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Congress members cite 'growing apprehension,' security risks in 3Com sale to Bain, China firm

WASHINGTON: A congressional committee is investigating the purchase of 3Com Corp. by a consortium that includes a Chinese company, intensifying scrutiny of the deal.

In a letter sent Friday, Rep. John Dingell said there is "growing apprehension in the Congress" about the security implications of the transaction. Dingell chairs the House Energy and Commerce Committee. Rep. Joe Barton, the senior Republican on the House Energy and Commerce Committee, and two other members also signed the letter sent to Treasury Secretary Henry Paulson.

Network equipment maker 3Com agreed in late September to be purchased by private equity firm Bain Capital Management and Huawei Technologies for $2.2 billion (€1.48 billion). Bain would own 83.5 percent of the company, while Huawei, a Chinese telecommunications company, would own 16.5 percent.

Huawei's alleged ties with China's military have raised security concerns on Capitol Hill and in some government agencies. Last fall, 14 senators alleged the company is the "preferred provider" of telecom equipment to China's People's Liberation Army, in a letter to a Treasury official.

The transaction is under review by a government panel charged with scrutinizing foreign investment for national security concerns. The panel is chaired by Treasury and includes the Defense, Homeland Security and Justice departments, among other agencies.

Dingell's letter cited reports that China's military has tried to hack into the Pentagon's computer network and said such actions make security concerns more relevant because 3Com develops network security software.

"Given that 3Com Corporation manufactures communications network components — some of which it supplies to the Pentagon, including firewall technology — this transaction raises significant concerns about its potential effect on the national security of the United States,"

the letter said.

Paulson was asked to provide information about the government's review in a "nonpublic briefing" by Feb. 28.

Dingell and the other members also asked Paulson to describe the "extent and nature" of Huawei Technologies' ties to China's military and whether such ties "constitute a threat to U.S. national security."

Reps. Ileana Ros-Lehtinen, Thaddeus McCotter and several members of Congress co-sponsored a resolution last fall that said the deal "threatens the national security of the United States" and called on the government to block it.

Shares of 3Com fell 8 cents to close at $4.05 Friday.