Review launched in 2nd Dubai deal

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 Committee on Foreign Investment in the United States (CFIUS) is investigating the security implications of Dubai International Capital's $1.2 billion 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 privately briefing leaders of half a dozen House and Senate committees this week about the two planned transactions, concerned that both 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 Dubai Ports World, 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. Opponents of the deal pointed to the UAE's alleged links to terrorism.

Last weekend, DP World agreed to a 45-day investigation to stem the protest and allay concerns of a possible breach of U.S. port security.

In the past, the foreign-investment committee rarely told Congress of such inquiries.

Dubai International Capital's acquisition of Doncasters could present some of the same political problems created by DP 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 defense contractors such as Boeing, Honeywell, Pratt & Whitney and General Electric.

Although many foreign companies manufacture parts used in U.S. military equipment, in this instance CFIUS members decided to look more carefully at the Doncasters transaction. The CFIUS met last week and tentatively decided to subject that proposal to a 45-day investigation, and it finalized that decision late Monday. The decision came on the final day of the regular 30-day review period.

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

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 port controversy erupted.

The security questions over Check Point's proposed $225 million purchase of Laurel, Md.-based Sourcefire were apparently raised early on, according to people familiar with the review.

Check Point was built by Gil Shwed, whom Forbes magazine has described as an Israeli billionaire who served in the electronic-intelligence arm of the Israeli Defense Forces.

Sourcefire makes network defense and intrusion-detection software for 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. Its vice president of engineering, Tom Ashoff, developed software for the secretive spy agency.

Last August, the Israeli government signed an agreement with the Pentagon to alert the United States before selling to other countries technology related to national security. The United States asked for the agreement after learning that Israel had sold unmanned aerial vehicles to China in late 2004.

The CFIUS investigation is to be completed in mid-March.