Sat, Mar 25, 2006 - Page 1 News List

US State Department draws flak over Lenovo purchase

NY TIMES NEWS SERVICE , HONG KONG

A US State Department purchase of more than 15,000 computers built by the Lenovo Group Ltd (聯想), a company controlled by the Chinese government, is starting to draw criticism in the latest sign of US unease about the role of foreign companies in the US economy.

The computers, worth more than US$13 million, are coming from factories in Raleigh, North Carolina, and Monterey, Mexico, that were part of the personal computer division that Lenovo purchased from IBM Corp last May.

Sean McCormack, a US state Department spokesman, said at the department's daily media briefing on Wednesday that the computers were intended for unclassified systems and would be serviced by the former IBM division.

The computer contracts are drawing heat from a diverse group of liberal and conservative critics who have been warning about China's growing power for years. These critics have been encouraged by the congressional scrutiny given to a plan by a company controlled by the royal family of Dubai in the United Arab Emirates to acquire operations at six US ports; the company has since agreed to give up those operations.

The critics warn that the deal could help China spy on US embassies and US intelligence-gathering activities, using hardware and software planted in the computers.

"The opportunities for intelligence gains by the Chinese are phenomenal," said Michael Wessel, a member of the US-China Economic and Security Review Commission, which was created by Congress to monitor and report on the bilateral relationship.

Larry Wortzel, the commission's chairman, said in an interview two weeks ago that while he would not be concerned if Airbus moved an aircraft production line to China, he would be worried if Lenovo ever started to sell computers to US government agencies involved in foreign affairs.

Responding on Thursday to the Lenovo deal, he predicted that, "Members of Congress, I think, will react very strongly when they see a deal like this come through."

Lenovo is a publicly traded subsidiary of Legend Holdings, which was started by the Chinese government in 1984 and is still controlled by the government; Lenovo declined on Thursday to comment on the computer sales to the State Department.

Word of the computer deal began to trickle out on Monday when a Lenovo distributor, CDW Government, a wholly owned subsidiary of the CDW Corp, announced its contracts to help the State Department modernize its information technology systems.

Max Peterson, the vice president of federal sales at CDW Government, said in a telephone interview that the State Department had approved a list of specific computer models, including the Lenovo models, and had asked computer systems integrators to bid for contracts to meet the department's needs and make their own choices among approved models.

CDW won the contracts and chose to begin delivering 500 Lenovo computers a week starting in November, he said.

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