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Key members of a controversial panel that reviews takeovers of U.S. companies by foreign investors Thursday stridently dismissed congressional criticism of their operations. The Government Accountability Office and some lawmakers argue that the review process carried out by the Committee on Foreign Investments in the United States, or CFIUS, too narrowly focuses on military and physical threats pending mergers could impose on the U.S. and its citizens. They want the review process expanded to include economic and energy issues as well. But U.S. Department of Treasury Deputy Secretary Robert Kimmitt insisted the move would be counterproductive. “I reject this notion that Treasury has narrowed the definition of national security,” he told the Senate Banking Committee. The hearing focused on a recent Government Accountability Office report highlighting disagreements within the interagency panel over how investments by foreign companies should be conducted. “Preservation of the U.S. defense industrial base, protection of resources vital to our future economic well-being and protection of our critical infrastructure are legitimate areas of concern,” Shelby said as he opened the hearing. “Congress needs to be comfortable that all of these considerations … are reviewed. That level of comfort is currently nonexistent.” After hearing CFIUS members’ opposition, however, a Shelby spokesman played down his boss’s determination to resolve his concerns with new legislation. “We have not prejudged anything,” said Shelby spokesman Andrew Gray. “Shelby thinks the process is flawed, but how we go about improving the situation is a determination we make down the road.” CFIUS is a multi-agency panel with 12 members, who also include representatives from the Department of Homeland Security and the Commerce Department. The panel is charged with examining national security issues raised by cross-border deals. CFIUS members, including Kimmitt; Stewart Baker, assistant secretary for policy, U.S. Department of Homeland Security; E. Anthony Wayne, U.S. Department of State; and Robert McCallum, acting deputy attorney general in the Justice Department all said any disagreements among themselves about the mission of CFIUS could be resolved within the panel’s existing statutory authorization. Concerns about CFIUS were raised this summer when the committee geared up for a potential review of China’s CNOOC Ltd.’s bid to purchase Unocal Corp. of El Segundo, Calif. CNOOC ultimately dropped its bid and Unocal was acquired by Chevron Corp., precluding the need for a CFIUS review. Shelby and some other lawmakers have raised additional concerns about the overall effectiveness of CFIUS. Shelby has floated a proposal to double the CFIUS review initial review period to 60 days. (The GAO reported that in some cases, participating agencies have only three to 10 days to make recommendations, often not enough time to conduct a thorough investigation.) But Kimmitt and other CFIUS members, including Baker, contended that changing the review timeline would not be helpful. “Ninety-five percent of cases don’t present troubles and get cleared within 30 days,” Kimmitt said. “Changing the initial review period would mean we would spend more time looking at cases that are not important and take time away from important cases.” “It’s not a good idea,” Baker chimed in. “We would be extending a lot of routine transactions.” To mitigate concerns about sufficient time, Baker said DHS has begun an early warning and information sharing program so that officials there and in other CFIUS member agencies could identify transactions of potential concern before they are formally filed with the committee. CFIUS members also took issue with GAO’s contention that committee members’ behind the scenes disputes indicate that the system is not working. Kimmitt also rebuffed criticism by lawmakers that CFIUS members have not made documents pertaining to some controversial deals accessible to lawmakers. To address that issue, legislation being considered in Washington would require some CFIUS reviews to be approved by Congress but Kimmitt again urged no congressional action. “Just as I don’t think the Department of Justice would like Congress involved in antitrust reviews, I don’t think Congress should participate in this approval process,” Kimmitt said. Legislation introduced by Senate Banking Committee Chairman Richard Shelby, R-Ala., would require CFIUS to submit its findings and recommendations to key congressional committees after its investigation is complete. Also, Shelby’s provision would require CFIUS to submit quarterly reports to Congress on all reviews. Kimmitt added that he and other CFIUS officials would do a better job of staying in touch with lawmakers about reviews. Shelby’s legislation, which was attached to a bill introduced by Sen. James Inhofe, R-Okla, was introduced in July and added to a defense bill. Inhofe also introduced stand-alone version as a back up should Shelby’s defense amendment be stripped. Besides adding another 30 days to the CFIUS initial review period Shelby’s measure would allow House and Senate committees to order a CFIUS investigations of proposed acquisitions by a state-owned foreign entity — even if CFIUS initially determines there are no national security concerns. Copyright �2005 TDD, LLC. All rights reserved.

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