Coast Guard intelligence report raised concerns about DP World
The Bush administration’s uphill battle to persuade Congress to allow the sale of U.S. port facilities to a Dubai government-owned company took another hit Monday when a report surfaced indicating that U.S. Coast Guard intelligence officials had raised red flags about the potential for the company to be infiltrated by terrorists.
Homeland Security officials downplayed the concerns as part of normal internal deliberations that were quickly resolved.
According to an unclassified excerpt, the Coast Guard’s Intelligence Coordination Center said intelligence gaps about Dubai Ports World prevented it from determining whether British ports operator Peninsular and Oriental Steam Navigation Co.’s sale of terminal operating rights to Dubai Ports World posed a security threat. The intelligence assessment was revealed by Sen. Susan Collins, R-Maine, chairman of the Homeland Security and Governmental Affairs Committee, during a briefing about the $6.85 billion port deal that is scheduled to close Thursday.
“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 DPW and P&O Ports merger,” the report said. “The breadth of the intelligence gaps also infer potential unknown threats against a large number of potential vulnerabilities.”
The Intelligence Coordination Center said it did not have enough information about operations, personnel and security procedures at DPW facilities and questioned whether there would be “foreign influence on DPW or P&O operations that affect security and other major decisions.”
The memo suggests that the administration’s review of DP World’s bid to acquire several U.S. port facilities was not as unanimous as previously indicated, and bolstered opponents of the transaction who argue the administration should have conducted a more in-depth 45-day investigation on top of the initial 30-day review by mid-level officials.
Some senators have charged the administration with ignoring a requirement that the interagency Committee on Foreign Investment in the United States (CFIUS) conduct a 45-day investigation when the investor is a foreign government and the sale could affect national security.
But the administration’s position is that the longer review period is unnecessary in this case because none of the 14 agencies and departments participating on the CFIUS panel voiced any dissent to the sale. Officials noted that the Coast Guard voted to approve the sale after resolving any initial concerns.
Stewart Baker, the Department of Homeland Security’s assistant secretary for policy and international affairs, said it was unfair to judge the report by one unclassified paragraph that the Coast Guard used as part of its overall determination. He suggested the Coast Guard was satisfied by open-book conditions placed on the sale that give law enforcement officials the right to walk into DP World offices and ask for records without a subpoena to run background checks on or investigate employees, or determine if there are foreign efforts to control operations in any U.S. facility. Customs and Border Protection, another DHS agency, is also more familiar with DP World because it works with the company’s domestic arm, the Dubai port authority, to inspect containers bound for the United States. Other assurances worked out by DHS include making mandatory instead of voluntary Dubai’s participation in the Container Security Initiative and DP World’s participation in the Customs-Trade Partnership Against Terrorism, a trusted trader program.
In response to a question, Baker said it is “highly likely” that DHS will ask for similar assurances from any other country that tries to buy a terminal in the United States.
But a skeptical Collins said, “the fact that assurances were needed to be built in only proves the point that there were national security concerns that required” the start of a 45-day investigation.
“What is troubling about this assessment is not that it raises questions, but rather that there are intelligence gaps that preclude an assessment” of the merger, she said.
Baker, who represented DHS on the CFIUS panel, admitted that he had never seen the Coast Guard intelligence report.
According to the administration’s timeline of events, lawyers for DP World and P&O informally approached the Treasury Department Oct. 17 to identify any potential issues ahead of time. On Nov. 2, CFIUS requested an intelligence assessment of DP World, nearly four weeks ahead of the Nov. 29 announcement of the proposed merger. In early December, the intelligence community delivered its threat assessment of DP World. After another briefing, the companies officially filed a formal notice with CFIUS on Dec. 16 requesting a security review to comply with U.S. law. The review concluded Jan. 17. Administration officials insist that the review was not rushed because they had 90 days to study the matter.
“I’m astonished at how many intelligence gaps there were in December and a month later those whole gaps closed,” Collins said.
The Senate Committee moved to a closed session to hear an explanation about the rest of the classified report from Coast Guard Adm. Thomas Gilmore, assistant commandant in charge of security, who declined to speak in public about how the service’s concerns were addressed.
In a statement issued Monday night, the Coast Guard said, “What is being quoted is an excerpt of a broader Coast Guard intelligence analysis that was performed early on as part of its due diligence process. The excerpts made public earlier today, when taken out of context, do not reflect the full, classified analysis performed by the Coast Guard. That analysis concludes ‘that DP World’s acquisition of P&O, in and of itself, does not pose a significant threat to U.S. assets in (continental United States) ports.’ 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.”
Collins also questioned why the Coast Guard recently began conducting a series of baseline inspections of P&O facilities to make sure there are no security gaps before the property transfer occurs if the agency was confident about the security assessment.
“We thought it prudent to take another look,” Gilmore replied.
Opponents of DP World’s investment pounced on the new revelation as evidence that the administration did not thoroughly examine the national security implications.
“If this isn’t a smoking gun, it shows that there may be one undetected by the CFIUS committee,” Sen. Charles Schumer, D-N.Y., said in a statement. “We need to know why Homeland Security objected and then backed off their objection given this devastating report. CFIUS seems to feel that only if there is an account of wrongdoing that they should block a merger; this report shows that a lack of knowledge can be just as dangerous. This vindicates all we have been saying about the need for not only a thorough investigation, but also an independent evaluation of whether or not this deal should go forward.”
On Monday, Schumer introduced a bill to suspend DP World’s takeover of P&O’s U.S. terminals, and require the administration to open a 45-day investigation, with final authority for approval resting with Congress. Schumer said the compromise reached between the White House and DP World over the weekend under which the company agreed to submit to another investigation and not take control of or influence its U.S. operations during the review period eliminated the need to push for a vote on the bill. But he added the legislation will remain at the ready in case the investigation is not complete or made public.
Collins introduced a similar, but milder, resolution that also insists that Congress be briefed on the investigation before it proceeds.
Warner, who helped broker the agreement, said DP World would file papers seeking a new CFIUS review by Wednesday.
Meanwhile, Sen. Carl Levin, D-Mich., urged the White House to ask DP World to hold off closing the P&O transaction as scheduled Thursday until the 45-day investigation is completed.
Under the agreement, DP World will create a holding company for its U.S. operations designed to act as a firewall between the owners in Dubai and managers of the U.S. operation, but “the truth of the matter is DPW is going to own this — no matter what happens during the 45-day period,” he said.
DP World would essentially become a passive investor that can receive economic benefits from its U.S. assets, but without making any decisions about how the North American subsidiary operates, said Clay Lowery, the Treasury Department’s assistant secretary for international affairs.
Levin grilled Lowery about whether the contract between the companies includes a provision to rescind the deal if the United States decides to withhold approval because of security problems.
The senator got Lowery to admit that the president’s power to block the deal after the fact would require going to district court to request that the company divest its U.S. interests.
“That’s a different position from just unilaterally undoing this deal,” Levin said. “If this closing takes place, DP World owns these facilities.”
The announcement of the DP agreement incorrectly suggested that the status quo would remain unchanged while the investigation proceeded, Levin argued.
Sen. Norm Coleman, R-Minn., said he was not concerned about any change in the status quo because no contract can exist in violation of the law and the courts would force a divestiture if the company does not have government approval to operate.
Coleman suggested Congress could authorize a special board, comprised of individuals with a background in security, to have oversight of the security issues involved with DP World port facilities to help satisfy lawmakers’ concerns.