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Saturday, July 4, 2015


Sailors spell out #USA next to the American flag to mark Independence Day on the flight deck of the aircraft carrier USS Theodore Roosevelt in the Arabian Sea, June 28, 2015. The carrier is deployed to the U.S. 5th Fleet area of operations to support Operation Inherent Resolve and strike operations in Iraq and Syria. U.S. Navy photo by Petty Officer 3rd Class Jackie Hart.


Friday, July 3, 2015

SpaceX leading investigation of mishap on This Week @NASA – July 3, 2015

West Wing Week: 07/03/15 or, “Amazing Grace”


Samantha Power
U.S. Permanent Representative to the United Nations
New York, NY
July 2, 2015


The United States condemns in the strongest possible terms the July 2 terrorist attack on a United Nations Multidimensional Integrated Stabilization Mission in Mali (MINUSMA) convoy near Timbuktu, northern Mali that resulted in the death of six peacekeepers and the injury of five other peacekeepers, all from Burkina Faso.

We express our condolences to the families of those killed and to the Government of Burkina Faso and wish those wounded a full recovery. We call on the Government of Mali to immediately investigate the incident and hold those responsible to account.

Such terrorist attacks threaten the stability of northern Mali and the well-being of all Malians. We take this opportunity to urge the Malian parties signatory to the 2015 Agreement for Peace and Reconciliation in Mali to stand united against these and all attempts to undermine the country’s march toward peace.

The United States reiterates its support for MINUSMA and its brave men and women, who work each day to assist the Malian people in the pursuit of lasting peace, security, development, and economic prosperity.



The High Resolution Imaging Science Experiment (HiRISE) camera aboard NASA's Mars Reconnaissance Orbiter acquired this closeup image of a light-toned deposit in Aureum Chaos, a 368 kilometer (229 mile) wide area in the eastern part of Valles Marineris, on Jan. 15, 2015, at 2:51 p.m. local Mars time.

The objective of this observation is to examine a light-toned deposit in a region of what is called “chaotic terrain.” There are indications of layers in the image. Some shapes suggest erosion by a fluid moving north and south. The top of the light-toned deposit appears rough, in contrast to the smoothness of its surroundings.  Image Credit: NASA/JPL/University of Arizona.  Caption: HIRISE Science Team.


Federal funding for science and engineering at universities down 6 percent
Latest figures show obligations down for R&D and facilities that support science and engineering

Federal agencies obligated $29 billion to 995 science and engineering academic institutions in fiscal year 2013, according to a new report from the National Science Foundation's (NSF) National Center for Science and Engineering Statistics (NCSES). The figure represents a 6 percent decline in current dollars from the previous year, when agencies provided $31 billion to 1,073 institutions.

After adjustment for inflation, federal science and engineering obligations to academic institutions dropped by $1 billion from FY 2011 to FY 2012, and by $2 billion between FY 2012 and FY 2013. The obligations fall into six categories:

Research and development;
R&D plant (facilities and fixed equipment, such as reactors, wind tunnels and particle accelerators);
Facilities and equipment for instruction in science and engineering;
Fellowships, traineeships and training grants;
General support for science and engineering;
Other science and engineering activities.
Of those categories, research and development accounted for 89 percent of total federal obligations during the past three years.

The three largest providers of federal funding in fiscal 2013 were the Department of Health and Human Services (58 percent), NSF (17 percent) and the Department of Defense (12 percent). The Department of Energy, the Department of Agriculture and NASA provided the remainder of funding (11 percent, combined). Of these six agencies, only the Department of Energy showed increased obligations between FY 2012 and FY 2013.

The leading 20 universities, ranked in terms of federal academic S&E obligations, accounted for 37 percent of the FY 2013 federal total. The Johns Hopkins University continued to receive the most federal obligations of any university, at $1.5 billion.

NCSES collects information about federal obligations to independent nonprofit institutions in two categories: research and development, and R&D plant. The $6.6 billion provided to 1,068 institutions in FY 2013 represented a 2 percent decrease from $6.8 billion the previous year. The leading 10 nonprofits accounted for 36 percent of fiscal 2013 funding, with the MITRE Corporation receiving the largest total, at $485 million.

The statistics are from the NCSES Survey of Federal Science and Engineering Support to Universities, Colleges and Nonprofit Institutions.


Media Contacts
Rob Margetta, NSF


Methane-eating microorganisms help regulate emissions from wetlands
Without this process, methane emissions from freshwater wetlands could be 30 to 50 percent higher

Though they occupy a small fraction of Earth's surface, freshwater wetlands are the largest natural source of methane emitted into the atmosphere. New research identifies an unexpected process that acts as a key gatekeeper in regulating methane emissions from these freshwater environments.

The study results are published this week in the journal Nature Communications by biologist Samantha Joye of the University of Georgia and colleagues.

The researchers report that high rates of anaerobic (no oxygen) methane oxidation in freshwater wetlands substantially reduce atmospheric emissions of methane.

New attention

The process of anaerobic methane oxidation was once considered insignificant in freshwater wetlands, but scientists now think very differently about its importance.

"Some microorganisms actually eat methane, and recent decades have seen an explosion in our understanding of the way they do this," says Matt Kane, program director in the National Science Foundation's Division of Environmental Biology, which funded the research. "These researchers demonstrate that if it were not for an unusual group of methane-eating microbes that live in freshwater wetlands, far more methane would be released into the atmosphere."

Although anaerobic methane oxidation in freshwater has been gathering scientific attention, the environmental relevance of this process was unknown until recently, Joye says.

"This paper reports a previously unrecognized sink for methane in freshwater sediments, soils and peats: microbially-mediated anaerobic oxidation of methane," she says. "The fundamental importance of this process in freshwater wetlands underscores the critical role that anaerobic oxidation of methane plays on Earth, even in freshwater habitats."

Without this process, Joye says, methane emissions from freshwater wetlands could be 30 to 50 percent greater.

Comparison of wetlands

The researchers investigated the anaerobic oxidation process in freshwater wetlands in three regions: the freshwater peat soils of the Florida Everglades; a coastal organic-rich wetland in Acadia National Park, Maine; and a tidal freshwater wetland in coastal Georgia.

All three sites were sampled over multiple seasons.

The anaerobic oxidation of methane was coupled to some extent with sulfate reduction. Rising sea levels, for example, would result in increased sulfate, which could fuel greater rates of anaerobic oxidation.

Similarly, with saltwater intrusion into coastal freshwater wetlands, increasing sulfate inhibits microbial methane formation, or methanogenesis.

So while freshwater wetlands are known to be significant methane sources, their low sulfate concentrations previously led most researchers to conclude that anaerobic oxidation of methane was not important in these regions.

Crucial process

The new findings show that if not for the anaerobic methane oxidation process, freshwater environments would account for an even greater portion of the global methane budget.

"The process of anaerobic oxidation of methane in freshwater wetlands appears to be different than what we know about this process in marine sediments," Joye says. "There could be unique biochemistry at work."

Adds Katherine Segarra, an oceanographer at the U.S. Department of the Interior's Bureau of Ocean Energy Management and co-author of the paper: "This study furthers the understanding of the global methane budget, and may have ramifications for the development of future greenhouse gas models."

Additional financial support for the research was provided by the Deutsche Forschungsgemeinschaft via the Research Center/Cluster of Excellence at the MARUM Center for Marine Environmental Sciences and department of geosciences at the University of Bremen, Germany.

-- Cheryl Dybas
-- Alan Flurry, University of Georgia
Samantha Joye
Christof Meile
Vladimir Samarkin
Related Institutions/Organizations
University of Georgia Research Foundation Inc


Wednesday, July 1, 2015
Justice Department Files Antitrust Lawsuit to Stop Electrolux from Buying General Electric's Appliance Business

The Department of Justice filed a civil antitrust lawsuit today seeking to block the acquisition of General Electric Company’s appliance business by AB Electrolux and Electrolux North America Inc., whose brands include Frigidaire.  The department said that the $3.3 billion acquisition would combine two of the leading manufacturers of ranges, cooktops and wall ovens sold in the United States, eliminating competition that has benefited American consumers through lower prices and more options.  According to the department’s complaint, purchasers in the United States spent over $4 billion on these major cooking appliances in 2014.

“Electrolux’s proposed acquisition of General Electric’s appliance business would leave millions of Americans vulnerable to price increases for ranges, cooktops and wall ovens, products that serve an important role in family life and represent large purchases for many households,” said Deputy Assistant Attorney General Leslie C. Overton of the Justice Department’s Antitrust Division.  “This lawsuit also seeks to prevent a duopoly in the sale of these major cooking appliances to builders and other commercial purchasers, who often pass on price increases to home buyers or renters.”  

The Antitrust Division’s lawsuit, which seeks to prevent the companies from merging and to preserve their existing head-to-head competition, was filed in the U.S. District Court for the District of Columbia.

Electrolux North America Inc. is an Ohio corporation headquartered in Charlotte, North Carolina.  Electrolux North America Inc. makes and sells major appliances, including those under the brand names Frigidaire, Tappan and Electrolux.  Electrolux’s annual major-appliance sales in the United States total approximately $2.6 billion.  Electrolux North America Inc. is a wholly owned subsidiary of defendant AB Electrolux.

General Electric Company is a New York corporation headquartered in Fairfield, Connecticut.  General Electric’s appliance business is based in Louisville, Kentucky.  It makes and sells major appliances, including those under the brand names GE Monogram, GE Café, GE Profile, GE, GE Artistry and Hotpoint.  In the United States, General Electric’s annual major appliance sales total approximately $3.4 billion.


Tuesday, June 30, 2015
VMWare and Carahsoft Agree to Pay $75.5 Million to Settle Claims that they Concealed Commercial Pricing and Overcharged the Government

VMware Inc. and Carahsoft Technology Corporation have agreed to pay $75.5 million to resolve allegations that they violated the False Claims Act by misrepresenting their commercial pricing practices and overcharging the government on VMware software products and related services, the Department of Justice announced today.  VMware is a Delaware corporation that specializes in computer virtualization software and has its principal place of business in Palo Alto, California.  Carahsoft is a privately held Maryland corporation that distributes information technology products to federal, state and local governments and has its principal place of business in Reston, Virginia.

“Today’s settlement demonstrates our continuing vigilance to ensure that those doing business with the government give the taxpayers a fair deal,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division.  “Government contractors who seek to profit improperly at the expense of taxpayers face serious consequences.”

“Transparency by contractors in the disclosure of their discounts and prices offered to commercial customers is critical in the award of GSA Multiple Award Schedule contracts and the prices charged to government agency purchasers,” said U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

“We will continue to look into all allegations of false claims in GSA contracts,” said Acting Inspector General Robert C. Erickson of the U.S. General Services Administration (GSA).  “I appreciate the hard work of our auditors, our agents and the attorneys on this complex case that has resulted in a large amount of money being returned to the United States.” Under the Multiple Award Schedule (MAS) Program, prospective vendors agree to disclose commercial pricing policies and practices to the GSA in exchange for the opportunity to gain access to the broad federal marketplace and the ease of administration that comes from selling to any government purchaser under one central contract.  GSA regulations require that, during contract negotiations with GSA, prospective vendors seeking an MAS contract make “current, accurate and complete” disclosures of the standard and non-standard discounts they offer to commercial customers.  The GSA relies on the accuracy of these disclosures in order to negotiate fair pricing for government purchasers.  Additionally, after the MAS contract is awarded, regulations require that MAS Program vendors disclose to the GSA changes in their commercial pricing practices, including improved discounts that are offered to commercial customers, after the MAS contract is in place.

The settlement resolves allegations that VMware and Carahsoft made false statements to the government in connection with the sale of VMware products and services under Carahsoft’s MAS contract.  These false statements allegedly concealed the companies’ commercial pricing practices and enabled the companies to overcharge the government for VMware’s products and services from 2007 through 2013.

The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  The civil lawsuit was filed in the Eastern District of Virginia by Dane Smith, who is a former vice president of the Americas at VMware Inc.  Mr. Smith’s share of the recovery has not been determined.

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Virginia and the GSA’s Office of Inspector General, with assistance from the Defense Criminal Investigative Service Mid-Atlantic Field Office.  The case is captioned United States ex rel. Smith v. VMware, Inc., et al., Case No. 10-CV-769 (E.D. Va.).  The claims resolved by the settlement are allegations only; there has been no determination of liability.    

Thursday, July 2, 2015


Thursday, July 2, 2015
Statement by Attorney General Loretta E. Lynch on the Agreement in Principle with BP to Settle Civil Claims for the Deepwater Horizon Oil Spill

Total Value of Settlement Would Top $18.7 Billion, the Largest Settlement with a Single Entity in American History

Today, BP disclosed that it has reached agreements in principle with the United States, state, and local governments for a settlement of civil claims arising from the April 20, 2010, Deepwater Horizon oil spill in the Gulf of Mexico.  The Attorney General made the following statement:

“Since the Deepwater Horizon oil spill – the largest environmental disaster in our nation’s history – the Justice Department has been fully committed to holding BP accountable, to achieving justice for the American people and to restoring the environment and the economy of the Gulf region at the expense of those responsible and not the American taxpayer.  In December 2010, my predecessor, Attorney General Eric Holder, announced a civil lawsuit against BP and its co-defendants.  Since that time, the Deepwater trial team has fought aggressively in federal court for an outcome that would achieve this mission, proving along the way that BP’s gross negligence resulted in the Deepwater disaster.

“Today, I am pleased to say that after productive discussions with BP over the previous several weeks, we have reached an agreement in principle that would justly and comprehensively address outstanding federal and state claims, including Clean Water Act civil penalties and natural resource damages.  BP is also resolving significant economic claims with the impacted state and local governments.  We will work diligently during the next several months to incorporate the agreement in principle into a consent decree, which would then undergo public comment before court approval.  If approved by the court, this settlement would be the largest settlement with a single entity in American history; it would help repair the damage done to the Gulf economy, fisheries, wetlands and wildlife; and it would bring lasting benefits to the Gulf region for generations to come.

“I am so very grateful to the Deepwater civil trial team, made up of men and women from the department’s Environment and Natural Resources Division and Civil Division, as well as the incredible response, investigative and supporting efforts of the Departments of Homeland Security, Interior, Commerce and Agriculture and the Environmental Protection Agency, whose efforts have made this important step possible.  I also appreciate the extraordinary effort of the many state leaders and environmental professionals who collaborated to advance this agreement in principle.”

NASA | Supercomputer Shows How an Exoplanet Makes Waves


Tuesday, June 30, 2015
Colombian Paramilitary Leader Sentenced to More Than 15 Years in Prison for International Drug Trafficking

A senior paramilitary leader and one of Colombia’s most notorious drug traffickers was sentenced today to serve 190 months in prison for leading an international drug trafficking conspiracy that imported into the United States ton-quantities of cocaine.  Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting Deputy Administrator Jack Riley of the U.S. Drug Enforcement Administration (DEA) made the announcement.

“Through his leadership position in the AUC, Salvatore Mancuso-Gomez directed the manufacture and shipment of over 100,000 kilograms of cocaine into the United States and elsewhere,” said Assistant Attorney General Caldwell.  “In addition to enriching himself, Mancuso-Gomez and the AUC used this drug money to raise and arm a paramilitary force of more than 30,000 fighters and cement his control over regions of Colombia.  This case is yet another example of our continued commitment to collaborating with our international partners to prosecute criminals and warlords who traffic in illegal narcotics, violence and intimidation.”

“DEA is committed to relentlessly attacking global criminal networks who use drug trafficking as a means to finance their terrorist activities,” said Acting Deputy Administrator Riley.  “The arrest and prosecution of Salvatore Mancuso-Gomez clearly illustrates this dedication.  As a senior leader in the AUC, Mancuso-Gomez controlled huge amounts of cocaine production in Colombia, and oversaw its movement to the United States and other parts of the world.  Proceeds from his drug trafficking enterprise were used to acquire weapons and further the AUC’s violent criminal agenda.  DEA is pleased that this significant narco-terror leader has faced justice in a U.S. court of law.”

Salvatore Mancuso-Gomez, aka El Mono and Santander Lozada, formerly of Monteria, Colombia, pleaded guilty in October 2008 to one count of conspiracy to distribute cocaine knowing and intending that it would be imported into the United States.  U.S. District Judge Ellen Segal Huvelle of the District of Columbia imposed the sentence.

According to the statement of facts agreed to as part of his guilty plea, Mancuso-Gomez held one of the highest level leadership positions within the Autodefensas Unidas de Colombia (United Self Defense Forces of Colombia or AUC), a terrorist and paramilitary organization in Colombia.  In September 2001, the AUC was designated a Foreign Terrorist Organization by the U.S. Department of State.  In May 2003, the AUC was placed on the Significant Foreign Narcotics Traffickers list by order of the President, pursuant to the Foreign Narcotics Kingpin Designation Act.  In February 2004, Mancuso-Gomez individually was designated as a Tier II Kingpin by the Department of Treasury’s Office of Foreign Assets Control, subjecting him to severe economic sanctions under the Kingpin Act.

The statement of facts also established that the AUC consisted of approximately 30,000 armed soldiers organized into blocs (or regions) with commanders for each bloc.  In connection with his guilty plea, Mancuso-Gomez admitted that, from the mid-1990s through 2004, he directed thousands of soldiers in two blocs of the AUC, controlling large areas where cocaine was produced.

Mancuso-Gomez admitted that the AUC produced approximately 2,000 kilograms of cocaine per month during the conspiracy, and that he and members of the organization transported the cocaine to the coastal areas of Colombia where it was loaded onto go-fast boats and other vessels for ultimate transportation to the United States and Europe.  Mancuso-Gomez also admitted that he levied taxes on other narcotics traffickers who needed passage through AUC-controlled territories, and that he used proceeds from his drug trafficking activities to purchase weapons and other supplies for AUC activities.  Mancuso-Gomez further admitted that he and the AUC maintained tight control of their territories in Colombia through intimidation of corrupt members of the Colombian government, including law enforcement and military personnel and politicians.

Today’s sentence does not account for violations of Colombian human rights-related laws allegedly committed by Mancuso-Gomez, which are being addressed in Colombia through the Justice and Peace process – a legal framework enacted in 2005 to facilitate the demobilization of its paramilitary organizations – and Colombian criminal justice system.

The case was investigated by DEA’s Bogotá and Cartagena, Colombia, Country Offices, and the DEA Special Operations Division.  The government of Colombia provided unprecedented assistance through the investigation, prosecution and sentencing phase of this case.

The case was prosecuted by Trial Attorneys Paul W. Laymon and Carmen Colon of the Criminal Division’s Narcotic and Dangerous Drug Section (NDDS).  NDDS Judicial Attachés in Bogotá, Colombia; the Criminal Division’s Office of International Affairs; and the Prosecutor General’s Office of the Republic of Colombia (Fiscalia), including the Fiscalia’s Transitional Justice program, provided significant assistance.


The Role of Youth, Women, Religious Groups, and Civil Society in Preventing Violent Extremism
Robert Berschinski
Deputy Assistant Secretary, Bureau of Democracy, Human Rights, and Labor
Remarks as Delivered at Central and South Asia Regional Conference on Countering Violent Extremism
Astana, Kazakhstan
June 30, 2015

Let me begin by thanking the Government of Kazakhstan for hosting this important conference and for your hospitality last night, and also thanking my fellow panelists for sharing your time and insights.

I'd like to take as my point of departure a few of the points raised by the U.S. head of delegation, Customs and Border Patrol Commissioner Gil Kerlikowske, in his opening remarks yesterday.

Given that we've heard a lot of panelists since yesterday morning, I'll offer a brief recap. Commissioner Kerlikowske said five things I think are worth repeating:

First, that as a life-long professional law enforcement officer, his perspective is that "real security is not about arrests and detention," but about "the way governments interact with their societies."

Second, that as we seek to prevent violent extremism, it is in governments' best interest to empower non-governmental organizations and other citizens--youth, women, faith leaders, and victims among them.

Third, that violations of religious freedom are one important driver of radicalization.
Fourth, that respect for human rights is a law enforcement best practice.

And fifth and finally, that corruption undermines society's faith in its government, which produces the kinds of alienation that can drive individuals toward the forms of violent extremism that we collectively seek to end.

One additional theme I've heard running through all the panels thus far is that the drivers of radicalization are complex, and thus we need to be as holistic and inclusive as possible in our response. It's clear that government alone cannot successfully address the issue. Non-governmental, community-based, and religious voices are essential.

I'd like to offer a few thoughts on each of these lessons.

First, as we heard in yesterday's panel on the uses and abuses of new media, we are all grappling with extremists' misuse of the internet to spread their message. And while there are certainly times in which calls for direct imminent violence by terrorist groups and their sympathizers should be taken offline, we should remember that peaceful expression and the free exchange of ideas are an essential part of the antidote to the appeal of violent extremist ideologies.

When we suppress peaceful and legitimate expression and ideas, even ones with which we disagree or even find abhorrent, we simply drive extremist voices underground, where they are harder to track and challenge, while in many cases enabling conspiracy theories to thrive. So engagement, rather than censorship, needs to be part of the solution.
Efforts to clamp down on freedom of expression lead me to my next point, which is that notwithstanding the many things that we don't know about the process of radicalization, one thing we do know is that one of the key drivers of political violence is that it is in part rooted in experiences of injustice—such as discrimination, corruption, and abuses by government authorities or security forces that are perpetuated with impunity.

This conference's analogue in Kenya just wrapped up last week, and one of the data points noted during that conference was that 65% of Shabaab members interviewed by a think tank said they joined the group as a reaction to the aggressive and discriminatory actions of local security forces, as well as ethnic profiling, arbitrary detentions, and police corruption.
Now we need to take each instance of radicalization within a local context, but there is a generalizable point to be made that populations that have access to transparent and non-corrupt governance, the rule of law, and the fundamental freedoms of expression, religious belief, association, and assembly tend to have fewer grievances and more outlets for what grievances they do have, and are thus more resistant to the call of violent extremism.
With respect to religious groups, we know that government efforts to control peaceful religious belief or practice, especially for so-called “non-traditional” religious actors, generates grievances and in some cases alienates communities -- the opposite of what we should seek to achieve from the perspective of countering violent extremist narratives of oppression and subjugation.

More broadly, reducing the space for civil society to operate--a trend that is unfortunately spreading across this region and around the world in parallel to the growth of groups like Al Qaeda and Daesh--harms governmental CVE efforts, as civil society actors are often those closest to vulnerable populations.

This is particularly true not only of religious groups, but also of women and youth. That's why, through the Global Counterterrorism Forum and other means, we must continue to develop best practices on incorporating women's views into CVE efforts, and conduct more study on what motivates women and girls toward radicalism.

A range of contextual challenges, including legal and institutional restrictions, safety concerns, and lack of resources and skills, often prevent full and effective participation of women and girls in CVE policy-making and programs. But women and girls are leaders, problem-solvers, inspirers, and teachers, as well as mothers, sisters, wives, and providers -- their input and efforts are imperative to batting back violent extremism.

Let me say in closing that we in government cannot do it alone. More broadly, as UN Secretary General Ban Ki-moon said recently while touring this region, curbing freedoms creates “an illusion of stability in the short-run” but ultimately fosters “a breeding ground for extremist ideologies" in the longer run.

As Ban said, “Around the world, the way to confront threats is not more repression, it is more openness. More human rights. The road to a stable future is by strengthening the rule of law. By fighting corruption. By ensuring an independent judiciary. By guaranteeing free media. By building just societies. By empowering citizens."

The United States fully supports these words from the UN Secretary General. Operating space for youth, women, religious groups, and civil society must be safeguarded—so that these populations can speak their minds, organize among themselves, and bring their experiences to bear on creating more peaceful, tolerant, and democratic societies.
Thank you.


6/29/2015 10:55 AM EDT

The Securities and Exchange Commission charged Kohlberg Kravis Roberts & Co. (KKR) with misallocating more than $17 million in so-called “broken deal” expenses to its flagship private equity funds in breach of its fiduciary duty.

KKR agreed to pay nearly $30 million to settle the charges, including a $10 million penalty.

The SEC Enforcement Division’s Asset Management Unit has been scrutinizing the private equity industry to make sure that fund managers aren’t misallocating or unfairly charging fees and expenses to investors.  An SEC investigation found that during a six-year period ending in 2011, KKR incurred $338 million in broken deal or diligence expenses related to unsuccessful buyout opportunities and similar expenses.  Even though KKR’s co-investors, including KKR executives, participated in the firm’s private equity transactions and benefited from the firm’s deal sourcing efforts, KKR did not allocate any portion of these broken deal expenses to any of them for years.  KKR did not expressly disclose in its fund limited partnership agreements or related offering materials that it did not allocate broken deal expenses to the co-investors.

“This is the first SEC case to charge a private equity adviser with misallocating broken deal expenses,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.  “Although KKR raised billions of dollars of deal capital from co-investors, it unfairly required the funds to shoulder the cost for nearly all of the expenses incurred to explore potential investment opportunities that were pursued but ultimately not completed.”

The SEC’s order instituting a settled administrative proceeding also finds that KKR failed to implement a written compliance policy governing its fund expense allocation practices until the end of the six-year period in 2011.

“KKR’s failure to adopt policies and procedures governing broken deal expense allocation contributed to its breach of fiduciary duty,” said Marshall S. Sprung, Co-Chief of the SEC Enforcement Division’s Asset Management Unit.  “A robust compliance program helps investment advisers ensure that clients are not disadvantaged and receive full disclosure about how fund expenses are allocated.”

KKR consented to the entry of the SEC’s order finding that the firm violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7.  KKR agreed to pay more than $14 million in disgorgement ($3.26 million was previously refunded to clients) as well as more than $4.5 million in prejudgment interest and the $10 million penalty.  KKR neither admitted nor denied the SEC’s findings.

The SEC’s investigation was conducted by Vincenzo A. DeLeo and Brian E. Fitzpatrick of the Asset Management Unit with the assistance of James E. Addison of the New York Regional Office.  The case was supervised by Panayiota K. Bougiamas of the Asset Management Unit.  The SEC examination that led to the investigation was conducted by Edward R. Perkins, Francine P. Catapano, Syed Husain, and Tracy O’Sullivan.


Friday, June 26, 2015
Indictment In UPMC Stolen Identity Scheme

On Wednesday, a federal grand jury in Pittsburgh returned a multi-count indictment against Yoandy Perez Llanes, a foreign national residing outside of the United States.  Llanes was charged in a 21-count indictment with a scheme to defraud the Internal Revenue Service (IRS), and the U.S. Treasury, using the stolen identities of employees of the University of Pittsburgh Medical Center (UPMC) to file false federal income tax returns in order to obtain unlawful tax refunds.  Llanes and unnamed conspirators converted the unlawful tax refunds to gift cards, which were used to buy merchandise which was shipped internationally.  All of these acts occurred generally between January and April 2014.  Llanes is charged with conspiracy to defraud the United States, wire fraud, money laundering and aggravated identity theft.

Early in 2014, thousands of employees of UPMC had their personal information compromised by hackers, who intruded into a UPMC computerized database stealing names, social security numbers, dates of birth and other personal identifying information.  This data was then used to file false 2013 federal tax returns.  Investigators learned that names and other identifiers were used by Llanes and other conspirators to file 935 false tax returns in which unlawful refunds were requested in the form of gift cards.  Quick action by the IRS, UPMC and frustrated the efforts of the fraudsters to file additional false returns and obtain further fraudulent proceeds.  While the perpetrators sought approximately $2.2 million in fraudulent refunds, only $1.4 million was actually disbursed as refunds.  Stolen Identity Refund Fraud, such as that alleged to have been perpetrated by Llanes, costs United States taxpayers billions of dollars.

This criminal scheme was complex and crossed national borders.  Llanes and the conspirators used anonymous and encrypted email to disguise their identities and proxy computers to file returns.  Using the fraudulently obtained gift cards, Llanes purchased hundreds of thousands of dollars in electronic merchandise for shipment through reshipping services in Miami, Florida, with instructions for delivery to “drop” locations outside the United States.  Llanes and others then retrieved the merchandise and advertised it for sale on online auction websites overseas.

Though Llanes and the conspirators attempted to conceal their whereabouts and their identities through the use of encrypted email and proxy services, investigators were able to uncover the sophisticated plot and identify Llanes.

The law provides for a sentence of imprisonment, a fine of $5.5 million or both.  Under the Federal Sentencing Guidelines, the actual sentence imposed would be based upon the seriousness of the offenses and the prior criminal history, if any, of the defendant.

Assistant U.S. Attorney Gregory C. Melucci is prosecuting this case on behalf of the government.

The IRS-CI, the U.S. Secret Service and the U.S. Postal Inspection Service, conducted the investigation leading to the indictment in this case.

An indictment is an accusation.  A defendant is presumed innocent unless and until proven guilty.

Wednesday, July 1, 2015


Statement by NSC Spokesperson Ned Price on Terrorist Attacks in Egypt

The United States strongly condemns the terrorist attacks against Egyptian security forces in North Sinai this morning, which killed dozens of Egyptian personnel and injured many others.  We extend our deepest condolences to the families of the deceased and the government and people of Egypt, and wish for a speedy recovery for those who were injured.  The United States stands resolutely with Egypt amidst the spate of terrorist attacks that have afflicted the country and, in the context of our long-standing partnership, will continue to assist Egypt in addressing these threats to its security.


Statement by Senior Advisor Brian Deese on China’s Submission of its Intended Nationally Determined Contribution

The United States welcomes China's submission of its Intended Nationally Determined Contribution (INDC) earlier today.  The INDC submission follows from the target that China announced in the November 2014 Joint Announcement by President Obama and President Xi and helps to provide continued momentum toward reaching a successful climate agreement in Paris.  Countries accounting for nearly 70 percent of current global energy carbon-dioxide emissions have already announced and are taking action on post-2020 climate policies.  The United States encourages all major economies to submit their INDCs as soon as possible to lay the groundwork for a successful outcome at the twenty-first session of the Conference of Parties in Paris at the end of this year.

Statement at Open Meeting on Clawbacks of Erroneously Awarded Compensation

Statement at Open Meeting on Clawbacks of Erroneously Awarded Compensation


07/01/2015 01:12 PM EDT
Statement on Cuba
John Kerry
Secretary of State
Vienna, Austria
July 1, 2015

SECRETARY KERRY: Good afternoon, everybody. Thank you for your patience. In Washington a few moments ago, President Obama announced that we had reached an agreement to formally re-establish diplomatic relations with the Republic of Cuba and that we will reopen embassies in our respective countries.

Later this summer, as the President announced, I will travel to Cuba to personally take part in the formal reopening of our United States Embassy in Havana. This will mark the resumption of embassy operations after a period of 54 years. It will also be the first visit by a Secretary of State to Cuba since 1945. The reopening of our embassy, I will tell you, is an important step on the road to restoring fully normal relations between the United States and Cuba. Coming a quarter of a century after the end of the Cold War, it recognizes the reality of the changed circumstances, and it will serve to meet a number of practical needs.

The United States and Cuba continue to have sharp differences over democracy, human rights, and related issues, but we also have identified areas for cooperation that include law enforcement, safe transportation, emergency response, environmental protection, telecommunications, and migration. The resumption of full embassy activities will help us engage the Cuban Government more often and at a higher level, and it will also allow our diplomats to interact more frequently, and frankly more broadly and effectively, with the Cuban people. In addition, we will better be able to assist Americans who travel to the island nation in order to visit family members or for other purposes.

This transition, this moment in history, is taking place because President Obama made a personal, fundamental decision to change a policy that didn’t work and that had been in place not working for far too long. I believe that’s leadership, and I appreciate that leadership. And President Castro felt similarly that it was time for a change. Both leaders agree that concentrating on the issues and possibilities of the future is far more productive than remaining mired in the past. And I would say as we look at the world today with conflicts that we see and even these negotiations taking place here in Vienna, it is important for people to understand that things can change, that leadership can be effective and can make a difference.

This step has been long overdue, and the response of the international community has reflected the relief and the welcoming that people all over the world feel for this step. This step will advance the President’s vision – President Obama’s vision – of an Americas where responsibilities are widely shared and where countries combine their strengths to advance common interests and values. And we, frankly, also believe that this opening will help to change relationships in the region as a whole.

I want to thank Assistant Secretary of State Roberta Jacobson and her team, our team at the State Department, together with those at the White House who have worked to lead these discussions with their Cuban counterparts in order to enable the normalization of our diplomatic relations and the reopening of our embassies. I also want to thank the Government of Switzerland for the essential role that they have played in serving as the United States protecting power in Cuba for more than 50 years.

And finally, I want to acknowledge the efforts of many in the United States Congress, the Cuban American community, civil society, faith-based organizations, the private sector, and others throughout our country and beyond who have supported the start of a new chapter of relations between the United States and Cuba. I look forward to meeting again with my Cuban counterpart, Bruno Rodriguez, who I saw most recently in Panama, and I also look forward to greeting our embassy personnel and the Cuban people in Havana later this summer. I look forward to taking part in the reopening of our United States embassy and in the raising of the Stars and Stripes over that embassy, and the beginning of a new era of a new relationship with the people of Cuba. Thank you all very much.

QUESTION: Mr. Secretary, will American diplomats have free access to talk to people --

SECRETARY KERRY: We’ll talk about all those details later. I’m not going to take questions right now, folks, but I appreciate very much your patience and interest.

QUESTION: Just a few words about the negotiations here today, please.

SECRETARY KERRY: Well, I’ve got to take these away for that. (Laughter.) We are working very, very hard. We have some very difficult issues, but we believe we’re making progress and we’re going to continue to work because of that. Thank you all.

QUESTION: Foreign Minister Zarif said there’s no deadline. Is there?

SECRETARY KERRY: Thank you very much.

QUESTION: Is there a deadline, sir?

SECRETARY KERRY: We have our own sense of deadline.



Right:  Defense Secretary Ash Carter, right, hosts an honor cordon to welcome Brazilian Defense Minister Jaques Wagner to the Pentagon, June 29, 2015. The two defense leaders met to discuss matters of mutual importance. DoD photo by Glenn Fawcett.  

Carter, Brazilian Counterpart Discuss Defense Relationship
DoD News, Defense Media Activity

WASHINGTON, June 30, 2015 – With Brazilian President Dilma Rousseff scheduled to meet with President Barack Obama at the White House today, Defense Secretary Ash Carter hosted Brazilian Defense Minister Jaques Wagner at the Pentagon yesterday to discuss the U.S.-Brazilian defense relationship.

In a statement summarizing the meeting, Pentagon officials said Carter commended Brazil's contributions to peacekeeping operations in Africa and around the world and discussed ways the United States and Brazil can continue to collaborate in support of international partners.

Deepening Cooperation

“Secretary Carter and Minister Wagner discussed the importance of deepening trade and defense technology cooperation, noting opportunities for future co-development and co-production,” the statement said.

They also discussed the recent ratification of the defense cooperation agreement and general security of military information agreement by the Brazilian legislature as signs of deepening cooperation between the U.S. and Brazilian militaries, officials added.

The defense leaders also discussed security preparations for next year's Summer Olympics in Rio de Janeiro, and Wagner invited Carter to visit Brazil ahead of the games, officials said.


Tuesday, June 30, 2015
Department of Justice Seeks Forfeiture of $34 Million in Bribe Payments to the Republic of Chad’s Former Ambassador to the U.S. and Canada

The Department filed a complaint today seeking the civil forfeiture of approximately $34 million, which represents the cash value of shares in a Canadian energy company that the company used to bribe Chad’s former Ambassador to the United States and Canada for the purpose of influencing the award of oil development rights.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Assistant Director Joseph S. Campbell of the FBI’s Criminal Investigative Division made the announcement.

From 2004 to 2012, Mahamoud Adam Bechir, 50, served as Chad’s Ambassador to the United States and Canada.  From approximately 2007 to 2015, Youssouf Hamid Takane, 52, was the Deputy Chief of Mission.  As alleged in the complaint, in 2009, Bechir and Takane agreed to use their official positions to influence the award of oil development rights in Chad to Griffiths Energy International Inc., a Canadian oil company, in exchange for shares in the company.  Thereafter, in or about October 2009, Griffiths Energy issued four million shares to the wives of Bechir and Takane and to another associate.

The complaint further alleges that Griffiths Energy agreed with Bechir and his wife that the company would pay a $2 million “consulting fee” to Bechir’s wife to influence the award of oil development rights in Chad.  After securing the desired oil development rights in February 2011, Griffiths Energy allegedly transferred $2 million to an account held by a shell company created by Bechir’s wife.  This bribe payment was commingled and laundered through U.S. bank accounts and real property, and eventually was transferred to Bechir’s bank account in South Africa, where he is now serving as Chad’s Ambassador.  In 2013, Griffiths Energy pleaded guilty in Canadian court to bribing Bechir.

The $34 million that the United States seeks in forfeiture represents the cash value of the four million shares in Griffiths Energy that were provided to the wives of Bechir and Takane and to their associate.  In a separate action filed in 2014, the United States also is seeking the civil forfeiture of over $100,000 in allegedly laundered funds traceable to the $2 million bribe payment.  Takane resides in the United States.

The investigation was conducted by the FBI.  The case is being handled by Trial Attorney Nalina Sombuntham and Senior Trial Attorney Steven C. Parker of the Criminal Division’s Asset Forfeiture and Money Laundering Section.

This case was brought under the Kleptocracy Asset Recovery Initiative by a team of dedicated prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section, working in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, return those proceeds to benefit the people harmed by these acts of corruption and abuse of office.


6/29/2015 10:55 AM EDT

The Securities and Exchange Commission today charged Kohlberg Kravis Roberts & Co. (KKR) with misallocating more than $17 million in so-called “broken deal” expenses to its flagship private equity funds in breach of its fiduciary duty.

KKR agreed to pay nearly $30 million to settle the charges, including a $10 million penalty.

The SEC Enforcement Division’s Asset Management Unit has been scrutinizing the private equity industry to make sure that fund managers aren’t misallocating or unfairly charging fees and expenses to investors.  An SEC investigation found that during a six-year period ending in 2011, KKR incurred $338 million in broken deal or diligence expenses related to unsuccessful buyout opportunities and similar expenses.  Even though KKR’s co-investors, including KKR executives, participated in the firm’s private equity transactions and benefited from the firm’s deal sourcing efforts, KKR did not allocate any portion of these broken deal expenses to any of them for years.  KKR did not expressly disclose in its fund limited partnership agreements or related offering materials that it did not allocate broken deal expenses to the co-investors.

“This is the first SEC case to charge a private equity adviser with misallocating broken deal expenses,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.  “Although KKR raised billions of dollars of deal capital from co-investors, it unfairly required the funds to shoulder the cost for nearly all of the expenses incurred to explore potential investment opportunities that were pursued but ultimately not completed.”

The SEC’s order instituting a settled administrative proceeding also finds that KKR failed to implement a written compliance policy governing its fund expense allocation practices until the end of the six-year period in 2011.

“KKR’s failure to adopt policies and procedures governing broken deal expense allocation contributed to its breach of fiduciary duty,” said Marshall S. Sprung, Co-Chief of the SEC Enforcement Division’s Asset Management Unit.  “A robust compliance program helps investment advisers ensure that clients are not disadvantaged and receive full disclosure about how fund expenses are allocated.”

KKR consented to the entry of the SEC’s order finding that the firm violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7.  KKR agreed to pay more than $14 million in disgorgement ($3.26 million was previously refunded to clients) as well as more than $4.5 million in prejudgment interest and the $10 million penalty.  KKR neither admitted nor denied the SEC’s findings.

The SEC’s investigation was conducted by Vincenzo A. DeLeo and Brian E. Fitzpatrick of the Asset Management Unit with the assistance of James E. Addison of the New York Regional Office.  The case was supervised by Panayiota K. Bougiamas of the Asset Management Unit.  The SEC examination that led to the investigation was conducted by Edward R. Perkins, Francine P. Catapano, Syed Husain, and Tracy O’Sullivan.



FTC Returns Almost $4 Million to Consumers in Debt Collection Scam
The Federal Trade Commission is mailing almost 95,000 checks totaling approximately $4 million to consumers who lost money to a debt collection operation that extorted payments from them using false threats.

In May 2014, the FTC settled charges against Asset Capital and Management Group, which, under various names, illegally extracted payments from consumers for credit card debt the defendants had purchased from creditors. The settlement order banned the defendants from the debt collection industry.

Consumers who receive the checks from the FTC’s refund administrator for this matter, Analytics Consulting LLC, should deposit or cash them within 60 days of the mailing date. The FTC never requires consumers to pay money or to provide information before refund checks can be cashed.


Friday, June 26, 2015

Tennessee Man Pleads Guilty to Hobbs Act Robbery of Former Employer
A Tennessee man pleaded guilty to Hobbs Act robbery and use of a handgun in a crime of violence, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney David Rivera of the Middle District of Tennessee.

Deonte Graham, 34, of Clarksville Tennessee, pleaded guilty before Chief U.S. District Judge Kevin Sharp of the Middle District of Tennessee.

On Oct. 21, 2011, Singletary Construction in Clarksville, Tennessee, was robbed of $17,000 in cash by two masked men with a gun.  Physical evidence recovered in connection with the robbery resulted in the identification of Michael Massey as one of the robbery suspects.  In May 2015, Massey pleaded guilty to his role in the robbery.

In connection with today’s guilty plea, Graham admitted that, in October 2011, he had worked for Singletary for more than one year.  According to Graham’s admissions, after the owner of the company accused Graham of misrepresenting the hours he worked and docked his pay, Graham and Massey devised a plan to rob Singletary.  Graham also admitted that, in December 2012, he bragged to a former Singletary employee about arranging the robbery because Singletary owed him money.

This case was investigated by Clarksville, Tennessee, Police Department and the Drug Enforcement Administration.  The case is being prosecuted by Trial Attorney Laura Gwinn of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorney Lynne T. Ingram of the Middle District of Tennessee.

Tuesday, June 30, 2015

A Tour of Space-time Foam


Friday, June 26, 2015
Former UW-Oshkosh Student Sentenced to 40 Months in Prison for Possession of Ricin

Kyle Allen Smith, 21, of Oshkosh, Wisconsin, was sentenced today to 40 months in federal prison for possession of ricin by the Chief District Judge William C. Griesbach of the Eastern District of Wisconsin, announced Assistant Attorney General for National Security John P. Carlin and U.S. Attorney James L. Santelle of the Eastern District of Wisconsin.

Smith was arrested on October 31, 2014, after two professors at the University of Wisconsin at Oshkosh reported to campus authorities that Smith was making unusual inquiries about chemical processes, including extracting of ribosomal inhibiting protein.  According to the plea agreement, Smith admitted growing castor bean plants and extracting ricin from the beans.  A substance found in Smith’s residence was sent to the Department of Homeland Security’s National Bioforensics Analysis Center at Fort Detrick, Maryland, and tested positive for the toxin ricin.  Ricin is a toxin that infects human cells and blocks their ability to synthesize their own protein.  Small doses of ricin may be lethal to human beings if ingested, inhaled or injected.  Symptoms of ricin poisoning can include difficulty breathing, nausea, vomiting and diarrhea, with possible death occurring within 36 to 72 hours.  According to information posted on the website of the Centers for Disease Control and Prevention (CDC), there are no known antidotes for ricin poisoning.

Smith admitted having homicidal thoughts and that these thoughts might have sparked his curiosity about the production of ricin.  He stated he would not use or test the ricin on any human because too many people knew what he was doing and would turn him in.

Assistant Attorney General Carlin joined U.S. Attorney Santelle in praising the actions of the professors and the University administration in bringing Smith to the prompt attention of law enforcement authorities.  It is a perfect example of “see something, say something,” which guides the required vigilance of our times.  Assistant Attorney General Carlin and U.S. Attorney Santelle also thanked the Wisconsin National Guard, 54th Civil Support Team, for the critical assistance they provided in the safe recovery of the ricin.

The case was investigated by the Oshkosh Police Department, the FBI and the University of Wisconsin – Oshkosh Police Department.  The case was prosecuted by Assistant U.S. Attorney Paul L. Kanter of the Eastern District of Wisconsin and the Justice Department’s National Security Division.


Rethinking computerized clinical alerts
Researchers at Indiana University-Purdue University Indianapolis redesign drug interaction warnings to avoid 'alert fatigue'

June is National Safety Month, with a call to action to reduce harm and injury through enhanced attention to safety.

Healthcare in the United States is constantly evolving to provide safe and quality care while decreasing the incidence of medical errors. Advances in health information technology can improve patient safety, including in the area of safer prescribing of medications through the smarter design of clinical alerts.

A frequent source of errors in clinical care settings is related to the prescribing of medications. Electronic Health Records have the potential to improve safety by notifying providers of potentially harmful medication interactions. Currently, clinicians using electronic health records encounter numerous alerts as they navigate computerized prescribing for their patients.

While these alerts are critical for patient safety, they are often overridden or ignored due to "alert fatigue"--an unintended consequence of the computerization of health care, where clinicians become desensitized to the large volume of safety alerts.

An estimated 90 percent of drug interaction alerts are ineffective, as they temporarily halt prescribing with generic warning imagery and brief messaging, but do not offer user-friendly interfaces with advice that resonates with the prescriber.

With support from the National Science Foundation's (NSF) Smart and Connected Health Program, Davide Bolchini and Jon Duke from Indiana University-Purdue University Indianapolis (IUPUI) are advancing knowledge in Human Computer Interaction (HCI)--a field that studies the design, development and implementation of information technologies for optimal use by a target audience--through a collaborative project to rethink and redesign computerized clinical alerts.

Identifying disconnects

"Although physicians routinely encounter drug-drug interaction alerts during daily medication prescribing, the effectiveness of such alerts remains extremely low," explained Duke, director of drug safety informatics at Regenstrief Institute.

An additional barrier to the desired effect of alerts is that healthcare providers may be wary of utilizing computerized advice in the same way they would trust advice from medical literature or peer providers.

These challenges necessitate new approaches to design which can leverage health information technology to improve the care team's integration of information into computerized alerts to ensure patient safety. Multiple, complex factors influence the healthcare team's decision-making and the researchers want to integrate this knowledge to optimize the design and impact of computerized drug interaction alerts.

The overarching objective is to re-design the content and visualization of alerts such that they capture the attention of providers while offering advice more likely to be trusted than current alerts.

"We are looking at how to improve the trust between the physician and computer," said Duke.

Visualizing trustworthy alerts

A crucial step in the process of transforming the design of drug-drug interaction alerts involved studying the types and sources of information that providers deemed important and impactful.

The team researched information flow by directly observing hospital team meetings. They then constructed work models to identify the themes that drive trusted advice in clinical settings. The models integrated the roles of evidence in medical literature and advice provided by peer consultants such as pharmacists and subspecialists.

The research team is now actively using this foundational knowledge to transform the computer interface to reflect various models of trust based alerts.

The team is also developing novel interface designs where computer alerts can convey drug safety guidance in various forms, including changes in the alert message tones, such as from danger-based tones to supportive ones. The new alert designs also vary the source of knowledge from the empirical medical research to a peer collaborator.

The design ideas include visualizations for different trust-based alert messages. Examples include warnings whose message stresses empathy, peer-endorsement, conflict-mitigation and collaboration. The team will test and evaluate the different alerts in the lab and in hospital environments to determine the effect on prescriber responses. They will also elicit healthcare provider feedback on the visual aspects and impact of the alerts.

"This innovative Human Computer Interaction project illustrates how studying novel visualizations and design can better integrate information that is meaningful to clinicians and maximize the potential of computerized alerts to improve safety," said Wendy Nilsen, Smart and Connected Health program director at NSF.

The broader impacts of this Smart and Connected Health project are numerous. The team believes that translating these research findings into real-world electronic medical record systems could improve the user experience of prescribers and yield a potential reduction in the millions of adverse drug events that occur each year.

"A key aspect of the work is to generate alerts that are perceived as collaborating with the providers rather than critiquing every micro-decision," said Bolchini. "We have the opportunity to change technologies which are pervasive and create the next generation of systems for human use and patient safety."

-- Nivedita Mohanty, National Science Foundation
-- Aaron Dubrow, NSF
Jon Duke
Davide Bolchini
Related Institutions/Organizations
Indiana University-Purdue University Indianapolis
Indianapolis , Indiana


Wednesday, June 24, 2015
Justice Department Reaches Agreement with Maryland Day Camp to Ensure Equal Rights for Children with Epilepsy

The Justice Department signed a settlement agreement today with Camp Bravo, a day camp that operates in Towson, Maryland, just outside Baltimore.  The settlement resolves allegations that Camp Bravo violated a child’s civil rights by denying her admission to the camp because she has epilepsy, in violation of the Americans with Disabilities Act (ADA).  Because the child would need emergency medication administered if she were to have a prolonged or acute repetitive seizure, Camp Bravo denied her admission.  Though the medication, Diastat, is designed to be administered by trained laypersons and could save the child’s life, Camp Bravo would not permit non-medical staff to administer the medication and later refused to permit the camp nurse to accompany the child on field trips or bus rides.  As a result, the child was not able to attend Camp Bravo for two consecutive summers.

Title III of the ADA prohibits discrimination on the basis of disability by private camps and child care programs.  Under the ADA, such entities must make reasonable modifications to their policies, practices or procedures when necessary to provide equal access to a child with a disability, unless a modification would fundamentally alter the nature of the goods and services.  It generally will be a reasonable modification required by title III of the ADA for certain public accommodations, such as camps and child care programs, to train laypersons to administer Diastat.

“Equal access to camps and child care programs is essential to children and parents across the country,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division.  “These programs allow children with disabilities to learn and play with their peers and develop important social skills.  The Civil Rights Division will not allow the exclusion of children with seizure disorders where life-saving medication can be safely administered by trained laypersons.”

“Federal law prohibits businesses from discriminating against children with disabilities,” said U.S. Attorney Rod J. Rosenstein of the District of Maryland.

Under the agreement, Camp Bravo will admit the child for all future camp sessions of the child’s choosing, as long as she is of eligible age, and will pay $8,000 to the family to compensate them for Camp Bravo’s failure to admit the child when she previously applied.  In addition, Camp Bravo will train its staff on the ADA and, if a child with epilepsy is enrolled in the camp, on epilepsy and seizures.  The camp will also adopt and enforce a nondiscrimination policy, as well as an emergency anti-seizure medication administration policy and procedure.  The department will monitor Camp Bravo’s compliance with the agreement for three years.

Monday, June 29, 2015


Monday, June 29, 2015

Attorney General Loretta E. Lynch Statement on the U.S. Supreme Court Ruling in Arizona State Legislature v. Arizona Independent Redistricting Commission
Attorney General Loretta E. Lynch released the following statement today after the Supreme Court ruling in Arizona State Legislature v. Arizona Independent Redistricting Commission:

“I am pleased that the Supreme Court has vindicated the rights of voters who want their electoral districts drawn fairly, independently and without undue emphasis on partisan affiliation or political creed.  Arizona’s approach to redistricting is an innovative and effective advance in the effort to reduce gerrymandering and give all Americans an opportunity to make their voices heard.  Today’s decision is a victory for the people of Arizona, for the promise of fair and competitive elections and for the principles of democratic self-governance that make our nation exceptional.”

NASA 360 Talks - Life on Mars


Friday, June 26, 2015
Former Senior Executive of Qualcomm Sentenced to 18 Months and Fined $500,000 for Insider Trading and Money Laundering
The former Executive Vice President and President of Global Business Operations for Qualcomm Inc., was sentenced today to 18 months in prison and fined $500,000 for his role in a three-year insider trading scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Laura E. Duffy of the Southern District of California made the announcement.

“Through his position as a high-ranking executive at Qualcomm, Jing Wang gained unique access to information about the company’s earnings and intended acquisitions and illegally exploited that inside information for personal gain,” said Assistant Attorney General Caldwell.  “He then enlisted the services of others – his stock broker and his brother – to cover up the scheme.  This prosecution demonstrates the Criminal Division’s commitment to holding accountable corporate executives who would undermine the integrity of the financial marketplace.”

“Jing Wang was a powerful insider at one of the world’s top corporations – but he threw it all away to make a few hundred thousand dollars,” said U.S. Attorney Duffy. “While Wang has lost his power, his position and his freedom, the real losers here are investors who play by the rules, and our nation’s financial system, which is diminished with every one of these schemes.”

Jing Wang, 52, of Del Mar, California, pleaded guilty in July 2014 to insider trading, money laundering and obstruction of justice for orchestrating a multi-year scheme to trade on the confidential information of Qualcomm and cover up his criminal conduct.  The sentence was imposed by U.S. District Judge William Q. Hayes of the Southern District of California.

In connection with his plea, Wang admitted that he made three, separate insider trades using a brokerage account in the name of his British Virgin Island (BVI) shell company, Unicorn Global Enterprises.  First, in early 2010, prior to Qualcomm’s announcement of a dividend increase and stock repurchase, Wang bought company stock valued at approximately $277,000.  He also admitted that, in December 2010, while attending Qualcomm’s Board of Directors meeting in Hong Kong, and hours after the Board approved a non-public offer to purchase Atheros, a developer of semiconductors for wireless communications, Wang purchased stock in Atheros.  Wang further admitted that, just a few weeks later, he directed his stockbroker, Gary Yin, to sell the Atheros stock, for approximately $481,000, and purchase Qualcomm stock one day before the company announced record earnings.

Wang also pleaded guilty to money laundering for transferring the illegal proceeds from Unicorn’s account to an account of a new BVI shell company he controlled.  He further admitted to obstructing justice by creating a false cover story in which he and co-conspirator Yin would blame Wang’s brother Bing Wang, who resides in rural China, for the insider trading and ownership of the Unicorn Account.  Among other acts, Wang collected incriminating evidence and provided it to Yin to take to China, and arranged meetings between Yin and Bing Wang during which the two rehearsed the false account.                                                                                              

Yin pleaded guilty to conspiring to obstruct justice and launder money, and currently is scheduled to be sentenced on July 17, 2015.  Bing Wang has been charged in connection with the scheme, and is wanted on an international arrest warrant.

This case was investigated by the FBI’s San Diego Field Office and the Internal Revenue Service-Criminal Investigation’s San Diego Field Division.  The SEC’s Los Angeles Regional Office provided substantial assistance.  The case is being prosecuted by Trial Attorney James P. McDonald of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Eric J. Beste of the Southern District of California.


6/26/2015 12:12 PM EDT
Transatlantic Missile Defense: Defining the Right Threat Set
Frank A. Rose
Assistant Secretary, Bureau of Arms Control, Verification and Compliance
The Atlantic Council
Washington, DC
June 24, 2015
As prepared

Thank you Ian for that kind introduction and for having me here today.

I always appreciate the opportunity to speak at the annual Atlantic Council missile defense conference alongside so many experts in this important field. Today, I would like to focus my remarks on how the Obama Administration has defined the ballistic missile threat and how we are cooperating to address this threat. I'll keep my comments brief to maximize our time to more freely engage on these issues.

The 2010 Ballistic Missile Defense Review (or BMDR) makes clear that the United States’ missile defenses are focused on defending against limited missile threats to the U.S. homeland and regional missile threats to our deployed forces, allies and partners throughout the world. The development of ballistic missiles by countries like Iran and North Korea, and the proliferation of these systems around the world is what drives our threat assessment.

Our deployment of missile defenses is focused on strengthening the twin U.S. goals of deterrence and assurance. In so doing, they also contribute to international peace and stability and reinforce our nonproliferation aims.

At the same time, we have made clear both in our policy and in the capabilities we have deployed that our missile defense efforts are not intended to affect the strategic balance with Russia and China.

As a practical matter, the U.S. experience with missile defense suggests that attempting to develop a comprehensive missile defense system to defend against ballistic missile attack from Russia would be extremely challenging – and costly – given the size and sophistication of Russia’s strategic missile force and the relatively limited number of missile defense interceptors that would be available to defend against such a large force.

It is to address the regional threats from the Middle East and North Korea, and to enhance our regional deterrence posture, that leads us to cooperate with our allies and partners in deploying missile defense systems and architectures today.

For example, I just returned from a trip to the Middle East, where the United States and Gulf Cooperation Council (or GCC) member states have committed to develop a region-wide ballistic missile defense capability, including through the development of a Ballistic Missile Early Warning System. At the recent U.S.-GCC Summit, the United States committed to work with the GCC to conduct a study of a GCC-wide missile defense architecture and offered technical assistance in the development of a GCC-wide Ballistic Missile Early Warning System. Finally, we agreed to hold a senior leader missile defense tabletop exercise to examine improved regional ballistic missile defense cooperation.

In Europe, we continue to make excellent progress implementing the European Phased Adaptive Approach (or EPAA), which will serve as the U.S. national contribution to NATO’s missile defense system.

Starting in 2011 with Phase 1, we deployed a missile defense radar in Turkey and began the sustained deployment of Aegis Ballistic Missile Defense (BMD)-capable ships in the Mediterranean. With NATO’s declaration of Interim Capability in 2012, the radar in Turkey transitioned to NATO operational control. Additionally, we have been working with Spain to deploy four U.S. Aegis BMD-capable ships at the naval facility at Rota which will allow us to increase our rotational presence in the region and respond to potential crises.

We are on track to complete the deployment of an Aegis Ashore site in Romania as part of Phase 2 of the EPAA later this year. When operational, this site, combined with BMD-capable ships in the Mediterranean, will enhance coverage of NATO from short- and medium-range ballistic missiles launched from the Middle East.

Finally, Phase 3 will involve the construction of an Aegis Ashore site in Poland equipped with the new SM-3 Block IIA interceptor. President Obama’s Fiscal Year 2016 budget request designates approximately $200 million for the establishment of the site, including construction which will begin next year, allowing us to remain on schedule to complete this site by 2018. The Phase 3 site in Poland, when combined with other EPAA assets, will provide ballistic missile defense coverage of all NATO European territory

In the Asia-Pacific, we are continuing missile defense cooperation through our bilateral alliances and key partnerships. I’d highlight that the next generation of Aegis missile defense interceptor, the Standard Missile-3 Block IIA, which we are co-developing with Japan, just completed a successful flight test earlier this month. We also recently deployed a second AN/TPY-2 radar to Japan, which will enhance the defense of both the United States and Japan.

Finally, over the past twenty years, the United States and NATO offered Russia various proposals for missile defense cooperation. Russia declined to accept our proposals. As you’re aware, Russia’s illegal actions in Ukraine led to the suspension of our dialogue on missile defense cooperation. But prior to the suspension, Russia continued to demand that the United States provide “legally binding” guarantees that U.S. missile defenses will not harm or diminish Russia’s strategic nuclear deterrent. These guarantees would have been based on criteria that would have limited our missile defenses and undermined our ability to protect ourselves, our deployed forces, allies and friends against an evolving and growing ballistic missile threat.

The 2010 BMDR is quite clear on our policy: U.S. missile defenses are neither designed nor directed against Russia’s or China’s strategic nuclear forces. However, by the same token, we have also made it clear that we cannot and will not accept legally-binding or other constraints that would limit our ability to defend ourselves, our allies, and our partners. The United States will continue to insist on having the flexibility to respond to evolving ballistic missile threats.

Allow me to conclude by emphasizing that U.S. cooperation on missile defense is not a one size fits all approach. Threats are diverse and so must be our solutions. We tailor our unique sets of capabilities to fit with each regional security environment stretching from Europe to the Asia-Pacific. And as more actors develop sophisticated ballistic missile capabilities, it is incumbent upon us to take the appropriate steps to defend the U.S. homeland, our deployed forces, and our allies and partners. I can personally attest that our diplomatic engagements the last six years have made us, and our allies, better equipped to meet the threats of today, and nimble enough to respond to what threats may lay ahead.

Thank you and I look forward to your questions and our discussion.


California Small Business Exports Forklifts to Brazil Supported by EXIM-Guaranteed Buyer Financing from Northstar Trade Finance

Financing will support 30 jobs

Washington, D.C. – Wiggins Lift Co. Inc., a small-business manufacturer in Oxnard, Calif., is exporting its forklifts to marinas in Brazil with the support of medium-term buyer financing being guaranteed by the Export-Import Bank of the United States (EXIM Bank) from Northstar Trade Finance Inc. in Vancouver, British Columbia.

Northstar – which was awarded EXIM’s Lender of the Year award in April – is providing approximately $1.4 million in EXIM-backed medium-term loans to finance the export of Wiggins Lift’s forklifts to three Brazilian borrowers: BR Marina Group S.A., Marina Verolme S.A. and Marina Porto Bracuhy Ltda. The exports sales are helping to sustain an estimated 30 jobs at the company.

“To compete successfully in global markets, exporters need to be able to offer their foreign buyers competitive financing terms in addition to a quality product or service,” said EXIM Bank Chairman and President Fred P. Hochberg. “Through EXIM’s Medium-Term Delegated Authority Program, we work with commercial lenders to empower small businesses such as Wiggins Lift to make sales on longer repayment terms and increase their exports.”

“EXIM’s guarantee is a positive for everyone. It facilitated competitive financing from Northstar for these marinas in Brazil and enabled them to purchase our world-class lifts. In turn, these sales are helping us continue to grow, add employees and contribute to the U.S. economy,” said Wiggins Lift CEO Michele McDowell.

“We at Northstar are pleased to support Wiggins Lift in these exports to Brazil. EXIM’s Medium-Term Delegated Authority Program is a powerful tool that enables American exporters to offer their customers a complete sales solution and to compete more effectively against their foreign competitors who offer financing,” said Northstar’s Craig MacKenzie, managing director, North America.

MacKenzie noted that the delegated authority program enables Northstar to significantly “speed up” the credit decision and approval process to a few days, which enables exporters to offer financing to their customers in a timely way.

Wiggins Lift Co. Inc. designs and manufactures custom heavy-lifting equipment for applications in the marine, mining, military, agriculture and other industries. Wiggins Lift was founded in the 1950s in Oxnard, Calif., where it currently employs over 50 workers. The woman-owned company is led by the founder’s granddaughter.

Northstar’s international trade finance includes a strategic approach to developing effective public-partnerships with key government agencies and departments, particularly successful in the provision of trade-related financing and insurance/guarantee solutions. Northstar’s partners include top financial institutions in North America and leading government agencies and credit insurers in Canada, the United States, Europe and Australia, among other countries.

EXIM Bank’s Medium Term Delegated Authority (MTDA) program enables the lender to make a commitment based on a set of defined parameters if they agree to share risk. The applications are made through EXIM’s online system, and transactions are authorized by the lender. Applications that are determined to be complete are generally made operative within five business days.


United States and Kazakhstan Initial New International Science and Technology Center Agreement
Bureau of International Security and Nonproliferation
June 24, 2015


On June 22, in Astana, Kazakhstan, Deputy Assistant Secretary of State for Nonproliferation Programs Simon Limage initialed on behalf of the United States the Agreement Continuing the International Science and Technology Center (ISTC) along with the European Union, Georgia, Japan, the Kingdom of Norway, Kyrgyz Republic, the Republic of Armenia, the Republic of Kazakhstan, and the Republic of Korea.

The ISTC, with its new headquarters at Nazarbayev University in Astana, Kazakhstan, seeks to minimize incentives for scientists and engineers in states with technologies, expertise, and related materials applicable to WMD to engage in activities that could result in the proliferation of WMD or related materials by supporting and cooperating in research and development activities for peaceful purposes. The initialing of the agreement sets the stage for signing the agreement once all parties have completed their internal procedures.

Deputy Assistant Secretary of State Limage, as the US representative to the ISTC Governing Board, led a U.S. interagency delegation, which included technical experts from the Departments of State and Energy. In the course of the two day Governing Board meeting, significant decisions were made to streamline the ISTC, endorse plans to expand the organization to other regions, and enhance opportunities for scientific projects in new fields.

Sunday, June 28, 2015


NASA Administrator Statement on the Loss of SpaceX CRS-7

The following is a statement from NASA Administrator Charles Bolden on the loss Sunday of the SpaceX Commercial Resupply Services 7 (CRS-7) mission.

“We are disappointed in the loss of the latest SpaceX cargo resupply mission to the International Space Station. However, the astronauts are safe aboard the station and have sufficient supplies for the next several months. We will work closely with SpaceX to understand what happened, fix the problem and return to flight. The commercial cargo program was designed to accommodate loss of cargo vehicles. We will continue operation of the station in a safe and effective way as we continue to use it as our test bed for preparing for longer duration missions farther into the solar system.

“A Progress vehicle is ready to launch July 3, followed in August by a Japanese HTV flight. Orbital ATK, our other commercial cargo partner, is moving ahead with plans for its next launch later this year.

“SpaceX has demonstrated extraordinary capabilities in its first six cargo resupply missions to the station, and we know they can replicate that success. We will work with and support SpaceX to assess what happened, understand the specifics of the failure and correct it to move forward. This is a reminder that spaceflight is an incredible challenge, but we learn from each success and each setback. Today's launch attempt will not deter us from our ambitious human spaceflight program.”


Readout of the President’s Call with Chancellor Angela Merkel of Germany

The President spoke today with Chancellor Merkel of Germany regarding developments in Greece.  The two leaders agreed that it was critically important to make every effort to return to a path that will allow Greece to resume reforms and growth within the Eurozone. The leaders affirmed that their respective economic teams are carefully monitoring the situation and will remain in close touch.  The President also offered his condolences for the loss of German citizens in Friday’s tragic attack in Tunisia.

Looking for Human Landing Sites on Mars on This Week @NASA – June 26, 2015



On April 27, 2015, the Moderate Resolution Imaging Spectroradiometer (MODIS) instrument on NASA’s Terra satellite observed dozens of fires burning in the eastern part of North Korea and parts of Russia north of North Korea. Actively burning areas, detected by the thermal bands on MODIS, are outlined in red.

While North Korea’s best agricultural land is located in the western part of the country, many people farm land along rivers in the mountainous areas. Fire is often used to clear debris from last year’s crops and to help fertilize the soil for the coming season.  While fire helps enhance crops and grasses for pasture, the fires also produce smoke that degrades air quality. The fires in this image have produced enough smoke to send plumes of haze drifting east over the Sea of Japan.  Last year at this time, the Earth Observatory posted a similar image of North Korea's agricultural fires.  NASA image courtesy Jeff Schmaltz, MODIS Rapid Response Team. Caption: NASA/Goddard, Lynn Jenner


Assistant Attorney General Leslie R. Caldwell Delivers Remarks at the ABA’s National Institute on Bitcoin and Other Digital Currencies
Washington, DC United States ~ Friday, June 26, 2015
Thank you Nina [Marino] for that kind introduction.

It is a pleasure to address today’s ABA National Institute on Bitcoin and Other Digital Currencies.  As head of the Justice Department’s Criminal Division, I am privileged to lead over 600 attorneys who investigate and prosecute federal crime, help develop criminal law and formulate law enforcement policy.  Our talented prosecutors perform crucial work in many of the areas relevant to today’s discussion, including the fight to combat money laundering, financial fraud, child exploitation and cybercrime.

This afternoon, I’d like to discuss the department’s approach to the emerging virtual currency landscape, our ongoing efforts to prosecute those who commit crimes by using virtual currency, and our view that compliance and cooperation from exchanges, companies and other market actors can ensure that emerging technologies are not misused to fund and facilitate illicit activities.

The department is aware of the many legitimate actual and potential uses of virtual currency.  It has the potential to promote a more efficient online marketplace.  It also potentially can lower costs for brick and mortar businesses, by removing the need to pay credit card-related costs.  And in theory, it can help speed and reduce the cost of cross-border transactions.  But we also have seen that criminals have been among the first to enthusiastically embrace the use of virtual currency, primarily in crime involving the internet.

Many of the inherent features of virtual currencies are exactly what makes them attractive to criminals.  Many criminals like virtual currency systems because these systems conduct transfers quickly, securely and with a perceived level of anonymity.  For others, the irreversibility of payments made in virtual currency and lack of oversight by a central financial authority is appealing.  Finally, the ability to conduct international peer-to-peer transactions that lack immediately available personally identifying information has made decentralized virtual currency attractive to those who wish to cover their money trail.

As a result, virtual currency facilitates a wide range of traditional criminal activities as well as sophisticated cybercrime schemes.

Much of the illicit conduct involving virtual currency occurs through online black markets such as the now-shuttered Silk Road, which operated on an anonymized “dark web” network that masked users’ physical locations, making them difficult to track.  Similar online black markets continue to operate, offering on a global scale, a wide selection of illicit goods and services.  While these have included more traditional crimes such as narcotics trafficking, stolen credit card information, and hit-men for hire, we have also seen a significant evolution in criminal activity.

For example, Bitcoin has been utilized to fund the production of child exploitation material through online crowd-sourcing – a development rarely seen before the prevalence of virtual currency.  It has also been used to buy and sell lethal toxins over the internet and as a payment method for virtual kidnapping and extortion, allowing near-instantaneous transactions across the globe between perpetrators of phishing and hacking schemes and their victims.

Despite the significant challenges in investigating, much less prosecuting, this activity, the department already has a strong record of bringing cases in which virtual currencies were used to facilitate criminal conduct.  While the burgeoning assortment of online exchanges, virtual currencies and virtual marketplaces has created a complex and evolving environment or “ecosystem” as this audience knows it, we too are keeping pace and will pursue those who exploit vulnerabilities in that ecosystem for illegal gain.

In this arena, we rely principally on money services business, money transmission and anti-money laundering statutes.  While individual users who are not acting as exchangers or transmitters are not required to register with FinCEN, many virtual currency systems, exchangers and related services are.  Additionally, most states also require money transmitters to obtain a state license in order to conduct business in that state, and some like New York have established virtual-currency specific licensing requirements.  Any failure to register or obtain a license may subject a money transmitter to criminal prosecution, and a money transmitter that knowingly moves funds connected to a criminal offense also faces prosecution for money laundering, regardless of licensing status.  Whether the currency involved is virtual or traditional, the department enforces these critical laws to prosecute money services businesses that engage in money laundering or facilitate crime by flouting registration and licensing requirements.

The department’s enforcement actions have evolved along with the virtual currency ecosystem.  Our first major action against a virtual currency service used for illicit purposes was in 2007, when the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), together with our Computer Crime and Intellectual Property Section (CCIPS), spearheaded the prosecution against e-Gold and its owners on charges related to money laundering and operating an unlicensed money transmitting business.  E-Gold was a popular online currency exchange, and was a favored hub for cybercriminals in part because of the lack of account holder identity verification.  An e-mail address was the only information needed to set up an account, allowing global anonymous transactions.  After a multi-agency investigation, e-Gold and three associated individuals pleaded guilty in 2008 to charges of money laundering and operating an unlicensed money transmitting business.

In the wake of e-Gold’s demise, the virtual currency system Liberty Reserve was created.  As alleged in our pending indictment, Liberty Reserve was structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes.

Liberty Reserve quickly became one of the principal money transfer agents used by cybercriminals around the world to distribute, store and launder the proceeds of their illegal activity.  Like e-Gold, any would-be account holder needed little more than a working email address to move funds around the globe.  Again, this virtual currency platform became a favorite of cybercriminals and other tech-savvy wrongdoers, enabling them to engage in anonymous financial transactions, all conducted in violation of BSA requirements.

Before the government shut down Liberty Reserve in 2013, it had accumulated more than one million users worldwide, including more than 200,000 in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds.  These funds included suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking and other crimes.

In a case jointly spearheaded by AFMLS and prosecutors from the Southern District of New York, several of Liberty Reserve’s top executives, including a co-founder of the company, the IT Manager and its Chief Technology Officer, have pleaded guilty to money laundering and operating an unlicensed money transmitting business and have been sentenced up to five years in prison.  The creator of Liberty Reserve was extradited to the United States from Spain in October 2014 and is currently awaiting trial, where he is, of course, presumed innocent.

The department has also taken action against a number of individuals and groups who sought to exploit decentralized systems such as Bitcoin and anonymized dark web servers to finance illicit trade and activity in online black markets.

The first major prosecution of a dark market website was by the Southern District of New York in a case against Ross Ulbricht, aka “Dread Pirate Roberts,” who was arrested in October 2013 and convicted by a jury for his role in creating and operating Silk Road, an online black market whose payment operations exclusively used Bitcoin.

Silk Road – designed to act as a black-market bazaar completely free from government regulation and oversight – attempted to enable its users to exchange illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement.  It emerged as one of the most extensive criminal marketplaces on the internet.  Before it was dismantled by law enforcement, Silk Road was used by thousands of drug dealers and other vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over a 100,000 buyers, and has been linked to at least six overdose deaths around the world.  Further, Silk Road was also used to launder hundreds of millions of dollars derived from these unlawful transactions.  And just a few weeks ago, in a federal courtroom in New York City, Ulbricht was sentenced to a term of life in prison – a cautionary tale for all those who would use dark spaces on the internet to flout the law.

The Silk Road story, however, did not end with Ross Ulbricht.  Two federal agents, sworn to uphold the law, were also apparently lured by the perceived anonymity of virtual currency.  

Carl Force, a Special Agent with the Drug Enforcement Administration, and Shaun Bridges, a Special Agent with the U.S. Secret Service, were both assigned to the Baltimore Silk Road Task Force, which investigated illegal activity in the Silk Road marketplace.

Force served as an undercover agent.  According to court documents, Force went rogue and developed additional online personas to engage in complex bitcoin transactions to steal hundreds of thousands of dollars from the government and from the targets of the investigation.  Independently, Bridges also allegedly engaged in an even larger direct theft, illegally diverting over $800,000 in virtual currency to his personal account.

Both individuals have been charged by the Criminal Division’s Public Integrity Section and prosecutors from the Northern District of California with wire fraud, theft of government property and money laundering.  These investigations and prosecutions should send a strong message to those who would exploit technology to commit crimes: no matter how anonymous people might feel using virtual currency, their actions are not untraceable.  People should not assume that law enforcement will not notice when they act on the dark web, or that we are not keeping up with emerging technology.  Our successful prosecutions have shown that neither the supposed anonymity of the dark web nor the use of virtual currency is an effective shield from arrest and prosecution.

In addition to the operators of Silk Road and the drug traffickers who conducted their deals online in bitcoin, prosecutors from the Southern District of New York have also taken action against those who enabled this activity through the operation of Bitcoin currency exchanges.  We understand that there are legitimate exchanges, and many of those are working closely with FinCEN and other regulators to ensure compliance with the law.  But there are also many exchanges that don’t concern themselves with following the law.

From approximately December 2011 to October 2013, Robert Faiella ran an underground Bitcoin exchange on the Silk Road website under the alias “BTCKing,” and sold bitcoin to users to fund their purchases on the site.

Faiella would run bitcoin orders through Charlie Shrem, who operated a New York-based company that acted as a bitcoin to fiat currency exchange.  Although Shrem was the company’s Anti-Money Laundering Officer and had registered the company with FinCEN as a money services business, Shrem failed to report any of BTCKing’s activity, despite knowing it was being used for illegal purchases.  Shrem’s assistance enabled BTCKing to finance Silk Road transactions without collecting any personal identifying information from customers.  Faiella pleaded guilty to operating an unlicensed money transmitting business involving funds he knew were intended to support unlawful activity, and Shrem pleaded guilty to aiding and abetting Faiella’s operations.  Just this past winter, they were sentenced to four and two years in prison, respectively.

While these cases demonstrate that the criminal use of virtual currency has grown rapidly in recent years, its comparative scale versus traditional money laundering still pales in magnitude.  Few virtual systems currently can accommodate the hundreds of millions of dollars we have seen in certain large-scale money laundering schemes involving government-issued currency.  That said, as virtual currencies become more mature and better understood by criminals, we expect to see an increase in both individualized criminal activity and large-scale money laundering enterprises.

In some ways, companies and individuals operating in the virtual currency ecosystem are at a crossroads, and they have an opportunity to help virtual currency emerge from its association with criminal activities.  While there obviously are good and legitimate reasons to use these currencies, industry participants are now on notice that criminals too, make regular use of them.  So, to ensure the integrity of this ecosystem and prevent its penetration by crime, the industry must raise the level of its game on the compliance front.

That includes strict compliance with money services business regulations and anti-money laundering statutes.  I understand that you have heard from our partners at FinCEN this morning about our collaborative efforts to investigate and enforce anti-money laundering laws, and you’ll also hear more from Katie Haun this afternoon about the investigation of the virtual currency business Ripple Labs, which operated an unlicensed money transmitting business.

Ripple sold a virtual currency called “XRP,” but failed for a time to register with FinCEN as a money service business and failed to establish and maintain appropriate anti-money laundering protections.  Importantly, the department resolved this investigation after Ripple agreed to a number of substantial remedial measures.  This includes cooperation in other ongoing investigations, a change in business model and oversight by independent auditors, an extensive look-back through their previous activities and development of an extensive compliance framework.

The resolution with Ripple Labs underscores the importance of having a strong compliance program to ensure adherence to the law.  Virtual currency exchangers and other marketplace actors comprise the front line of defense against money laundering and other financial crime.  Robust compliance programs, such as those imposed on Ripple Labs, are essential to keeping crime out of our financial system.  If a money services business finds itself subject to a criminal investigation, we will look, as we do in all cases involving potential prosecution of a business entity, at the factors set forth in the Principles of Prosecution of Business Organizations, or Filip Factors.  Two of the Filip Factors in particular, the existence of an effective and well-designed compliance program and a company’s remedial actions, including steps to improve upon an existing compliance regime, are explicitly set forth as factors prosecutors should consider.

As you know, there is no “one-size-fits-all” compliance program.  Rather, effective anti-money laundering and other compliance programs must be tailored to meet the circumstances, size, structure and risks encountered by each entity.  And virtual currencies, with their perceived anonymity, pose compliance risks that money transmitters such as Western Union do not face. Industry participants must address those risks, even when it may be costly to do so.

Just as in any other corporate investigation, when reviewing the conduct of, for example, an exchange, the department will examine whether a company has meaningfully addressed compliance.  We have resolved cases against many financial institutions and other entities, and are deeply familiar with hallmarks of a genuine compliance program.

We expect virtual currency businesses to take compliance risk as seriously as they take any other business risk.  Now, we recognize that new entrants in emerging fields may find that compliance requires a significant expenditure of resources, and we will be context-specific in analyzing appropriate compliance frameworks including consideration of the size and scope of the business.  But a real commitment to compliance is a must, particularly given the significant risks in the virtual currency market.  In the long run, investment in effective compliance programs will be well worth it, especially in the event that a company has to interact with law enforcement.

In many ways, I think that is a message that everybody gathered here today can appreciate.  As the virtual currency markets attempt to move past their association with the Silk Roads and Liberty Reserves of the online world, are used to finance legitimate activity, and are becoming increasingly subject to regulation, robust compliance with existing anti-money laundering laws and regulations is necessary – indeed, critical – to bolster the reliability and value of virtual currency.

The challenges posed by the cases I’ve described are not unique to the virtual currency world.  Indeed, these dark web criminals are merely using new tools to conduct the same old crimes, committing what is essentially street crime like drug trafficking and extortion, but over computer networks.

For those investors, exchanges and compliance officers who deal in virtual currency, compliance is of paramount importance.  Adherence to regulations and state license requirements can reduce the liability of corporations who invest or deal in virtual currency.  As seen with Ripple Labs, compliance and remediation can lead to a more favorable resolution of criminal investigations and adhering to anti-money laundering guidelines allows the legitimate use of virtual currency to grow and be responsive to infiltration and abuse by criminal elements.  While the department will aggressively investigate and prosecute criminal activity that is funded through virtual currency, money services businesses that fall under the department’s scrutiny can also receive credit for meaningful and sincere compliance efforts.

 Your compliance and cooperation will make it more difficult for those who seek to operate illicit and underground marketplaces and will be a key element for law enforcement to shed light on these illegal virtual currency transactions.  It also will help to ensure the continued viability of virtual currency systems in the future.

Thank you for the opportunity to address this year’s National Institute on Bitcoin and Other Virtual Currencies.