Coast Guard Warned Of Ports Deal Gaps

Citing broad gaps in U.S. intelligence, the Coast Guard cautioned the Bush administration that it was unable to determine whether a United Arab Emirates-owned company might support terrorist operations, a Senate panel said Monday.

The surprise disclosure came during a hearing on Dubai-owned DP World's plans to take over significant operations at six leading U.S. ports. The port operations are now handled by London-based Peninsular & Oriental Steam Navigation Company.

"There are many intelligence gaps, concerning the potential for DPW or P&O assets to support terrorist operations, that precludes an overall threat assessment of the potential" merger," an undated Coast Guard intelligence assessment says.

"The breadth of the intelligence gaps also infer potential unknown threats against a large number of potential vulnerabilities," the document says.

However, Coast Guard spokesman Commander Jeff Carter said in a statement that the Cost Guard's analysis of the port deal was taken out of context, reports CBS News correspondent Bob Orr.

"Upon subsequent and further review, the Coast Guard and the entire CFIUS panel believed that this transaction, when taking into account strong security assurances by DP World, does not compromise U.S. security," the statement said.

Sen. Susan Collins, chairman of the Senate Homeland Security committee, released an unclassified version of the document at a briefing Monday. With the deal under intense bipartisan criticism in Congress, the Bush administration agreed Sunday to DP World's request for a second review of the potential security risks related to its deal, CBS News correspondent Mark Knoller reports.

The document raised questions about the security of the companies' operations, the backgrounds of all personnel working for the companies, and whether other foreign countries influenced operations that affect security.

"This report suggests there were significant and troubling intelligence gaps," said Collins, R-Maine. "That language is very troubling to me."

Administration officials defended their decision not to trigger a 45-day review of national security implications of such a deal.

"In this case, the concerns that you're citing were addressed and resolved," Clay Lowry, the Treasury Department's assistant secretary for international affairs, told lawmakers.

The Coast Guard indicated to The Associated Press that it did not have serious reservations about the ports deal on Feb. 10, when the news organization first inquired about potential security concerns.

"Any time there's a new operator in a port our concern would be that that operator has complied with the ISPS (International Ship and Port Facility Security) code overseas, and we just want to take a look at their track record," Cmdr. Jeff Carter, a Coast Guard spokesman, said at the time. "And then we would look forward to working with them in the future ensuring they complied with all applicable regulations and international agreements."

The White House thinks the deal is fine as is, but spokesman Scott McClellan said Monday the new review was "a reasonable middle ground."

Senate Majority Leader Bill Frist, who helped negotiate the plan, quickly recommended that lawmakers wait for the outcome before acting on legislation to delay or block the deal. Frist, R-Tenn., said he expects oversight hearings to continue this week.

In six pages of legal documents sent Sunday to the White House, Dubai-based DP World offered to submit to a second, broader investigation of its plans to run shipping terminals in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia.


60 Minutes reports on holes in port security.
The Treasury Department, which governs the U.S. review panel, said it would accept DP World's extraordinary offer once the company formally filed its request for one. It said the same government panel will reconsider the deal that it earlier had agreed unanimously posed no national security concerns.

The administration hopes that the new review and the delay will help to calm the public, but members of Congress still want a voice in the process, reports CBS News senior White House correspondent Bill Plante.

Some senators, led by Charles Schumer, D-N.Y., said they still intend to introduce legislation Monday to block the deal pending the new review and to require congressional approval before DP World can conduct business in the United States. Under existing law, Congress effectively has no role considering deals.


Mr. Bush has pledged to veto any measure blocking the deal. "The president's position remains the same," McClellan said. After the review, it will be up to the president to decide whether the deal takes effect.

The administration's announcement means the White House likely won't face a broader revolt this week by fellow Republicans. A united GOP can assert that its leaders — in Congress and at the White House — have taken additional steps to protect national security.

DP World's offer was highly unusual. The secretive U.S. committee that considers security risks of foreign companies buying or investing in American industry has conducted such full-blown investigations only about two dozen times among the more than 1,500 international deals it has reviewed.

The company said that during the renewed scrutiny, or until May 1, a London-based executive who is a British citizen would have authority over DP World's U.S. operations. It pledged that Dubai executives would not control or influence company business in the U.S., but said it was entitled to all profits during the period. It also said it will appoint an American to be its chief security officer in the United States.

"We hope that voluntarily agreeing to further scrutiny demonstrates our commitment to our long-standing relationship with the United States," said Edward H. Bilkey, the company's chief operating officer.

President Bush has personally defended his administration's earlier approval of DP World's proposal to buy London-based Peninsular & Oriental Steam Navigation Co. It was not immediately clear whether the re-examination by the same U.S. officials would produce a different outcome.

White House national security adviser Steven Hadley told CBS News' Face The Nation that "the security considerations here have been well-addressed; there isn't a security risk. This needs to be made clear to the Congress and to the American people. We need a little time to do that."

In the administration's earlier review, completed Jan. 17, DP World agreed to cooperate with law enforcement investigations and disclose many private business records on demand by U.S. agents. The government panel unanimously approved the deal after an ordinary 30-day review, during which U.S. intelligence agencies reported they found no derogatory information about DP World in their files.

In its legal papers, DP World said it would abide by the outcome of the pending review but indicated it could sue if the results were any different.

A chief critic of the ports deal, Rep. Peter King, chairman of the House Homeland Security Committee, said the company appeared to invite the more thorough investigation sought by many lawmakers. King, R-N.Y., said the proposal should be enough to delay immediate efforts in Congress to block the deal.