Bayh Introduces Legislation to Make Security a Top Priority in Future Business Deals

Bayh Introduces Legislation to Make Security a Top Priority in Future Business Deals

Smart and Secure Foreign Investment Act would require DNI to certify foreign acquisitions like Dubai port sale

Calling the initial approval of the Dubai takeover of U.S. port operations a failure to recognize today's security threats, U.S. Senator Evan Bayh today introduced the Smart and Secure Foreign Investment Act, which would ensure that homeland security concerns are addressed before business deals involving foreign countries are considered. Among other things, Bayh's legislation would require the Director of National Intelligence (DNI) to approve such sales, so that homeland security is given greater consideration before deals are approved.

"The Dubai takeover is yet another example that our current system for reviewing foreign business deals is broken," Senator Bayh said. "We need a tough and smart policy that recognizes the reality of today's world and puts homeland security first. My legislation will bring the old system up-to-date by ensuring that national security is considered before any business deal is approved, whether it involves port operations or any other security asset."

Currently, the Committee on Foreign Investment in the United States (CFIUS) is responsible for reviewing the national security implications of foreign takeovers of domestic companies. However, since CFIUS was enacted in 1988, it has blocked only one purchase of a U.S. company. A 2005 Government Accountability Office (GAO) report requested by Senators Bayh, Shelby (R-AL) and Sarbanes (D-MD) found that CFIUS uses such a narrow definition of national security that it approves too many questionable takeovers without sufficient review.

Another example of CFIUS failing to prevent the takeover of a company with national security interests took place in 1995, when the Committee approved the sale of Magnequench, an Indiana-based company responsible for making 80 percent of the magnets used to guide U.S. smart bombs, to a Chinese consortium.

"It's past time we updated CFIUS to meet the national security demands of today," Senator Bayh said. "We need a post 9-11 system that looks at these deals differently and recognizes why we shouldn't rely on China to produce important weapons systems or outsource control of our ports."

Bayh's legislation would put in place several steps to reform the process to ensure that national security is given greater consideration in the review of such acquisitions. This comprehensive approach would not only guard against future port takeovers, but also purchases involving other U.S. homeland security assets, such as defense companies and energy interests. Bayh's legislation would:

· Require the Director of National Intelligence (DNI) to certify that there are no troubling national security implications before the sale is reviewed by CFIUS;

· Add the Director of National Intelligence (DNI) to the Committee to bolster national security consideration;

· Require CFIUS to consider the country in which the foreign investor is located, including its relationship with the United States and its expanding defense capabilities. Currently, the home country is not taken into account during the approval process, so a nation with possible ties to terrorism is given the same consideration as a long-standing ally, such as Great Britain;

· Require the President to notify Congress and relevant state officials of all proposed foreign acquisitions; and

· Increase transparency by requiring CFIUS to hold a public hearing on proposed transactions before a final decision is made.

http://bayh.senate.gov/~bayh/releases/2006/02/28FEB06PR.htm