State Department Is Criticized for Purchasing Chinese PC's

["Richard M. Smith" <rms () bsf-llc com>]

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March 24, 2006

State Department Is Criticized for Purchasing Chinese PC's 

By KEITH
<http://topics.nytimes.com/top/reference/timestopics/people/b/keith_bradsher
/index.html?inline=nyt-per> BRADSHER

HONG KONG, March 23 - A State Department purchase of more than 15,000
computers built by the Lenovo
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.m
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=LNVGY> Group of
China
<http://topics.nytimes.com/top/news/international/countriesandterritories/ch
ina/index.html?inline=nyt-geo>  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.
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.m
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=IBM>  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.


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