PLEAS TO ROMNEY TO COME CLEAN ON CHINA LINKS

Republican presidential hopeful, Mitt Romney has been asked to intervene to stop the Chinese from acquiring a stake in 3COM, an American company that protects classified US intelligence networks.
The former Massachusetts governor is believed to have enough clout to persuade the major hedge fund he founded, Bain Capital, from merging with Huawei Technologies to buy 3Com. The sale would give Bain 80% of 3Com with 20% going to Huawei. When the $2.2 billion merger was first announced in September there was a whispering campaign in Washington that the deal presented a risk to the US intelligence but little was said publicly about the matter. Since then, there has been a clamor for Romney to use his influence to persuade Bain Capital to pull out of the merger. He was CEO of Bain Capital until 2002 when he became Massachusetts governor. However, his tax returns show that he and his family earned $6 million in 2006 from holdings in 30 Bain Capital funds.
His fellow presidential candidate, Duncan Hunter (R. Calif.), has publicly condemned the merger and has called on Romney to exert his influence on Bain, pointing out that Romney received considerable financial support for his presidential campaign from Bain principals. In Hunter’s view the deal would place sensitive US intelligence networks at risk, especially at a time when it is clear China is keen to acquire US military technology. He added that the Chinese company at the center of the controversy was “closely aligned with the Chinese government.”
While that issue was all but ignored when the merger was announced several months ago two factors have forced it into the public domain. One is the presidential campaign and the other is a deteriorating relationship with China. On both those levels it was perhaps inevitable that the 20% acquisition of a US hi-tech security company would sooner or later be a prickly issue. Duncan Hunter lost no time pointing out that, in light of China’s refusal to allow the Kitty Hawk to dock in Hong Kong during recent Chinese war games, it was vital to prevent foreign companies acquiring US military technology.
But the issue is far from just a political spat between Hunter and Romney. There is a serious intelligence issue surrounding the merger. Huawei Technologies is well known to the US intelligence community because its founder, Ren Zhengfei, is a former officer in the Chinese Peoples’ Liberation Army and several of the company’s leading customers are Chinese government-run businesses. On Huawei files, Zhengfei is listed as having 1% ownership but the majority shareholder is not named, leading to speculation that the PLA owns and controls Huawei. It is well known the PLA controls a multitude of Chinese companies in the hi-tech and military fields.
For almost a decade, the CIA has had its eyes on Ren Zhengfei and his company. In 2003, the agency accused him of selling hi-tech security systems to Saddam Hussein. In 2003 he was hit with a copyright infringement by the US technology giant, Cisco. It claimed he had stolen patents for some of its equipment, but he denied the charge. Nevertheless, he later admitted guilt and reached a financial settlement with Cisco.
For years, cyber warfare experts have been warning the Pentagon that the PLA has been developing a cyber capability for use in the opening hours of a conflict with the United States. Chinese military hackers have been trained to attack the joint communications systems of US military and intelligence agencies and to cripple the computer networks on which the US economy relies. Since 2000, the US navy, which has an edge on all other services in fighting a hit-tech enemy, has been aware of tens of thousands of intrusions by hackers into US security systems. The Pentagon has admitted that its security systems have come under sustained assaults from probing cyber attacks originating in China.
In a world in which armies are relying more heavily on hi-tech communications and weaponry, victory in future conflicts may be measured by which side has the most secure Comms systems and the best networks for keeping the economy safe. For those reasons, a Chinese stake in 3Com, not matter how lucrative it may be for 3Com shareholders, is now seen as a bridge too far because 3Com’s expertise is in protecting secure US networks. To that end it has had contracts with the Defense department.
According to a classified intelligence report acquired by the Washington Times, the office of the Director of National Intelligence considers the merger a threat to the security of this country. It will now be up to the White House, or the Treasury Dept that deals with inward investment by foreign companies, to review the matter.
If there is any doubt about the risk posed by allowing the merger to go ahead, all the White House has to do is review testimony before a House subcommittee in 2001 in which nuclear arms control expert, Prof. Gary Milhollin, accused Huawei of acquiring technology in the US and then using it in ways that threatened the US military. His statement was a polite way of saying that the company was deliberately purchasing US technology for the PLA. In PLA manuals about future conflicts, the US military is the enemy and all Chinese war games are predicated on that basis.
Gov. Mitt Romney has refused to comment on the merger, probably hoping it will not gain much traction in the presidential race. His gamble may not pay off if the issue is taken up by enough members in Congress who believe the merger should be stopped.