. 11, 2001, attacks, the system is not set up to prevent a country in the Middle East from doing business with the United States. Rice repeated that the deal was thoroughly vetted and noted that the UAE is a very good ally in the War on Terror.
Fran Townsend, assistant to the president for homeland security and counterterrorism, told FOX News that not one federal agency raised an objection to the deal when it was going through the review process, therefore, it was not unusual for the president to not know about such deals until it was complete.
"Rarely do these wind up on the president's desk and that's only after there has been an investigation and there is some disagreement," Townsend said. "This didn't get there because none of the agencies who reviewed it had any objection and any security concerns the Department of Homeland Security addressed in a security agreement with DP world.
She stressed that the United States is not outsourcing port security, only some port operations.
"Port security will continue to be in the very capable hands of the Coast Guard, and Customs and Border Pontrol," she said. "This is really a commercial deal. There are commercial deals in U.S. ports around the country with other companies, other foreign companies and we address those commercial concerns and the security arrangements because we continue to control security. Security arrangements in U.S. ports won't change regardless of whether this deal goes through or not."
DHS issued a release of port security activities it conducts independently of terminal operators that noted that funding for port security has increased by more than 700 percent since September 11, 2001, from $259 million in 2001 to about $1.6 billion in fiscal year 2005.
The White House late Wednesday also issued a fact sheet that described the CFIUS review process. It said the Treasury Department, which chairs the 12-member panel comprised of officials from the departments of Defense, State, Homeland Security, Commerce and Justice, received notices of transactions, served as the contact point for the private sector, established a calendar for review of each transaction and coordinated the interagency process.
During the 30-day review, each member of the 12 agencies involved conducted internal analyses of the national security implications of the deal, consulted with the intelligence community and brought in officials from the departments of Transportation and Energy. All CFIUS decisions were made by consensus of the entire panel, the White House stated.
'When in Doubt, Cut it Out'
That process, however, does not satisfy Congress.
"Current law dealing with approval of foreign investment needs to be revised. Right now, it's a 12-member committee headed by the Treasury secretary," said Sen. Susan Collins, R-Maine, chairwoman of the Senate Homeland Security and Governmental Affairs Committee, adding, "Congress is really cut out of the loop.
"I think that law should be revised ... I understand the need for confidential review to protect classified information as well as to protect proprietary information. Once the decision is made, Congress should be informed so we can exercise our oversight responsibility," Collins said.
Others contend that the review process at the administration level was incomplete, especially because the panel did not use the entire 45 days allotted to review the sale.
"Outsourcing the ownership of this critical homeland security priority to Dubai Ports World without a thorough review makes no sense at all," added Sen. Patty Murray, D-Wash., who appeared with Collins.
The deal also stinks to several lawmakers who say the UAE's past linkages to the Sept. 11, 2001, hijackers and other international relationships are suspect.
"The wisdom of the American people should be taken into account here. ... It is not as I have seen reported in some corners some form of Islamophobia. That entire description would indicate some sort of irrational fear," said Rep. J.D. Hayworth, R-Ariz., who noted that the UAE was the birthplace of two Sept. 11 hijackers and was used as an operational and financial base for some of the hijackers.
Critics argue the UAE was an important transfer point for shipments of smuggled nuclear components sent to Iran, North Korea and Libya by a Pakistani scientist. The UAE also refuses to recognize Israel and considers the Taliban the rightful government in Afghanistan.
"The bottom line is this: When in doubt, cut it out," Hayworth said.
"In regards to selling American ports to the United Arab Emirates, not just NO, but HELL NO!" Rep Sue Myrick, R-N.C., wrote to Bush in a letter posted on her Web site.
'The UAE is a Very Solid Friend'
Officials counter that the U.S.-UAE alliance goes far deeper than this port deal as part of ongoing reforms in the intelligence services. DHS argued that the UAE gives U.S. and coalition forces "unprecedented access" to its ports and territory, overflight clearances and other logistical assistance. It also provides support for U.S. Navy ships that dock in Jebel Ali and Fujairah, both in the UAE and managed by DP World, and for the U.S. Air Force at Al Dhafra Air Base in the UAE.
DHS also submitted that the UAE has frozen accounts of suspected groups linked to terrorists and has enacted aggressive anti-money laundering and counter-terrorist financing laws. The country allows Customs and Border Protection agents in its ports in Dubai, where they inspect cargo departing for the United States.
"The UAE was one of the first nations to offer financial aid to the U.S. after Hurricane Katrina struck the Gulf Coast. UAE's $100 million donation was one of the largest by any nation," DHS adds.
Former Central Command chief Tommy Franks told FOX News that not only is the UAE a great ally in the War on Terror, but there are more American Navy ships in Dubai's port than any other in the world. He also said the port is run in excellent fashion.
Sen. Joseph Biden, D-Del., agreed that the U.S.-UAE relationship is a decent one but added, "they have been an ally but just as the Colombian government has been an ally with us in terms of fighting narcotics. We wouldn't put the Colombian government in charge of a border control spot. They are an ally, they should be treated fairly. [But] it looks like commerce has been put in front of security."
He added: "If the president pushes this, the Congress will stop it."
Many lawmakers say they have enough support to override a presidential veto, which Bush has promised if a bill passes trying to halt the deal.
Senate Armed Services Committee Chairman John Warner has organized a briefing Thursday for his panel by the by six individuals representing the departments that performed the CFIUS review. Warner, R-Va., told FOX News that after long discussions with Defense Secretary Rumsfeld and other administration officials, "I left with the feeling that the administration had conducted, under the law — as required — a careful review, that the security feature was looked at scrupulously, and that they decided it was not a security risk."
Warner said the UAE is a "valuable ally" and he has seen nothing to indicate the administration didn't do a "careful and thorough job."
DP World is the seventh largest terminal operator in the world, operating 23 facilities in 13 countries. It has terminal contracts in countries including: Germany, Australia, India, South Korea, China, Saudi Arabia and Venezuela.
If it does win U.S. approval for the deal, a condition for the sale, the company will own the contracts for terminals now run in the United States by P&O.
Outside of cruise ship terminals in those ports, operations include two of the 14 terminals in Baltimore's port, one of three terminals in the Miami port, one of five terminals in Newark, two of five terminals in New Orleans, one of five terminals in Philadelphia. DHS officials also note that the deal lets DP World run four of 12 terminals in Houston and allows it to be involved in stevedoring for all five terminals in Norfolk, though DP World would not manage any specific terminal.
The company's retiring chief operating officer, American Edward H. Bilkey, said the company will do whatever the Bush administration asks to enhance shipping security and ensure the sale goes through. Bilkey said Wednesday he will work in Washington to persuade skeptical lawmakers they should endorse the deal; Senate oversight hearings already are scheduled.
"We're disappointed," Bilkey told the AP in an interview. "We're going to do our best to persuade them that they jumped the gun. The UAE is a very solid friend, as President Bush has said."
FOX News' Carl Cameron and The Associated Press contributed to this report.