Israel, Md. ties called secure

U.S. probe of software deal, experts say, won't weaken relationship

March 04, 2006|By STACEY HIRSH | STACEY HIRSH,SUN REPORTER

Maryland has worked hard to forge a special relationship with Israel: It has created a Maryland/Israel Development Center to encourage trade and investment. It started a $1 million high-tech joint venture fund to foster technology development in the two countries. And it began an incubator program to encourage Israeli companies to open offices in Maryland's technology incubators.

Top Maryland politicians have taken a personal interest in nurturing the relationship: Gov. Robert L. Ehrlich Jr. has visited Israel three times, once as governor and twice as a congressman. Baltimore Mayor Martin O'Malley took a trip there in January. And Lt. Gov. Michael S. Steele traveled to Israel in November.

So local experts don't see the relationship faltering as a result of the lengthy national security review threatening an Israeli company's planned acquisition of a Columbia-based Internet security firm.

"The relationship with Israel is too large and complex to be derailed by something like this," said Peter Morici, a professor of international business at the University of Maryland's Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission, an independent federal agency.

Israeli firm Check Point Software Technologies Ltd.'s $225 million bid to buy Sourcefire Inc., which makes software that protects against hackers, is under investigation by the Committee on Foreign Investment in the United States, or CFIUS. That's the same panel that approved Dubai Ports World's bid to run some operations at six U.S. ports, including Baltimore.

Experts say the Sourcefire deal raises national security issues because the Internet is used for critical communications during national disasters and by the Defense Department to transmit information.

The Sun reported yesterday that the FBI opposes any sale of Sourcefire's technology to a foreign entity.

But Barry Bogage, executive director of the Maryland/Israel Development Center, doesn't think the probe will scare off Israeli investment. "This is specifically an acquisition," he said. "Most trade has to do with sales and marketing and joint research and distribution."

Bogage, who has headed up the Maryland/Israel Development Center for 14 years, said this is the first acquisition he's seen of a Maryland company by an Israeli company. More than 30 Israeli companies have offices in Maryland, he said.

In past years, many Israeli companies opened offices in California, but the time difference and long flight between the Middle East and the Golden State led many Israeli businesses to open offices on the East Coast, Bogage said.

Maryland is an attractive option, he said, because of its strong information technology and life sciences work force and proximity to federal government offices, including the Food and Drug Administration and the National Institutes of Health. Companies that want to sell to the federal government want an office in Maryland, Bogage said.

The CFIUS investigation won't deter that, Bogage said, because it involves investigation by the federal, not state, government. "It's not going to matter where you are in the U.S. if it's a federal government issue," Bogage said.

In Israel, the Check Point investigation has garnered little attention. Until recently, CFIUS had investigated 25 of the 1,600 cases it looked at, according to the Treasury Department. Only one of those deals was nullified.

Chris Foster, deputy secretary of the Maryland Department of Business and Economic Development, says Israel and Maryland share a common thread in the aerospace and defense industries. DBED's venture fund is a Sourcefire shareholder, and Foster says the Sourcefire acquisition bodes well for Maryland business. Steele visited with Check Point executives during his trip to Israel in November.

"This really helps us when it comes to building the security cluster," Foster said, "and we see the potential for Check Point to grow their security cluster here."

The Israeli and Maryland governments have much in common, said Art Abramson, executive director of the Baltimore Jewish Council and a political scientist who accompanied the mayor and the governor on their trips to Israel. State leaders have in the past talked with Israeli officials on homeland security issues, and the U.S. relationship with Israel is an important concern for Maryland voters.

"Obviously, it's vitally important that the voters understand the whole gamut of relationships that elected officials have, Israel being one of them," Abramson said. "And from a very political perspective understand that the Jewish community does vote, and obviously it is of great interest to the community how Americans deal with positions on Israel."

Ehrlich said it was too early to tell what impact the investigation could have on the Maryland-Israel relationship, and he is being briefed on the issue. "It's an item of interest but not concern as yet," he said yesterday.

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