US government may veto Huawei's acquisition of 3Leaf Systems

The US government is likely to veto Chinese telecom network gear maker Huawei Technologies Co Ltd's 2010 acquisition of 3Leaf Systems, according to a report in The Wall Street Journal, yesterday .

The US Committee on Foreign Investment (Cfius) may urge President Barack Obama to veto the $2-million acquisition by Huawei of the small US start-up company 3Leaf Systems, said the paper.

Shenzhen-based Huawei, which is already under intense scrutiny in many countries including India for its links to the Chinese People's Liberation Army, had been asked by Cfius in November 2010 to secure retroactive clearance for its hush-hush acquisition of 3Leaf. (See: US government questions Huwaei on "sneak" 3Leaf Systems acquisition) 

Cfius, which is chaired by the Treasury Secretary Timothy Geithner and has representatives from the Defence and Homeland Security departments, is empowered to review acquisitions that could have national security implication

Cfius does not formally block a deal, but informs American companies to voluntarily drop a transaction if it finds that the deal is not in the interest of national security. However it has blocked three Chinese deals earlier.

Cfius was scheduled to make its recommendation early this week, and the deal can be still approved by Prresident Obama as he is not required to abide by the recommendations of Cfius, the paper said.