from:news.bbc.co.uk/1/hi/business/4849742.stm

US group wants China 'spy' probe  



Lenovo is to supply 15,000 PCs to the state department

A US agency is calling for an official probe into Chinese computer firm Lenovo's contract to supply 15,000 computers to the US State Department.

The US-China Economic and Security Review Commission (USCC) said it feared the PCs could be fitted with bugging devices to spy on the US government.

Lenovo, which last year bought IBM's PC arm, said it had nothing to hide and would welcome the investigation.

Concern has been rising in the US over foreign companies buying US firms.

Political opposition

Earlier this month United Arab Emirates-based docks company Dubai Ports World was forced to announce that it would sell all US ports it had inherited after it bought UK firm P&O.

The move by Dubai Ports World followed extensive opposition from US politicians.

Last year, Chinese oil producer CNOOC withdrew from the race for US oil firm Unocal last year, again in the face of strong US political opposition.

However, Jeff Carlisle, vice president of government relations for Lenovo, said his firm had "nothing to hide".

Mr Carlisle added that no investigation was warranted and voiced concerns that Lenovo could be put at an unfair disadvantage regarding future US government contracts due to the controversy.

The State Department is spending about $13m (£7m) on the Lenovo computers, which are assembled at factories in North Carolina and Mexico.

Mr Carlisle added that the circuit boards are originally made in US ally Taiwan, and not mainland China.

Foreign intelligence

Yet USCC member Michael Wessel said the opportunity for intelligence gathering through the computers was "enormous".

Larry Wortzel, head of the USCC - whose membership is appointed by the US Congress - said he expected US lawmakers to begin a probe.

"If you're a foreign intelligence service and you know that a [US] federal agency is buying 15,000 computers from [a Chinese] company, wouldn't you look into the possibility that you could do something about that?" he said.

Another Article on the Matter with links
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from:www.redherring.com/article.aspx?a=16328

PC Spy Threat Alarms US Group

A U.S. advisory commission worries the Lenovo PCs sold to the State Department could be used for spying.
March 30, 2006

Lenovo’s campaign to raise its profile in the North American personal computer market ran off track Thursday following reports that a U.S. advisory commission is concerned that PCs the Chinese company sold to the State Department could be used for espionage.

The concerns arose after the U.S. State Department purchased more than 15,000 Lenovo computers for its offices. Members of the U.S.-China Economic and Security Review Commission, a government group that reports to Congress on the national security implications of trade between China and the United States, were scant on details.

But members said foreign governments could exploit such a sale.


“If you’re a foreign intelligence service and you know that a [U.S.] federal agency is buying your company [products], wouldn’t you look into the possibility that you could do something about that?” said Larry Wortzel, head of the commission.

Lenovo isn’t owned by the Chinese government. However, large Chinese companies do get tax breaks and other support because the country hopes one of its own businesses will reach multinational status (see China’s Secret Weapon).

Lenovo’s vice president for government relations, Jeff Carlisle, said the machines were no different than others in the Thinkpad line of computers that Lenovo acquired when it purchased IBM’s PC division last year (see Lenovo-IBM Deal Finalized
). He said they are assembled in the U.S. and Mexico with chipsets made in Taiwan.


“[Unauthorized installments] would be easily detectable by just about anybody,” he said of concerns of secretly embedded codes.

The State Department deal, worth $13 million, included “unclassified systems with removable hard drives,” according to Reuters. Department spokesperson Sean McCormack said the purchase was the “the best value for U.S. taxpayers.”

Lenovo said it “completely complied with U.S. requirements concerning government suppliers,” reported People’s Daily, a government-owned newspaper in China.

Lenovo’s U.S. Strategy Threatened

The flap could slow Lenovo’s recent push into the U.S. market. In February, the company unveiled its first line of self-branded computers aimed squarely at the West (see Lenovo PCs Shedding IBM Skin). Last month, it announced it may start trading in the United States (see Lenovo May Go Public In U.S.).

The security concerns threaten China’s first real chance of having a multinational company with the same brand recognition as a large Asian company such as Sony (see Lenovo’s U.S. Push).

The latest spy worries come on the heels of a broad controversy involving foreign company activities in the U.S.

After much public criticism, a Dubai company dropped its bid to operate six key ports in the United States. Concerns that Arab leaders and terrorists could subsequently gain control of the ports forced the company to sell them to a U.S. buyer.

Just last week, an Israeli network security firm, Check Point, dropped its $225-million plan to buy Sourcefire, a U.S. firm that has contracts with the government. The decision followed concerns in the U.S. government about security (see Check Point Drops Sourcefire Deal).

And last summer, Congress expressed fears after China’s CNOOC bid to buy U.S. oil company Unocal Corp. Some critics said the deal could put the Chinese government in control of American oil reserves.