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Strategies & Market Trends : Rande Is . . . HOME -- Ignore unavailable to you. Want to Upgrade?

To: Tradelite who wrote (29313)	7/11/2000 10:46:54 AM
From: Tradelite	Respond to of 57584

Here's example of what feds can do to block mergers with foreign companies: ________________ FBI Intervenes in Planned Sale Of Internet Service to Japanese By John Schwartz Washington Post Staff Writer Friday, July 7, 2000; Page E04 The FBI is raising national security concerns about a Japanese telecommunications giant's planned acquisition of a U.S. Internet company, as the agency seeks to maintain its ability to track criminals and terrorists in the digital age. According to sources familiar with its action, the FBI has intervened in the announced $5.5 billion acquisition of Englewood, Colo.-based Verio Inc. by NTT Communications, a subsidiary of Nippon Telegraph and Telephone Corp., which in turn is more than half-owned by the Japanese government. Verio is a major provider of Internet services to corporations. NTT Communications provides telecommunications services in more than 200 countries. On June 30, NTT Communications announced that it had received notice from the Committee on Foreign Investment in the United States (CFIUS), an interagency committee chaired by the Treasury secretary that examines foreign investment deals. "NTT Communications believes that the proposed transaction does not raise national security concerns," the company said in a statement. Neither the FBI nor the Treasury Department would comment on the matter, nor would spokesmen officially acknowledge that an investigation had been launched. Share prices of Verio dropped $1.62 1/2 yesterday, closing at $54.25. Sources familiar with the FBI move say the agency is not trying to scuttle the merger but has concerns that its ability to enforce wiretap laws in the online world could be compromised by foreign ownership of Internet service providers. "The sense I get is it's more needing to assuage concerns rather than trying to kill the deal," said Brett Lambert, an analyst at the Washington consulting firm DFI International. "There are some legitimate concerns. They felt NTT had not addressed them in a manner that was sufficient to give them a pass." The FBI has the authority to raise such concerns under laws protecting Americans against risks of direct foreign investment. President Gerald Ford created CFIUS by executive order in 1975 to monitor overseas investment in U.S. companies. In 1988, Congress gave the president the power to block mergers that threatened national security in the Exon-Florio Amendment to the Defense Production Act of 1950. Under the Exon-Florio provisions, an investigation can go on for as long as 45 days; after that time, the case goes to the president for final action within 15 days. Stewart Baker, a former counsel to the National Security Agency who specializes in telecommunications regulations, suggested that the FBI was simply trying to put pressure on NTT and Verio to sign off on Internet wiretap concessions by threatening to hold up the merger. He noted that the FBI was given broad powers by Congress in 1994 to demand the ability to wiretap emerging telecommunications networks but the agency has not had notable success in getting Internet companies to toe that line. "For the first time, the FBI has found a handle on the Internet and Internet wiretap," said Baker, who called the tactic "wickedly effective." Baker, who said he has no direct tie to the case but is monitoring it for some of his clients, said the FBI move raises uncomfortable ironies, occurring at the same time that American trade officials are pressuring Japan to open its own telecommunications markets. "We aren't very good at living up to the standards we expect from the rest of the world," Baker said. David Farber, an Internet pioneer who serves on the board of the Electronic Frontier Foundation, warned that the FBI action "could start a trade war." Farber, the chief technologist for the Federal Communications Commission, noted that he was speaking only for himself. But he said that the nation's law enforcement authorities' continued demands for ready access to communications weakens privacy and security protections.