'Like a skunk at a picnic'

'Like a skunk at a picnic'

At last week's JoC Asia-East Coast Maritime Conference in Norfolk, we had a most interesting speaker. He is not from the maritime industry and said he felt a bit "like a skunk at a picnic." He was not ashamed to tell the audience that he was "probably the least qualified person" in the room to address industry issues. Yet he has had more of an impact on the industry than perhaps any other individual in recent years. His name is Joseph A. Muldoon III, and if his name doesn't ring a bell, what he did most certainly will. For it was Muldoon, a Washington lawyer and lobbyist, who ignited the wildfire we know as DP World.

Muldoon became involved in the DP World case last December at the request of a family friend, the owner of Eller & Co., an unhappy partner of P&O Ports in the Port of Miami Terminal Operating Co. If that hadn't happened, he said, "I don't think this would have been an issue."

Why give Muldoon any more press than the mountain of it he's already generated? For the majority of the international trade community that views the DP World blowup as a fiasco, Muldoon is no friend. The controversy brought attention to the industry, some no doubt beneficial, but the uproar vastly exaggerated the security risks from DP World operating U.S. terminal facilities and presented the U.S. as xenophobic, protectionist and racist - not exactly the image we're trying to portray these days.

Muldoon, indeed, would not be relevant for mention here were it not for the interesting timing of his speech last week and for what he said, some of which only perpetuates the falsehoods that have characterized this debate from the beginning.

First, let's hear how Muldoon told the story.

Late last year, when it appeared DP World was emerging as a leading contender to acquire P&O Ports, including its U.S. assets, Muldoon said he was approached by Eller to see if anything could be done from Washington to prevent DP World from emerging as the winner. DP World was owned by the United Arab Emirates, and Eller didn't want a government for a partner, Muldoon said. A government owner as opposed to a purely private business would have a different set of motivations and possibly would claim sovereign immunity in a dispute, he said.

And dispute was what characterized the relationship between Eller and P&O Ports. Since its 1999 acquisition of ITO Corp., which owned half of POMTOC, P&O Ports had made "repeated attempts," Muldoon said, including going to court, to acquire Eller's 25 percent stake in POMTOC. According to Muldoon, Eller simply "didn't want to sell," and "just wanted to be left alone."

After P&O agreed to be acquired by DP World, an Eller subsidiary sued, seeking to block the sale. In Washington, meanwhile, Muldoon went to work on behalf of Eller, focusing on the interagency Committee on Foreign Investment in the U.S., or CFIUS, which had approved DP World's takeover of P&O Ports. Muldoon discovered that despite a law saying that the committee "shall" conduct a full-blown security review when the acquiring party is owned by a foreign government, that had not been done in this case and had been overlooked in many others as well. "The word 'shall' was deemed discretionary by the president," Muldoon said.

The attorney needed to enlist the support of Congress, but did not have high hopes. "I thought that this was a huge long shot," he told the audience. "My goal was to get one congressman to make a statement."

Muldoon focused on senators and representatives from states where P&O Ports operated. He hit paydirt with Sen. Chuck Schumer, D-N.Y., who repeatedly had criticized Bush administration strategy on port security and called for 100 percent inspections of inbound containers. Schumer criticized the deal in a press conference. That started the ball rolling, and the rest, as they say, is history. To avert legislation and with Bush conceding defeat as the story blew up into a national obsession, DP World announced on March 15 that it would sell its U.S. operations, which include terminal operations at six U.S. ports and its stevedoring services at approximately 20 Atlantic and Gulf ports. Case closed? Not so fast.

It's now late June, and while the story has faded from the headlines, it's been quietly heating up again behind the scenes. Muldoon said, "We've been totally silent, haven't said a word." But that is not entirely true.

About two months ago, a Web site, www.portsforus.org, appeared on the Internet. Muldoon is listed as the press contact. The message of the site is that not only is the deal to sell the P&O assets in the U.S. not finalized, but it may not be the intention of DP World to sell the business at all. "How will you feel if the government of Dubai ends up owning and operating the ports after all?" the site asks. "DP World has every intention of entering the U.S. market . . . Say hello to the owner and operator of our ports, Sheik Mohammad bin Rashid al-Maktoum."

News stories with this as the theme have also appeared recently, including a recent spot on CNN's Lou Dobbs show, and an ad in Roll Call, the Capitol Hill weekly newspaper.

At last week's conference, Muldoon expressed skepticism that DP World is serious about selling. He said that it was not initially disclosed that the U.S. businesses represented 10 percent of the value of P&O Ports. Given what some consider the steep price of $6.8 billion that DP World eventually paid after winning a bidding war against Singapore's PSA Corp., 10 percent of that price would be a big number to achieve in a sale.

Not mentioned, but along the same lines, is that DP World still has the approval of CFIUS to acquire the P&O assets and that no legislation was passed barring the sale. The commitment to sell was solely a tactical decision to relieve political pressure. "It raises the question in my mind that they are serious about selling," Muldoon said.

DP World has been forced to respond, and it has been straightforward in doing so. On June 9, P&O Ports sent a letter to members of the House and Senate assuring them that the sale is moving forward.

"The sale is proceeding as planned," wrote Nick Luff, the P&O official overseeing the sale from the company's London headquarters. He said P&O has been working with Deutsche Bank Securities Inc. and Sullivan & Cromwell LLP to restate the financial statements, and to prepare the offering memorandum and the accompanying data. "During the coming weeks, our advisors will approach a range of potential buyers," the letter said. "A large number of parties have expressed interest."

Luff also stated that since the takeover of P&O by DP World, the U.S. unit has been operating under a "hold separate" agreement under which DP has committed not to exercise management control over the business.

What is going on here? What is the agenda at work behind the attempt to revive the story? One possibility is that well-intentioned citizens believe that it would be a travesty for U.S. security for DP World to acquire the U.S. P&O assets.

Another possibility is that Eller wants to acquire P&O's stake in POMTOC, the dominant terminal operator in Miami. As currently planned, the U.S. P&O assets would be sold as a unit, and could probably expect bids from other big terminal-operating companies or private-equity investors. But if the business were placed in receivership, as the portsforus.org site urges, Eller might have a chance to acquire the POMTOC stake - which may be what this whole controversy is really about.