- The Washington Times - Thursday, May 1, 2003

NEW YORK (AP) U.S. national-security concerns forced a Hong Kong-based conglomerate to pull out of the $250 million purchase of bankrupt fiber-optic carrier Global Crossing Ltd. yesterday, leaving the deal in the hands of a partner in Singapore.
   Hong Kong’s Hutchison Whampoa and Singapore Technologies Telemedia originally agreed last year to pay $125 million each and together assume a 61.5 percent stake in Global Crossing.
   But critics of the deal, including some members of Congress, have questioned whether Hutchison has ties to the Chinese government. The deal was being scrutinized by the Committee on Foreign Investment in the United States (CFIUS), made up of officials from several government agencies.
   Although Hutchison, controlled by billionaire Li Ka-shing, offered to take a passive role in Global Crossing, it still faced a possible rejection by CFIUS, which this week said it would open a 45-day investigation into the deal.
   Rather than wait for a resolution, Hutchison pulled out, and Singapore Technologies Telemedia agreed to pay the full $250 million for the stake. Otherwise, the deal essentially remains the same.
   Global Crossing’s chief executive, John Legere, said CFIUS has not expressed security concerns about Singapore Technologies Telemedia, even though its parent company is owned by Singapore’s government.
   “I think it’s going to have a big effect,” said Stewart Baker, a telecommunications lawyer with Steptoe & Johnson LLP and former general counsel for the National Security Agency. “Singapore is in a different category these days from Hong Kong, which is increasingly part of China in every respect and raises geopolitical concerns that Singapore may not.”
   Hutchison spokesman Mark McGann denied that his company has any connection to the Chinese government. He pointed out that regulators in other countries, including Britain, had approved the Global Crossing deal.
   He said Hutchison tried to be flexible with CFIUS and respect the “bigger concerns in the current environment, post 9/11.” But “we decided we could not wait any longer to make the investment,” he said.
   A spokesman for the U.S. Treasury Department did not return a call seeking comment about the review of the Global Crossing deal.
   Global Crossing, which is based in Bermuda but has corporate offices in Florham Park, N.J., was one of the highest fliers in the telecom boom of the late 1990s, developing a 100,000-mile fiber-optic network connecting 27 countries.
   But the fiber-optic market collapsed because of severe overcapacity, and Global Crossing filed one of the biggest bankruptcies in U.S. history in January 2002, claiming assets of $22 billion and debts of $12 billion.
    The company’s accounting has also fallen under federal scrutiny and is the subject of shareholder lawsuits.
   If the deal wins approval, Mr. Legere expects Global Crossing to emerge from bankruptcy within months with about $200 million in debt. He said the company has been overhauled while in Chapter 11 and dramatically cut costs.

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