News reports on Friday described a previously unknown aspect of the U.S. economic war against Iran.  --  The Financial Times of London reported that in July 2006 the Securities and Exchange Commission sent letters to Ford Motor Company's chief financial officer asking that the automotive company "demonstrate that its 'reputation and share value' were not at risk as a result of business dealings" in Iran, Sudan, and Syria.[1]  --  Ford owns 33% of Mazda, which has dealerships in Syria, replied that "We do not believe that this de minimis business activity by Mazda impacts Ford's reputation or share value, or the value of Ford's ownership interest in Mazda."  --  "The SEC declined to comment yesterday whether it was satisfied with Ford's responses or whether it was asking other companies similar questions.  But an industry source said such queries had been directed to several multinationals.  The U.S. has modest direct trade links with the three countries but is expected to gradually escalate sanctions on Iran if the stand-off continues over Tehran's nuclear program.  Companies dealing with Syria and Sudan face a risk of falling foul of rules on financial links to entities deemed to have terrorist links."  --  AP reported that the SEC's first letter to Ford, which the agency released publicly this week, was dated Jul. 5, 2006, and complained:  "Your annual report does not include any information about these operations."[2]  --  "Ford responded in a letter dated July 18 that it has one authorized dealership in Syria, which opened in May.  Ford contended it is legally allowed to sell products in Syria that contain less than 10 percent of U.S.-originated content, and it legally can do business with Syrian nationals who are not government officials," Tom Krisher wrote.  --  Reuters noted:  "The unusual exchange between the No.2 U.S. automaker and the SEC follows letters written by the regulatory body to European and U.S. oil companies, asking them to inform investors about the risks they face from investing in countries the U.S. identifies as those supporting terrorism."[3] ...

1.

Companies

SEC QUIZZES FORD ON DEALINGS WITH 'TERRORIST-SUPPORTING' STATES
By Bernard Simon (Toronto) and Demetri Sevastopulo and Eoin Callan (Washington)

Financial Times (UK)
November 25, 2006

http://www.ft.com/cms/s/6df4bb22-7c2a-11db-b1c6-0000779e2340.html

The Securities and Exchange Commission has raised concern about the investment risks of U.S. companies doing business in countries deemed to be terrorist-supporting states by asking Ford Motor, and possibly others, about dealings in Iran, Sudan, and Syria. The enquiries emerged in letters dating back to July between the SEC and Ford's chief financial officer Don Leclair.

The SEC asked the Detroit-based carmaker to demonstrate that its "reputation and share value" were not at risk as a result of business dealings in the three countries. All three countries have been accused of being state sponsors of terrorism by the U.S. State Department.

Ford replied that its interests, comprising mainly Ford, Land Rover, and Mazda dealerships, were small relative to its worldwide operations. Ford owns 33 per cent of Mazda.

Referring to Syria, the carmaker added that "our limited and lawful business activity is public information, and we have not been able to identify any resulting negative impact on our reputation or share value."

Ford said it had no reason to believe vehicles sold by its dealerships in recent years had gone to the Syrian government or government-controlled groups. On Mazda's business in Iran and Syria, it said: "We do not believe that this de minimis business activity by Mazda impacts Ford's reputation or share value, or the value of Ford's ownership interest in Mazda."

The SEC specifically asked Ford whether the Syrian government or government officials had an interest in the dealerships that sell its vehicles. It also asked the company to confirm business volumes had not changed significantly in the past three years.

The SEC declined to comment yesterday whether it was satisfied with Ford's responses or whether it was asking other companies similar questions. But an industry source said such queries had been directed to several multinationals. The U.S. has modest direct trade links with the three countries but is expected to gradually escalate sanctions on Iran if the stand-off continues over Tehran's nuclear program. Companies dealing with Syria and Sudan face a risk of falling foul of rules on financial links to entities deemed to have terrorist links.

2.

Markets

SEC ASKS FORD ABOUT SYRIA, SUDAN
By Tom Krisher

Associated Press
November 24, 2006

http://www.chron.com/disp/story.mpl/ap/fn/4358412.html

DETROIT -- Federal regulators have pressed Ford Motor Co. for information about its business in Syria and Sudan, which are under economic sanctions or other controls for being state sponsors of terrorism.

Ford said its operations in those countries are legal and not material to investors.

The Securities and Exchange Commission, in a letter to Ford dated July 5 but not released until Friday by the agency, said it appeared from Ford's Web site and news media accounts that the company has operations in Sudan and Syria. It also said that Mazda Motor Corp., which is part-owned by Ford, has a presence in Iran and Syria.

"Your annual report does not include any information about these operations," SEC Division of Corporation Finance Branch Chief David R. Humphrey said in the letter to Ford Chief Financial Officer Don Leclair.

The letter asks the company to describe its past, current, and future operations in the countries and whether Ford believes contacts there "constitute a material investment risk for your security holders."

Ford responded in a letter dated July 18 that it has one authorized dealership in Syria, which opened in May. Ford contended it is legally allowed to sell products in Syria that contain less than 10 percent of U.S.-originated content, and it legally can do business with Syrian nationals who are not government officials.

Treasury Department spokeswoman Molly Millerwise said there is no general prohibition on a U.S. company doing business in Syria. American companies cannot do business in Iran or Sudan unless licensed or exempted from economic sanctions, she said.

The letter noted that several U.S. government officials attended the grand opening of the Ford dealership in Syria, including representatives from the embassy in Damascus.

Ford said its Land Rover subsidiary has a contract with a distributor in the United Kingdom that sells vehicles in Sudan, and that Land Rover and Ford subsidiaries Volvo and Jaguar each have a dealership in Syria.

"These companies sell only products with less than 10 percent U.S. content to their authorized dealerships," the Ford letter said.

Ford addressed the question about Mazda by stating that the Japanese automaker is a separate legal entity from Ford, although Ford owns about a third of Mazda.

In 2005, Ford said it did about $50 million worth of business in the countries cited by the SEC, a small percentage of its $177 billion in global revenues.

"We do not believe that a reasonable investor would deem this lawful activity material from a qualitative standpoint," the letter said.

SEC spokesman John Nester said Friday that the agency reviews all company filings at least once every three years and often will ask for comments that result in changes or clarifications. He would not comment specifically on the request made of Ford.

Ford spokeswoman Becky Sanch said she could not comment, and Mazda spokesman Jay Amestoy said he had no comment.

3.

SEC ASKS FORD ABOUT MIDEAST TIES

Reuters
November 24, 2006

Original source: Reuters

DETROIT -- The U.S. Securities and Exchange Commission Friday disclosed it asked Ford Motor Co. to detail its business ties to Syria, Iran, and Sudan, three countries the U.S. government considers "terrorist-sponsoring states."

In a chain of correspondence, released Friday, but dating back to July, the SEC asked Ford to demonstrate that its "reputation and share value" were not at risk because of its business in those countries.

In mid-August, Ford said it sells vehicles through dealerships in Syria, while its Land Rover subsidiary sells its sports utility vehicles through a British distributor in Sudan.

Mazda Motors Corp., in which Ford has a 33 per cent stake, sells its products through Japanese trading companies in Iran and Syria, Ford said.

"Our limited and lawful business activity in Syria is public information, and we have not been able to identify any resulting negative impact on our reputation or share value," Ford said in a letter to the SEC dated Aug. 16, 2006.

The SEC responded to Ford a week later, saying it had no further comment on the company's annual financial report.

A Ford spokeswoman and a SEC spokesman declined further comment Friday.

The unusual exchange between the No.2 U.S. automaker and the SEC follows letters written by the regulatory body to European and U.S. oil companies, asking them to inform investors about the risks they face from investing in countries the U.S. identifies as those supporting terrorism.

Ford said in the letter to the SEC that sales of Mazda vehicles by the distributors to outlets in Iran and Syria combined resulted in sales revenue of less than $60 million in 2004 and 2005, and $85 million in 2003.

"We do not believe that this . . . business activity by Mazda impacts Ford's reputation or share value, or the value of Ford's ownership interest in Mazda," it said in the letter.

The authorized dealerships that sell products of Ford's non-U.S. subsidiaries in Syria are neither owned nor controlled by the Syrian government or government officials, Ford said in response to a SEC inquiry of distributor Griwati Auto in Syria.

The automaker further said it did not believe that any of the vehicle sales by dealerships in Syria in recent years were to the Syrian government or government-controlled groups.

But Ford said Land Rover vehicles were sold to various government departments in Sudan, with the bulk of the sales volume going to the Sudan's Ministry of Interior.

"We have been advised further that the other government sales have been largely used for agricultural development purposes," Ford said in the letter.