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Ehrlich objects to port deal

Should have been told about security issues before sale, he says

By Meredith Cohn and Gwyneth K. Shaw

Sun reporters

February 21, 2006

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Gov. Robert L. Ehrlich Jr. said yesterday that he was concerned that a state-owned company in the United Arab Emirates could gain control of some operations at the port of Baltimore - the highest-ranking Maryland official to weigh in on what has ballooned into a major national political issue over port security.

Maryland's governor joined both potential Democratic opponents for his seat and members of Congress in condemning last week's sale to Dubai Ports World of a British company that held contracts to provide services at 21 U.S. ports, with management control at several.

The proposal has ignited debate about security at U.S. ports, where leaders have complained for years that the majority of money and attention has gone to bolster security at airports.

"We needed to know before this was a done deal," said Ehrlich, who said he might seek a way to reverse the sale. "To find out when we did, how we found out, given the state of where we are concerning security, is very troubling."

A week ago, Ehrlich's appointed port director, F. Brooks Royster III, expressed little alarm about the Dubai operator even though it would have one of its largest U.S. stakes in Baltimore. Port security experts overall said they saw little reason to stop the transaction. And in the weeks leading to the deal between DP World and Peninsular & Oriental Steam Navigation Co. of the United Kingdom, little concern was raised.

The Dubai company will not own any U.S. ports, port and security experts note. Foreign companies have operated in American ports for years, and all are subject to the rules that clamped down on access to terminals and have required more information about crews and cargo since Sept. 11, 2001. Some port and security officials, including Maryland's Royster, suggested that the deep pockets of the Dubai company might aid their efforts to expand or improve security.

"This is not productive and a waste of time and energy," Sigmund Shapiro, chairman of Samuel Shapiro Co. Inc., a customs and logistics company at the Port of Baltimore, said of the groundswell of political criticism.

"Scare tactics are not useful," he said. "And closing off our borders is wrong. We have ships coming from Korea, are we going to close our borders to them? ... We need to keep commerce going. Guess who Dubai Ports World will give jobs to - American longshoremen."

But a growing roster of elected officials, and now even some of the ports, say they want more information and contend that the deal moved through official channels in secret.

Baltimore Mayor Martin O'Malley, a candidate for governor, said yesterday that he plans to make the Dubai deal an issue at this week's U.S. Conference of Mayors meeting in Key West, Fla.

"Not so long as I'm mayor and not so long as I have breath in my body," O'Malley said about the deal going forward. "We are not going to turn over the port of Baltimore to a foreign government. It's not going to happen."

Montgomery County Executive Douglas M. Duncan, also a Democratic candidate for governor, criticized the deal yesterday.

"Port security has long been a soft spot in the war on terror and one that has been almost completely ignored by the Bush administration," he said in a statement. "And the safety of the people of Maryland should not be placed in the hands of a foreign nation with questionable security credentials."

The $6.8 billion transaction hinged on recent approval from the Committee on Foreign Investments in the United States, which examines investment that could pose security risks.

The committee is headed by Treasury Secretary John W. Snow and has representatives from a dozen federal agencies, including the Department of Homeland Security. It determined that the deal posed no threat, but because its deliberations occur in private, lawmakers have questioned whether it looked hard enough at the implications of allowing a United Arab Emirates firm into some of the largest U.S. ports.

One of the hijackers involved in the Sept. 11 attacks was from the UAE, and others traveled through the emirates, although the State Department lists Dubai as a "leading partner" in the war on terrorism.

The political outcry has been striking in its bipartisanship, rallying a diverse group in Washington from New York's Democratic Sen. Hillary Rodham Clinton to Pennsylvania's Republican Sen. Rick Santorum.

Nearly all of the lawmakers who have weighed in represent states that contain one of the ports involved. In New York, Republican Gov. George E. Pataki voiced doubts yesterday about the acquisition and Republican Rep. Peter T. King, the House Homeland Security chairman, was one of the earliest and loudest critics.

Several lawmakers asked Snow to re-review the deal. Others called for congressional hearings. The Senate Banking Committee, on which Maryland Sen. Paul S. Sarbanes is the top Democrat, plans a session on the deal when lawmakers return from a Presidents Day recess next week.

Senators Clinton and Robert Menendez, a New Jersey Democrat, plan to push legislation that would bar companies owned by foreign government from controlling operations at U.S. ports. Menendez said yesterday that President Bush should stop the deal immediately.

White House Press Secretary Scott McClellan defended the administration's decision on the deal again yesterday, saying "transactions like this go through a rigorous review process."

Maryland Democratic Rep. C.A. Dutch Ruppersberger said his concerns have nothing to do with the fact that Dubai Ports World is owned by an Arab government.

"I wouldn't want Germany or France or any country owning the company that is controlling the operations of our ports," said Ruppersberger, a member of the House Intelligence Committee whose district includes the port of Baltimore. "For us not to have total control over personnel, over operations, is not in our best interest. And I can't understand why the administration doesn't see that."

He and others said they hoped to bring the issue of port security into the spotlight.

"At a minimum, I think, it's an impetus for additional funding for port security," said Rep. Vito J. Fossella, a New York Republican.

It is unclear whether any of the protests will have an effect on the contracts each port has signed with the company. The port of Baltimore, for one, currently has a six-year deal with former P&O to operate Seagirt Marine Terminal that began in 2001 and an option to extend for another six years. P&O took over operations there in 1999 when it bought a New Jersey firm.

The work involves managing the flow of containerized cargo, loading and unloading ships and overseeing dockside storage.

In New York and New Jersey, P&O has a 30-year deal with the port authority to operate the container terminal in Port Newark and a 20-year deal with the city of New York to run the cruise ship terminal.

meredith.cohn@baltsun.com gwyneth.shaw@baltsun.com