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.


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