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Date Posted: 02:40:38 10/19/07 Fri
Author: Bob-O-Link

Oct 6, 2007

Treasury official recused on 3Com

Paulson admits conflict of interest

By Kevin Carmichael BLOOMBERG NEWS

U.S. Treasury Secretary Henry Paulson won’t participate in any government review of the purchase of 3Com Corp. because his former employer, Goldman Sachs Group Inc., is advising 3Com in the deal, his spokeswoman said.

Boston-based Bain Capital LLC said Sept. 28 that it is teaming with Huawei Technologies Co., China’s biggest maker of telecommunications-networks equipment, to buy 3Com for $2.2 billion. Bain has voluntarily submitted the acquisition agreement for review by U.S. authorities for security concerns.

Paulson chairs the Treasury’s Committee on Foreign Investment in the United States, or CFIUS, which reviews international investments that have national-security implications. He was chairman of Goldman for eight years before moving to Washington.

“Secretary Paulson would not have any involvement in a CFIUS review of this transaction,” Brookly McLaughlin, Paulson’s spokeswoman, said yesterday in Washington.

Huawei will take a 16.5 percent stake in 3Com, which is based in Marlboro, Mass.

“The U.S. government review in this matter will conclude that the company will be firmly controlled by an American firm, have only a small minority foreign shareholder and that the deal presents no risks to national security,” Bain said in an e-mailed statement.

The Treasury secretary is chairman of CFIUS, a multi-agency panel that reviews purchases of domestic assets involving companies based abroad, so any analysis would normally involve the secretary.

Paulson, who was sworn in as Treasury chief on July 10, 2006, was obligated to remove himself from any decisions involving Goldman Sachs for one year. Paulson took that a step further and pledged to recuse himself from anything that directly involves Goldman Sachs for his entire tenure as secretary, McLaughlin said.

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