Category Archives: Security

Neutrality Matters

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Net Neutrality CNN dot com

Image:  CNN.com

“WIRED”

“In a time when there are too few companies with too much power – we need net neutrality now more than ever.

Getting rid of Title II would lead to even more centralization, handing more power to the largest Internet companies while stifling competition and innovation.

Next month, Amazon, Netflix, and dozens of other companies and organizations will host a “day of action” aimed at saving net neutrality as we know it. The Federal Communications Commission, meanwhile, is on the verge of revoking its own authority to enforce net neutrality rules, and the country’s biggest telecommunications companies are cheering along. The future of the internet is on the line here, but it’s easy to be cynical about the conflict: What does it matter which set of giant corporations controls the internet?

Under the current net neutrality rules, broadband providers like Comcast and Charter, and wireless providers like AT&T and Verizon, can’t block or slow down your access to lawful content, nor can they create so-called “fast lanes” for content providers who are willing to pay extra. In other words, your internet provider can’t slow your Amazon Prime Video stream to a crawl so you’ll keep your Comcast cable plan, and your mobile carrier can’t stop you from using Microsoft’s Skype instead of your own Verizon cell phone minutes.

If the Trump administration gets its way and abolishes net neutrality, those broadband providers could privilege some content providers over others (for a price, of course). The broadband industry says it supports net neutrality in theory but opposes the FCC’s reclassification of internet providers as utility-like “Title II” providers, and that consumers have nothing to worry about. But it’s hard not to worry given that without Title II classification, the FCC wouldn’t actually be able to enforce its net neutrality rules. It might be less alarming if the internet were a level playing field with free and fair competition. But it’s not. At all.

If you want to search for anything online, you’ve got to go through Google or maybe Microsoft’s Bing. The updates your Facebook friends share are filtered through the company’s algorithms. The mobile apps you can find in your phone’s app store are selected by either Apple or Google. If you’re like most online shoppers, you’re mostly buying products sold by Amazon and its partners. Even with the current net neutrality laws there’s not enough competition—without them, there will be even less, which could stifle the growth and innovation that fuels the digital economy.

Fast lanes or other types of network discrimination could have a big impact on the countless independent websites and apps that already exist, many of which would have to cough up extra money to compete with the bigger competitors to reach audiences. Consider the examples of Netflix, Skype, and YouTube, all of which came of age during the mid-2000s when the FCC’s first net neutrality rules were in place. Had broadband providers been able to block videos streaming and internet-based phone calls in the early days, these companies may have seen their growth blocked by larger companies with deeper pockets. Instead, net neutrality rules allowed them to find their audiences and become the giants they are today, and without net neutrality, they could even potentially become the very start-up-killers that would’ve slowed or stopped their own earlier growth. Getting rid of net neutrality all but ensures that the next generation of internet companies won’t be able to compete with the internet giants.

The end of net neutrality could also have ranging implications for consumers. Amazon, Netflix, YouTube, and a handful of other services may dominate the online video market, but without net neutrality, broadband providers might try to make it more expensive to access popular streaming sites in an attempt to keep customers paying for expensive television packages. “[Net neutrality] protects consumers from having the cost of internet go up because they have to pay for fast lane tolls,” says Chris Lewis, vice president of the advocacy group Public Knowledge.

Lewis also points out that there are a few other consumer friendly protections in the FCC’s net neutrality rules. For example, the FCC rules require internet service providers to disclose information about the speed of their services, helping you find out whether you’re getting your money’s worth. They also force broadband providers to allow you to connect any device you like to your internet connection, so that your provider can’t force you to use a specific type of WiFi router, or tell you which Internet of Things gadgets you can or can’t use.

“The Internet is as awesome and diverse as it is thanks to the basic guiding principle of net neutrality,” says Evan Greer, campaign director for Fight for the Future, one of the main organizers of the net neutrality day of action, which will take place on July 12 and try to raise awareness about net neutrality across the web.”

https://www.wired.com/story/why-net-neutrality-matters-even-in-the-age-of-oligopoly/

Half of Industrial Control Systems Suffered Cyber Attack Last Year

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Cyber Attacks

The National Institute of Standards and Technology’s industrial control security testbed. (Photo Credit: NIST)

“FIFTH DOMAIN CYBER”

“Data gathered comes from 359 industrial cyber security practitioners in 21 countries that completed online surveys between February 2017 and April 2017.

One-in-five respondents experienced two incidents within the 12-month window.

Threats to industrial control systems are becoming increasingly widespread, according to a new survey from cyber security firm Kaspersky Lab and Business Advantage that found over half of the companies sampled reporting at least one cyberattack in the last 12 months.

The top observed threat remains conventional malware, which played a part in 53 percent of actual incidents, followed by targeted attacks, such as spear phishing to more sophisticated advanced persistent threats. The top perceived threats are  third-party supply chain/partners and sabotage/intentional damage from other external sources.

This has led three-in-four companies to expect a cyber attack to happen to them, though 83 percent feel prepared to combat an incident.

Organizations might not be as ready as they believe themselves to be, however, considering the fact that the anti-malware solutions already implemented by 67 percent of respondents still allowed for so many incidents.

Increasing the frequency of issuing patches/updates could contribute to protection from incidents like the WannaCry pandemic, but the increased attack surface and access granted to external parties by growing enterprises complicates matters.

Therefore, risk management is being recognized as a growing priority, but finding properly trained staff and reliable external partners to implement cyber security tops the challenges of companies that acknowledge financial loss is shown to decrease in organizations that have security awareness programs for staff, contractors and partners.

Looking at the survey’s findings, the top risk factors appear to be the access of external parties, a lack of compliance with industry/government regulations and the use of wireless connections. This has led companies to express support for some level of mandatory reporting and governance to help bring about more transparency to help develop frameworks to address the risks.

Some factors that appear to help mitigate threats include documented cybersecurity programs being set in place; regular security assessments/audits being conducted; vulnerability scans and patch deployments happening biweekly at minimum; unidirectional gateways being installed between control systems and the rest of the network; anti-malware solutions being installed for industrial endpoints; industrial anomaly detection tools, intrusion detection and intrusion prevention tools being used; and staff and contractors being given regular security awareness training.”

The entire survey can be accessed by filling in a form on the Kaspersky blog.

Letting Government Contractors Pick Their Own Auditors is a Bad Idea

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Hand in Jar istockphoto by Getty

Image: istock photo by Getty

“THE PROJECT ON GOVERNMENT OVERSIGHT”

“The law in question is the 2017 National Defense Authorization Act (NDAA) passed late last year.

When it comes to contract auditing, giving audit responsibilities to a company working directly for a contractor hampers the government’s ability to negotiate good deals for taxpayers.

Section 820 of the law states that “contractors with the Department of Defense may present, and the Defense Contract Audit Agency shall accept without performing additional audits, a summary of audit findings prepared by a commercial auditor” of contractors’ indirect costs (with some exceptions). This section is scheduled to go into effect on October 1, 2018.

Last year, in annual legislation setting defense policy, Congress gave military contractors the authority to hire their own auditors to review the bills those contractors send to the government. For decades, the Pentagon’s own Defense Contract Audit Agency (DCAA) has helped government contracting officials negotiate better deals by examining a contractor’s charges. But last year’s legislation, which goes into effect next year, diminishes the DCAA’s oversight authority to the detriment of taxpayers.

The topic was broached in an important, but under-the-radar Congressional oversight hearing in April.

Most of the hearing centered on the cost of government versus private auditors, with two conflicting tales being told. But a bigger issue went largely unaddressed: whether allowing contractors to pick their own auditors creates inherent conflicts of interest since the auditors would be in the position of serving contractors—their client—rather than taxpayers. There is a reasonable fear that these private sector auditors, in an effort to keep their client happy and win repeat business, would be reluctant to disclose to the government that the contractor is overcharging taxpayers.

New legislation pending before Congress would rescind Section 820, but it would also allow “contractors to engage commercial auditors to perform incurred cost audits,” according to a Department of Defense (DoD) analysis. The analysis also states that the new provision creates “several unintended consequences that will negatively impact the Department and industry.” The DoD opposes both Section 820 and the new Congressional language. The DoD’s proposed alternative keeps the power to conduct these audits in DCAA’s hands with an option allowing the government (rather than the contractors) to hire private sector auditors on a case-by-case basis. After analyzing the issue, POGO supports the Department’s proposed alternative.

DCAA’s Role

DCAA is responsible for auditing the financial side of certain defense contracts to “ensure that warfighters get what they need at fair and reasonable prices,” according to  its website. DCAA looks for whether contractor costs are “allowable, allocable, and reasonable,” and it performs other audits to ensure contractors have adequate business and accounting systems and adhere to federal cost and accounting principles. DCAA’s report for fiscal year 2016 notes that it audited $287 billion in contract costs that year. These audits are not usually intended to uncover fraud, although DCAA sometimes finds indicators of criminal activity and participates in law enforcement investigations.

What Are “Indirect Costs” and Why Do They Matter?

Contractors charge the government for two types of costs: direct costs that specifically relate to the contract, such as labor and materials, and indirect costs that exist apart from specific work on the contract, such as the rent a contractor pays for its office or fringe benefits for employees.

But there’s nothing fringe about these costs. Within incurred cost audits, indirect costs make up the majority of all questioned costs, according to DCAA Director Anita Bales. Because they are less clear-cut than direct audits, audits of indirect costs can be contentious—especially when auditors want more access to contractor information than the contractor is willing to provide—and quite technical. For instance, contractors are allowed to charge the government for indirect costs associated with litigation under some circumstances, but not in other situations. Contractors can easily pad their profits at taxpayers’ expense if these costs are not carefully examined.

An example of indirect cost overbilling made the news in February 2016 when the Justice Department announced that Centerra Services International (formerly known as Wackenhut Services LLC) agreed to pay $7.4 million to resolve a whistleblower lawsuit alleging the company had defrauded taxpayers. According to the Justice Department, Centerra double billed its labor costs while providing firefighting services on a military base in Iraq. The government alleged Centerra “inflated its labor costs by billing the salaries of certain managers as direct costs under the subcontract, when those salaries had already been charged as indirect costs.”

The Centerra case isn’t a one-off. In 2015, a DCAA audit questioned $14.6 million in costs that a contractor charged the government, according to a DoD Inspector General report to Congress. The vast majority—$14 million—involved wrongly billed indirect costs.

Lessons from the Recent Past

We don’t have to look very far back in history to see that allowing profit-motivated companies to hire their own profit-motivated auditors can lead to problems.

The Enron scandal showed that accountants and auditors aren’t immune from conflicts of interest. “Obviously the history of Enron and the financial crisis suggest we have to be very careful in this situation,” Representative Seth Moulton (D-MA), Ranking Member of the House Armed Services Oversight and Investigations Subcommittee said during his opening statement at the April hearing. Arthur Andersen, Enron’s auditor, had conflicts of interest. It was simultaneously employed as internal and external auditor, meaning that the supposedly independent external auditor could cover up the inaccuracies of the internal audit team.

More recently, during the fallout of the Great Recession, the government required banks to conduct mortgage foreclosure reviews. Banks were allowed to hire for those reviews their own “independent consultants” who proved to be not so independent. The New York Department of Financial Services (NYDFS) punished several of these consultants, including Promontory Financial Group, Deloitte, and PricewaterhouseCoopers, for “misconduct, violations of law, and lack of autonomy.” Settlements generally included multi-million dollar fines and temporary bans from consulting.

“A consultant’s allegiance too often goes to the client that pays the bills,” former NYDFS General Counsel Daniel Alter wrote in a 2015 piece for American Banker. Laws like Sarbanes-Oxley, which create criminal liability for misrepresenting financial statements, have helped to prevent future Enrons by balancing that pressure. However, criminal liability doesn’t apply to other types of financial reporting, such as the consulting work done in the aftermath of the housing crisis and the proposed contract audits.

Counting the Costs  

At the April Congressional hearing, DCAA Director Anita Bales testified that third-party auditors would cost an estimated 30 percent more than DCAA auditors. David Berteau, President and CEO of the Professional Services Council, a contractor lobbying group, countered in his testimony that when civilian agencies have used private auditors, they have in some cases paid significantly less than they used to pay DCAA.

Bales’ claim that DCAA auditors were 30 percent cheaper was based on a comparison of hourly billing rates, according to emails provided to POGO through the Freedom Of Information Act (FOIA). Berteau and other employees of the Professional Services Council did not respond to emails requesting evidence supporting their claims.

Other members of the federal auditing community have told POGO that the comparison of auditing costs is not clear cut. DCAA has more specialized experience and might charge lower costs per auditor hour, but they may also take longer to conduct audits (which may be a good thing in the long run, as more thorough audits may save even more money). Pricing for private auditors can also vary widely from company to company and even year to year, making a comprehensive analysis difficult.

And although cost was the most-discussed factor at the hearing, it isn’t the only factor that needs to be examined. A federal source, not authorized to speak on the record, who is familiar with both DCAA and private contract audits for civilian agencies said the work of private auditors still has to be closely checked, even when they are hired directly by the government. Both last year’s NDAA and a recent proposal for this year’s NDAA prohibit DCAA from examining the work of private auditors before accepting the results.

There is also concern over how the records generated by private auditors would be handled: Will they be subject to FOIA? How would the discovery of potential fraud be handled? Would private sector audits be incorporated into the DCAA’s “Management Information System” that tracks audit data so that auditors can spot trends and look at the bigger picture?

What About Incurred Costs?

New Congressional language would rescind Section 820 but would allow contractors to hire auditors to audit incurred costs. The argument for this is DCAA’s lower rate of return when it audits incurred costs. However, DCAA’s other auditing work with the same contractor and on the same contracts benefits from its incurred cost audits, and vice-versa. For instance, DCAA conducts audits of contractors’ billing, accounts, and internal control systems. The insights DCAA gains from those audits assists DCAA when it audits a contractor’s incurred costs. According to a DoD analysis of the impacts of the recently proposed legislation, keeping incurred cost audits in the hands of DCAA:

…allows for the continuation of many initiatives that DCAA has put in place to more efficiently and effectively perform audits (e.g., the use of the low risk sampling process, the coordination of subcontract assist audits, and the process for obtaining and determining adequacy of incurred cost proposals). Without one group coordinating the need for commercial auditors, the Department will lose many of these efficiencies and will lose adequate oversight over the complete incurred cost audit process. [emphasis added]

One of the primary motivations for the new Congressional language on incurred cost audits is DCAA’s incurred cost audit backlog, which was relatively large until a few years ago and has recently become more manageable according to DCAA’s most recent annual report. The agency said it was on track to eliminate the backlog by next year, although with the hiring freeze it may have to re-evaluate that goal. Regardless of whether the backlog is eliminated one or three or even five years from now, Congress is proposing a rather drastic solution to a problem that is no longer drastic itself.

This is not a backyard experiment with few consequences for failure. Billions of taxpayer dollars are on the line every year. While DCAA has room for improvement, privatizing the agency’s work would most likely make it harder to crack down on contractor overbilling.

Given the large risks and the unclear benefits or privatizing contract audits, Section 820 should be repealed. If DCAA needs a temporary boost, it should be given authority to hire more staff on a temporary basis, or perhaps even hire private sector auditors on a short-term basis. The Defense Department proposes the latter, calling it “much more effective” while ensuring “that a function that is inherently governmental in nature continues to be performed by Government auditors when feasible, but allows for the use of commercial auditors when necessary to address incurred cost backlog.”

POGO does not often agree with the Defense Department, but its proposal makes sense. Let’s learn from our past mistakes rather than repeat them.”

http://www.pogo.org/blog/2017/06/letting-contractors-pick-own-auditors-bad-idea.html

Generals and Admirals Need Checks and Balances Too

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ASSOCIATION OF UNITED STATES ARMY”  By Lt. Col. Joe Doty, USA Retired and Maj. Gen. Rich Long, USA Retired

“Without question, most past and present top officers are some of the finest, most competent, values-based and selfless officers our nation can produce.

But they, like us all, are human, flawed, and we all need a healthy dose of oversight and accountability.

Some generals have made the news lately for behaviors that violate the professional ethic. Although this trend seems new or current, it isn’t. Thomas E. Ricks, a well-published author on defense matters, wrote “General Failure” in the November 2012 issue of The Atlantic and in the same year published a book, The Generals: American Military Command from World War II to Today, on the same topic. His critique focused on a perceived lack of accountability in our armed forces at the general-officer level.

In June 2008, Lt. Col. Robert Bateman wrote “Cause for Relief: Why Presidents No Longer Fire Generals” in Armed Forces Journal. And in May 2007, then-Lt. Col. Paul Yingling wrote his (in)famous “A Failure in Generalship,” also in Armed Forces Journal. Our national security advisor, Lt. Gen. H.R. McMaster, in 1997 wrote Dereliction of Duty: Lyndon Johnson, Robert McNamara, the Joint Chiefs of Staff, and the Lies that Led to Vietnam. The book talks about failures at our highest officer and political levels up to and during the Vietnam War.

Generals are human beings and as such we need to be honest and frank about human behavior and human frailty. Nobody is perfect. So it seems to be an appropriate question: How is the system working in terms of oversight and accountability for general officers?

Recently we’ve had an admiral caught up in the “Fat Leonard” scandal; a former aide to the secretary of defense, Maj. Gen. Ronald Lewis, was relieved of his duties due to transgressions; and Maj. Gen. David Haight was forced to retire due to questionable professional behavior. At some point, we must ask ourselves whether there is a more effective system of checks and balances that can mitigate some of these issues. Lastly, and perhaps most egregiously, there is the case of former Brig. Gen. Jeffrey Sinclair, who pleaded guilty to adultery, maltreatment of a subordinate, engaging in improper relations and several other charges. Who was providing oversight of him or holding him accountable for his actions?

Don Snider, an expert in the study of the Army profession, notes that professions like the military are self-policing. Other unique aspects of professions (such as law and medicine) include that they:

  • Provide a necessary service to the country.
  • Have a shared ethic.
  • Have a unique expert knowledge.
  • Develop their own members.

Our military takes each of these aspects of being a profession seriously. As the most senior representatives of a self-policing profession, our general officers should be the standard-bearers and set the example for the rest of the force—and for the country—in their personal and professional lives.

They should also know how to self-police. Assuming there is real self-policing of generals, either by someone or a group, would it be helpful to make the policing process more transparent? Would making public the specific (and anonymous) examples of how generals are holding themselves accountable be an appropriate service to the nation?

At the risk of oversimplifying this self-policing and oversight challenge, is a general’s immediate supervisor responsible for policing and holding accountable his or her subordinate? Is the four-star responsible for the three-star? Is the two-star responsible for the one-star? Here, it is important to note that the concept of chain of command is ingrained in the DNA of every service member. It is part of the professional ethic. And the construct of chain of command has a built-in concept and understanding of responsibility and accountability, which does not cease once someone is promoted to general rank.

DoD inspectors general certainly play a role in oversight and accountability, but it’s a role initiated after an allegation has been made. IG investigators are not involved in the day-to-day business of general officers. How do we get more proactive and ahead of the allegations?

At the top levels, trust is sacrosanct. Theoretically, our promotion and selection system has selected those who need little or no oversight. However, the promotion and selection system is only as good as people can make it, and there will be bad apples. It can be argued that officers at this level need more or closer oversight due to their strategic responsibilities and the potential for national or international embarrassment. The Gen. David Petraeus affair could serve as an example.

Mathematically and statistically, it is safe to assume there are bad apples among general officers. The military’s selection and promotion system is run by human beings, so it must have flaws and make mistakes. Is it realistic to think every general never does anything wrong? This violates common and reasoned sense. There are just over 300 generals in the active Army and about 650 in the Total Army. The fact that only one or two get in trouble each year is pretty good and perhaps surprising, but because of the sacred nature of their duties, even one-tenth of a percent is too high. Again, the need for oversight and accountability.

In terms of the human dimension and understanding of this topic, there are basic psychological processes at work. One can be called the Bathsheba Syndrome or “the dark side of success,” which suggests absolute power corrupts absolutely or that enormous success can be an antecedent to ethical failure. There are numerous historical examples of this: Tiger Woods and Richard Nixon come to mind. As such, it can easily be argued that because of their success, top officers need more oversight and accountability.

Expectancy theory is taught in most basic psychology courses and suggests people behave in ways they are expected to behave. Officers who attain the rank of general are the best of the best and are expected to be that way—almost flawless—and in some cases, may think they are flawless (as their evaluation reports state) and therefore think they can get away with anything. Unhinged or unbalanced ambition and/or unhealthy narcissism are recipes for disaster.

There is a difference between an officer who knows they should be and deserve to be a general, and one who may be a bit surprised and humbled to obtain the rank. This difference may be cognitively and emotionally subtle at the individual level, but can be profound in how it plays out. Again, an argument for more structured oversight and accountability.

It is the nature of life in the military to cover for each other. Loyalty to and taking care of your buddies and comrades in arms is part of the professional ethic. These bonds are emotional and powerful, as they must be due to the nature of the profession. But to what extreme? When are the times when this loyalty does not and should not apply?

The answer is: when one’s actions are unethical, against the law or will hurt the effectiveness of the organization. Importantly, a subordinate’s loyalty to a general-level officer is often exponentially magnified due to the rank, position power, referent power and expert power of the general. Hence, loyalty at this level may be impervious to and blind to wrongdoing. Asking or expecting a subordinate to call out a possible transgression by a superior officer can, unfortunately, be a career-ender for the subordinate. Is it realistic to think people in and around Sinclair over the course of his career never suspected anything nefarious was going on?

A recommended solution to this challenge is for DoD to require colonels selected as executive officers for generals to attend the IG course and have as part of their duties a formal responsibility of reporting and answering outside the chain of command and to certify, under oath, that they are not aware of malfeasance or issues that must be addressed. Other duties could include:

  • Challenging the general’s assumptions and thinking.
  • Attempting to find blind spots in the general’s personality and thinking.
  • Asking lots of “why” questions.
  • Providing candid and blunt feedback and assessments.

We also recommend that DoD increase its education and developmental opportunities in terms of helping officers increase their emotional intelligence, specifically in terms of self-awareness and self-management. Emotional intelligence is a leadership skill that can be taught, learned and increased over time. Individuals with high levels of emotional intelligence are less vulnerable to self-delusion, burnout, and personal and professional indiscretions.

Our purpose here is not to poke anyone in the eye or throw stones. Our focus is on organizational improvement and learning. “

GENERALS NEED CHECKS AND BALANCES TOO

 

 

U.S. Army Is Growing By Thousands of Soldiers

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ALLIED SPIRIT V

(Photo Credit: Markus Rauchenberger/Army)

“ARMY TIMES”

“The Army has used a suite of force-shaping measures and incentives to retain and recruit enough soldiers to bring the force back to over a million.

[Measures] including five-figure enlistment and retention bonuses, as well as major opportunities for National Guard and Army Reserve soldiers to go active.

The Army is on track to reach its end strength goal of 1,018,000 soldiers by the end of September, and that will mean enough manpower to fill holes in existing combat units, save some units from planned deactivations, and man some new ones.

Units throughout the Army will feel the benefit of adding 28,000 troops to the active and reserve components, according to a Thursday release from the Army, reversing a drawdown that had planned for just 980,000 soldiers this year.

“These force structure gains facilitated by the FY17 end strength increase have begun, but some will take several years to achieve full operational capability,” said Brig. Gen. Brian J. Mennes, director of the Force Management Division, in the release. “Implementation of these decisions, without sacrificing readiness or modernization, is dependent upon receiving future appropriations commensurate with the authorized end strength.”

The Army has used a suite of force-shaping measures and incentives to retain and recruit enough soldiers to bring the force back to over a million, including five-figure enlistment and retention bonuses, as well as major opportunities for National Guard and Army Reserve soldiers to go active.

In addition to filling existing manning gaps in brigade combat teams, the release said, the plus-up will save several units that were slated for deactivation. They are:

  • 4th Infantry Brigade Combat Team (Airborne), 25th Infantry Division, based Joint Base Elmendorf-Richardson, Alaska.
  • 18th Military Police Brigade Headquarters based in Grafenwoehr, Germany.
  • 206th Military Intelligence Battalion at Fort Hood, Texas.
  • 61st Maintenance Company at Camp Stanley, South Korea.
  • 2nd Combat Aviation Brigade at Camp Red Cloud, South Korea.

Soldiers retained during the end strength build up also could end up joining the recently announced Security Force Assistance Brigades and their training school, as well as an aviation training brigade at Fort Hood.

More soldiers will also help with the Army’s increased manning in Europe.

The Army is planning to station the following units overseas, according to the release.

  • A field artillery brigade headquarters with an organic brigade support battalion headquarters, a signal company and a Multiple Launch Rocket System battalion (MLRS).
  • Two MLRS battalions with two forward support companies.
  • A short range air defense battalion.
  • A theater movement control element.
  • A petroleum support company.
  • An ammunition platoon.

Further, the Army plans to convert an infantry brigade to an armored brigade and add 1,300 new staff to Training and Doctrine Command, in an attempt to increase training and recruiting capacity, the release said.

“The end strength increase will augment deploying units, and units on high readiness status, with additional soldiers to increase Army readiness and enable us to continue to protect the nation,” Mennes said.”

https://www.armytimes.com/articles/the-army-is-growing-by-thousands-of-soldiers-heres-where-theyre-going-to-go

 

 

Pentagon Declares Lockheed F-35 “Too Big to Fail”

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F-35 Too Big to Fail

(Photo Credit: Staff Sgt. Staci Miller/US Air Force)

“DEFENSE NEWS” By Michael P. Hughes

“Officially begun in 2001, with roots extending back to the late 1980s, the F-35 program is nearly a decade behind schedule, and has  failed to meet many of its original design requirements.

It’s also become the most expensive defense program in world history, at about $1.5 trillion before the fighter is  phased out in 2070.

The F-35 was billed as a fighter jet that could do almost everything the U.S. military desired, serving the Air Force, Marine Corps and Navy — and even Britain’s Royal Air Force and Royal Navy — all in one aircraft design. It’s supposed to replace and improve upon several current — and aging — aircraft types with widely different missions. It’s marketed as a cost-effective, powerful multi-role fighter airplane significantly better than anything potential adversaries could build in the next two decades. But it’s turned out to be none of those things.

The unit cost per airplane, above $100 million, is roughly twice what was promised early on. Even after U.S. President Donald Trump lambasted the cost of the program in February, the price per plane dropped just $7 million — less than 7 percent.

And yet, the U.S. is still throwing huge sums of money at the project. Essentially, the Pentagon has declared the F-35 “ too big to fail.” As a retired member of the U.S. Air Force and current university professor of finance who has been involved in and studied military aviation and acquisitions, I find the F-35 to be one of the greatest boondoggles in recent military purchasing history.

Forget what’s already spent

The Pentagon is trying to argue that just because taxpayers have flushed more than $100 billion down the proverbial toilet so far, we must continue to throw billions more down that same toilet. That violates the most elementary financial principles of capital budgeting, which is the method companies and governments use to decide on investments. So-called sunk costs, the money already paid on a project, should never be a factor in investment decisions. Rather, spending should be based on how it will add value in the future.

Keeping the F-35 program alive is not only a gross waste in itself: Its funding could be spent on defense programs that are really useful and needed for national defense, such as  anti-drone systems to defend U.S. troops.

Part of the enormous cost has come as a result of an effort to share aircraft design and replacement parts across different branches of the military. In 2013, a study by the think tank Rand found that it would have been cheaper if the Air Force, Marine Corps and Navy had simply  designed and developed separate and more specialized aircraft to meet their specific operational requirements.

Not living up to top billing

The company building the F-35 has made grand claims. Lockheed Martin said the plane would be far better than current aircraft — “four times more effective” in air-to-air combat, “eight times more effective” in air-to-ground combat and “three times more effective” in recognizing and suppressing an enemy’s air defenses. It would, in fact, be “ second only to the F-22 in air superiority.” In addition, the F-35 was to have better range and require less logistics support than current military aircraft. The Pentagon is still calling the F-35 “ the most affordable, lethal, supportable, and survivable aircraft ever to be used.”

But that’s not how the plane has turned out. In January 2015, mock combat testing pitted the F-35 against an F-16, one of the fighters it is slated to replace. The F-35A was flown “clean” with empty weapon bays and without any drag-inducing and heavy, externally mounted weapons or fuel tanks. The F-16D, a heavier and somewhat less capable training version of the mainstay F-16C, was further encumbered with two 370-gallon external wing-mounted fuel tanks.

In spite of its significant advantages, the F-35A’s test pilot noted that the F-35A was less maneuverable and markedly inferior to the F-16D in a visual-range dogfight.

Stealth over power

One key reason the F-35 doesn’t possess the world-beating air-to-air prowess promised, and is likely not even adequate when compared with its current potential adversaries, is that it was designed first and foremost to be a stealthy airplane. This requirement has taken precedence over maneuverability, and likely above its overall air-to-air lethality. The Pentagon and especially the Air Force seem to be relying almost exclusively on the F-35’s stealth capabilities to succeed at its missions.

Like the F-117 and F-22, the F-35’s stealth capability greatly reduces, but does not eliminate, its radar cross-section, the signal that radar receivers see bouncing back off an airplane. The plane looks smaller on radar — perhaps like a bird rather than a plane — but is not invisible. The F-35 is designed to be stealthy primarily in the X-band, the radar frequency range most commonly used for targeting in air-to-air combat.

In other radar frequencies, the F-35 is not so stealthy, making it vulnerable to being tracked and shot down using current — and even obsolete — weapons. As far back as 1999 the same type of stealth technology was not able to prevent a U.S. Air Force F-117 flying over Kosovo from being located, tracked and shot down using an outdated Soviet radar and surface-to-air missile system. In the nearly two decades since, that incident has been studied in depth not only by the U.S., but also by potential adversaries seeking weaknesses in passive radar stealth aircraft.

Of course, radar is not the only way to locate and target an aircraft. One can also use an aircraft’s infrared emissions, which are created by friction-generated heat as it flies through the air, along with its hot engines. Several nations, particularly the Russians, have excellent passive infrared search and tracking systems that can locate and target enemy aircraft with great precision — sometimes using lasers to measure exact distances, but without needing radar.

It’s also very common in air-to-air battles for opposing planes to come close enough that their pilots can see each other. The F-35 is as visible as any other aircraft its size.

Analysts weigh in

Lockheed Martin and the Pentagon say the F-35’s superiority over its rivals lies in its ability to remain undetected, giving it “ first look, first shot, first kill.” Hugh Harkins, a highly respected author on military combat aircraft, called that claim “a marketing and publicity gimmick” in his book on Russia’s Sukhoi Su-35S, a potential opponent of the F-35. “In real terms an aircraft in the class of the F-35 cannot compete with the Su-35S for out and out performance such as speed, climb, altitude, and maneuverability,” he wrote.

Other critics have been even harsher. Pierre Sprey, a co-founding member of the so-called fighter mafia at the Pentagon and a co-designer of the F-16, calls the F-35 “inherently a terrible airplane” that is the product of “an exceptionally dumb piece of Air Force PR spin.” He has said the F-35 would likely lose a close-in combat encounter to a well-flown MiG-21, a 1950s Soviet fighter design. Robert Dorr, an Air Force veteran, career diplomat and military air combat historian, wrote in his book “Air Power Abandoned”: “The F-35 demonstrates repeatedly that it can’t live up to promises made for it. … It’s that bad.”

How did we get here?

How did the F-35 go from its conception as the most technologically advanced, do-it-all military aircraft in the world to a virtual turkey? Over the decades-long effort to meet a real military need for better aircraft, the F-35 program is the result of the merging or combination of several other separate and diverse projects into a set of requirements for an airplane that is trying to be everything to everybody.

In combat, the difference between winning and losing is often not very great. With second place all too often meaning death, the Pentagon seeks to provide warriors with the best possible equipment. The best tools are those that are tailor-made to address specific missions and types of combat. Seeking to accomplish more tasks with less money, defense planners looked for ways to economize.

For a fighter airplane, funding decisions become a balancing act of procuring not just the best aircraft possible, but enough of them to make an effective force. This has lead to the creation of so-called multi-role fighter aircraft, capable both in air-to-air combat and against ground targets. Where trade-offs have to happen, designers of most multi-role fighters emphasize aerial combat strength, reducing air-to-ground capabilities. With the F-35, it appears designers created an airplane that doesn’t do either mission exceptionally well. They have made the plane an inelegant jack-of-all-trades, but master of none — at great expense, both in the past and, apparently,  well into the future.

I believe the F-35 program should be immediately canceled; the technologies and systems developed for it should be used in more up-to-date and cost-effective aircraft designs. Specifically, the F-35 should be replaced with a series of new designs targeted toward the specific mission requirements of the individual branches of the armed forces, in lieu of a single aircraft design trying to be everything to everyone.”

http://www.defensenews.com/articles/what-went-wrong-with-lockheeds-f-35-commentary

This article was originally published on The Conversation .

About the Author

Image result for Michael P. Hughes is a professor of finance at Francis Marion University.

Michael P. Hughes is a professor of finance at Francis Marion University. He served more than 21 years in the U.S. Air Force. During that time, he spent more than 14 years in nuclear treaty monitoring and related activities, while the initial 7 years were in the aircraft maintenance and engineering (propulsion) arena with F-4 and F-15 aircraft.

http://departments.fmarion.edu/business/hughes-michael-p.html

5 Ways to Make Terrorism Worse

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Terrorism Worse

“DEFENSE ONE”

“Terrorists are pleased to confront a United States that demonizes Muslims and seeks only its own advantage.

Donald Trump seems to regard a terrorist attack almost anywhere in the world as an opportunity to take to Twitter to tout his domestic political agenda. Instead of further straining relations with key democratic allies, the president would be better off reconsidering his own policies that are making terrorism worse.

First, Trump has realigned U.S. policy in the Middle East to give uncritical support to authoritarian regimes whose repressive policies fuel grievances that are exploited by violent extremists. Governments like Saudi Arabia also promote extreme, intolerant interpretations of Islam throughout the world on which terrorist groups like ISIS and al-Qa’eda base their worldviews. If Trump were serious about reducing the threat from terrorism, he would confront his authoritarian allies about the hateful incitement spread by preachers and religious and educational institutions in their countries, and about the direct support that still flows to violent extremist groups in Syria and elsewhere. He would also urge U.S. allies to govern in a way that provides hope to the millions of young people across the region who are squeezed between repressive, corrupt authoritarian rulers and violent extremists who claim to offer the only alternative. Instead, Trump condones the harmful practices of his authoritarian allies, remaining silent about their violations of human rights while offering lavish praise and arms sales.

Second, the Trump administration has taken sides in the ancient sectarian rift between Sunni and Shi’ite Muslims that has helped fuel conflict in Syria and elsewhere and created conditions in which terrorist groups like ISIS and al-Qa’eda thrive. Exploitation of sectarian divisions by Iran, Saudi Arabia, and their proxies has been one of the chief drivers of terrorist violence in the Middle East in recent years, such as the bombings in Baghdad last week, which killed dozens. Trump is encouraging U.S. allies to step up sectarian conflict in Bahrain and Yemen while issuing threats against Iran, steps that vindicate and embolden sectarian extremists in Tehran. Terrorist attacks in the Iranian capital, immediately claimed by ISIS, received only perfunctory condemnation from the White House. The White House statement, which seemed to blame the victims for the assault, has received widespread condemnation. This hopelessly one-sided approach to violence against civilians will only fuel resentment and more violence. To reduce the threat of terrorism, the United States must work to ease sectarian conflicts in the region. Trump is making them worse.

Third, Trump continues to push a travel ban against six majority-Muslim countries, even as more and more federal courts declare it unconstitutional. The president’s single-minded pursuit of this discriminatory policy supports the narrative of violent extremists who claim that Muslims are unwelcome in the West. The travel ban abets recruiting efforts in another way as well: by fomenting distrust of law enforcement among American Muslims, thus reducing the chance that violent extremists might be reported to authorities.

Fourth, Trump’s and his administration’s harsh rhetoric against Muslims, enthusiastically backed up by his cheerleaders in the media, gives license to bigots whose actions benefit ISIS and other extremist groups. Hate crimes against Muslims have jumped, perhaps by half, since Trump began his campaign for the presidency, and he has little to say about this alarming trend. The spread of bigoted attitudes towards Muslims fuels divisions that are be exploited by violent extremists.

Fifth, and perhaps most importantly, the Trump administration is not providing leadership on universal human rights and therefore failing to offer any constructive alternative to the hateful, nihilistic ideology of the terrorists. The Trump administration has pledged to put America first and secure American interests in a world “where nations, nongovernmental actors and businesses engage and compete for advantage.” Terrorists are only too pleased to confront the United States in such an amoral world, one without universal values or common interests and with no sense of global community.

By turning its back on these values, the Trump administration is unilaterally giving up the United States’ greatest strength, and making it easier for terrorists to spread division, fear, and violence.”

http://www.defenseone.com/ideas/2017/06/five-ways-president-trump-making-terrorism-worse/138602/?oref=d-topictop

The US Military’s Iran Connection?

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Military and IRAN

(Photo: KGL Logistics logo, Iran rials by Serova / Flickr)

“THE PROJECT ON GOVERNMENT OVERSIGHT”

“The chairman of a key US military contractor in the Middle East was recently charged with multiple felonies in a major fraud, money laundering, and public corruption scheme.

Fraud and money laundering charges are only the latest in a string of KGL controversies in recent years.

There have been accusations of business ties to Iran in violation of US sanctions, and of systematic leaking of sealed and privileged federal court documents and other sensitive material to KGL’s Washington lawyers by the Defense Logistics Agency (DLA), the DoD component that oversees KGL’s US military contracts.

According to court papers in Kuwait, where the charges were filed, misappropriated investor money so far totals more than $160 million, a figure that could go higher, the Project On Government Oversight (POGO) has learned. The contractor, Kuwait and Gulf Link Transport, better known as KGL, is a publicly traded conglomerate with hundreds of millions of dollars in US military contracts. The criminal charges, together with other court documents and unreported revelations made by former executives of a KGL affiliate in a US lawsuit, involve KGL’s possible violation of US sanctions against Iran, and accusations of potentially illicit flows of cash from Russia, Iran, and Syria. Taken together, the allegations raise troubling questions about the American military’s heavy reliance on the firm.

The 2017 criminal indictment by Kuwaiti prosecutors points specifically to a KGL affiliate, called KGL Investments (KGLI), as the alleged nexus of fraud and money laundering inside company headquarters from 2007 to 2015.

Two former KGLI executives have also made related allegations in little-noticed 2013 sworn statements filed in a US lawsuit. One executive said he was told by his KGLI boss that Iran’s state-owned shipping company, sanctioned by the United States in 2008 as a nuclear proliferator, was “KGL’s vehicle to Iran and she further told me that…[it] made a lot of money for KGL.”

The executive also said, “Specifically, it appeared to me that KGLI was engaged in money laundering, and presenting false financial information to investors.”

A spokesperson for KGL told POGO that, “Notwithstanding the name, KGL Investments is neither owned nor controlled by any of the KGL group of companies. No KGL entity is a party to the legal proceedings in Kuwait. The Kuwait courts will address and resolve the disputed allegations.” KGL has long denied it has ever violated US sanctions in any way.

However, KGL Investments, KGL, and many of its subsidiaries are co-located in the same office building and directed, in part, by KGL’s just-indicted chairman, who is also a director of KGLI, according to court papers. The indictment says that a portion of the embezzled funds was channeled to KGL component companies.

Also targeted in the criminal complaint against KGL’s chairman is the Vice-Chairman of KGLI. Convictions could result in jail sentences. Court documents list victims of the alleged fraud as key government departments: Kuwait’s Public Institution for Social Security and its Ports Authority. The Ports Authority serves as a staging area for America’s ongoing military involvement in Iraq, and was indispensable to US Central Command (CENTCOM) in both the first and second Gulf Wars and occupation of Iraq.

According to an official in Kuwait, senior US military personnel at the American embassy and at Camp Arifjan, a large American base in Kuwait, were officially informed of the criminal indictment, and received written copies of the details. This was done, the official said, because the indictment targets executives related to a major US military contractor, allegedly involved in stealing from important Kuwaiti institutions. In a separate dispute, the Ports Authority recently banned KGL from operating in the port. It remained unclear what action, if any, the US military might take in response. Spokespersons at CENTCOM, the Department of Defense, and the US Army’s Contracting Command all declined to comment.

What Happens Next?

Further revelations about KGL or its subsidiaries, or a conviction of one or both of the indicted executives, could call into question the conglomerate’s grip on sizable US military contracts, and its eligibility to receive future awards. Beyond the large contracts it already has, KGL is currently in line for a sizable share of the new so-called Heavy Lift VIII (HL8), a $200 million transportation-services deal that the US military could assign by August. But there is the possibility the award could run afoul of federal contracting rules, which require ethical conduct and the avoidance of serious crimes.

According to contracting rules, officially known as the Federal Acquisition Regulation (FAR): “Purchases shall be made from, and contracts shall be awarded to, responsible prospective contractors only.” The FAR goes on to specify that, “… To be determined responsible, a prospective contractor must … have a satisfactory record of integrity and business ethics.” The regulation notes that contractors may be subject to debarment, suspension, or ineligibility if they are convicted or face a civil judgment for fraud, embezzlement, or “any other offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a Government contractor or subcontractor.”

In December, the Iran Sanctions Act was extended by 10 years on a 99-0 vote in the Senate, and a 419-1 vote in the House of Representations. The law states that the federal government “shall terminate a contract with such person or debar or suspend such person from eligibility for Federal contracts for a period of not less than 2 years” if they are found to have falsely certified to be in compliance with US sanctions against Iran.

KGL has repeatedly said it complied with provisions of the FAR.

A Hearing in Court

The criminal charges against KGL executives are the result of a four-year probe by Kuwait’s national security police. A court hearing on the matter in Kuwait was held on May 21, and another is scheduled for June 11. Among other records, POGO obtained a 21-page copy of a charge sheet dated May 9, 2017 (in Arabic).

The document names three defendants. Saed Dashti, 61, is chairman of KGL. Maria [Marsha] Lazareva, 44, is Vice-Chairman and Managing Director of KGLI, where Saed Dashti also serves as a director. A third defendant, Mohamed Al-Asfour, 71, is a senior public official: the executive vice-chairman of Kuwait’s Ports Authority.

Documents describe Lazareva as a Russian national. She was educated at the Wharton business school and public records associate her with real estate ownership in the Philadelphia area. According to news accounts, she showed up in court for the May 21 hearing, protesting her innocence.

The indictment says Dashti and Lazareva transferred large sums of investors’ money to their own private accounts and to a variety of KGL subsidiaries or related companies between 2007 and 2015. They did this, court documents say, partly using a network of financial institutions including the Hong Kong and Shanghai Banking Corporation (HSBC) and one of its branches in the Cayman Islands. The bank also has branches in the United States, Kuwait, Asia, and other parts of the world. It’s unclear whether any of the allegedly embezzled funds passed at some point through the American financial system, which could trigger a US investigation.

A civil lawsuit involving KGL in Pennsylvania has brought to light accusations that could bear directly on the alleged fraud and money laundering scheme in Kuwait. The lawsuit, brought by KGL, charges the firm’s principal competitor, Agility Public Warehousing Co., with defaming KGL’s reputation by falsely claiming it had ties to Iran.

Saed Dashti and Marsha Lazareva

Saed Dashti and Marsha Lazareva (Source: Instagram)

 

Testimony in the Pennsylvania case—which is ongoing—includes declarations sworn in 2013 by a pair of former executives of KGL Investments, as part of Agility’s defense. Both said Dashti and Lazareva misinformed investors about KGLI’s financial condition, and one of the executives reported they had made repeated trips to Russia, Iran, and Syria in an apparent attempt to shore up KGLI’s faltering finances.

The two former KGLI executives testified that Dashti and Lazareva occupied offices on the same floors and hallways at KGL’s headquarters in Kuwait along with other subsidiaries.

One of the executives who testified, Ahmed Mabrouk, is an American citizen currently employed in the US financial industry. Court records identify him as former KGLI Vice-President Investments, a job where he testified he spent 18 months in 2008 and 2009 (a period covered by the 2017 criminal indictment) helping to analyze KGLI’s so-called “Port Fund,” an entity that invested in marine facilities around the Middle East and elsewhere. Under oath, Mabrouk said:

“Ms. Lazareva described to me the Islamic Republic of Iran Shipping Lines (IRISL) as KGL’s vehicle to Iran and she further told me that IRISL made a lot of money for KGL. When I was employed at KGLI, I observed Ms. Lazareva in her office reviewing documents related to IRISL, which bore the logo of IRISL, as well as the Iranian emblem.”

The declaration of Mabrouk, who could not be reached for comment, did not include documentary or other evidence to support his statement.

The United States, European Union (EU), and United Nations (UN) have all imposed sanctions on IRISL, Iran’s state-owned shipping company and a former joint-venture partner with KGL. Referring to US sanctions, applied in 2008, then-Treasury Under Secretary for Terrorism and Financial Intelligence Stuart Levey explained:

“Not only does IRISL facilitate the transport of cargo for U.N. designated proliferators, it also falsifies documents and uses deceptive schemes to shroud its involvement in illicit commerce. IRISL’s actions are part of a broader pattern of deception and fabrication that Iran uses to advance its nuclear and missile programs.”

In his declaration, Mabrouk said, “I reviewed KGLI’s internal financial statements and observed that KGLI consistently had a negative cash flow.” Mabrouk also testified that he looked at “…financial statements that had been provided to investors. The financial statements provided to investors consistently, and in bad faith, misrepresented financial data regarding KGLI and its portfolio companies’ actual financial condition.”

Concern about KGLI’s financial condition, according to Mabrouk, caused KGLI’s banks to stop lending it money, creating a cash squeeze. And that led to “fundraising” trips by Dashti and Lazareva, he said:

“I understood that Ms. Lazareva and Saeeed (sic) Dashti took a number of trips on private planes to, among other places, Iran, Syria and Russia. Following each trip, I observed in KGLI’s internal financial statements an influx of funds into KGLI’s accounts. Ms. Lazareva told me and others at KGLI that these trips were for ‘fundraising;’ however, to my knowledge, such fundraising was not tied to any formalized investment process.”

Mabrouk did not say what, if anything, KGL Investments did in exchange for the money it allegedly received, or that he knew specifically that inflows had come from Iran, Syria, and Russia, even though he said the pair had travelled there.

Mabrouk did specify that Lazareva at one point asked him to travel to Syria to “review a potential investment in a port,” but he refused because that country was under US sanctions. Because Mabrouk also holds an Egyptian passport, he said Lazareva told him to use that travel document instead of an American passport. When he refused a second time, it set off a chain of events which, he said, led to his departure from the company.

Another KGLI executive also offered testimony in the same Pennsylvania court case. Wael Salam, an American citizen who worked for KGLI both in Kuwait and in Atlanta, said he was the firm’s Chief Investment Officer. He said both Dashti and Lazareva were directly and deeply involved in decision-making at the firm. He also reported that KGL funded KGLI with money from its subsidiaries as well as seeking contributions from outside investors.

Salam said that, from his perspective as an insider at the company, making profits did not appear to be KGLI’s principal goal, at least given its decision to sink its money and assets from its “Port Fund” into a variety of failing or near-bankrupt facilities in Egypt, Pakistan, and other countries.

Four years before the criminal indictments in Kuwait, Salam testified that he wanted to leave KGLI “…because I believed it was engaging in illicit activities … Specifically, it appeared to me that KGLI was engaged in money laundering, and presenting false financial information to investors.” His statements also show that Salam was trying to raise money to start his own investment fund after he left KGLI, which the company cited as one of the grounds for his dismissal. He could not be reached for comment.

Salam said Lazareva asked him on multiple occasions to visit Iran, sometimes without explanation and at other times to evaluate a port investment. When he refused because Iran was under US sanctions, she suggested that he, too, use his Egyptian passport. He again refused to go and, following a series of disputes and alleged high-pressure tactics by the company, was fired.

A KGL representative declined to comment to POGO on the testimony of Mabrouk or Salam.

More Ties to Iran

The Pennsylvania court case recently provided additional information about KGL’s relationship with Iran, a controversy that stretches back into the Obama Administration. As evidence emerged indicating possible sanctions violations by KGL in its joint ownership of ships with IRISL, Ashton Carter, then Under Secretary of Defense for Acquisition, Technology and Logistics and later Secretary of Defense, wrote to US lawmakers who had inquired about the situation.

In letters to Senators Claire McCaskill, Robert Menendez, Mark Kirk, Robert Bennett, and others in 2011, Carter wrote that DoD could find “no substantial information” that KGL had continuing ties to Iran that would prevent it from holding US military contracts. By that time, the company had publicly announced its decision to end all business dealings with Iran in compliance with US law.

Since then, however, as part of legal discovery in the Pennsylvania court case, KGL has divulged emails and documents, and offered testimony from one of its former executives that appear to show it did have business with IRISL—at a time when Under Secretary Carter was telling Congress just the opposite. At least that is the argument set forth in an extensively documented summary of KGL’s own internal records filed by KGL’s adversary in the Pennsylvania case. Among other things, the summary cites those KGL records showing that its joint venture with IRISL made “at least 63 financial transactions” with the Iranian shipper after US sanctions had been imposed. In another example from the summary, a former KGL executive, Allan Rosenberg, gave the court a statement describing how he set up a “ghost structure” email system that resulted in the concealment of KGL’s continuing business with the Iranian-owned company.

A KGL spokesperson declined to comment on the summary or on Rosenberg’s statement.

Airplane Parts for Iran?

In May last year, Fuad Dashti, a brother of the recently indicted Saed Dashti—both members of the wealthy Kuwaiti family that controls KGL—was arrested at San Francisco International Airport. He was charged with involvement in illegally selling aircraft parts to Iran, according to a senior US official, and brought to Washington, DC, apparently for questioning by the FBI. One official at the time described him as, “singing like a bird” while in US custody. Fuad Dashti has since been allowed to leave the United States and was photographed some months ago in Doha, Qatar. At the time of his arrest, a KGL spokesman told POGO that “the alleged conduct [of Fuad Dashti] does not involve KGL or any of its affiliates and that Mr. Fuad Dashti was not acting as a KGL employee or representative.”

However, Fuad Dashti maintains ongoing financial ties to KGL, and has been listed as a top executive and part owner of National Cleaning Company, which is partly owned by KGL. According to the recent indictment in Kuwait, Saed Dashti also owns a share of National Cleaning, though it is unclear whether misappropriated funds were diverted to the company. There was no reply to POGO’s repeated attempts to reach Fuad Dashti, including a message left at a California house where he is listed as owner.

Key Questions Remain

The criminal indictment of KGL’s chairman adds to a growing roster of unresolved issues swirling around the company and its role as a contractor with hundreds of millions of dollars in business with the US military. Questions surrounding the company’s possible financial ties to Iran, and even Syria and Russia, raise national security concerns at a time when those countries are actively engaged in confronting American interests.

America’s federal acquisition regulations require ethical conduct from companies and their leaders. The large body of evidence in Kuwait’s extensively documented fraud and money laundering case raises doubts whether that requirement is being met.

So, too, does the arrest of Fuad Dashti, long a key figure in KGL’s controlling dynasty, on charges of commercial dealings with Iran. Yet the US government has made virtually no public statements about the matter. The fact that KGL, as long ago as 2011 and perhaps earlier, has been the focus of a probe led by the FBI into its ties with Iran only adds to the doubts. Again, no result of that investigation has ever been made public. And the same is true of the US official response to a well-documented pattern of leaks to KGL’s Washington lawyers by the Defense Logistics Agency. Senior US officials have told POGO that the DoD’s Office of General Counsel and its Defense Criminal Investigative Service have looked at or been made aware of the matter. Yet neither has made a public statement about the issues.

Indeed, years of requests for information about KGL from agencies ranging from DoD to the Treasury’s Office of Foreign Assets Control have been met with incomplete answers and, on occasion, with apparently inaccurate information. Given that result, Congress needs to clear up what is going on with KGL and its huge government contracts, because federal agencies appear unable or unwilling to shed light on the issue, or credibly resolve it.

Given the new criminal charges lodged against KGL’s chairman, the American public needs to know whether the company is a responsible and deserving recipient of US taxpayer funds. To find out, Congress should look into what the FBI and other agencies have learned after years of investigating the company’s conduct, and inform the public of what it learns.

Of course KGL is not the only logistics contractor the US military could rely on. Its principal competitor, and one of the largest single US contractors in the Iraq war, is Agility Public Warehousing Company. Yet Agility, too, has faced its share legal problems: the Department of Justice recently settled criminal, civil, and administrative charges against it. In the criminal case, which began in 2009, DOJ sought hundreds of millions of dollars in compensation for alleged overcharging.  In the end, Agility was only required to “pay a maximum of $551…in restitution.” In the civil case, the company agreed to pay $95 million, ending its suspension and allowing it to bid once again on US government contracts.

Taken together, Agility’s recently resolved legal problems and the new criminal charges against KGL’s chairman highlight the need for Congress and the Defense Department to reevaluate a contracting framework that has made America’s military the captive of two giant companies in one of the most strategic parts of the globe, an area where US forces cannot operate without extensive logistical support. As an alternative to this dysfunctional system, Congress and the Defense Department should examine how to foster more competition by explicitly encouraging the Pentagon to make deals with a wider variety of market participants.”

http://www.pogo.org/our-work/articles/2017/us-top-militarys-iran-contracting.html

 

National Geospatial Intelligence Agency (NGA) To Offer Data to Industry for Partnerships

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NGA Federal News Radio

NGA Headquarters – Image:  “Federal News Radio”

“BREAKING DEFENSE”

“The idea: offer companies chunks of the “wonderland” of unclassified NGA data so they can use them to build new products or to test algorithms key to their products.

It’s a bold and rare move by a large and largely secretive government agency.

The top two leaders of the National Geospatial Intelligence Agency, Robert Cardillo and Susan Gordon, met with Anthony Vinci, now NGA’s director of plans and programs, to discuss ways to get more value from the agency’s incredibly valuable pools of data.

Using The Economist‘s description of data as the oil of today — the most valuable commodity in our economy — Vinci argued the agency must deploy it and help pay the American people back for the investment they have made in building the agency. If data is the new oil, Vinci said companies should “turn it into plastic,” adding value.

Cardillo told reporters would NGA would create a B corporation — in effect a non-profit government company — and hire an outsider to run it.

This, I think it’s fair to say, is not a slam dunk. Culturally, it will be challenging, Vinci admitted. “It’s straightforward, but it sort of breaks every rule we have in the IC (Intelligence Community).” The IC doesn’t share data and it doesn’t partner with outsiders, except for allied and friendly governments when needed.

This process may sidestep the whole process of generating a requirement for an intelligence system. “I don’t think that’s how problems can be solved any more,” Vinci said. The current system, which can be circumvented if an urgent need exists, is generally slow and restrictive, one that the Pentagon and the IC are increasingly trying to amend.

I spoke with three senior industry officials who listened to Vinci’s presentation and they were hopeful but cautious. All three said they thought the new effort could yield unexpected and useful returns on taxpayer’s investments in the data.

The biggest obstacle may be Congress. Although NGA would not be making money from the data sharing and it would not be releasing any data that could help our enemies, they would be sharing a government resource which voting taxpayers paid for and over which lawmakers have oversight. Whether the products resulting from the data would be licensed back to NGA, or allowed to generate profits for companies is all still to be determined.

“That’s part of what were trying to figure out Vinci told me,: “taxpayers paid for this data and how can we get that value back to them.”

http://breakingdefense.com/2017/06/nga-to-offer-data-to-industry-for-partnerships/

 

Big Industry Winners in the Saudi Weapons Offer

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SAUDI-DEFENCE

(Photo Credit: FAYEZ NURELDINE/AFP/Getty Images)

“DEFENSE NEWS”

“The big winner, at least on the platform side, is Lockheed Martin, with an estimated $29.1 billion in potential sales.

That includes seven THAAD missile defense batteries ($13.5 billion), and three KC-130J and 20 C-130J aircraft ($5.8 billion), as well as four multi-mission surface combatant ships ($6 billion)

Now that details of the $110 billion arms package offered to Saudi Arabia are known, Lockheed Martin appears to be the clear winner among American defense firms.

First, a caveat: Defense News broke the details of the roughly $84 billion in unknown weapons offerings that President Donald Trump brought with him on a May 20 visit to the Kingdom. But by the nature of how foreign military sales are completed, dollar totals are best-guess estimations and likely represent the ceiling for what could be spent. The figures listed may well come down, and the timeframes listed may well change, based on final negotiations around the equipment.

the company’s Sikorsky arm also benefited, with two types of Black Hawk variants: 14 MH-60R Seahawk rotorcraft ($2 billion) and 30 UH-60 rescue helicopters ($1.8 billion). That could potentially grow. A statement from Lockheed, released after the visit to Saudi Arabia, claimed that a deal was being reached with Saudi company Taqnia to “support final assembly and completion of an estimated 150 S-70 Black Hawk utility helicopters for the Saudi government.”

A few other companies also fared well.

Boeing cashed in with an eight-year sustainment deal ($6.25 billion) for their F-15 aircraft, along with a relatively small $20 million deal to run a study on recapitalizing Saudi’s older fleet of F-15 C/D aircraft.

Raytheon’s big win came from an unknown type of enhancement for the Patriot missile system ($6.65 billion). BAE, meanwhile, hopes to bring in $3.7 billion worth of work on its Bradley vehicle, with a pair of contracts – one to modify 400 existing vehicles, and another to produce 213 new ones. (The company may also cash out on an order for 180 Howitzers, worth $1.5 billion.)

There is also a $2 billion order for an unknown number of Mk-VI patrol boats, produced by SAFE Boats International.

The previously unreported list includes roughly 104,000 air to surface weapons, including 27,000 GBU-38 designs ($1.24 billion, Boeing), 9,000 GBU-31v3 designs ($690 million, Boeing), 9,000 GBU-31v1 designs ($490 million, Boeing), 50,000 GBU-12 designs ($1.67 billion, Lockheed and Raytheon) and 9,000 GBU-10 designs ($370 million, Lockheed and Raytheon.)

Known unknowns
But there is a chance for more growth, based on a set of unspecified aircraft and satellite programs. The list includes $2 billion for a light air support aircraft, type and quantity to be decided later. It also includes another $2 billion for four new aircraft to replace the Kingdom’s Tactical Airborne Surveillance System, which serves a similar role to the U.S. Air Force JSTARS.

The light air support seems to have a fairly small list of options: either Textron with it’s AT-6 (or, perhaps, its Scorpion jet, still in search of a first customer) or the Embraer/Sierra Nevada team’s A-29 Super Tucano. Both the UAE and Jordan have ordered the A-29, so buying the Super Tucano would give the Kingdom commonality with two of its closest allies.

The wildcard may be the U.S. Air Force’s OA-X experiment, which is holding a flyoff between the Scorpion, AT-6 and A-29 this summer. In theory, the Air Force is looking at replacing the A-10 with one of the three planes, but the service has been careful to stress this summer’s action is more of a fact-finding exercise than a downselect. At the same time, if the USAF shows a preference for one of the jets, the Saudis may look in the same direction.

As to the TASS replacement, the first question is whether the Saudis look to glom onto the JSTARS recapitalization, which should be awarded sometime in fiscal year 2018. If so, Boeing, a Northrop Grumman/L-3/General Dynamics team and a Lockheed Martin/ Bombardier team would benefit here.

However, the TASS and JSTARS setups are somewhat different, and it may be the Saudis would look for a custom solution.

Meanwhile, the Kingdom has been offered a clutch of satellites, with as-yet-unknown designs: two “Remote Sensing Satellites” estimated at $800 million and two satellite communications & space based early warning systems estimated at $4 billion.

Given the focus on missile defense, the space based early warning systems could well be a derivative of Lockheed’s Space Based Infrared System (SBIRS) missile defense satellite. If so, the U.S. may be able to seek an arrangement with the Kingdom on information sharing, which would widen the overall capability of the missile tracking system.

How quickly these contracts can be pushed through the system is an open question. Roman Schweizer, an analyst with Cowen Washington Research Group, wrote in a note to investors Friday that “precision munitions and missile defense remain top priorities for the Kingdom.”

“We think the elements of the package will probably go through as individual items, which could reduce opposition. We think some of the more easily defined items that have been either sold to Saudi before or to other countries could proceed quickly (such as THAAD, Patriot, precision munitions, helicopters, F-15, C-130Js, etc.),” he wrote.”