CHINESE FIRM TO LEASE OLD LONG BEACH BASE.

Byline: Karen Gullo Associated Press 

Shut by military cutbacks, a historic Navy base in Long Beach is about to be leased to a China-owned shipping company under an agreement assisted by the White House.

President Clinton twice met with Long Beach officials to push their plan forward - once in California last year and at a White House meeting in 1995 that included his chief of staff and the Pentagon's No. 2 official.

The deal approved by the Navy turns over the base - valued by the city at $65 million and by preservationists at as much as $300 million - free of charge to the city of Long Beach. The city has agreed to lease it to COSCO, the China Ocean Shipping Co., which already has a small operation at the base.

The prospect has raised some eyebrows - a U.S. government property encompassing prime port space turned over to a foreign shipping company with a recent checkered history and in direct competition with U.S. shippers.

Materials prepared for the president's September 1995 meeting identified the Chinese company as the likely ``anchor tenant'' for the base. Participants said Clinton shook hands and encouraged his subordinates to do what they could to assist Long Beach.

Others in the meeting included Clinton's then-Chief of Staff Leon Panetta, Deputy Defense Secretary John White, various other officials and Carmen Perez, vice president of the Long Beach harbor and a former vice chairwoman of the Democratic National Committee.

The committee, a subject of intense scrutiny for months because of hundreds of thousands of dollars in campaign money donated by China and Taiwan interests, figured tangentially in at least two other COSCO connections.

Donor Johnny Chung, a Chinese-American businessman from California, gave $366,000 to the Democrats that was later returned on suspicion it illegally came from foreign sources. Chung brought six Chinese officials to the White House last year to watch Clinton make his weekly radio address. One of the six was an adviser to COSCO.

Also in 1996, the chairman of one of two Chinese arms companies implicated in a scheme to smuggle 2,000 illegal Chinese-made weapons into Oakland aboard a COSCO ship had coffee in the White House in an affair associated with DNC fund raising. Officials of the weapons companies were indicted, but COSCO was not charged.

Despite the China connection, the Long Beach deal apparently went forward without a national security review.

``To the best of the recollection of those involved, there seemed to be no reason to check with the National Security Council on the decision made by Long Beach government officials,'' White House spokesman Lanny Davis said.

``We supported that business transaction on the grounds that it would help the local economy,'' he said. The facility is expected to create between 300 and 600 direct jobs.

COSCO, the Chinese government's merchant marine, is among the world's largest cargo enterprises with 600 ships. It has been involved in several recent controversies in addition to the Oakland smuggling episode.

In December, a COSCO ship plowed into a crowded boardwalk in New Orleans, injuring 116 people. Mechanical failure has been blamed. In 1992, the company was fined $400,000 to settle allegations it violated U.S. shipping law by paying kickbacks to shippers instead of abiding by published tariffs.

Six COSCO ships have been detained for violating international safety regulations in the last year, the Coast Guard says, putting the company on a target list of shippers to monitor.

Last summer, China promised to punish COSCO for shipping 640 tons of waste from the United States to China, where it was dumped.

And in 1993, U.S. Navy ships stopped a COSCO ship in the Persian Gulf after U.S. intelligence warned it might be carrying chemical weapons materials. The ship was searched after a 24-day standoff, but nothing was found.

America's former top intelligence officer said he believes the White House at least should have consulted with national security agencies because of ``potential use of smuggling or electronic intelligence.''

``Strictly from a standpoint of the Navy departure, if all sensitive facilities and capabilities have been removed, there is no inherent national security problem,'' former CIA director Robert Gates said.

``But any time you turn over an American port facility to a foreign-owned company, especially one with significant government connection, then at least it ought to be vetted through national security agencies,'' he said.

A Navy official said no intelligence review was sought because of COSCO's existing small presence in Long Beach, and the expansion is not considered a security threat.

Bids were not sought on the project, and no U.S. companies are known to have expressed interest in taking over the property the Chinese shippers are expanding into.

City officials hail the agreement as an economic lifesaver for a community hard hit by defense cutbacks. ``We were almost at a point of desperation,'' Long Beach Mayor Beverly O'Neill said.

O'Neill, instrumental in securing the president's assistance, is going to China next month on a trade mission. She wrote Clinton last year thanking him for his ``personal intervention.''

The historic base is to be converted to a state-of-the-art cargo terminal to receive ships bearing thousands of containers with clothes, video cameras, toys and building materials manufactured in China.

The facility will create only 300 to 600 direct jobs, but thousands of indirect jobs and millions of dollars of business will be generated in the region as a result of increased trade, city officials said.

The city's harbor will pay $200 million to prepare the base, dredge the waterfront and dispose of contaminated material. It will also contribute $200,000 for the Chinese company's moving costs. Work is to begin soon and be completed by next summer.

In turn, COSCO will lease the base for 10 years at $14.5 million a year, with an option to expand onto an additional 150 acres of old Navy shipyards to be developed at the harbor's expense.

Opponents, who want to preserve the base's historic buildings, say COSCO is getting an incredible deal.

A cultural preservation group called Long Beach Heritage and several other local organizations, who sued to block the plan, won a partial victory last week when a judge ordered the harbor to reconsider the project.

Cosco officials at the company's U.S. headquarters in Secaucus, N.J., and in Beijing would not comment or respond to questions.

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PHOTO The Long Beach Navy base, closed due to downsizing, is set to be leased to Ocean China Shipping Co., creating up to 600 jobs.

Associated Press