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Saturday, August 3, 2013

Weekly Address: Securing a Better Bargain for the Middle Class | The White House

Weekly Address: Securing a Better Bargain for the Middle Class | The White House


At FTC's Request, Court Orders Halt to Debt Collector's Illegal Practices, Freezes Assets

Defendants Allegedly Broke the Law by Posing as Process Servers, Threatening Lawsuits, and Contacting Consumers’ Employers and Family Members in Violation of Their Privacy.

At the request of the Federal Trade Commission, a U.S. district court has halted a debt collection operation that allegedly extorted payments from consumers by using false threats of lawsuits and calculated campaigns to embarrass consumers by unlawfully communicating with family members, friends, and coworkers.  The court order stops the illegal conduct, freezes the operation’s assets, and appoints a temporary receiver to take over the defendants’ business while the FTC moves forward with the case.

The lawsuit, part of the FTC’s continuing crackdown on scams that target consumers in financial distress, charged four individuals and seven companies.  The FTC alleged that the defendants were part of an elaborate debt collection scheme operating from locations in Orange and Riverside counties in California, and that they used various business names including Western Performance Group, as well as fictitious names, which they changed frequently to avoid law enforcement scrutiny.

The FTC alleged that the defendants called consumers and their employers, colleagues, and family members posing as process servers or law office employees, and claimed they were seeking to deliver legal papers that purportedly related to a lawsuit.  In some instances, the defendants threatened that consumers would be arrested if they did not respond to the calls.  But the debt collectors were not process servers or law office employees, and the defendants did not file lawsuits against the consumers.  The FTC charged that the defendants’ false and misleading claims violated the FTC Act and the Fair Debt Collection Practices Act.  In addition, the FTC alleged that the defendants violated the Fair Debt Collection Practices Act by:

improperly contacting third parties about consumers’ debts; failing to disclose the name of the company they represented, or the fact that they were attempting to collect a debt, during telephone calls to consumers; and failing to notify consumers of their right to dispute and obtain verification of their debts.

The complaint names as defendantsThai Han; Jim Tran Phelps; Keith Hua; James Novella; One FC, LLC, also doing business as Western Performance Group and WPG; Credit MP, LLC, also doing business as AFGA, CMP, AFG & Associates, AF Group, Allied Financial Group, and Allied Guarantee Financial; Western Capital Group, Inc., also doing business as ERA, LMR, WCG, and WC Group; SJ Capitol LLC, also doing business as SCG; Green Fidelity Allegiance, Inc., also doing business as WRA; Asset and Capital Management Group; and Crown Funding Company, LLC.

The Commission vote authorizing the staff to file the complaint was 4-0.  The FTC filed the complaint and the request for a temporary restraining order in the U.S. District Court for the Central District of California.  On July 24, 2013, the court granted the FTC’s request for a temporary restraining order.  The Federal Trade Commission would like to thank the U.S. Postal Inspection Service for its assistance in bringing this case.


Perez: Senate workforce investment bill will create opportunity, strengthen middle class

WASHINGTON — Secretary of Labor Tom Perez today issued the following statement regarding Senate committee markup of the Workforce Investment Act of 2013:

"To create opportunity for the American people and ensure a better bargain for the middle class, we need strong partnerships to build a world-class workforce.
"By collaborating with business leaders, labor, workforce boards, community colleges, nonprofits and others, we can build a workforce system that ensures workers have the skills they need to succeed and employers have the workforce they need to compete in the 21st century.

"We applaud the U.S. Senate for taking a major step in that direction with the bipartisan approval by the Committee on Health, Education, Labor and Pensions of S. 1356, the Workforce Investment Act of 2013. I particularly want to thank Chairman Harkin, Ranking Member Alexander, Senator Murray and Senator Isakson for their efforts. This step to modernize the Act is long overdue — it was 15 years ago this summer that the Workforce Investment Act first became law.
"We need a demand-driven approach to workforce development, one that responds to the needs of employers and prepares people for the jobs that are actually available. We need to align the workforce system with regional economies and establish a more integrated network of American Job Centers. We need to promote innovation and strengthen performance evaluation in the system, so consumers can get information about programs and services that work and taxpayers know we are spending their dollars wisely.

"S. 1356 meets these tests, building on the strength of the current law at the same time that it updates and streamlines the system. It is a significant improvement over the partisan legislation passed by the House in March. The House bill froze funding and failed to provide many of the services needed by workers with the greatest barriers to employment, including veterans, disadvantaged youth and people with disabilities.

"We hope that S. 1356 will move quickly to the Senate floor, with Congress sending a sound, bipartisan bill to the White House for the president's signature. Reauthorizing the Workforce Investment Act will grow our economy, help restore middle-class security and empower more people to live the American Dream."


CFTC Charges Florida-Based AmeriFirst Management LLC and Its Owners, John P. D’Onofrio, George E. Sarafianos, and Scott D. Piccininni, in Multi-Million Dollar Fraudulent Precious Metals Scheme

CFTC alleges that the Defendants engaged in illegal, off-exchange commodity transactions and deceived retail customers regarding financed precious metals transactions

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against AmeriFirst Management LLC (AML) of Fort Lauderdale, Florida, and its owners, John P. D’Onofrio of Fort Lauderdale, George E. Sarafianos of Lighthouse Point, Florida, and Scott D. Piccininni of Fort Lauderdale.  The CFTC Complaint charges the Defendants with operating a precious metals scheme where the Defendants marketed illegal, off-exchange financed commodity transactions and fraudulently misrepresented the nature of those transactions.

According to the Complaint, filed on July 29, 2013, AML held itself out as a precious metals wholesaler and clearing firm, operating through a network of more than 30 precious metals dealers. As alleged, these dealers solicited retail customers to invest in financed precious metals transactions, where a customer gave a percentage deposit of the total value of the metal, typically 20%, and the dealer supposedly made a loan to the customer for the remaining 80%, supposedly sold the customer the total metal amount, and supposedly allocated the total metal amount at a depository to be held for the customer.

The Complaint alleges that AML created customer documents that represented that the dealer had in fact made such a loan and sold and allocated the total metal amount to the customer. However, these documents were false because the dealer never made a loan to the customer, nor did the dealer sell or allocate any metal to the customer, according to the Complaint. Further, the Complaint alleges that although there was no loan and no metal was allocated to the customer, AML charged the customer finance and storage fees.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 expanded the CFTC’s jurisdiction over transactions like these and requires that such transactions be executed on or subject to the rules of a board of trade, exchange, or commodity market, according to the Complaint. This new requirement took effect on July 16, 2011. The Complaint alleges that all of the Defendants’ financed commodity transactions took place after this date and were illegal. The Complaint also alleges that the Defendants defrauded customers in these financed commodity transactions.

In its continuing litigation, the CFTC seeks a permanent injunction from future violations of federal commodities laws, permanent registration and trading bans, restitution to defrauded customers, disgorgement of ill-gotten gains, and civil monetary penalties.

The CFTC Division of Enforcement staff responsible for this action are David Chu, Mary Beth Spear, Eugene Smith, Patricia Gomersall, Ava Gould, Scott Williamson, Rosemary Hollinger, and Richard Wagner.

Remarks at the Iftar Roundtable

Remarks at the Iftar Roundtable


Action Targets Supporters and Businesses Linked to Sinaloa Boss Ismael Zambada Garcia

 WASHINGTON – The U.S. Department of the Treasury today designated three individuals and three entities linked to Ismael Zambada Garcia, one of the principal leaders of the Sinaloa Cartel.  Those designated include Jose Antonio Nunez Bedoya, a Mexican attorney and notary public who helps to create front companies in order to conceal and launder assets on behalf of Zambada Garcia, members of Zambada Garcia’s family, and other members of the Sinaloa Cartel.  Nunez Bedoya incorporated Estancia Infantil Nino Feliz and Establo Puerto Rico on behalf of Zambada Garcia, and he notarized real estate purchases on behalf of Santa Monica Dairy, all of which were previously designated by the Treasury Department’s Office of Foreign Assets Control (OFAC) in May 2007.  Additionally, Nunez Bedoya notarized real estate purchases on behalf of Sinaloa Cartel leader Joaquin Guzman Loera and his wife, Griselda Lopez Perez, whom OFAC designated in September 2012.

“Treasury will continue to target and disrupt financial operations linked to the Sinaloa Cartel by taking action against any facilitators, legal or financial professionals, or businesses that are laundering their narcotics proceeds,” said OFAC Director Adam J. Szubin.

The cash-intensive businesses designated by OFAC today were Parque Acuatico Los Cascabeles, a Sinaloa-based water park, Centro Comercial y Habitacional Lomas, a shopping mall in Culiacan, and Rancho Agricola Ganadero Los Mezquites, a cattle ranch in Sinaloa.  Nunez Bedoya incorporated and notarized all three businesses on behalf of Zambada Garcia.

Also designated today were Tomasa Garcia Rios and Monica Janeth Verdugo Garcia, wife and daughter of deceased narcotics trafficker Jose Lamberto Verdugo Calderon.  Verdugo Calderon, who was killed by the Mexican military in January 2009, was widely identified by U.S. and Mexican authorities as a major financial operative and lieutenant for Zambada Garcia.  Tomasa Garcia Rios and Monica Janeth Verdugo Garcia own Rancho Agricola Ganadero Los Mezquites and Parque Acuatico Los Cascabeles.

Today’s action would not have been possible without critical support from the Drug Enforcement Administration.

“The Sinaloa Cartel cannot hide behind front companies like a water park or agricultural business,” said DEA Special Agent in Charge Doug Coleman.  “We are working with OFAC to expose these traffickers’ front companies for what they really are – illegal enterprises that fuel the drug trade, its violence and corruption.  As we continue to follow the money trail, we starve these traffickers of their assets and eventually put their global criminal networks out of business.”

Today’s action, pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act), generally prohibits U.S. persons from conducting financial or commercial transactions with these designees and also freezes any assets they may have under U.S. jurisdiction.  The President named Ismael Zambada Garcia and the Sinaloa Cartel as significant foreign narcotics traffickers pursuant to the Kingpin Act in May 2002 and April 2009, respectively.

Internationally, OFAC has designated more than 1,300 businesses and individuals linked to 103 drug kingpins since June 2000.  Penalties for violations of the Kingpin Act range from civil penalties of up to $1.075 million per violation to more severe criminal penalties.  Criminal penalties for corporate officers may include up to 30 years in prison and fines up to $5 million. Criminal fines for corporations may reach $10 million.  Other individuals could face up to 10 years in prison and fines pursuant to Title 18 of the United States Code for criminal violations of the Kingpin Act.


Monday, July 29, 2013
Federal Courts Authorize Service of John Doe Summonses Seeking Identities of Persons Using Payment Cards in Norway

Ten Lawsuits Initiated Pursuant to Tax Treaty Between United States and Norway; Seven Petitions Granted, Three Petitions Remain Pending
The Justice Department announced that federal courts in Minnesota, Texas, Pennsylvania, Oklahoma, Virginia and California have entered orders over the past week authorizing the Internal Revenue Service (IRS) to serve John Doe summonses on certain U.S. banks and financial institutions, seeking information about persons who have used specific credit or debit cards in Norway.  The summonses are referred to as “John Doe” summonses because the IRS does not know the identity of the person being investigated.  While orders have been entered in seven of these cases, the United States’ petitions in three additional cases remain pending.

The lawsuits, filed on July 19 and 22, 2013, in nine federal districts, were initiated at the request of the Norwegian government under a treaty between Norway and the United States.  The treaty allows the two countries to cooperate in exchanging information that is helpful in enforcing each country’s tax laws.  The United States is seeking the identities of persons who have used specific debit or credit cards issued by certain U.S. financial institutions so that Norway can determine if those persons have complied with Norwegian tax laws. A total of 18 U.S. financial institutions are identified in the government’s court filings. The filings do not allege that these financial institutions have violated any U.S. laws with respect to these accounts.

As alleged in court papers filed by the Justice Department, Norwegian authorities have reason to believe, based upon the use of payment cards in Norway that were issued by U.S. banks, that unidentified card holders may have failed to report financial account information or income on their Norwegian tax returns.  Court papers cite examples where individuals using non-Norwegian payment cards have claimed to be tax residents of other countries but were found to have resided in Norway for sufficient time to subject them to taxes in Norway.  

 “The Department of Justice and the IRS are committed to working with our treaty partners to fight tax evasion wherever it occurs,” said Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division. “All taxpayers should know that our efforts in this area are global, coordinated and will continue.”

  “These summonses reflect our continuing efforts to work with our international partners on offshore tax evasion,” said Douglas O’Donnell, IRS Assistant Deputy Commissioner, Large Business & International (LB&I). “By using effectively our existing network of bilateral agreements, countries can help one another put an end to the global practice of evading taxation by hiding assets abroad.”

The lawsuits are a part of ongoing international efforts to stop persons from using foreign financial accounts as a way to evade taxes.  Courts have previously approved John Doe summonses allowing the IRS to identify individuals using offshore accounts to evade their U. S tax obligations.  In the present suits, the Justice Department is seeking the identities of persons who may be attempting to hide their Norwegian taxable income in U.S. financial accounts.



New York State Suspends Attorney Mitchell S. Drucker from Practicing Law for Three Years Based On Insider Trading Violation

The Commission announces that on July 17, 2013, the Appellate Division, Second Department, of the New York State Supreme Court (the "Appellate Division"), issued a decision suspending attorney Mitchell S. Drucker from the practicing law for three years, commencing August 16, 2013. The decision provides that Drucker cannot apply for reinstatement earlier than February 16, 2016. The Court imposed this sanction based on the judgment the Commission obtained in its insider trading case against Drucker. SEC v. Mitchell S. Drucker, et al, 06 Civ. 1644 (S.D.N.Y.) In December 2007, a jury in the United States District Court for the Southern District of New York found that Drucker, who was in the legal department of public company NBTY, Inc., violated the antifraud provisions of the securities laws by insider trading the common stock of NBTY, tipping his father, who traded, and trading his friend's NBTY shares. In its decision, the Appellate Division upheld the determination of a Special Referee that Drucker had (1) "engaged in conduct involving dishonesty, deceit, fraud, or misrepresentation, in violation of former Code of Professional Responsibility DR1-102(a)(4) (22 NYCRR 1200.3[a][4])," and (2) "engaged in conduct adversely reflecting on his fitness as an attorney, in violation of former Code of Professional Responsibility DR 1-102(a)(7) (22 NYCRR 1200.3[a][7])." In imposing its sanction, the Appellate Division found:

. . . [W]e note the absence of cooperation by the respondent with the SEC, as well as the absence of any admission by the respondent that he engaged in insider trading. As the District Court noted, the respondent "failed to cooperate … until … he could no longer conceal his transgression, thereby misleading his employer," and he failed to take responsibility for what he did. We find the absence of remorse to be an aggravating factor, consistent with the District Court's finding that the respondent was entitled to "no mercy" as a result of the "brazenness" of his conduct and his "cocky refusal to own up to it." Moreover, we note the District Court's description of the respondent as having "demonstrated utter indifference to the law and to his client," and of his conduct as "egregious."

Previously, on December 26, 2007, Judge Colleen McMahon, whose decision and findings were cited by the Appellate Division, enjoined Drucker from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and barred him from serving as an officer and director of any public company. The judgment also ordered defendant Drucker to pay disgorgement and prejudgment interest totaling $201,146, to pay, and be jointly and severally liable with his father, defendant Ronald Drucker for, disgorgement and prejudgment interest totaling $74,411, and to pay, and be jointly and severally liable with his friend, relief defendant William Minerva for, disgorgement and prejudgment interest totaling $11,577. Finally, the judgment ordered Mitchell Drucker to pay a civil penalty of $394,486, representing two times the combined ill-gotten gains obtained by defendants Mitchell Drucker and Ronald Drucker, and relief defendant Minerva. Drucker subsequently completed those payments to the U.S. Treasury.

In February 2008, the Commission issued an Order temporarily and then permanently suspending Drucker from practicing before the Commission based on his insider trading judgment.

Friday, August 2, 2013

West Wing Week: 08/02/13 or "Let Us Be Awed By Their Shining Deeds" | The White House

West Wing Week: 08/02/13 or "Let Us Be Awed By Their Shining Deeds" | The White House


Remarks With United Arab Emirates Foreign Minister Abdullah bin Zayed Before Their Meeting
John Kerry
Secretary of State
London, United Kingdom
August 2, 2013

SECRETARY KERRY: Welcome, everybody. I’ll say a couple – do you want to say anything? Let me just say it’s a great pleasure for me to meet with Sheikh Abdullah, the Foreign Minister of the Arab Emirates. And I’m really grateful for his enormous efforts over the last weeks to try to help resolve the crisis in Egypt.

Yesterday, I made a few comments about sort of the intent of the July 30th movement, and what I want to make clear – I think His Highness Sheikh Abdullah would join me in this – is that all of the parties involved have a responsibility to be inclusive, to work towards a peaceful resolution. The last thing that we want is more violence. The temporary government has a responsibility with respect to demonstrators to give them the space to be able to demonstrate in peace. But at the same time, the demonstrators have a responsibility not to stop everything from proceeding in Egypt.

Egypt needs to get back to a new normal. It needs to begin to restore stability to be able to attract business and good people to work. And that’s a high priority. And we will work very, very hard, together and with others, in order to bring parties together to find a peaceful resolution that grows the democracy and respects the rights of everybody. That’s what we’re engaged in and that’s part of what we will talk about – not all but part of what we’ll talk about today.

Your Highness.

FOREIGN MINISTER ABDULLAH: Well, first of all, Secretary, I have to thank you for meeting with me today. And I think it’s extremely important to see the U.S. leadership not only in helping calm the situation in Egypt, but also your efforts in putting new life in the peace process. We saw that huge effort that United States and yourself is doing at the moment. And of course, you’ll find all support from our end, from the Arab side.

But just to go back to Egypt for a second, Egypt is an extremely important country, not only for the Arab countries but for the region as well. And here we think we have to look forward. We have to make sure that this interim government can be successful, can be successful in leading Egypt to a better future. And the UAE, with the United States and others, is doing its very best to give this government the support it needs, but also to encourage all the other parties to reach to a position where it can negotiate with this government – here I’m talking about the previous government.

We’d like to see the situation go normal in Egypt, because normalcy is the only way for a successful Egypt. We don’t want to see anybody stopping Egypt from the way it should go, but that’s only going to happen by all parties being in an inclusive dialogue. And I think here the UAE and the United States do agree.

SECRETARY KERRY: Thank you all very much. Appreciate it.

Consumer Updates What is Gluten-Free? FDA Has an Answer

Consumer Updates What is Gluten-Free? FDA Has an Answer

Week in Images

Week in Images



U.S. Marine Corps Cpls. Michael Emerson, left, scans the surrounding area for threats as Andrew Crisp, right, relays information to his leadership team during Operation Grizzly in Helmand province, Afghanistan, July 18, 2013. Emerson and Crisp are assigned to Fox Company, 2nd Battalion, 2nd Marine Regiment. U.S. Marine Corps photo by Cpl. Alejandro Pena.

A U.S. Marine scans the surrounding area for threats during Operation Grizzly in Helmand province, Afghanistan, July 18, 2013. U.S. Marine Corps photo by Cpl. Alejandro Pena.


Remarks With Pakistani Foreign Affairs Advisor Sartaj Aziz
John Kerry
Secretary of State
Prime Minister's Residence
Islamabad, Pakistan
August 1, 2013

MODERATOR: Good afternoon, ladies and gentlemen. (Inaudible.)

SECRETARY KERRY: Well, thank you very much. As-Salaam Alaikum. It’s a pleasure to be here and I was privileged to be able to meet with the Prime Minister as well as the Prime Minister’s Foreign Affairs Advisor, His Excellency Sartaj Aziz. We’ve just come from a very productive meeting with Prime Minister Sharif, and I’m very grateful to him for delaying his trip. He is leaving for a pilgrimage to Mecca during this most Holy Month of Ramadan, and I want to honor his willingness to delay his trip a little bit in order to be able to meet today. I’m very grateful to him for that.

Let me say what a pleasure it is for me to be back in Pakistan. I have been here many times, as the people of Pakistan know, and I was very privileged to work in the United States Senate in order to pass what became known as the Kerry-Lugar-Berman bill, which provided significant economic assistance to the people of Pakistan. And we did that because we specifically wanted to make clear that America does not want to have a transactional relationship, we do not want to have a relationship based on the moment or based on an issue such as counterterrorism or Afghanistan, but we want a relationship with the people of Pakistan for the long term. One of the largest diasporas of Pakistanis lives in the United States of America. We have a huge Pakistani-American population. We’re proud of their many contributions to America, to our society, and they are proud always of their heritage and of their continuing links to their homeland, to Pakistan.

I also want to applaud the people of Pakistan for this remarkable, historic transition that has taken place here with this election. I was privileged to be here a few years ago at the last election with then Senator Joe Biden and Senator Chuck Hagel. Now the three of us are privileged to work for President Obama in his Administration – obviously, one as the Vice President of the United States, Secretary Hagel is the Secretary of Defense. So we’re privileged – all three of us – to continue to work on the relationship with Pakistan, and it’s with our friendship and our understanding as we come here today at an historic time in Pakistan’s democratic journey. I was privileged to be here the day of the election for the first transfer of power from one president to another at the ballot box. And now we have seen the first transfer of that elected president civilian to another civilian president. So the march towards democracy in Pakistan is something to be celebrated. And that is another reason why I’m privileged to be here at this moment. The people of Pakistan deserve enormous credit for their role in the peaceful transition of power from one democratically-elected government to another.

I’m here with a simple message: The United States is committed to a long-term partnership with the people of Pakistan, and we remain fully engaged in building a relationship that is based on mutual interests and mutual respect. And we are working closely with the new government in order to advance a shared vision of the future that is marked by peace, by stability, and by prosperity.

It is also no secret that along this journey in the last few years we’ve experienced a few differences. I think we came here today, both the Prime Minister and myself, with a commitment that we cannot allow events that might divide us in a small way to distract from the common values and the common interests that unite us in big ways. As we discussed this morning, the common interests far exceed and far outweigh any differences. So we’re here to speak honestly with each other, openly about any gaps that may exist that we want to try to bridge. And our people deserve that we talk directly and with candor and represent their interests.

I’m pleased to announce that today very quickly we were able to agree to a resumption of the Strategic Dialogue in order to foster a deeper, broader, and more comprehensive partnership between our countries. And this revitalized dialogue will address in a realistic fashion all of the many key issues between us, from border management to counterterrorism to promoting U.S. private investment and to Pakistan’s own journey to economic revitalization.

I want to emphasize the relationship is not defined simply by the threats that we face. It is not only a relationship about combatting terrorism. It is about supporting the people of Pakistan and particularly helping at this critical moment for Pakistan’s economic revival. That has been a centerpiece of Prime Minister Nawaz Sharif’s campaign, it is a centerpiece of his governing efforts, and it will be a centerpiece of our relationship.

The Prime Minister has outlined an ambitious agenda of reforms that will unlock growth and opportunity. And I know that some of these reforms are going to be difficult. They always are. But they are essential to creating sustainable development, more reliable energy supplies, and better services for the people of Pakistan.

Our partnership is also about energy, education, trade, and investment. We have the largest Fulbright program in the world right here in Pakistan. And through the Kerry-Lugar-Berman Act, we’ve helped to bring 1,000 megawatts of power to the national grid, which is providing power and uplifting the lives of 16 million Pakistanis. We’ve launched a new investment fund that will help grow small and medium sized enterprises. And I’m pleased to report that we are funding the rehabilitation of all four major trade routes between Pakistan and Afghanistan.

Pakistan’s regional position brings enormous economic opportunities, and we want to recognize those. That’s why we welcome and encourage the steps that Pakistan and India have taken to expand their economic relationship. As I said when I visited New Delhi just a few weeks ago, if Pakistan and India can confidently invest in each other, then the rest of the world is more confidently going to invest in both of them, and the returns on that investment to this region will be simply enormous.

Now, of course, Pakistan cannot achieve its full economic potential until it overcomes extremism, extremist threats within its borders. I want to say that Pakistan troops have fought very bravely against this threat and its people have suffered enormously, including perhaps more than 40,000 Pakistanis who have been killed by terrorists over the past decade. The truth is we face a common enemy in terrorism, and the choice for Pakistanis is clear: Will the forces of violent extremism be allowed to grow more dominant, eventually overpowering the moderate majority? And I ask anybody in Pakistan to ask themselves: How many bridges have those terrorists offered to build? How many schools have they opened? How many economic programs have they laid out for the people? How many energy plants have they tried to build? I think the choice is clear. I believe Pakistanis are going to recommit to the values that are espoused by the founder of the country, Muhammad Ali Jinnah, who helped people come together to build a stable, moderate democracy and an economically vibrant and tolerant nation that is at peace with itself and its neighbors.

The reality is that the fates of Afghanistan and Pakistan are intertwined. And addressing the threat that is posed by cross-border militancy is a key aspect of our Strategic Dialogue. This is a challenge that cannot be met by any one country. It will take a united effort to resolve the issues of safe havens and political reconciliation.

So I want to thank His Excellency in particular for his visit to Kabul, which was a very important visit last month. Both of our countries share an interest in a unified, stable, and peaceful Afghanistan, and so we greatly appreciate Pakistan’s assistance in the Afghan reconciliation process. And that is a process that obviously will take time and perseverance.

In the end, the relationship between the United States and Pakistan has traveled a long way. And yes, we still do have ground to cover. But after my discussions today, I can tell you unequivocally that we do share a long-term vision for the relationship. And I believe that in Prime Minister Nawaz Sharif we have someone who is committed to try to grow that relationship.

To ensure that we continue our important bilateral conversation at the highest levels, I have extended on behalf of the President of the United States an invitation to Prime Minister Sharif to meet with the President and have a bilateral meeting with him in the United States this fall.

So I thank you again, Your Excellency, for the gracious hospitality which I always have received when I come here to Pakistan. But thank you for the hospitality and welcome you’ve shown me and my team here today, and I will look forward after your comments to taking a couple of questions.

MR. AZIZ: Thank you. It’s my pleasure to welcome Secretary of State John Kerry on his first bilateral visit to Pakistan and also thank him for the very positive and constructive statement that he just made. Senator Kerry is a very familiar and well-respected figure who has always been welcomed in Pakistan as a good friend. We appreciate the leadership that he has exhibited in the past as the Chairman of the Senate Foreign Relations Committee and now in his new capacity as Secretary of State to promote and strengthen the partnership between our two countries.

As Secretary Kerry mentioned, we have had very intensive and frank discussion in a very collegial atmosphere to strengthen the foundations of our friendship and to further build our partnership to achieve our shared goals in the future. As he mentioned, in these foundations there are many mutually reinforcing elements. The U.S. is our largest trading partner and a major source of foreign direct investment and economic assistance. We have – Pakistan has a large diaspora in the United States, and a significant number of highly-educated Pakistanis both in the public and private sectors owe their skills to universities in the U.S. However, most importantly --

SECRETARY KERRY: I think they have a microphone problem.

MR. AZIZ: However, most importantly, it is our shared faith in democracy and respect for the rule of law and human freedoms and commitment to the promotion of peace and security in the region that binds our countries in a new and stronger partnership. As we look into the future, we want trade, more trade, larger investment and cooperation in development, including education as the building blocks of a new and renewed partnership.

In this regard, we highlighted the importance of securing greater market access for Pakistani products in the U.S. and larger foreign direct investment as the new government attaches highest priorities to economic revival. I also conveyed our gratitude to the U.S. for their support for the Diamer-Bhasha dam as a part of its vital effort to deal with the energy crisis.

Of course, these efforts to revive the economy and produce – will not produce full results without peace and stability in our region. In fact, both of us agreed that Pakistan wishes to have good relation with all its neighbors and we hope to expand our connectivity for the mutual benefit.

There are, of course, other challenges too, and today we have discussed the path forward as the U.S. draws down its forces in Afghanistan in areas such as Afghan reconciliation, ground lines of communication, IEDs, counterterrorism. We have to improve – we have improved our bilateral coordination significantly, and we have continued to work to improve them further.

I have reiterated Pakistan’s clear commitment to facilitating U.S. withdrawal from Afghanistan and supporting any Afghan-led and Afghan-owned solution and reconciliation for peace and stability in Afghanistan.

I also briefed Secretary Kerry about the (inaudible) of a comprehensive counterterrorism strategy our government is in the process of formulating in consultation with all the stakeholders.

We also shared our concerns on the drone strikes which Pakistan not only considers a violation of our sovereignty but it’s also counterproductive as they undermine the overall counterterrorism cooperation efforts.

And as Secretary Kerry mentioned, in order to give impetus to these understandings, we have agreed on the resumption of the Strategic Dialogue process and holding the next ministerial-level dialogue within the next six months. As some of you would recall, this dialogue started in 2010 and three sessions were held within 2010, in March, July and October. But then several events derailed this process and no meeting has been held since October 2010, and therefore the objective of transforming U.S.-Pakistan relations from a transactional to a sustainable strategic partnership has remained unfulfilled. And we think after the historic democratic transition in Pakistan the time to realize this objective has arrived, and that is what we have agreed on.

And we are also grateful for the invitation to the Prime Minister visit President Obama later this year which will further help to (inaudible) and strengthen. And in particular on the economic front, which is the key building block of our relationship, we hope that we can double our bilateral trade through enhanced market access to something like $11 billion in the next five years.

So I thank Secretary Kerry for this visit. Let me state it clearly that we are committed to work together in all these areas in a very pragmatic and positive manner on the basis of respect for each other’s interests as well as concerns. So I thank you again and look forward to seeing you (inaudible).

SECRETARY KERRY: Thank you, Sartaj. Thank you very much.

MODERATOR: We’ll take four questions, two each side. Michael Gordon of New York Times. Sir, you’ll have to speak up because (inaudible).

QUESTION: Hello. Okay. Mr. Secretary, the effort to get talks going with the Afghan Taliban in Doha is frozen and it now appears that NATO’s military mission may well end and that most if not all of the NATO troops may be gone before any negotiations even get underway. And that means that the United States’ leverage and the Afghan Government’s leverage in these talks will be reduced if they’re ever resumed. What have you asked the Pakistanis to do to get these talks going, and what steps are you taking to bring the United States military strategy and the diplomatic strategy into alignment?

And a question, please, for Mr. Aziz: What specific efforts is Pakistan undertaking now to get these talks underway? And sir, as you know, the United States has repeatedly pressed Pakistan to crack down on safe havens that Haqqani and other networks have used to carry out attacks in Afghanistan. Was this issue raised again today by Mr. Kerry? And what is Pakistan actually prepared to do, and would Pakistan be prepared to do more about the safe havens if the United States would commit to reducing its drone strikes? Thank you.

SECRETARY KERRY: Well, Michael, let me just say that I – of course, we talked about this issue today. Pakistan has been very helpful with respect to this process and we’re very grateful to the Pakistanis for their initiative, and they will continue to be helpful.

I disagree that I think the NATO mission will end before – I mean, look, if the talks are going to take place, they’re going to take place. If they don’t, that’s their choice, but it will not change the fundamental strategy of what the United States and Afghanistan and the ISAF forces are doing. The President has made it clear that he will, at the appropriate time, be announcing an ongoing American presence. And the negotiations on a bilateral security agreement are underway and I am confident will be completed at an appropriate moment in time. And our plans continue for an election in Afghanistan in 2014 that will be the centerpiece of this transition. The Afghan forces this year, without regard to what happens with the Taliban, have taken over lead responsibility in Afghanistan for security. We are working with them. And so that will continue, obviously, into next year, and the training and equipping will continue beyond that.

So the reason we hope the talks can take place is because everybody understands that a political resolution is better than continued fighting. And our hopes are that it would be possible to be able to combine that with the rest of the transition that is taking place in Afghanistan. We will continue those efforts, but it doesn’t – I don’t agree that there is a lack of synchronization between the military strategy and the diplomatic strategy. The diplomatic strategy is to try to get to talks but to continue the process of preparing the Afghan people for their election and for a transition that will take place regardless.

MR. AZIZ: Well, what can Pakistan do? I think as Secretary Kerry said, it is a process between the Afghan stakeholders and we are doing our best to facilitate that process. We can’t do more than facilitate. And obviously, there are many stakeholders, and Taliban have not so far been persuaded to talk to Karzai directly, but they may be persuaded to talk to the High Peace Council under certain conditions. So that is the next effort that is being made. And if they do, then at least they can talk about talks and how to organize them. But I think in these efforts what President Karzai will be coming here later this month, so we’ll explore with him also how much flexibility he will show in dealing with this issue, and hopefully after that some new attempt can be made.

On the safe havens, of course, we had a very detailed discussion with our plans, on our overall comprehensive strategy, the All Parties Conference that we are planning to hold, and how the follow-up will take place. And as it unfolds, all of you will come to know how we propose to deal with it. Thank you.

MODERATOR: Mr. Asif Bhatti of Geo Television.

QUESTION: Thank you very much. I have a question to His Excellency, Senator John Kerry. As advisor mentioned that we have reservations on drone attacks, so you might know about the public reservations and sentiments on the drone attacks. And the Pakistani Government especially criticizing these attacks and they think that it should be stopped now. What is your strategy? Are you seriously thinking to change your drone attack policy?

And the second part of my question is that are you considering the swapped deal of prisoners with Pakistan and especially handing over Dr. Aafia Siddiqui to Pakistan? Thank you.

SECRETARY KERRY: Say the last part again? I’m sorry.

QUESTION: Secretary, there’s a – are you considering seriously that there will be exchange of prisoners deal between Pakistan and United States, and will you hand over Dr. Aafia Siddiqui to Pakistan?

SECRETARY KERRY: Well, I don’t have any comment or anything to add with respect to any potential prisoner exchange or non-exchange. It’s just we didn’t even talk about that at this point this morning.

With respect to the drone policy, we’ve had an ongoing dialogue with our friends in Pakistan regarding all aspects of our relationship, our shared interests, including, obviously, the counterterrorism cooperation. And I think the President of the United States made it very, very clear recently in a major speech that he delivered at our National Defense University in which he laid out the legal and the policy standards that guide any actions that we have against any individuals with respect to terror and under what circumstances we might take direct action.

That stands on its own. That is a very clear articulation of our policy and of what it – where it will go. But we obviously don’t discuss publicly every aspect of our counterterrorism activities. I will say this, I’ll quote the President: “We must define our effort not as a boundless global war on terror, but rather as a series of persistent, targeted efforts to dismantle specific networks of violent extremists that threaten America.”

I know there are issues of sovereignty that are raised often. I would simply remind all of our friends that somebody like an al-Qaida leader like al-Zawahiri is violating the sovereignty of this country. And when they attack people in mosques and blow up people in villages and in marketplaces, they are violating the sovereignty of the country.

So I think the President has made a policy as limited and as clear as is humanly possible, and he has laid out a very transparent, accountable, thorough legal justification for any counterterror policies the United States may or may not engage in.

QUESTION: Do you have any --

MODERATOR: Deb Riechmann of Associated Press.

QUESTION: Thank you. Mr. Aziz, on the drone attacks, is Pakistan – the number of drone attacks has recently declined. Is Pakistan still asking for a further curtailment of these strikes that are so unpopular in your country?

And Secretary Kerry, back on the bilateral security agreement issue, there’s an unnamed State Department official that’s been quoted as saying that the U.S. has resolved most of the issues on the BSA and that is nearing completion on the agreement with Afghanistan. And right now, you’re running up against the one-year deadline on those negotiations and the troop level decision is hinged on this. Where do we stand on this? Are you guys about ready to wrap this up or are we, as Karzai said, still not talking about this, or – there’s even reports that you’ve read a completed text on this.

SECRETARY KERRY: Well, I’m not going to comment on an agreement that hasn’t been finalized. It’s always dangerous to predict completion prior to completion. So we’re making progress. We’re working on it. I am personally confident that we will have an agreement and the agreement will be timely, and I am confident that the President has ample space here within which to make any decisions he wants to make regarding the future troop levels. So I think we’re on a good track. I feel very comfortable with where we are. And as I say to you, I expect this agreement to be completed at an appropriate time.

QUESTION: (Inaudible) you expect it?

SECRETARY KERRY: I expect it to be completed at an appropriate time.

QUESTION: Secretary Kerry, (inaudible) both questions --

MODERATOR: Mr. Baqir Sajjad of Dawn newspaper, a question.

QUESTION: (Inaudible) on both questions (inaudible) --

QUESTION: (Inaudible) regards to (inaudible).

QUESTION: Sir, do you have any (inaudible)?

QUESTION: (Inaudible) answer to the question that we --

MR. AZIZ: Yes, the question about drones. As I mentioned, we have registered our concern and will continue to do so that drone attacks are counterproductive in terms of our relationship (inaudible). So in the light of today’s discussion we’ll continue this dialogue on how to stop this policy of drone attacks as far as the U.S. is concerned.

QUESTION: Have you asked for curtailment?

MR. AZIZ: We are – no, we are (inaudible) stopping, not just containment. (Laughter.)

MODERATOR: Mr. Baqir Sajjad of Dawn newspaper.

QUESTION: Sir, you mentioned that you took up the issue of cross-border insurgency. Are you confident that Pakistan, which has not moved on safe havens on its side of the border, will do it this time?

SECRETARY KERRY: Well, I’m confident that we’re working in good faith to find ways to go forward and find the best policy that we can put in place. We talked for a number of hours this morning and we covered an enormous amount of topics, and a couple of them it was important for me to cover very closely and very specifically. So we began to scratch the surface of some of this. I’ll be meeting again later this evening. I’m going to have further meetings, and this afternoon, and we agreed precisely because of the complexity of working out the details that we’re going to begin the Strategic Dialogue immediately. And over the six months, we will have a ministerial, but we have five committees that will begin to meet very quickly on this. So I expect a lot of definition and a lot of progress to come to the forefront.

What was important today was that there was a determination by the United States and by Pakistan to move this relationship to the full partnership that it ought to be and to find the ways to deal with these individual issues that have been irritants over the course of the past years. And I believe that the Prime Minister is serious about doing that. I know that President Obama is also, which is why the President looks forward to meeting with the Prime Minister in about a month or so in the United States. So this conversation will continue, and I’m confident we’re going to find effective ways to manage the challenges that we both face.

MODERATOR: Ms. Saima Mohsin of CNN.

QUESTION: Thank you. He’s introduced me already. My first question is for Sartaj Aziz. There’s a lot of talk about safe havens in Pakistan, and the United States in the past few years has put a lot of pressure on Pakistan to deal with it, but that hasn’t happened. With the new government – and it seems that the military is keen to do so as it did with Swat, but not without the backing of the government – is the government looking at this, and are you planning on doing something about it and sending in a military operation in Waziristan?

And for Secretary of State Kerry and looking ahead to troop withdrawal in Afghanistan and this relationship with Pakistan, Afghanistan, and the United States, there seems to be a huge upsurge in violence and a lot of concern about what’s going to happen come 2014. And we’re already seeing violence, as I said. So you mentioned monitoring the border, but what do you think you can achieve that you haven’t managed to in the past decade?

MR. AZIZ: Well, on the first question, as you know, this operation started in 2009, and out of seven agencies in the tribal areas, six we have already launched military operation and tried to gain effective control and establish the right of the state. The only agency left is now Waziristan. And obviously, with 150,000 troops deployed in the tribal areas, we are overstretched right now. And therefore, right now, we are planning to have an All Parties Conference in which we consult all the stakeholders. Obviously, dialogue has to go along with military action, so we will explore that option first. And if that doesn’t work, then we’ll see under what conditions and by what timeframe we’ll do the alternative actions.

So I think basically, partly it’s a question of capacity, partly it’s a question of timing, and the other options without which the basic objectives cannot be achieved. So in the coming weeks, you’ll know how the strategy works.

SECRETARY KERRY: Well, let me be very clear. The United States is drawing down, not withdrawing. There’s a distinction. The President will announce the number of forces that he will commit for the United States, and other countries have already committed certain numbers of forces who will remain in Afghanistan for two purposes: one, counterterrorism; and two, to train, equip, and advise the armed forces.

Together, all of these countries, over 50 nations – about 52, 53 nations – have combined to help train and equip a military of 350,000 people in Afghanistan. That’s a very sizable army. And I believe, properly trained and equipped as they will continue to be over the course of the next year and beyond, they will have an ability to be able to cooperate, hopefully, with the Pakistanis and others in order to provide the kind of security and protection that the people of Afghanistan and the people of Pakistan deserve.

So I am very hopeful that as we go forward here, people will remember that this is a transition, not an ending. It is a transition to Afghans themselves who will stand up and fight for the freedoms that they want and for the lifestyle they want and for the country that they want. And I believe that as in other places in the world, when people are given the ability and the capacity to be able to fight for their own future, they do.

So I think we’re going to see an important transition take place, and if we work out modalities between us that begin to deal with some of these issues with respect to the borders and safe havens and other things, which I think we can work out, that will only strengthen the effort going forward. So I think this is a very important year, and not – and I think most importantly, a year with the opportunity for the people of Afghanistan to choose their future leadership in the spring of next year.

I think we’ve got to wrap up in a moment, don’t we?

MODERATOR: One question, please.

SECRETARY KERRY: Well, I’m afraid if it’s one, it’s ten, and then I’m going to be late. (Laughter.) So bear with me. I’m sorry, folks. Thank you.

MR. AZIZ: Thank you very much.

SECRETARY KERRY: Thanks so much.


Secretary Hagel Statement on Senior Leaders

              I would like to congratulate General Martin Dempsey and Admiral Sandy Winnefeld on their Senate confirmation to second terms as chairman and vice chairman of the Joint Chiefs of Staff.  Both of these proven leaders are tireless advocates for our men and women in uniform and innovative thinkers who are helping to shape the military of the future.  I strongly value their counsel, as does President Obama.  Their continued service and wise advice will be essential as we continue to draw down from the war in Afghanistan and confront other national security challenges.

              I also strongly support President Obama's nomination of Deborah James to serve as the 23rd secretary of the Air Force.  Deborah is an outstanding leader with deep experience in the Department  of Defense, the private sector, and non-profit organizations that support the men and women of our armed services.  If confirmed, Deborah will lead the Air Force during a time of great consequence for our airmen and their families.  I appreciate her willingness to serve her country once again.


Monday, July 29, 2013
Department of Justice Files Lawsuit Against Vero Beach, Fla. Doctor and Medical Practice for Retaliating Against Deaf Couple

The Department of Justice announced today that it has filed a lawsuit against Dr. Hal Brown and Primary Care of the Treasure Coast of Vero Beach, Fla. (PCTC), alleging that the doctor and the medical practice violated the Americans with Disabilities Act by discriminating against Susan and James Liese, who are deaf. The complaint alleges that the doctor and the practice violated the ADA by retaliating against Mr. and Mrs. Liese because they engaged in activities protected under the act.  The suit was filed in the U.S. District Court for the Southern District of Florida in Ft. Pierce.

According to the Justice Department’s complaint, the doctor and medical practice terminated Mr. and Mrs. Liese as patients because the couple pursued ADA claims against a hospital for not providing effective communication during an emergency surgery.  The hospital is located next door to and affiliated with PCTC.  The complaint alleges that the Lieses threatened the hospital with an ADA suit based on failure to provide sign language interpreter services, and upon learning of the lawsuit, PCTC and Dr. Brown, who was the Liese’s primary doctor at PCTC, immediately terminated the Lieses as patients.

“The Department of Justice is committed to enforcing the provisions of the ADA that protect an individual from retaliation when he or she opposes disability discrimination and prohibit interference with an individual in the exercise of rights granted by the ADA,” said Jocelyn Samuels, Acting Assistant Attorney General for the Civil Rights Division.  “A person cannot be terminated as a patient because he or she asserts the right to effective communication at a hospital.”

The enforcement of the ADA is a top priority of the Justice Department’s Civil Rights Division.  The ADA prohibits retaliation against an individual because they oppose an act that is unlawful under the ADA and because they made a charge, testified, assisted or participated in any manner in an investigation, proceeding or hearing under the ADA.  The ADA also makes it unlawful to coerce, intimidate, threaten or interfere with any individual exercising their rights protected by the ADA.

Thursday, August 1, 2013


Presenter: Senior Defense Officials July 31, 2013
Defense Department Background Briefing on the Strategic Choices and Management Review in the Pentagon Briefing Room

GEORGE LITTLE:  Thanks to those of you who stayed behind.  Wanted to -- I'll let my colleagues introduce themselves in a minute, but this is a backgrounder on the Strategic Choices and Management Review.  And my colleagues will be on background as senior defense officials.  Would all of them go ahead and introduce --

             SENIOR DEFENSE OFFICIAL:  (off mic)

             SENIOR DEFENSE OFFICIAL:  (off mic)

             SENIOR DEFENSE OFFICIAL:  (off mic)

             MR. LITTLE:  Great.  So with that, I don't think we have any opening remarks.  I think we have about 20 minutes, a hard stop at 4 o'clock for some other meetings.  So why don't we go straight to questions?  Go ahead.

             Q:  The -- one of the options for the size of the Army that was covered in this review was 420,000 to 450,000, I believe.  It said that the -- it had been determined that the strategy could be carried out with that sized Army.  Does that mean that, regardless of what happens with sequestration, the Army is likely to fall to that level?

             SENIOR DEFENSE OFFICIAL:  So, I mean, I think it's fair to say that, just as the secretary said in his -- in his remarks, that coming out of the war in Afghanistan, this is a -- this is an opportunity to relook at the force that we need.  And one area that we do think we can look at is the size of the ground force.  And so we've asked the Army to take a look at what size they can achieve within the fiscal guidance that we have given them, as they build their budget.  And so that'll determine what level we come out at.

             Q:  So the -- the Army's assessment will determine that level?

             SENIOR DEFENSE OFFICIAL:  Well, the Army will bring in a proposed budget and a proposed level that they can operate in, and then we will do an assessment in the fall where we look to see what the impacts are, what were the tradeoffs that they made, if they preserved structure.  What were the other things they did within their budget to trade off against that?

             Q:  So I don't understand, though, what in the opening statement that that meant.  Because that 420,000 to 450,000 to five tactical squadrons and C-130s of the Air Force seem to be presented separately from the two choices under the sequester.  So it seems like -- I read that as, going forward, we have to look at -- that there will be a cut, and we don't know where between 420,000 and 450,000 it will be, but it will be somewhere between those numbers, which is a substantial cut from 490,000.  So is that correct?  The future will be somewhere between 420,000 and 450,000, as opposed to 490,000?

             SENIOR DEFENSE OFFICIAL:  Yeah, I mean, that's certainly what we expect to come out of the budget.  It's been part of the deliberation that we did in the Strategic Choices and Management Review.  It's certainly conversations we've had with the Army, as they looked at that themselves and what they would have to live with, with a smaller budget.  So I think that's our expectation it's where they will -- they will be.

             And, again, the reason those were called out separately is the first thing we did was to try to live with all of the tenets that are currently in the defense strategic guidance and -- and so what we did was we asked, are there any places in the budget where we can find either forces or some modernization efforts that we don't need?  And what we identified was we thought we could take some -- reduce some of the -- of the ground forces and the tactical aircraft.

             Q:  (off mic) what areas of risk did you identify going from 490,000 down to 450,000, or areas, missions that we wouldn't likely do under the lower scenario?

             SENIOR DEFENSE OFFICIAL:  So, actually, as -- (inaudible) -- pointed out, that level is really most closely aligned with the current strategy.  And in the current strategy already, we're looking at level of COIN in the future and coming out of large-scale, irregular warfare COIN, where you do require large numbers or sustained -- over many years -- large-scale rotations.  So really coming out, that's -- that's really where it's -- it's aligning more closely with the strategy we have.

             Q:  (off mic) Is it a reflection that the Army would be less of a player in the pivot/rebalance to Asia than the Air Force or the Navy?

             SENIOR DEFENSE OFFICIAL:  I wouldn't say that that's necessarily true.  I think it's more reflective, as -- (inaudible) -- I think both indicated, it's more reflective of trying to refine the alignment between the joint force and the defense strategic guidance that came out a year-and-a-half ago that did -- you know, we've gotten out of Iraq.  We're drawing down in Afghanistan.  As -- (inaudible) -- said, we don't envision doing large-scale, multi-year stability operations.

             So it's more reflective of that than it would be, you know -- I think, you know, we would -- we would say we're -- we've just put in a four-star, you know, Army commander in Asia Pacific and we anticipate having them a role, most of the Asian nations have substantial ground forces, and we think the Army can make a good contribution there.

             Q:  When you were looking at this review, you said that you were looking at, you know, immediate things we could do with force structure that were excess now, as well as modernization programs.  The fact that you didn't call out any specific programs for cancellation, does that mean that you didn't find any weapons programs that were bloated, you know, or unnecessary or -- or that could be done without or redundant?

             SENIOR DEFENSE OFFICIAL:  Right, we looked at -- we looked at -- we looked for any redundancy, certainly, within our program set.  And so I won't deny that there are programs that are -- that look very similar in both the Air Force and Navy, but they do support different mission sets.  And so it's not -- it's not a redundancy, so much as a very similar program being developed in multiple services for very good reasons.

             So -- and I would say, yes, we did not find any particular capabilities that we thought we could do away with under the current strategy.  It's a pretty -- still a pretty ambitious strategy that we've set for ourselves.

             Q:  How is sequestration being implemented with '14?  I mean, cutting 10 percent across, are you doing targeted cuts?  How are you going to get that implemented?  Because the secretary keeps saying it's the law, it's the law, so you're doing it, right?

             SENIOR DEFENSE OFFICIAL:  So -- so that's -- that's still to be determined.  That is -- that is, what -- what does our FY '14 budget actually look like under execution?  Our undersecretary for comptroller is working closely with the services now to understand how we would execute that.  A lot of that depends on what the rule sets are, which we don't know yet, as -- (inaudible) -- said.  There's still tremendous amount of uncertainty.

             Under sequestration, in FY '13, it was a very simplistic, across-the-board cut.  We did exclude military personnel from those cuts.  And so the -- we'll have a rule set for FY '14.  If there's more flexibility, we won't take across-the-board cuts.  And in fact, the letter that the secretary sent over to Chairman Levin and Senator Inhofe does talk about the fact that we'd like flexibility to distribute the cuts a little bit --

             Q:  Does the '15 budget reflect sequestration?  Or -- or --

             SENIOR DEFENSE OFFICIAL:  We haven't -- we haven't built the '15 budget yet.

             MR. LITTLE:  And just to clarify for people, the Strategic Choices and Management Review looked at FY '15 to '19, not at FY '14 execution under sequestration.

             Q:  On force structure, could you sort of explain the -- the reasoning behind reducing C-130 fleets, the fleet size?

             SENIOR DEFENSE OFFICIAL:  It's -- it's a question purely of what's required.  We looked very closely at their day-to-day requirements.  We looked at warfighting requirements under the different operating plans that we have, the different scenarios that we expect to have, and we just ask, is there sufficient capacity?  Are there other opportunities to cut?  And what we have identified within the SCMR was there were opportunities to take reductions here.

             Q:  (off mic) you look at more specific -- I mean, is this related to the drawdown of the war in Afghanistan and -- and what exactly went into your thinking, in terms of that specific (off mic)

             SENIOR DEFENSE OFFICIAL:  So I -- I think to a great extent, and I know -- (inaudible) -- worked more closely in this area during the review, but even with the demand signals that we have today, there's excess capacity within the C-130 fleet.  And we could -- we could take reductions there.

             So it's not that we are looking at -- you know, there will be -- we do expect future reductions.  But even modeling the demand signals that we have today, there's excess.

             Q:  So one last question.  I know that this isn't a definite decision, but when do you foresee those reductions happening?

             SENIOR DEFENSE OFFICIAL:  It's all part of the budget process, and the '15 budget would give the first glimpse as to what our decisions are.  Again, these aren't -- none of these are decisions.  I want to emphasize that.  This is to give the secretary a sense of -- and the deputy secretary a sense of the choices that they could make and to try to meet different fiscal targets.  And so you'd have to wait until the '15 budget to see what our -- what we actually do in that area.

             Q:  Can I clarify one figure that the secretary laid out?  He talked about this $30 billion to $35 billion shortfall in the first five years of sequestration.  Is that every year, $30 billion to $35 billion?  Or is that cumulative over five years?

             SENIOR DEFENSE OFFICIAL:  It's -- it's $30 billion to $35 billion in '14 and '15.  It gets a little bit better as we continue through the BCA period.  And toward the end of it, we find a sufficient savings to actually close on the full sequestration number.

             SENIOR DEFENSE OFFICIAL:  Based on the -- based on the SCMR --

             SENIOR DEFENSE OFFICIAL:  Based on the SCMR.

             SENIOR DEFENSE OFFICIAL:  -- which is what we're talking about today.

             Q:  So in '14 and -- and '15, say the target's $55 billion.  Even if you did the most draconian cuts, you'd still only save like $15 billion?  You'd have in excess of $35 billion in each year?  Is that --

             SENIOR DEFENSE OFFICIAL:  That's what -- yeah, so it's $15 billion to $20 billion, I think, roughly the numbers that we would see in '14 and '15.  And, again, that's partly because -- and the secretary emphasized this point -- the strategic choices that we make, the drawdown in forces, whether it's Army or naval forces, does take time to deliver savings.  And so those savings accrue much later.  Even some of the compensation savings can -- there are cumulative effects that make the total savings larger.  So what we see in the near years is that the strategic decisions we just begin on provide very small numbers of savings.

             SENIOR DEFENSE OFFICIAL:  But we have to separate, again, the SCMR from '14 and what might happen with a continuing resolution or some other (off mic)

             SENIOR DEFENSE OFFICIAL:  That's right, yes.

             Q:  So if I -- if I hear you right, even if you do the worst case, you're going to save maybe $15 billion for '14, $15 billion for '15, and you've got this remaining $30 billion to $35 billion that you have to account for somewhere in your force?  That's -- that's the issue?

             SENIOR DEFENSE OFFICIAL:  That's the -- that's the shortfall that he was referring to, right.  So it's -- so the Strategic Choices and Management Review, the options that we teed up, totaled in those -- in those first couple of years only $15 billion to $20 billion.  And so the rest will -- and it's not actually very different than what we're seeing in FY '13, some of the same cuts.

             Q:  (off mic)

             Q:  (off mic)

             MR. LITTLE:  About five more minutes.

             Q:  On the strategic choices, I never quite understood the previous responses.  Is the rebalance to the Pacific, is that in jeopardy in a worst-case scenario?

             SENIOR DEFENSE OFFICIAL:  We -- as you all know, the rebalance to Asia Pacific is central to our strategy.  And we are committed to sustaining that effort in a very significant way.  Under, you know, the worst case, sequestration becomes permanent over a 10-year period, the SCMR, I think, points us in the direction that it would be very challenging to implement that exactly as how it was originally conceived.  But we are prioritizing the rebalance as we -- as we went through FY '13, as we look to FY '14 execution.  We are prioritizing that to -- because we think it's such an essential part of our strategy.

             Q:  Can I just ask you to follow up on the question of the tactical air squadrons?  I mean, if you -- how -- can you walk us through your thinking on having excess capacity there at a time when, you know, Russia and China are known to be developing their own fifth-generation fighters?  You know, there's been a lot of discussion with that.  How would that unfold if you're going to reduce tactical air squadrons?  I mean, what do you take out?  And is -- you know, and how do you justify that, given the threat that we're always hearing about?

             SENIOR DEFENSE OFFICIAL:  Do you want to take (off mic)

             SENIOR DEFENSE OFFICIAL:  I can -- I can address that.  Even despite sequestration, we've continued to always refine the strategy.  The strategy we have now, the defense strategic guidance, has a defeat and a deny aspect to it.  And as we review Air Force -- U.S. Air Force capability, we look at how many squadrons are required to execute that strategy.  We continue to refine that.

             As we've worked through it and as we've looked at what is required to defend the homeland, what is required by our best projection to counter the threat, we do believe there is some room for some reductions.  Again, that's always risk when you take reductions, as you work through.  But as we assessed it and as we looked at it, that was one area where we thought we could minimize the risk and still squeeze some force structure.

             Q:  How does that -- how do you --

             MR. LITTLE:  I think (off mic)

             Q:  How does the F-35 --

             MR. LITTLE:  (off mic) I've got -- I've got limited time here for other folks.  Kate?

             Q:  With the consolidation of combatant commands, could you identify which combatant commands make the most sense for consolidation under sequestration?  And does any consolidation make sense, even without sequestration?

             SENIOR DEFENSE OFFICIAL:  (off mic) do you want that?

             SENIOR DEFENSE OFFICIAL:  Yeah, I can -- I can take that, as well.  We're -- we're still working through if it makes sense, to borrow your words, to consolidate, and the secretary and the chairman definitely want some options brought forward.  We haven't completed our review, but we have to look at the missions and how we would adjust and align missions first.

             We need to work through, are there real savings there?  And we've got an ongoing effort to take a look at infrastructure, for example, in Europe to see what -- what is there and what could be consolidated.

             But part of it, as well, is not just the joint combatant command, but the subordinate commands under it.  And we've asked the services to take a hard look at that as they build their -- their POMs to come into the department.  We've asked them to take a really hard look at, where could they consolidate and streamline those three- and four-star commands to get savings?

             Q:  So have you guys looked at the active-reserve component force mix?  And where is the most efficient way to place the key equipment by service, TACAIR, stuff like that?

             SENIOR DEFENSE OFFICIAL:  Yeah, so -- very much the active-reserve mix was part of what we did.  The analysis took into account the mix that we currently have today and what it might look like under reduced structure.  Of course, we get different access to those, so were able to model the access rates to the different components, as well.

             And, I mean, both components play a role across all the services and by force elements.  They all play different roles, when I look at the -- the active versus the guard and reserve.

             So the mix question is a complicated question.  There's certainly cost elements to that, there's -- but there's also access.  There's training, their ability to respond, all of which play into that.  And so I think the short answer really is that we're going to continue to look at the proper balance between the active and reserve, even under reduced fiscal levels, because it's a way we have to get to a balanced budget.

             Q:  But to follow up on that, on the ground forces, it does sound like what the secretary said today indicates a potential recalibration of less active-duty.  He didn't note any cuts to the reserve component.  Is that fair to say, that it looks like -- that the active-duty will take potentially a brunt of the cuts?

             SENIOR DEFENSE OFFICIAL:  I would say at this point, all options are on the table.  In fact, in the Strategic Choices and Management Review, we teed up reductions in both components for the secretary to think about.

             MR. LITTLE:  We've got time for one or two more questions.  Yes, sir?

            Q:  On civilian workforce, I know you've got the 20 percent reduction in headquarters components.  Did you get any more specific on reshaping or resizing the civilian workforce in any more detailed way?  Is there a target, either civilians or contractors?

             SENIOR DEFENSE OFFICIAL:  I'm not sure -- (inaudible) -- go ahead.

             SENIOR DEFENSE OFFICIAL:  I mean, we looked at a wide range of options, and we still are looking at a wide range of options.  There are several ideas out there that could generate some savings.  One of them is to take a look at our civilians and see if there's any opportunities to put some downward pressure on matching -- or make sure we're matching the appropriate seniority to the job at hand.  So we're taking a look at some of that.

             We're also taking a look at paying compensation just like we are for military.  And, you know, are there areas where we could actually generate some savings for -- on the civilian side?  And as we -- as we work through, depending on the level of budget we have, we'll have to work through whether we'll be required to push harder on the overall size of our civilian workforce.

             MR. LITTLE:  (off mic) questions.

             Q:  Back to the guard and reserve, on the five TACAIR squadrons and C-130s, did you look at which -- which component those cuts would come from?  And on the tactical squadrons, did you look at which airframes those could possibly be?

             SENIOR DEFENSE OFFICIAL:  I imagine we made specific choices because we had to cost these, as well.  Again, that's now over to the -- over to the Air Force, over to the services to think about what's the proper balance, what's the proper choice, as they look at drawing down.  And, again, it's up to five -- I think the secretary announced -- tactical aircraft reductions, but it's not -- not our decision yet, not in finality in the -- in the budget.

             SENIOR DEFENSE OFFICIAL:  And the SCMR was -- to answer the first part of your question, the SCMR was not specific about which units we were aggregating the assessment.

             MR. LITTLE:  And final question goes to (off mic)

             Q:  Can you elaborate on how far into the future you'd have to backload the cuts to make them strategically executable?  And also, what's the way ahead for the QDR?

             SENIOR DEFENSE OFFICIAL:  You want to (off mic) (Laughter.)

             SENIOR DEFENSE OFFICIAL:  Yeah, so we didn't -- we didn't attempt to come up with an optimal profile that would give us the best strategic outcome over -- over a 10-year period or a 20-year period for the department.  You know, what -- we looked at fundamentally those three budget profiles.  And the president's budget does very much align well with the defense strategic guidance, and the sequestration clearly does not.

             The in-between budget was purely just a look at, you know, is there -- is there something in between?  But there are impacts.  I mean, we talk -- we call it bending the strategy, but there are certainly elements of the strategy that are affected, not to the point that we would consider it a break, but it's -- I wouldn't -- I don't want to call that optimal in any sense.  But that was not the goal of the strategic choices review, was to come up with any sort of optimal profile.

             MR. LITTLE:  All right.  Thank you, everyone.  Speaking of --

             Q:  On the QDR?

             MR. LITTLE:  Oh, QDR, okay.

             SENIOR DEFENSE OFFICIAL:  As the secretary said, we will be -- I think the QDR is a lot -- will build on the SCMR process.  It's going to be starting in early fall.  And that will be a place where we will be able to look in more detail at how to shape those recommendations that we would bring forward to the president, as the secretary talked about, in terms of, you know, we -- we don't yet have a certainty on what the resource picture will look at, so we will be, I think, using the QDR process to look more -- you know, we looked at sort of the illustrative options in the SCMR, and the QDR will be a chance to sort of look at that in more detail and develop recommendations for the president, as he thinks about the '15 budget and beyond.

             MR. LITTLE:  Thanks for your time, everyone.  Appreciate it.

Press Briefing | The White House

Press Briefing | The White House



In the week ending July 27, the advance figure for seasonally adjusted initial claims was 326,000, a decrease of 19,000 from the previous week's revised figure of 345,000. The 4-week moving average was 341,250, a decrease of 4,500 from the previous week's revised average of 345,750.

The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending July 20, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending July 20 was 2,951,000, a decrease of 52,000 from the preceding week's revised level of 3,003,000. The 4-week moving average was 3,026,000, a decrease of 500 from the preceding week's revised average of 3,026,500.


The advance number of actual initial claims under state programs, unadjusted, totaled 279,869 in the week ending July 27, a decrease of 60,084 from the previous week. There were 312,931 initial claims in the comparable week in 2012.

The advance unadjusted insured unemployment rate was 2.3 percent during the week ending July 20, a decrease of 0.1 percentage point from the prior week's revised rate. The advance unadjusted number for persons claiming UI benefits in state programs totaled 2,927,554, a decrease of 126,553 from the preceding week's revised level of 3,054,107. A year earlier, the rate was 2.5 percent and the volume was 3,246,888.

The total number of people claiming benefits in all programs for the week ending July 13 was 4,695,366, a decrease of 154,140 from the previous week. There were 5,964,451 persons claiming benefits in all programs in the comparable week in 2012.

No state was triggered "on" the Extended Benefits program the week ending July 13.

Initial claims for UI benefits filed by former Federal civilian employees totaled 2,279 in the week ending July 20, a decrease of 31 from the prior week. There were 2,222 initial claims filed by newly discharged veterans, a decrease of 188 from the preceding week.

There were 20,008 former Federal civilian employees claiming UI benefits for the week ending July 13, an increase of 266 from the previous week. Newly discharged veterans claiming benefits totaled 35,010, a decrease of 1,464 from the prior week.

States reported 1,564,517 persons claiming Emergency Unemployment Compensation (EUC) benefits for the week ending July 13, a decrease of 49,668 from the prior week. There were 2,532,828 persons claiming EUC in the comparable week in 2012. EUC weekly claims include first, second, third, and fourth tier activity.

The highest insured unemployment rates in the week ending July 20 were in Puerto Rico (4.9), New Jersey (3.6), Connecticut (3.5), Alaska (3.4), California (3.4), Pennsylvania (3.4), New Mexico (3.2), Nevada (2.9), Virgin Islands (2.9), Illinois (2.8), New York (2.8), Oregon (2.8), and Rhode Island (2.8).
The largest increases in initial claims for the week ending July 20 were in California (+7,723), Missouri (+635), Kansas (+427), Illinois (+383), and Maine (+136), while the largest decreases were in New York (-14,966), Pennsylvania (-8,817), Alabama (-6,019), Georgia (-5,504), and Wisconsin (-3,324).

FDA Warns of Rare Acetaminophen Risk

FDA Warns of Rare Acetaminophen Risk


Ex-Im Bank Chairman Outlines How American Exporters Can Remain Competitive Despite Unprecedented Challenges
In Annual Competitiveness Report, Hochberg Describes Path to Success in Tough Global Market 

Washington, DC – Today, Export-Import Bank Chairman Fred P. Hochberg outlined the unprecedented challenges facing our nation’s exporters in a keynote address at the Center for American Progress. During his speech, Hochberg spoke about how U.S. companies are often forced to go head-to-head with foreign governments who offer attractive financing, provided a strong defense of Ex-Im Bank, and outlined how U.S. companies can succeed in an increasingly competitive global environment.

Excerpts from Hochberg's speech 

“American products are the best in the world. And on a level playing field, they often come out on top. But, today more than ever, foreign governments are willing to do whatever it takes to close a sale – putting massive resources behind their chosen exporters, which are often state-owned enterprises.”

“In this year’s competitiveness report, we found that China, Korea, Japan and others are ramping up government export support… Yet, here at home, Congress has required the Treasury Department to begin negotiations with our competitors to end export credits…To end export credits when our competitors are playing by a completely different set of rules…This would be a self-inflicted wound our economy cannot sustain.”

“Make no mistake, foreign governments would love to see Ex-Im go out of business and swoop in and snatch the $50 billion worth of exports we financed last year. They would love to have those 255,000 American jobs for themselves. Failing to reauthorize our charter next year is a particularly bad idea in light of the growth of the global middle class and the unprecedented competition America faces from Asia and Russia, among many others.”

Key findings from Ex-Im Bank's Competitiveness Report 

Commercial bank capacity has declined and cost of funds has increased worldwide since the global financial crisis, shifting the volume of demand from commercial lenders to export credit agencies (ECAs).

The global financial crisis has altered the landscape, affecting economic progress in Europe while manufacturing prowess has vastly improved in Asia. Many Asian countries have ambitious export plans to gain market share and the financing that goes along with it.

U.S. exporters compete in many markets and sectors that other countries have targeted as a “national interest,” either explicitly as part of their national policy, or implicitly by making available a range of official financing tools intended to maximize the flow of national benefits.

More and more financing is being offered outside of OECD guidelines. But it’s not just interest rates. It is open season on other inducements as non-OECD countries continue to use financing to sway purchase decisions.
About Ex-Im Bank

Ex-Im Bank is an independent federal agency that helps create and maintain U.S. jobs by filling gaps in private export financing at no cost to American taxpayers. In the past five years (from Fiscal Year 2008), Ex-Im Bank has earned for U.S. taxpayers nearly $1.6 billion above the cost of operations. The Bank provides a variety of financing mechanisms, including working capital guarantees, export-credit insurance and financing to help foreign buyers purchase U.S. goods and services.


FTC Acts Against Spam Text and Robocalling Operations
Case Continues FTC Crackdown on "Free Gift Card" Scammers

The Federal Trade Commission has moved to shut down an international network of scammers that sent millions of unwanted text messages to consumers, using the lure of “free” gift cards and electronics to entice consumers into an elaborate scheme designed to take their money and target them for illegal robocalls.
In its complaint, the FTC alleges that scammers sent unwanted text messages to consumers, many of whom had to pay for receiving the texts. The messages promised consumers free gifts or prizes, including gift cards worth $1,000 to major retailers such as Best Buy, Walmart and Target.

Consumers who clicked on the links in the messages found themselves caught in a confusing and elaborate process that required them to provide sensitive personal information, apply for credit or pay to subscribe to services to get the supposedly “free” cards. In addition, consumers’ phone numbers were signed up to receive unwanted automated telemarketing calls, also known as robocalls.

This complaint builds on a nationwide sweep conducted by the Commission in March to crack down on scammers who use these spam text messages to deceive consumers.

The FTC complaint names nine defendants who allegedly were involved in various aspects of the operation in violation of the FTC Act and the Telemarketing Sales Rule.  It seeks injunctions against the defendants preventing them from continuing their alleged deceptive and unfair practices as well as requiring them to pay monetary relief.

According to the complaint, when consumers followed the links included in the unwanted messages, they were directed to sites that collected a substantial amount of personal information, including in some instances health information, before being allowed to continue toward receiving the supposed gift cards.  In many cases, the information was requested under the guise of being shipping information for the supposed gift cards.  The Commission alleges that in addition to selling the information for marketing purposes, the defendants also made unwanted automated telemarketing calls to consumers selling products such as home security, satellite television and travel services.

Once consumers entered their personal information, they were directed to another site and told they would have to participate in a number of “offers” to be eligible for their gift card.  In some cases, consumers were obligated to sign up for as many as 13 of the offers. These offers frequently included recurring subscriptions for which consumers were required to provide credit card information and pay up front for “shipping and handling” charges.  In other cases, they required consumers to submit applications for credit that would be reflected in their credit reports and possibly affect their credit score.

In most, if not all, instances, it would be impossible for a consumer to receive the allegedly “free” merchandise without spending money, according to the complaint.

The defendants in the case are Acquinity Interactive, LLC, located in Deerfield Beach, Fla.; 7657030 Canada Inc., located in Kirkland, Quebec, and also doing business as Acquinity Interactive; Garry Jonas, an officer of Acquinity Interactive; Revenue Path E-Consulting Pvt Ltd, located in Pune, India; Revenuepath Ltd, registered in Nicosia, Cyprus; Worldwide Commerce Associates, LLC, registered in Las Vegas, Nev., and also doing business as WCA; Sarita Somani, an officer of the Revenue Path defendants and Worldwide Commerce Associates; Firebrand Group S.L., LLC, registered in Las Vegas, Nev.; and Matthew Beucler, an officer of Firebrand.

The Commission vote authorizing the staff to file the complaint was 4-0.  The complaint was filed in the U.S. District Court for the Northern District of Illinois.

NOTE:  The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest.  The case will be decided by the court.


Statement on Strategic Choices and Management Review
As Delivered by Secretary of Defense Chuck Hagel, Pentagon Press Briefing Room, Wednesday, July 31, 2013

Good afternoon.

I want to make some remarks about our Strategic Choices Management Review, which I directed about four months ago, and Sandy Winnefeld, who as you all know is the Vice Chairman of the Joint Chiefs, is here and will add his comments, as well.

The Chairman is in Arizona, where he has just recently welcomed his eighth grandchild, so he's doing important business, as he is taking care of twin boys who are 2 years old.  So he is testing his Chairmanship and his ability in that regard.  So that's why General Dempsey is not with us today.

So I'll begin, and then Admiral Winnefeld will add his thoughts.  And we'll take some questions.  And if you all want to go deep, deep down into what I'm going to talk about, then we have some of our budget and financial analysts here to go as deep as you want to go on what I'm going to talk about here in the next few minutes.  So, thank you for giving me some time today.

Earlier today, I briefed key congressional committee leaders on the findings of DoD's Strategic Choices Management Review.  And this afternoon, as I've said, I want to talk about these findings and clarify the major options and the difficult choices that we have ahead.

I directed the Strategic Choices and Management Review four months ago to help ensure the Department of Defense is prepared in the face of unprecedented budget uncertainty. Although DoD strongly supports the President's Fiscal Year 2014 request and long-term budget plan for the entire federal government, the deep and abrupt spending cuts under sequestration that began on March 1st of this year, are, as you all know, the law of the land.  Sequestration will continue in the absence of an agreement that replaces the Budget Control Act.

The purpose of the Strategic Choices and Management Review, which was led by the Deputy Secretary of Defense, Ash Carter, with the full participation of General Dempsey and Admiral Winnefeld, the Service Secretaries and the Service Chiefs, was to understand the impact of further budget reductions on the Department and develop options to deal with these additional cuts.  It had three specific objectives:

Help DoD prepare for how to deal with sequestration if it continues in Fiscal Year 2014;
Inform the fiscal guidance given to the military services for their F.Y. 2015 through 2019 budget plans;
And, third, anchor the upcoming Quadrennial Defense Review, which will assess our defense strategy in light of new fiscal realities and the many threats and complexities and uncertainties of this new century.
The Strategic Choices and Management Review did not produce a detailed budget blueprint. That was not the purpose of the review.  It generated a menu of options, not a set of decisions. These options were built around the potential budget scenarios:

First, the President's F.Y. 2014 budget, which incorporates the carefully calibrated and largely back-loaded $150 billion reduction in defense spending over the next 10 years.
Second, the Budget Control Act sequester-level caps, which would cut another $52 billion from defense spending in Fiscal Year 2014, with $500 billion in reductions for the DoD over the next 10 years.
And third, an "in-between scenario" that would reduce defense spending by about $250 billion over the next 10 years, but would be largely back- loaded.
It's important to remember that all these cuts are in addition to the $487 billion reduction in defense spending over the next decade required by the initial caps in the Budget Control Act of 2011, which DoD is currently implementing.  If sequester-level cuts persist, DoD would experience nearly $1 trillion in defense spending reductions over the next ten years.

To help DoD balance strategic ends, ways and means under these budget scenarios, the Strategic Choices and Management Review scrutinized every aspect of DoD's budget, including contingency planning, business practices, force structure, pay and benefits, acquisition practices, and modernization portfolios.  Everything was on the table.

As I discussed last week at the VFW Convention in Louisville, four principles helped guide this review:

First, prioritizing DoD's missions and capabilities around our core responsibility of defending our country;
Second, maximizing the military's combat power by looking to reduce every other category of spending first;
Third, preserving and strengthening military readiness;
And, fourth, honoring the service and sacrifice of DoD's people and their families.
Those principles, and a rigorous review process, resulted in packages of options that included management efficiencies and overhead reductions, compensation reform, and changes to force structure and modernization plans.

Allow me to share with you some of the options the review identified in each of the areas I've just mentioned.

First, management efficiencies and overhead reductions.  A tenet of the review was what we need to focus on is maximizing savings from reducing DoD's overhead administrative costs and other institutional expenses.

For several years, DoD has been paring back overhead.  About $150 billion in five-year efficiency reductions were proposed by Secretary Gates.  An additional $60 billion in savings were identified by Secretary Panetta.  And I submitted a $34 billion savings package in our latest budget.  DOD is continuing to implement these efficiency campaigns, but despite much progress, as well as good efforts and intentions, not every proposal has generated the savings we expected or gained the support of Congress – most notably, our request for a Base Realignment and Closure round.

The review showed that DoD will have to do more in this area, much more, even though it is getting more difficult to find these cuts, and it can take years for significant savings to be realized.  After considering the results of the review, I determined that it is possible and prudent to begin implementing a new package of efficiency reforms now – ones that should be pursued regardless of fiscal circumstances.

Some of these management efficiencies and overhead reductions include:

Reducing the Department's major headquarters budgets by 20 percent, beginning with the Office of the Secretary of Defense, the Joint Staff, Service Headquarters and Secretariats, Combatant Commands, and defense agencies and field activities. Although the 20 percent cut applies to budget dollars, organizations will strive for a goal of 20 percent reductions in government civilians and military personnel.
Reducing the number of direct reports to the Secretary of Defense by further consolidating functions within OSD, as well as eliminating positions and;
Reducing intelligence analysis and production at combatant command intelligence and operation centers, which will also foster closer integration and reduce duplication across defense enterprises.
These management reforms, consolidations, personnel cuts, and spending reductions will reduce the Department's overhead and operating costs by some $10 billion over the next five years and almost $40 billion over the next decade.  They will make the Department more agile and more versatile.

Past efficiency campaigns have shown that implementation can be very challenging, so effective follow-through is critical, if savings targets are to be realized.  This is especially true of OSD reductions.  I've asked Deputy Secretary Carter to identify someone from outside DoD who is deeply knowledgeable about the defense enterprise and eminently qualified to direct implementation of the OSD reductions and report to the Deputy Secretary.

In addition to the measures I've described, the review identified additional consolidations and mission reductions that could be required, if sequester-level caps are imposed over the long term.  These measures include consolidations of regional combatant commands, defense agency mission cuts, and further IT consolidation.

These changes would be far-reaching and require further analysis and consideration. Though defense bureaucracies are often derided, the fact is that these offices perform functions needed to manage, administer, and support a military of our size, complexity, and global reach.

Even over the course of a decade, the cumulative savings of the most aggressive efficiency options identified by the review are $60 billion.  That's a small fraction of what is needed under sequester- level cuts.  We will have to look elsewhere for more savings.

The review also confirmed that no serious attempt to achieve significant savings can avoid compensation cuts, which consume roughly half of the DoD budget.  If left unchecked, pay and benefits will continue to eat into our readiness and modernization. That could result in a far less capable force that is well-compensated, but poorly trained and poorly equipped.

Any discussion of compensation should acknowledge the following:

No one in uniform is overpaid for what they do for this country;
People are DoD's most important asset; and we must sustain compensation packages that recruit and retain the finest military in the world.
The significant military pay and benefit increases over the last decade reflected the need to sustain a force under considerable stress, especially the Army and Marines, during the height of the Iraq and Afghan campaigns.
One post-9/11 war is over, and the second, our nation's longest war, is coming to an end.
Overall, personnel costs have risen dramatically, some 40 percent above inflation since 2001. The Department cannot afford to sustain this growth.
 Reflecting these realities, the President's Fiscal Year 2014 budget included a package of modest compensation-related reforms that have the strong support of our uniform leadership. Congress has signaled its opposition to some of these proposals, including modest increases in TRICARE fees for working-age retirees.  But given our current fiscal situation, DoD has no choice but to consider compensation changes of greater magnitude for military and civilian personnel.

The review developed compensation savings options that we believe would continue to allow the military to recruit and retain the high-quality personnel we will need.  If we were to pursue these options, we would need Congress's partnership to implement many of them. Examples include:

Changing military health care for retirement -- for retirees to increase use of private-sector insurance when available;
Changing how the basic allowance for housing is calculated, so that individuals are asked to pay a little more of their own housing costs;
Reducing the overseas cost-of-living adjustments; and
Continuing to limit military and civilian pay increases.
Many will object to these ideas, and I want to be clear that we are not announcing any compensation changes today.  Instead, I've asked Chairman Dempsey to lead an effort with the Service Chiefs and the Senior Enlisted Advisers to develop a package of compensation proposals that meet savings targets identified in the review – almost $50 billion over the next decade – and still enabled us to retain and recruit the high-quality force.  We would begin implementing this package in the Fiscal Year 2015 budget. Senior OSD staff will lead a similar review for civilian pay and benefits.

The review also identified more sweeping changes to meet sequester-level targets, such as eliminating civilian pensions for retired military personnel serving in civilian government service, ending subsidies for defense commissaries, and restricting the availability of unemployment benefits.  This package would yield savings of almost $100 billion over the next decade, but would have a significant impact on our service members and our workforce.  But a sequester-level scenario would compel us to consider these changes, because there would be no realistic alternative that did not pose unacceptable risks to national security.

The efficiencies in compensation reforms identified in the review – even the most aggressive changes – still leave DoD some $350 billion to $400 billion short of the $500 billion in cuts required by sequestration over the next ten years.  The review had to take a hard look at changes to our force structure and modernization plans.

The President's Defense Strategic Guidance anchored this effort.  The goal was to find savings that best preserve the tenets of the President's strategy, such as strategic deterrence, homeland defense, and the rebalance to the Asia Pacific.  The review concluded we should not take reductions proportionately across the military services.  Instead, the options we examined were informed by strategy, and they will guide the services as they build two sets of budgets for F.Y. 2015 through 2019, one at the President's budget level and one at sequester-level caps.

While we want to preserve flexibility for each military service to develop the best force possible, given reduced resources, the review identified areas where we have excess capacity to meet current and anticipated future needs.  In particular, the analysis concluded that we can strategically reduce the size of our ground and tactical air forces – even beyond the current drawdown.

I've not made any program or force structure decisions, and more analysis will be required before the decisions are made.  But with the end of the war in Iraq, the drawdown in Afghanistan, and a changing requirement to conduct protracted large-scale counterinsurgency operations, it makes sense to take another look at the Army's force structure – which is currently planned to reach 490,000 in the active component and 555,000 in the reserves.

One option the review examined found that we could still execute the priority missions determined by our defense strategy, while reducing Army end strength to between 420,000 and 450,000 in the active component and between 490,000 and 530,000 in the Army Reserves.  Similarly, the Air Force could reduce tactical aircraft squadrons – potentially as many as five – and cut the size of the C-130 fleet with minimal risk.

In the months ahead, I will work closely with Chairman Dempsey and each of the Service Chiefs to reach agreement on the proper size of our armed forces, taking into account real-world needs in a dangerous world.

A modest reduction in force structure, when combined with management efficiencies and compensation reforms, would enable us to meet the $150 billion in savings required by the President's budget proposal while still defending the country and fulfilling our global responsibilities.  We can sustain our current defense strategy under the President's budget request.

Significant reductions beyond the President's plan would require many more dramatic cuts to force structure.  The review showed that the "in-between" budget scenario we evaluated would "bend" our defense strategy in important ways, and sequester-level cuts would "break" some parts of the strategy, no matter how the cuts were made.  Under sequester-level cuts, our military options and flexibility will be severely constrained.

Given that reality, the review examined two strategic approaches to reducing force structure and modernization that will inform planning for sequester-level cuts.  The basic tradeoff is between capacity – measured in the number of Army brigades, Navy ships, Air Force squadrons, and Marine battalions – and capability – our ability to modernize weapons systems and to maintain our military's technological edge.

In the first approach, we would trade away size for high-end capability.  This would further shrink the active Army to between 380,000 to 450,000 troops, reduce the number of carrier strike groups from 11 to 8 or 9, draw down the Marine Corps from 182,000 to between 150,000 and 175,000, and retire older Air Force bombers.  We would protect investments to counter anti-access and area-denial threats, such as the long-range strike family of systems, submarine cruise missile upgrades, and the Joint Strike Fighter, and we would continue to make cyber capabilities and special operations forces a high priority.

This strategic choice would result in a force that would be technologically dominant, but would be much smaller and able to go fewer places and do fewer things, especially if crisis occurred at the same time in different regions of the world.

The second approach would trade away high-end capability for size.  We would look to sustain our capacity for regional power projection and presence by making more limited cuts to ground forces, ships, and aircraft. But we would cancel or curtail many modernization programs, slow the growth of cyber enhancements, and reduce special operations forces.

Cuts on this scale would, in effect, be a decade-long modernization holiday.  The military could find its equipment and weapons systems – many of which are already near the end of their service lives – less effective against more technologically advanced adversaries.  We also have to consider how massive cuts to procurement and research and development funding would impact the viability of America's private-sector industrial base.

These two approaches illustrate the difficult tradeoffs and strategic choices that would face the Department in a scenario where sequester-level cuts continue.  Going forward in the months ahead, DoD – and ultimately the President – will decide on a strategic course that best preserves our ability to defend our national security interests under this very daunting budget scenario.

The balance we strike between capability, capacity, and readiness will determine the composition and the size of the force for years to come.  We could, in the end, make decisions that result in a very different force from the options I've described here today.  Our goal is to be able to give the President informed recommendations, not to prejudge outcomes.  Regardless, the decision-making process will benefit from the insights of this review provided.

In closing, one of the most striking conclusions of the Strategic Choices and Management Review is that if DoD combines all the reductions I've described, including significant cuts to the military's size and capability – the savings fall well short of meeting sequester-level cuts, particularly during the first five years of these steep, decade-long reductions.

The reality is that cuts to overhead, compensation, and forces generate savings slowly.  With dramatic reductions in each area, we do reach sequester-level savings, but only toward the end of a 10-year timeframe.  Every scenario of the review examined showed shortfalls in the early years of $30 billion to $35 billion.

These shortfalls will be even larger if Congress is unwilling to enact changes to compensation or adopt other management reforms and infrastructure cuts we've proposed in our Fiscal Year 2014 budget.  Opposition to these proposals must be engaged and overcome, or we will be forced to take even more draconian steps in the future.

A lot has been said about the impact of sequestration.  Before this review, like many Americans, I wondered why a 10 percent budget cut was, in fact, so destructive.  Families and businesses trim their costs by similar projections.  But this analysis showed in the starkest terms how a 10 percent defense spending reduction causes the reality in a much higher reduction in military readiness and capability.  Unlike the private sector, the federal government, and the Defense Department in particular – simply does not have the option of quickly shutting down excess facilities, eliminating entire organizations and operations, or shutting massive numbers of employees – at least not in a responsible, moral, and legal way.

The fact is that half of our budget – including areas like compensation, where we need to achieve savings – are essentially off- limits for quick reductions.  Given that reality, the only way to implement an additional, abrupt 10 percent reduction in the defense budget is to make senseless, non-strategic cuts that damage military readiness, disrupt operations, and erode our technological edge.   We have already seen some of the significant effects of the $37 billion reduction occurring in this Fiscal Year – including halting all flying for some Air Force squadrons, canceling ship deployments, ending Army Combat Training Center rotations for brigades not deploying to Afghanistan, and imposing furloughs for 650,000 DoD civilians.

In Fiscal Year 2014, this damage will continue if sequestration persists.  DoD is now developing a contingency plan to accommodate the $52 billion sequester-level reduction in Fiscal Year 2014, which I outlined in a letter this month to Senate Armed Services Committee Chairman Levin and Ranking Member Inhofe. Congress will need to help us manage these deep and abrupt reductions responsibly and efficiently.

The bold management reforms, compensation changes, and force structure reductions identified by the Strategic Choices and Management Review can help reduce the damage that would be caused by the persistence of sequestration in Fiscal Year 2014, but they won't come close to avoiding it altogether.

The review demonstrated that making cuts strategically is only possible if they are "backloaded."  While no agency welcomes additional budget cuts, a scenario where we have additional time to implement reductions – such as in the President's budget – would be far preferable to the deep cuts of sequestration.  If these abrupt cuts remain, we risk fielding a force that over the next few years is unprepared due to a lack of training, maintenance, and the latest equipment.

And as I mentioned last week at the VFW Convention, a top priority in future-year budget plans is to build a ready force, even if that requires future reductions in force structure.  No matter the size of our budget, we have a responsibility to defend the country and America's vital interests around the world.  That means crafting the strongest military possible under whatever level of resources we are providing.

DoD has a responsibility to give America's elected leaders and the American people a clear-eyed assessment of what our military can and cannot do in the event of a major confrontation or a crisis after several years of sequester-level cuts.  In the months ahead, we will continue to provide our most honest and best assessment.  And the inescapable conclusion is that letting sequester-level cuts persist would be a huge strategic miscalculation that would not be in our country's best interests.  While I've focused today on the impact to DoD, sequester-level cuts would equally harm other missions across the government to support a strong economy, which, as is always the case, supports a strong national defense. And this will be important, because providing that support through that economy to our servicemembers, veterans and their families is part of our overall readiness and capabilities and capacity responsibilities.  DoD depends on a strong education system to maintain a pool of qualified recruits.  We rely on domestic infrastructure that surrounds our bases and installations.  And we count on scientific breakthroughs funded by research and development grants and a strong manufacturing base to maintain our decisive technological edge.  All of these areas are threatened by sequestration.

It is the responsibility of our nation's leaders to work together to replace the mindless and irresponsible policy of sequestration.  It is unworthy of the service and sacrifice of our nation's men and women in uniform and their families.  And even as we confront tough fiscal realities, our decisions must always be worthy of the sacrifices we ask America's sons and daughters to make for our country.