Clinton Approves NTT-Verio Deal

SAN FRANCISCO (08/23/2000) - The White House announced Wednesday that President Clinton will allow Japan's Nippon Telegraph and Telephone Corp. to purchase the U.S. Web hosting company Verio Inc., which had undergone an unusual high-level review due to espionage concerns.

The proposed US$5.5 billion deal came under the scrutiny of a federal government national security panel due to concerns about potential spying because NTT, which is majority owned by the Japanese government, could have access to U.S. wiretapping activities.

A White House statement said a memo approving the deal was signed Tuesday.

The president's approval came after a recommendation by the Committee on Foreign Investment in the United States, which reviewed the company's proposed acquisition of Verio, based in Englewood, Colo., for more than two months. The NTT-Verio deal marked the first time that a law called the Exon-Florio provision of the Defense Production Act, usually relegated to aerospace or weapons deals, has been invoked to look at an Internet acquisition.

While government officials are barred from discussing the review process, there were reports that the FBI had been concerned that the deal could give NTT access to U.S. wiretapping information. That concern had pitted the law enforcement community against other government agencies that oversee trade, which argued that failing to approve the deal could result in trade repercussions.

"President Clinton has decided against intervening in the proposed acquisition of Verio ... by NTT Communications,'' the White House statement said. "As a result of the investigation and negotiations with NTT Communications and Verio, any national security issues that may have been presented by this transaction have been resolved." While NTT reached an agreement in May to pay $60 per share for the shares of Verio it does not already own, the company had extended the offer several times during the security review.

The Exon-Florio provision, which became law in 1988, authorizes the president to investigate and, if necessary, to bar a proposed foreign acquisition of a U.S. company. In order to do so, the president must find that there is evidence that the foreign government might threaten national security and that current laws don't allow the president to best protect national security.

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