Second Dubai Firm Under U.S. Review

A second Dubai-owned company confirmed Thursday the Bush administration has launched an unusual investigation over the potential security risks of its business moves in the United States.

Dubai International Capital LLC said it plans to buy a British precision-engineering company with two U.S. plants that make precision parts used in engines for military aircraft and tanks.

The company said in a statement it is confident the U.S. will approve its $1.2 billion offer to buy Doncasters Group Ltd. It said it was pursuing all regulatory approvals "as is customary for international business transactions of this nature."

Meanwhile, Congressman Duncan Hunter, a California Republican, blasted the administration's willingness to let a company owned by Dubai purchase some operations at six U.S. ports.

Hunter, the chairman of the House Armed Services Committee said he'll do everything he can to "kill" the controversial ports deal.

Hunter said "Dubai cannot be trusted," adding that the country is "a bazaar for terrorist nations." Hunter said it has helped move materials for weapons of mass destruction, like heavy water and high-speed electrical switches, to Pakistan, Iran and other countries.

The U.S. has conducted only 25 such investigations among 1,600 business transactions reviewed by the Committee on Foreign Investments in the United States. The panel, made up of 12 government representatives, judges the security risks of foreign companies buying or investing in American industry.

The disclosure of a rare, second U.S. review involving an investment by a Dubai-owned company came just before Britain's High Court approved the $6.8 billion sale of London-based Peninsular and Oriental Steam Navigation Co. to Dubai-owned DP World.

Justice Nicholas Warren agreed to stay his ruling until Friday to permit Miami-based Eller and Company Inc. to appeal his decision. Eller presently is a business partner with the British company and has complained that under the sale it will become an "involuntary partner" with Dubai's government.

Warren said he was not persuaded by Eller's objections.

DP World will assume operations at six major U.S. ports, a deal that has touched off an intense debate in Congress over port security.

Lawmakers convened new hearings Thursday to investigate the administration's earlier approval of that plan.

In a hearing of the Senate Banking Committee, senators said the ports deal should have been subject to greater scrutiny because DP World is government-owned. They said the United Arab Emirates, a loose federation that includes Dubai, has purported ties to terrorism.

Unclear is whether Dubai's relationship with the United States "is sincere or it's just good for business," said Sen. Jim Bunning, R-Ky.

The Washington Post first reported the second Dubai investigation on Thursday.

Sen. Christopher Dodd, D-Conn., cited disclosure of the second investigation as proof lawmakers should consider updating the confidential process for approving such transactions after the September 2001 terror attacks.

"This system is broken. I think all of us agree," Dodd said. "I think you can point to various reasons why that's happened over the years. The world has changed."

Deputy Treasury Secretary Robert Kimmitt conceded that U.S. agencies should communicate better about the process. "Always room for improvement," he said.

The review panel, known as CFIUS, has faced broad criticism in Congress over its scrutiny of the ports deal, which it approved Jan. 17 after a routine, 30-day review.

In a highly unusual move, DP World offered earlier this week to submit to a broader 45-day investigation to avert an impending political showdown between President George W. Bush and Congress. That formal investigation has not yet started.

Mr. Bush, the final arbiter of the new investigation, suggested there was no reason to think it would produce any different outcome than the government's initial review and urged Congress to be careful.

"What kind of signal does it send throughout the world if it's OK for a British company to manage the ports but not a company that has been secured, that has been cleared for security purposes, from the Arab world?" he asked.

In an interview later with ABC News, Mr. Bush said he would stand by the deal, adding, "The only way it won't happen is if there is a true security threat to the United States of America."

Former President Bill Clinton has acknowledged DP World privately sought his advice about two weeks ago over how to respond to the controversy brewing in Washington. Clinton's wife, Sen. Hillary Rodham Clinton has been a leading critic of the ports deal.

"He told them that they needed to submit to full scrutiny and they needed to make their proposal safer and more secure for America's ports," said Jay Carson, a spokesman for the former president. Carson said Clinton is supportive of his wife's position on the subject.