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Blogger's Note: I appreciate the article for connecting the dots. Good investigative reporting includes assimilating seemingly minute points of information and seeing if a picture emerges. This article accomplishes that end.
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It's just yet another blurry line -
David Lazarus
Sunday, February 26, 2006
SF Chronicle
Say what you will about the propriety -- and national- security implications -- of having a government-owned Middle Eastern company manage major U.S. ports.
What's even more remarkable is that once again President Bush is forced to defend a controversial deal involving a corporate entity linked to a senior member of his administration.
To date, the gold-medal winner in potential corporate-political logrolling has been Vice President Dick Cheney, whose former employer, Halliburton, has received millions of dollars in government contracts in Iraq and elsewhere.
Now we have as silver medalist Treasury Secretary John Snow, who previously served as head of transportation giant CSX Corp. The company sold its global port assets to Dubai Ports World for $1.15 billion a year after Snow left for the White House.
Snow's Treasury Department was the government agency that subsequently vetted and approved the $6.8 billion sale of a British company to state-run Dubai Ports World. The Dubai conglomerate in turn will take over the British firm's management of six U.S. ports.
The Treasury Department says Snow played no role in CSX's dealings with Dubai Ports World.
"If people do look into it, they'll see in fact there's absolutely no personal interest or relationship on the part of Secretary Snow with business activities at CSX Corp.," Tony Fratto, a Treasury spokesman, told reporters last week.
But the situation once again highlights how blurry the line separating political and corporate interests has become. This is the danger of having former CEOs running the country, especially when they come from powerful industries like oil and transportation.
"The potential for conflict of interest is greater today than it's ever been," said Kirk Hanson, executive director of the Markkula Center for Applied Ethics at Santa Clara University.
The concern, he said, lies not just in an official's affiliation with a former employer but also in the fact that the official typically maintains relationships with executives who remain with the company.
Snow may have had nothing to do with CSX selling its ports division to the Dubai company, Hanson observed. But it's likely that Snow knows high-level people who now work for the Mideast firm.
Dubai Ports World's general counsel, George Dalton, and its head of business development, Matt Leech, came to the company from CSX.
"As more Republican and Democratic officials move into private-sector jobs and then move back into the public sector, you'll see more and more cases like this," Hanson said.
Some critics of the deal, not unreasonably, have noted that two of the 19 hijackers behind the Sept. 11, 2001, attacks on the World Trade Center and Pentagon were from the United Arab Emirates.
Moreover, 11 of the hijackers -- all Saudis -- flew to the United States from Dubai. And U.S. officials say that Dubai played a central role in Osama bin Laden's financial network prior to the attack.
Last but not least, Dubai was also used by the man called the father of Pakistan's nuclear program, Abdul Qadeer Khan, to quietly provide nuclear technology to Iran and Libya.
On the other hand, Dubai serves as a base for U.S. military activities in the region and is credited by the Bush administration with being an ally in efforts to combat terrorism.
Bush, who has staked his presidency on national-security issues, told reporters last week that he's comfortable with Dubai Ports World overseeing commercial aspects of some of the largest ports in the United States.
"If there was any chance that this transaction would jeopardize the security of the United States, it would not go forward," he insisted.
"This is a company that has played by the rules, that has been cooperative with the United States, a country that's an ally in the war on terror, and it would send a terrible signal to friends and allies not to let this transaction go through."
What kind of signal does it send, though, to have yet another top administration official linked to yet another controversial corporation entrusted with vital (and profitable) aspects of the nation's defense?
Snow pocketed $33.2 million when he divested his CSX holdings before joining Treasury in 2003.
He got an additional $8 million in deferred compensation a year later and will receive annual pension payments of $79,129.
Snow parlayed a stint as head of the National Highway Traffic Safety Administration in 1976-77 to become a lobbyist for the Chessie System railway, which merged with the Seaboard Coast Line in 1980 to form CSX.
He was named president of the company in 1988, chief executive a year later and chairman in 1991. He remained with CSX until Bush tapped him for the Treasury post.
Snow sold CSX's shipping division, CSX Lines, to none other than the Carlyle Group in 2002 for $300 million.
Carlyle is a prominent Washington investment firm that in past years has counted among its associates the likes of former President George H.W. Bush, former Secretary of State James Baker and the bin Laden family (spawning a raft of conspiracy theories).
In 2004, Carlyle turned around and sold off CSX Lines (now called Horizon Lines) to another investment firm, Castle Harlan, for $650 million. Castle Harlan was co-founded by John Castle, a prominent Republican donor.
A few months later, CSX said it was selling its international terminal business to Dubai Ports World, making the Mideast company one of the leading operators of maritime facilities.
And now Dubai Ports World is set to assume management of docks in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia -- with the blessing of Snow's Treasury Department.
Daryl Koehn, executive director of the Center for Business Ethics at Houston's University of St. Thomas, said that even if Snow played no role in any of these events, citizens are right to be concerned.
"There's a smell test that has to be passed in these cases," she said. "The appearance of a conflict can be just as bad as a real conflict when it comes to the trust people place in government."
David Lazarus' column appears Wednesdays, Fridays and Sundays. Send tips or feedback to dlazarus@sfchronicle.com.
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URL: http://sfgate.com/cgi-bin/article.cgifile=/c/a/2006/02/26/BUGHIHDT5P1.DTL
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