Saturday, March 25, 2006

State Department Is Criticized for Purchasing Chinese PC's

The New York Times
State Department Is Criticized for Purchasing Chinese PC's

HONG KONG, March 23 — A State Department purchase of more than 15,000 computers built by the Lenovo Group of China is starting to draw criticism in the latest sign of American unease about the role of foreign companies in the American economy.

The computers, worth more than $13 million, are coming from factories in Raleigh, N.C., and Monterrey, Mexico, that were part of the personal computer division that Lenovo purchased from I.B.M. last May. Sean McCormack, a 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 I.B.M. 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 American ports; the company has since agreed to give up those operations.

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

"The opportunities for intelligence gains by the Chinese are phenomenal," said Michael R. Wessel, a member of the United States-China Economic and Security Review Commission, which was created by Congress to monitor and report on the bilateral relationship. Larry M. 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 American 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 company controlled by Legend Holdings, which was started with Chinese government backing in 1984; the government-controlled Chinese Academy of Sciences now holds 65 percent of Legend, while Legend's employees own the rest. 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 Corporation, sent a press release to members of the business news media announcing its contracts to help the State Department modernize its information technology systems. CDW, based in Vernon Hills, Ill., said that it had been carrying out an $11.65 million contract to supply the State Department with more than 15,000 Lenovo ThinkCentre M51 desktop computers, plus a $1.35 million contract to provide nearly 1,000 Lenovo ThinkCentre M51 minitower computers.

Max R. Peterson II, 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.

Chinese ownership of Lenovo was never discussed with the State Department through the contract process and the computer deliveries, Mr. Peterson said.

He noted that the Committee on Foreign Investment in the United States had approved the Lenovo acquisition of the I.B.M. division.

David Barboza contributed reporting from Shanghai for this article.