Nevertheless, financial market experts as well as political prognosticators have already decided that CFIUS will give the SABIC-GE Plastics deal its seal of approval with no national security issues at all to arise. Therefore, the deal is expected to close in the 3rd quarter of 2007. And while GE Plastics may not be a direct contractor or supplier to either government or commercial entities, it still could have national security implications.
And it does not completely dismiss the fact that the U.S. government will be dealing with the Saudi Royal Kingdom-state government as it assumes the laws and regulations of the U.S. Any contracts which GE Plastics previously had and which remain active, with either its parent company GE or directly with other corporations or government agencies, would supposedly transfer to SABIC. Such government agencies for which GE Plastics could have existing contracts with are the Department of Transportation (DOT), the Department of Defense (DOD), the Department of Homeland Security (DHS), the Federal Emergency Management Agency, (FEMA), the Federal Aviation Agency (FAA) and the National Aeronautics and Space Administration (NASA), to name but a few.
And based upon the lack of underlying history of this more than unusual corporate arrangement, a more thorough review might be warranted by CFIUS, which is an inter-agency committee chaired by the Secretary of Treasury. Rather than its routine 30-day investigative period, it could self-impose the more thorough 45-day review process. For as much as the U.S. government as well as the government’s industrial complex wishes to favor the promotion of global trade above that of national security, in an age of political correctness, the fact is, the U.S. military is engaged in two simultaneous wars in the Middle East. And it would perhaps be better to use more deliberation and discretion rather than to rubber-stamp such an acquisition.
The Exon-Florio Amendment, which emerged in 1988, amended Section 721 of the Defense Protection Act of 1950, as part of the 1988 Omnibus Trade and Competitiveness Act of 1988. The statute authorized the President of the U.S. to block or suspend a merger, acquisition or takeover by a foreign entity if there is credible evidence that a “foreign interest exercising control might take action that threatens to impair the national security” in the event existing law does not provide “adequate and appropriate authority for the President to protect the national security in the matter before the President.”
Equally deceptive in the process, whereby foreign governments or foreign owned corporations purchase a U.S. owned entity is that they then become indirect stakeholders in U.S. public policy as well. They not only access capital gains but gain political clout on Capitol Hill too. Such opportune objectives of a foreign nation do not just begin during the corporate bidding process, however, but requires a methodology of lobbying dealmakers otherwise known on Capitol Hill as the U.S. Congress. To wit, the Saudi Arabian government spends $20 million annually to lobbying organizations and law firms representing them in order to gain exclusive access to lawmakers in advancing such financial interests or specific foreign trade policy agendas.
For example, former Secretary of State, James Baker, a senior partner in the law firm, Baker Botts, LLC, of Houston, TX, is legal representative to Saudi Prince Sultan bin Abdul Aziz, one of several Saudi persons, entities, Islamic foundations and financial institutions named as defendants in a pending lawsuit brought by the 9/11 Families to Bankrupt Terrorism.
And lastly, but no less important, in the last frontier of U.S. fire sale economics, concerns the type of financial instruments which will be used for the SABIC-GE Plastics transaction promising GE $9 million in cash, after taxes. In mid-2006, SABIC set up an Islamic finance arm to oversee its domestic Islamic bond issues. Since the United Kingdom is home to two Islamic banks, sukuks, or asset-based Islamic bonds, are readily marketed to international investors. SABIC plans to finance $2.2 billion of the GE Plastics deal by issuing bonds. The finance group and underwriters for the SABIC-GE transaction are the combined CitiGroup, Inc., HSBC Holdings Plc, Amro Holding NV and GE Capital, a division of GE, GE Plastics’ parent company. Bonds are expected to be sold in Europe and in the U.S.
Of note, is that in April 2006, Dow Jones and CitiGroup launched the first Islamic Bond Index, created specifically to assess global bonds’ compliance with Shariah investment guidelines. Shariah law dictates that such money be used for only those purposes compatible with Islam. But there are potential difficulties with such transactions in that they are specifically Shariah law compliant instruments and may conflict with U.S. law.
Presently, it has not yet been decided by SABIC if in fact it will exclusively issue Islamic bonds for the purchase. But the complexities involved in the GE Plastics sale is anything but straight forward and for that very reason is deserved of more scrutiny, analysis and caution from not only CFIUS but from the U.S. Congress.
And U.S. Congressional representatives should be far less mindful about critics’ scorn and far more concerned with their dutiful obligation to govern in the best interest of the American people and their responsibility to use foresight in order to best preserve America’s future and its assets.
Copyright © 2007 Diane M. Grassi
Contact: dgrassi@cox.net(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
