Tags: tech | secrets | to | China

3Com Deal May Give U.S. Secrets to Chinese Firm

Thursday, 04 Oct 2007 03:01 PM

By Rod Proctor

Selling part of the pioneering computer firm 3Com to a Chinese company with strong links to that nation's military could effectively hand over sensitive security technology to the Chinese, defense experts warn.

The $2.2 billion sale would put Massachusetts-based 3Com in the hands of global investment powerhouse Bain Capital Partners.

Part of the deal also gives a minority interest to Huawei Technologies, a Chinese computer-networking firm founded by a former officer of the Peoples Liberation Army.

Huawei would "become a commercial and strategic partner of 3Com," according to a report by Bill Gertz of The Washington Times.

“Huawei is up to its eyeballs with the Chinese military,” one defense official tells the Times.

“We are proposing to sell the PLA a key to our front door,” another defense official tells the Times.

GOP lawmakers have reacted strongly to the proposed sale, which was announced Sept. 28, and Pentagon officials are investigating it.

Bain Capital has agreed to submit the deal to the Treasury's Committee on Foreign Investment in the United States (CFIUS) for review.

According to the Times, Alabama GOP Senator Jeff Sessions has said the 3Com-Huawei purchase raises more red flags that the nixed Dubai Ports deal, which would have left the management of six major U.S. ports in the hands of a United Arab Emirates company.

The Pentagon uses 3Com equipment to prevent computer intrusion, or hacking, into sensitive databases. The 3Com technology includes computer-intrusion detection.

Huawei, as a "strategic partner" of 3Com, would become part owner of that technology.

The sale comes only weeks after Britain’s Financial Times reported that China’s PLA had successfully hacked into a Pentagon computer network serving the office of Defense Secretary Robert Gates in June.

The Pentagon is still trying to determine how much data was stolen.

Other countries have also experienced cyber attacks emanating from China.

Part of the British House of Commons system was shut down last year due to incursions.

Germany has experienced intrusions as well. German Chancellor Angela Merkel reportedly raised the issue with the Chinese during a visit to Beijing.

Rep. Duncan Hunter, R-Calif., and Rep. Pete Hoekstra, R-Mich., are calling for a thorough review before the merger goes through.

Sen. Christopher S. Bond, R-Mo., tells the Times, "It is troubling to me that a foreign military organization with interests in communications might obtain access to our security systems."

Huawei's checkered past is one reason for lawmakers' concerns.

Several years ago, Huawei and two other Chinese firms were charged with violating U.N. sanctions against Iraq, by helping Saddam Hussein's regime build a fiber-optic system linking the country's air-defense network. U.S. and British warplanes bombed the network in August 2001 after Iraqi missiles fired on allied aircraft patrolling the no-fly zone.

Huawei also helped the Taliban militia build a telephone-switching system in Afghanistan prior to the overthrow of the regime after 9/11, according to the Times.

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