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Bush learned of port deal only after administration had OK'd it

WASHINGTON—President Bush didn't know about the deal to allow a state-owned United Arab Emirates company to manage terminals at six major U.S. ports until after his administration had approved it, White House officials said Wednesday.

The White House also acknowledged that it made a mistake in not briefing Congress about the pending transaction, which has ignited a bipartisan firestorm on Capitol Hill and among governors of some affected states.

Rep. Sue Myrick, R-N.C., who's usually a Bush supporter, sent him a one-sentence letter Wednesday, which said: "In regards to selling American ports to the United Arab Emirates, not just NO—but HELL NO!"

"I mean, in hindsight, when you look at this and the coverage that it's received and the false impression that is left with some, we probably should have briefed members of Congress about it sooner," White House Press Secretary Scott McClellan conceded.

Senate Majority Leader Bill Frist, R-Tenn., and House Speaker Dennis Hastert, R-Ill., called Tuesday for Bush to freeze the deal until it's reviewed more thoroughly, and Frist promised legislation to achieve that if the president won't. Bush threatened to veto such legislation, and the White House reaffirmed his threat Wednesday.

The deal is a planned $6.8 billion acquisition by Dubai Ports World, the UAE firm, of Peninsular and Oriental Steam Navigation Co., a British firm that's been managing terminals at the ports of Miami, Philadelphia, New York, New Jersey, Baltimore and New Orleans.

Opponents say they fear that the deal could compromise security, noting that two of the Sept. 11 hijackers had used the UAE as a base and al-Qaida laundered money through the country's banking system.

Bush maintains that the UAE is a staunch ally in the war on terrorism, that DP World has followed all the rules and that to block it would send a discriminatory message that America welcomes British investment but not Arab.

While defending the deal, McClellan acknowledged that the president didn't know that his administration's interagency task force had approved it until the media began reporting the growing political reaction to it last week. Bush wasn't informed earlier because the interagency review found nothing to raise it to the presidential level, McClellan said.

Once the controversy erupted, McClellan said, Bush went back to the agencies that compose the Committee on Foreign Investment in the United States and asked them, "Are you comfortable with this transaction going forward? And every one of those Cabinet secretaries expressed that they were comfortable with this transaction being approved."

The Committee on Foreign Investment in the United States is a 12-agency panel that includes the CIA and departments of State, Defense and Homeland Security, among others, and is chaired by the Treasury Department. It's charged with reviewing foreign purchases of U.S.-based assets that might compromise national security. For the DP World transaction, two additional agencies—the Department of Transportation and the Energy Department—joined the panel.

"They also look at the intelligence; they ask for intelligence advice from the intelligence services about is there a threat from this transaction, are there vulnerabilities of this transaction," Clay Lowery, the Treasury Department's assistant secretary for International Affairs, said Tuesday.

Committee on Foreign Investment in the United States agencies have 30 days to conduct their reviews. If a decision isn't reached within that time, a formal 45-day "investigation" is begun.

DP World's review was longer than 30 days, Lowery said, because the company voluntarily had briefed committee officials in November about the transaction, but technically only the 30-day review was conducted.

Last September the Government Accountability Office, a nonpartisan watchdog agency of Congress, faulted the committee process as judging too hastily. It also questioned whether the panel should expand its definition of national security.

Its report said the Treasury Department "narrowly defines what constitutes a threat to national security—that is they have limited the definition to export-controlled technologies or items and classified contracts, or specific derogatory intelligence on the foreign company."

The GAO report faults the Treasury Department as reluctant to open 45-day investigations "because of a perception that they would discourage foreign investment—a potential conflict with U.S. open investment policy."

According to the GAO, the Committee on Foreign Investment in the United States received 470 notices from companies from 1997 through 2004 but initiated just eight investigations. Six of those ended with the bidding companies' withdrawing; the remaining two went to the president for a decision.

Under committee guidelines, member agencies must announce any concerns they hold about a pending purchase by the 23rd day of the 30-day review. Several committee members complained that "in complex cases, it is difficult to complete analyses to meet that standard within 23 days," the GAO report found.

One Defense Department official said that without advance notice of an acquisition, "the time frames are too short to complete analysis and provide input."

Though the Treasury Department chairs the committee, Homeland Security was the lead agency assessing DP World.

"The review said that there was no derogatory information against this company, and that this company did not raise ... undue concerns about national security in the country," Lowery said.

However, committee officials did negotiate security issues with DP World and the British firm. They got assurances from both that they'd continue to participate in security programs they'd voluntarily entered with the Homeland Security and Energy departments. DP World also had participated voluntarily in a U.S.-coordinated foreign port-screening program.

"We were eager to have them continue in that," said Stewart Baker, the assistant secretary for policy at the Treasury Department. "And P&O had become part of our best-practices program ... for security of the supply chain. We wanted to make sure that they (DP World) would continue with that."

Administration officials viewed the transaction from a foreign-policy standpoint, not a political one. White House Deputy Chief of Staff Karl Rove, Bush's primary political adviser, wasn't involved in reviewing the deal, McClellan said.

Lawmakers of both parties continued to object Wednesday.

Rep. Peter King, R-N.Y., the chairman of the House Committee on Homeland Security, said the deal could give al-Qaida operatives a bird's-eye view of security arrangements at American ports.

"My main concern is that the company is going to be interfacing with our security," he said. "If al-Qaida operatives are in the company, you'd literally have the enemy operating from within."

Democratic New Jersey Gov. Jon Corzine said he'd file a federal lawsuit to block DP World from working the port of Newark.

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(Knight Ridder Newspapers correspondents Lesley Clark of The Miami Herald and Steven Thomma of the Washington Bureau contributed to this report.)

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HOW TERMINALS WORK

A terminal handles cargo containers entering and leaving a port. For imports, it unloads the containers from steamships and transfers them to a yard, where they're stored until transported out of the port by truck or rail.

A terminal leases space at a port just as a store leases space at a shopping mall or an airline leases gate space at an airport.

Terminal operators are responsible for their own security, and must submit a plan to the Coast Guard for approval under the Maritime Transportation Security Act of 2002. Local police generally are responsible for securing port entrances and common areas, and Customs and Border Protection is responsible for scrutinizing cargo and passengers entering the country.

As shipping has consolidated worldwide, it's common for non-U.S. firms to operate terminals. The Peninsular and Oriental Steam Navigation Co., which Dubai Ports World is attempting to buy, is British. At the Port of Los Angeles, foreign companies manage about 80 percent of the terminal space, according to the Council on Foreign Relations.

_By Steve Harrison of The Miami Herald

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(c) 2006, Knight Ridder/Tribune Information Services.

GRAPHIC (from KRT Graphics, 202-383-6064): 20060222 PORTSECURITY

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