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Military aircraft outsourced to dubai { March 2 2006 }

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U.S. probes 2nd Dubai firm
National security inquiry also to look into Israeli company

By Jonathan Weisman and Susan Schmidt
The Washington Post
Published March 2, 2006

WASHINGTON -- The Bush administration, stung by the public outcry over the Dubai port deal, has launched a national security investigation of another Dubai-owned company set to take over plants in Georgia and Connecticut that make precision components used in engines for military aircraft and tanks.

The administration notified congressional committees this week that its secretive Committee on Foreign Investment in the United States is investigating the security implications of Dubai International Capital's $1.2billion acquisition of London-based Doncasters Group Ltd., which has subsidiaries in the United States.

It is also investigating an Israeli company's plans to buy the Maryland software security firm Sourcefire, which does business with Defense Department agencies.

Administration officials are briefing leaders of half a dozen House and Senate committees this week about the two planned transactions, concerned that the deals could stir controversy in a political climate that remains supercharged over the Dubai port deal.

Republican and Democratic lawmakers angrily protested after learning late last month that the administration had approved a $6.8 billion deal to allow a maritime company based in the United Arab Emirates to take over significant operations at six U.S. ports without a thorough investigation and without consulting members of Congress. Last weekend, the Dubai maritime company agreed to a 45-day investigation to stem the protest and allay concerns.

In the past, the foreign investment committee rarely told Congress of such inquiries. Wary of another misstep, administration officials decided to inform lawmakers of the two other pending transactions with possible U.S. national security implications.

There have been suggestions in the trade press that the publicly traded Israeli firm, Check Point Software Technologies, has been subjected to more scrutiny than Dubai Ports World, the state-owned Arab company that was initially cleared to take over operations at the six major U.S. ports with no security investigation. That inquiry was initiated only after an outcry about turning over ports to a country that has been cited for ties to terrorism.

Sources familiar with the Israeli investigation said cybersecurity officials at the Departments of Defense, Justice and Homeland Security all raised serious concerns about the purchase before the ports controversy erupted.

Dubai International Capital's acquisition of Doncasters could present some of the same political problems created by Dubai Ports World's purchase of London-based Peninsular and Oriental Steam Navigation Co. Once again, a state-controlled Dubai company with deep pockets is purchasing a British firm with U.S. holdings. Doncasters has operations in nine U.S. locations and manufactures precision parts for military contractors such as Boeing, Honeywell, Pratt & Whitney and General Electric.

A representative of Doncasters' corporate office in Connecticut said the company had no comment on the investigation.

Although many foreign companies manufacture parts used in U.S. military equipment, in this instance members of the Committee on Foreign Investment in the United States decided to look more carefully at the Doncasters transaction. The committee met last week and tentatively decided to subject that deal to a 45-day investigation. It finalized the decision late Monday.

The "process is charged with determining if there are national security concerns in any transaction, and it takes that role very seriously," said Tony Fratto, spokesman for the Treasury Department, which leads the interagency panel.

The 45-day investigation of the Israeli deal began in early February, several weeks before the controversy erupted over the ports deal, administration officials said. The investigation of the Dubai-Doncasters deal began this week.

Fratto said that neither investigation was started "because of public reaction to some other transaction."

Of the 1,500 acquisitions that have been referred to the CFIUS, one has been rejected. But deals with security implications tend to fall through before the 45-day investigation.

In the case of Check Point, the security questions apparently were raised early on, according to people familiar with the review. Check Point's proposed $225 million purchase of Sourcefire, based in Laurel, Md., raised red flags with government cybersecurity officials.

Sourcefire makes network defense and intrusion detection software for an array of customers, including the Defense Department. The company has deep roots in the National Security Agency. Its founder and chief technology officer, Martin Roesch, has served as an NSA contractor.

Copyright 2006, Chicago Tribune

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