McLean's - American Shipper

TRANSPORT / PORTSbecame front-page news.In mid-October, more than a monthbefore the takeover of P&O was officiallyannounced, DP World lawyers informallyapproached the U.S. Treasury Departmentabout their potential investment. Treasuryheads an interagency group known as theCommittee on Foreign Investment in theUnited States (CFIUS) that reviews foreignacquisitions to make sure they do not threatenU.S. security. Other agencies represented onCFIUS include the National Security Agencyand the departments of Defense, HomelandSecurity, State, Justice, and Commerce.The CFIUS process is officially launchedwhen the Treasury Department receives awritten notice of the transaction, but in mostcases companies consult with executiveagencies ahead of time to head off potentialproblems and make sure they have a goodchance of getting approved.Treasury officials immediately referredDP World to the Department of HomelandSecurity to resolve any security issues.By the time DP World formally appliedfor a security clearance on Dec. 16, it hadalready been vetted by the intelligencecommunity and several agencies.On Jan. 17, CFIUS met and approved theP&O sale to DP World.Eller was unable to afford a high-pricedlobbying firm, so it hired a Washington lobbyistnamed Joseph Muldoon III who wasfriends with someone at the company.Eller was rebuffed by CFIUS, so on thelast day of January Muldoon took Eller’scomplaints to Capitol Hill. Eller arguedthat DP World threatened security becauseit would be more difficult to get a foreigngovernment to comply with U.S. securityrules, and the company would have accessto security plans for protecting ports thatcould be shared with the government ofDubai, elements of which it claimed mayhave ties to terrorists.Muldoon started with the Senate BankingCommittee, because it had held a hearinglast year about problems with the CFIUSprocess after a Chinese company tried to buya U.S. oil company. He also met with staffon the Homeland Security, Armed Servicesand Commerce committees.Then, Muldoon said, he took a map ofP&O Ports North America’s 22 port facilitiesand targeted lawmakers who representthose ports. High on his list was DemocraticSen. Charles Schumerof New York, home ofthe Port of New York-New Jersey.Schumer spokesmanIsrael Klein confirmedthat the senatorwas first tipped off tothe sale and the administration’sapproval bySchumeran Eller representative and subsequentlytalked to a wire service reporter.The Arabs Are Coming. On Feb. 11,the Associated Press reported that the P&Osale to DP World had been quietly approvedby a Cabinet-level committee that meets tomake sure foreign investments do not posea threat to national security. A handful ofnewspapers followed up that week witheditorials denouncing the sale. But the storydidn’t take off until Feb. 16, when Schumerheld a press conference along with a halfdozenlawmakers questioning the linkupbetween the two port operators and askingfor a more thorough review.The members of Congress said theyplanned to launch hearings if the administrationdid not take a second look at the deal, andsome threatened to take legislative action toblock the sale of U.S. port assets if PresidentBush didn’t withdraw DP World’s permissionto do business. They argued that the UnitedArab Emirates, a loose federation of statesTimeline: How the port deal went downthat includes Dubai, could not be trusted withinfrastructure vital to national security becausetwo of the Sept. 11 hijackers originatedfrom there, and received money transfersthrough the loose UAE banking system. DPWorld should also be disqualified, they said,because of the UAE’s previous support for theTaliban regime in Afghanistan, and its role asa transfer point to hide the origin of nuclearand chemical components smuggled to Iran,North Korea, Libya and Pakistan.“Outsourcing the operations of our largestports to a country with a dubious record onterrorism is a homeland security accidentwaiting to happen,” Schumer said, raising thespecter that terrorists could easily infiltratethe company to gain access to secure areas ofthe port and assist an attack or smuggling ofa weapon of mass destruction in a containerdestined for a major city.Rep. Vito Fossella, R-N.Y., said handingcontrol of strategic ports to the UAEis equivalent “to an official announcementthat Dubai was taking over security at ourairports.”On Feb. 17, Eller filed suit in Florida askinga judge to block the sale because it wasbeing involuntarily dragged into the deal towork alongside DP World, in violation of itspartnership arrangement with P&O.Schumer held a press conference thatweekend with 9/11 victims’ families on thewaterfront near the site of the former WorldTrade Center to attack the president forjeopardizing homeland security by givingDubai access to U.S. ports.Michael Chertoff, secretary of homelandsecurity, appeared on Sunday morning talkshows to defend the “very disciplined” reviewof the proposed sale and the extra safeguardcommitments negotiated with DP World. Buttelevision commentators criticized him forarguing that the country needs a balancedapproach to trade and security.Meanwhile, DP World sent a team of top•October•••November• • •DecemberOct. 17Lawyers for DP World, P&O quietlyapproach Treasury Departmentfor preliminary discussions.Oct. 30London’s Sunday Timesreports DP World is preparingtakeover bid for P&O.Nov. 2Treasury staff request intelligencerisk assessment from the Directorof National Intelligence.Oct. 31P&O acknowledges takeover bid fromundisclosed buyer. U.S. Customs andBorder Protection reviews pendingtransaction for the first time.Nov. 29DP Worldmakes$5.7 billionofferfor P&O.Dec. 16After two months of informalinteraction, DP World,P&O file merger noticewith Treasury, starting30-day security review period.Dec. 2Temasek Holdings, the Singapore governmentcontrolledparent company of global portoperator PSA International, begins raisingstake in P&O from 2 percent to 4.1 percent78 AMERICAN SHIPPER: APRIL 2006