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Cross-border deals already have to meet many U.S. regulatory requirements, and now there’s another: getting Tom Ridge’s approval. In a little-noticed move, President George Bush added the Homeland Security secretary this winter to the Committee on Foreign Investment in the United States (CFIUS). Former committee members, as well as lawyers who work with the panel, say that Ridge’s addition will likely strengthen the influence of security hawks on the committee. As a result, international mergers could become more difficult to pull off. One deal has already run into a buzz saw at the committee. For almost a year, Hutchinson Whampoa Ltd. and Singapore Technology Telemedia Pte Ltd. have been trying to win approval for their purchase of a controlling stake in Global Crossing Ltd. But several government agencies that sit on CFIUS refused to approve the deal because of concerns over possible links between Hutchinson Whampoa and the Chinese military. As a result, Hutchinson Whampoa withdrew its bid in April, though at press time Singapore Technology was still moving ahead with its part of the deal. Under a 1998 federal law, CFIUS is required to evaluate the national security risks of corporate transactions in which a non — U.S. investor aims to effectively gain control of a U.S. business. The committee is composed of top officials from 11 executive departments, including the secretaries of Commerce, State, Treasury, and Defense, along with the attorney general, the president’s national security adviser, and the U.S. trade representative. (Treasury chairs the panel.) With little fanfare, Bush added Ridge to the CFIUS roster by executive order in February, bringing the panel’s membership to 12. Former officials who have worked with the committee, and lawyers who have advised clients on CFIUS matters, say that they’re unsurprised by Ridge’s addition. Indeed, some CFIUS experts say the move is mostly symbolic. But other experts suggest that Ridge’s presence inevitably tips the committee’s balance in favor of those who take a hard line on foreign investment. A former senior administration official who handled CFIUS matters says, “You need to run a process with a reasonable set of checks and balances so that the security and intelligence imperatives are not considered in isolation, or used as a pretext for mercantile interests opposed to foreign investment.” A greater emphasis on security concerns, in turn, may make it harder for foreign investors to get the committee’s blessing. Greg Mastel, a trade policy adviser at Washington, D.C. — based Miller & Chevalier, says that the addition of Ridge “absolutely raises the bar” for CFIUS approval. A Department of Homeland Security spokeswoman declined to answer questions about the agency’s role on CFIUS, other than to say, “We’re honored to be part of it.” A White House spokesman declined to comment on the president’s decision to add DHS to the committee, other than to observe that “there is a correlation” between Ridge’s role and the committee that made it a “natural fit.” Although the powerful committee operates in almost total secrecy, some of the deals it reviews — such as the Global Crossing sale — garner publicity nonetheless. The bankrupt company, incorporated in Bermuda but based in New Jersey, boasts an extensive fiber-optic telecommunications network within the United States. Hutchinson Whampoa and Singapore Technology’s joint bid was expected to save Global Crossing from liquidation. But some members of CFIUS, especially the Pentagon and the Federal Bureau of Investigation, blocked the deal because of possible ties between Hutchinson Whampoa and the Chinese military, according to people close to the negotiations between the companies and the government. Representatives from Hutchinson Whampoa, Singapore Technology, and Global Crossing declined to comment publicly on the government’s objections to the deal. But the companies worked for at least four months to assuage CFIUS’s concerns, relying on advisers from Covington & Burling; Skadden, Arps, Slate, Meagher & Flom; Kissinger McLarty Associates; Latham & Watkins; and Paul, Weiss, Rifkind, Wharton & Garrison. In the face of unbending opposition within CFIUS, however, Hutchinson finally abandoned its bid. Former government officials who handled CFIUS cases while at Treasury, the Pentagon, and other agencies say they’re not surprised that the committee was so unyielding. Since 9/11, they note, the Bush administration has stressed its concern about the potential vulnerability of the U.S. telecommunications infrastructure. In some corners of the defense and intelligence communities, any American investment by a company with alleged ties to China is likely to be viewed with suspicion.

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