WASHINGTON – A second United Arab Emirates-owned company confirmed Thursday that the United States is investigating one of its acquisitions.
Dubai International Capital LLC in December announced a $1.2 billion deal to buy Doncasters Group Ltd., a British precision-engineering company with subsidiaries in the United States. Doncasters has operations in nine U.S. locations and manufactures precision parts for defense contractors such as Boeing, Honeywell, Pratt & Whitney and General Electric.
The Washington Post reported Thursday that the Bush administration had notified congressional committees this week that the U.S. Committee on Foreign Investment in the United States is conducting a 45-day investigation into the security implications of Dubai International Capital's acquisition. The company is set to take over plants in Georgia and Connecticut that make defense parts used in engines for military aircraft and tanks.
The company said it's confident the deal will still close.
"Dubai International Capital is pursuing all proper U.S. regulatory approvals regarding the acquisition of Doncasters Group Ltd. as is customary for international business transactions of this nature," Dubai International Capital said in a statement. "It is confident of obtaining those approvals and closing the transaction as originally envisioned."
CFIUS is also investigating an Israeli company's plans to buy the Maryland software security firm Sourcefire, which does business with Defense Department agencies, the Post reported.
News of the second national security probe comes amid deafening charges on Capitol Hill that the administration inadequately reviewed a deal involving another UAE-owned company, Dubai Ports World, that is trying to purchase a British firm that runs 24 terminals at six U.S. ports. DP World is set to acquire terminal and shipping operations from London-based Peninsular and Oriental Steam Navigation Co., in a $6.8 billion deal.
Britain's High Court approved the takeover of P&O by DP World on Thursday, despite a last-minute objection by a Miami-based company, Eller & Co., which argued that U.S. concerns about a UAE company owning significant operations at some U.S. ports could substantially harm its business. Justice Nicholas Warren dismissed the appeal as he gave the required go-ahead for the $6.8 billion deal.
Several congressional committees on Thursday are looking into various aspects of the DP World deal, including the process by which CFIUS approves such deals.
Sen. Charles Schumer, one of the more vocal critics of the DP World deal, will have tough questions for witnesses during the Senate Banking Committee hearing Thursday morning. He will also address the second investigation into Dubai International Capital.
"It's become clear that Dubai Ports World isn't a single incident," the New York Democrat said in a statement. "We not only need a thorough review of this new proposed takeover; but we need an examination of the role foreign countries, particularly those that have had a past nexus with terrorism, play in areas with vital national security interests."
Administration officials have stressed that in the case of DP World, the UAE-owned company would only be taking over port operations of some terminals in six U.S. ports and that the United States is not outsourcing port security. They point out that many port operations are currently operated by foreign companies.
But lawmakers are up in arms over the fact that the deal apparently did not go through the normal review process usually designated for such foreign deals and argue that port operations and port security go hand-in-hand. They point out that the UAE does not have a clean slate when it comes to terrorism, despite the fact that administration officials call Dubai a great partner in the War on Terror.
Rep. Peter King, R-N.Y., chairman of the House Homeland Security Committee, said Wednesday, that the intelligence community's investigation into the DP World deal "was severely limited and restricted, and did not in any way involve questions regarding terrorism."
"Another concern here is Dubai is doing a billion dollars of business each year with Iran," said Alex Formuzis, a spokesman for Sen. Frank Lautenberg, D-N.J. Formuzis called Iran "our loudest enemy."
"This is a country that is fueling the insurgency that is killing our soldiers" in Iraq, he said. "If these concerns don't rise to the level of why this deal should not go through ... I am not sure what else you would need."
Is Israel The Big Issue?
In what could become one of the strongest arguments against the UAE, some lawmakers are arguing that the Arab country's boycott against Israel demonstrates why the United States should hold the UAE at arm's length.
"The Jerusalem Post reports that the DP government-controlled parent company participates in the Arab boycott of Israel, which is inconsistent with everything that we believe in America. So that casts even more doubt on the judgment of the administration officials who claim to have thoroughly investigated DP. And it clearly calls for further congressional review, which is taking place," said Sen. John Kerry, D-Mass., said during a Wednesday Senate hearing.
State Department spokesman Adam Ereli defended the UAE's position on Arab-Israeli issues, saying the "UAE is supportive of our efforts - and the efforts of the international community - to bring peace between Arabs and Israelis and specifically Israelis and Palestinians."
Ereli acknowledged that the UAE observes the Arab Leagues' boycott of Israel. But "it has renounced or does not enforce the secondary and tertiary aspects of the boycott, which means it does business with companies, including American companies, that do business with Israel," he said
Ereli added that the United States wants to see the boycott completely dropped and is pressing the UAE to lift it.
Reem Al Hashimy, commercial attachée for the UAE embassy in Washington, also defended the boycott.
"It's a decision with other Arab countries as part of the Arab League to deny diplomatic relations with the state of Israel," she said. "We do not have diplomatic ties with the state of Israel, but we have been consistently supportive of a Middle East peace plan, we have endorsed and also supported the Oslo Accords, the roadmap and every economic summit that has brought both parties together to try to find a peaceful resolution."
Lautenberg, a former commissioner for the port authority in his state, said lawmakers aren't pleased with the company the UAE keeps, or its questionable behavior.
"They are party to a boycott which is illegal under all kinds of world agreements, international agreements against Israel, and (they are) still sticking by that," he said.
In January, CFIUS approved the deal after what it says was a three-month investigation.
"Tell me what I'm missing here — government-run company, government officials associating with Usama bin Laden. How do you know that tomorrow new people will not be put in place? Can you tell me that?" Rep. Bernie Sanders, I-Vt., asked Treasury Undersecretary Robert Kimmit during a House Financial Services Committee hearing Wednesday.
Separately, King said he didn't understand why the United States would favor a country with the UAE's track record.
"Even today the UAE is not exactly the most modern country. There's no democracy there whatsoever. They still have the boycott against Israel and you still have laws on the books regarding Muslim women marrying non-Muslim men. So its not exactly as if its the center of cosmopolitanism either," King said.
In the UAE's defense, Hashimy said her country has cooperated in the War on Terror
"The UAE, in particular, has worked very closely with their U.S. counterpart in capturing key Al Qaeda operatives, in working together on intelligence matters, on money laundering. We have task forces set up on terrorist financing and on non-proliferation," she said.
Lawmakers say they are willing to see what CFIUS can produce in the way of a complete review over the next 45 days, but that doesn't mean they will be satisfied.
The president "has decided to take 45 days to re-assess what's going on and educate the American people. Then we will make a decision, but you can't be making those kinds of decisions in the dark as far as I am concerned," said House Speaker Dennis Hastert, R-Ill.
"I can't prejudge the deal, but I do want to be in a position ... when the 45 days is done to cast a judgment," added Sen. Norm Coleman, R-Minn.
Late Wednesday, Coleman announced he will introduce a bill that will permit foreign governments to own and invest in facilities with a national security interest, provided that the foreign government establishes a U.S. general business corporation to act as a blind trust.
Some longshoremen, like Mark Montgomery, say lawmakers may be overreacting. Montgomery notes that of the 65 people who work for P&O in the Port of Baltimore, 64 are American citizens. All are promised their jobs if DP World eventually succeeds with the deal.
The "whole structure, the personnel, all of the people that were here, that are here today, will be here tomorrow," Montgomery said, adding that "terminal operators" like DP World are responsible for tying up the ships, and booking the longshoremen to load or unload them. They are not in any way related to the security operations.
But Sen. Joseph Biden, D-Del., said relations with the UAE may never reach the level it has with some other allies, and the administration shouldn't try to make excuses for the distance that necessarily exists.
"The administration is running a real risk, a real risk because of their incompetence to run that flag up the pole in hopes that we would say, 'oh geez, we don't want to be seen as anti-Arab.' This has nothing to do with being anti-Arab. Not all allies are created equal. They never have been," Biden said.
FOX News' Major Garrett, Jim Angle, Teri Schultz and Sharon Kehnemui Liss and The Associated Press contributed to this report.
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