CHAIRMAN OF HOUSE WAYS AND MEANS COMMITTEE CAMP'S STATEMENT ON PRESIDENT'S BUDGET

FROM: CONGRESSMAN DAVE CAMP'S WEBSITE
Camp Statement on the President’s Budget
Wednesday, April 10, 2013
Washington, DC – Today, Ways and Means Chairman Dave Camp (R-MI) made the following statement in response to the President’s FY2014 Budget.

"Our country faces great challenges, and meeting those challenges requires that we work together. I welcome the President’s inclusion of reforms to Medicare and Social Security. With more than 10,000 Baby Boomers becoming eligible for benefits each day, it is critical that the White House and Congress work together to protect and preserve these programs for current and future beneficiaries. That is why the Committee will convene a series of hearings beginning next week to examine reforms supported by the President as well as other bipartisan solutions to help our nation’s seniors.

"I also welcome the President stepping forward on tax reform. However, as our economy continues to struggle and millions of Americans have given up looking for work altogether, the President’s plan doesn’t truly fix our broken tax code. In fact, while looking to help corporate America, the President’s plan does not address how complex, costly and unfair the tax code is for American families and small businesses. If the President is willing to do tax reform for Wall Street, then he should be willing to do tax reform for Main Street. Instead, the President chose to raise taxes again to fuel even more Washington spending. Tax reform should not be about making people pay more; it should be about strengthening our economy.

"I am most disappointed that the President’s budget never balances. Independent economists have shown that when we clean up the tax code and get spending back under control, we can strengthen the economy and create up to 1 million jobs in the first year alone. Those are the kinds of solutions we should focus on and work together to achieve. The American people deserve real results."

SECRETARY OF DEFENSE HAGEL LAYS WREATH AT HOLOCAUST MEMORIAL

 

U.S. Defense Secretary Chuck Hagel places a wreath as Israeli Defense Minister Moshe Yaalon and Robert Ozzett, Yad Vashem’s director of libraries, watch at the Yad Vashem Holocaust memorial in Jerusalem, April 21, 2013. DOD photo by Erin A. Kirk-Cuomo

FROM: U.S. DEPARTMENT OF DEFENSE

At Israel’s Holocaust Memorial, Hagel Lays a Wreath in Remembrance
By Cheryl Pellerin
American Forces Press Service

JERUSALEM, April 21, 2013 – On the first afternoon of two days of talks with military and government officials here, Defense Secretary Chuck Hagel toured Yad Vashem, Israel’s living memorial to the Holocaust, and in the Hall of Remembrance laid a wreath on a stone crypt containing ashes of Holocaust victims.

Hagel walked the solemn and evocative displays of the Holocaust History Museum with his son Ziller and Israeli Defense Minister Moshe Ya’alon, later calling the institution "important, inspirational and beautiful."

Yad Vashem was established in 1953 as the world center for documentation, research, education and commemoration of the Holocaust, Nazi Germany’s murder of 6 million Jews during World War II.

After Hagel’s visit to the museum, he participated in a memorial ceremony in the Hall of Remembrance, visited the Children’s Memorial and signed the Yad Vashem guest book.

Then, sheltered by the building from a steady rain, Hagel took a few moments to speak with reporters and museum guests.

Thanking those who have made the institution possible, the secretary said of Yad Vashem, "I’ve brought my son Ziller with me on this trip and I particularly wanted him to accompany me here for this experience."

Such institutions and museums are created as a tribute to generations of the past and in particular victims of the past, he said, "but maybe more importantly these institutions are built to instruct future generations."

The secretary added, "They come together at an intersection that is important for all of us as one dimension or responsibility for each person. There is no more poignant, more touching, more effective way to tell a story than this reality, as painful as it is."

"We must prepare future generations in our time here for a clear understanding that we must never allow this to happen again."

After Hagel signed the guestbook, he read his inscription to the audience.

"For my friends of Israel," the secretary read, "thank you for this magnificent institution, reminding all mankind of the depths of evil but also the promise and hope and courage of man -- a beautiful and important tribute to those victims of the past and an instruction and reminder for the generations of the future. [Signed,] your friend, Chuck Hagel, United States secretary of defense."

Today’s visit was part of a 6-day trip to the Middle East, Hagel’s first as defense secretary. He will make stops in Jordan, Egypt, Saudi Arabia and the United Arab Emirates before returning to the United States April 26.

U.S. State Department Daily Press Briefing - April 23, 2013

Daily Press Briefing - April 23, 2013

President Obama Speaks at the 2013 White House Science Fair | The White House

President Obama Speaks at the 2013 White House Science Fair | The White House

EDUCATION DEPARTMENT AND WHITE PLAINS PUBLIC SCHOOLS RESOLVE CIVIL RIGHTS INVESTIGATION

FROM: U.S. DEPARTMENT OF EDUCATION
U.S. Department of Education Announces Resolution of White Plains, N.Y., Public Schools Civil Rights Investigation

April 18, 2013

The U.S. Department of Education's Office for Civil Rights (OCR) announced today that it has entered into a resolution agreement with the White Plains, New., Public Schools. The agreement commits the district to ensuring that all students, including African American, Hispanic and English Language Learner (ELL) students, are provided with equal opportunity and equal access to challenging classes and programs that will put students on a pathway for success in college and careers.

Under the agreement, the district will, as necessary:
Expand criteria to determine eligibility and selection for enrollment in programs and courses.
Expand student, parent, and community outreach about the available courses and programs; and
Make improvements to the academic counseling services at the middle and high school levels and training for relevant district and school site administrators and personnel.
These changes will be based on recommendations from an expert consultant, feedback from students, parents and staff, and a comprehensive self-assessment.

"Every student, regardless of his or her race, color, or national origin, must have an equal opportunity to participate in rigorous programs and courses that will put them on the right track toward being ready for college and careers," said Seth Galanter, acting assistant secretary for civil rights. "I applaud the steps the White Plains Public Schools have agreed to take to help ensure their compliance with Title VI."

OCR initiated a compliance review at White Plains under Title VI of the Civil Rights Act of 1964 to assess whether the district discriminated against minority students by establishing and implementing policies and procedures that resulted in their exclusion from enrichment programs, advanced/honors courses and Advanced Placement (AP) courses.

Because the district begins identifying students for its enrichment program as early as the end of second grade, it is critical that the process, criteria and communication about entry to the enrichment program ensure an equal opportunity for all students to access and participate in the program. These types of programs frequently serve as a path to advanced/honors courses and AP courses at the high school level. African American, Hispanic and ELL students had disproportionately lower enrollment in all those program and courses.

The district worked closely with OCR and voluntarily entered into a resolution agreement prior to the completion of the investigation.

As a result, OCR made no findings on lack of compliance. The office's investigation revealed, however, that a disproportionately low number of minority students were participating in the district's high school Honors and AP high school courses and in earlier enrichment programs and advanced courses at the elementary and middle school levels.

For example, during school year 2011-2012, African American students represented 18 percent of the high school student enrollment, but less than 10 percent (37 of 395 students), of the Honors and AP enrollment.

That same year, Hispanic students represented 47 percent of the high school student enrollment, but only 31 percent (122 of 395) of the Honors and AP enrollment; and ELL students represented 9 percent of the high school enrollment, but only 3 percent (10 of 395) of the Honors and AP enrollment. If minority students were provided equal opportunities to participate in enrichment programs in their earlier years, they would have been more likely to participate in Honors and AP classes proportionate to their high school enrollment; over 100 additional minority students would have been enrolled in Honors and AP.

OCR's mission is to ensure equal access to education and promote educational excellence throughout the nation through the vigorous enforcement of civil rights. OCR is responsible for enforcing federal civil rights laws that prohibit discrimination by educational institutions on the basis of disability, race, color, national origin, sex, and age, as well as the Boy Scouts of America Equal Access Act of 2001.

DVIDS - Video - Afghanistan Briefing

DVIDS - Video - Afghanistan Briefing

U.S. NAVY'S FIRST LITTORAL COMBAT SHIP ARRIVES IN SINGAPORE

 

Sailors assigned to the Forward Liaison Element of the littoral combat ship USS Freedom observe the Freedom as it arrives in Singapore. Freedom is on an eight-month deployment to Southeast Asia. The littoral combat ship platforms are designed to employ modular mission packages that can be configured for surface warfare, mine countermeasures, or anti-submarine warfare. The Freedom is homeported in San Diego. U.S. Navy photo by Petty Officer 1st Class Jay C. Pugh

FROM: U.S. NAVY
USS Freedom Arrives in Singapore for First Rotational Deployment
Navy News Service

SINGAPORE, April 18, 2013 – The Navy's first littoral combat ship USS Freedom arrived here today, highlighting the next phase of the ship’s deployment to Southeast Asia

"Freedom has met every milestone of this deployment on time and with the professionalism you would expect of U.S. Navy sailors," said Navy Cmdr. Timothy Wilke, USS Freedom’s commanding officer. "I'm proud of Freedom's accomplishments to date, but I'm also looking forward to putting the ship through its paces over the next several months while deployed more than 8,000 miles from homeport."

Announced at the 2011 Shangri-La Dialogue regional security conference here, Freedom's maiden overseas deployment began with a March 1 departure from its San Diego homeport. The first-in-class ship has since transited the Pacific Ocean, entered the 7th Fleet area of responsibility, and made port visits in Hawaii, Guam and, most recently, in Manila. Additional port visits will occur throughout the deployment.

As with other parts of this deployment, lessons learned from logistics and maintenance support during the transit and port visits will inform follow-on rotational deployments, as well as the overall littoral combat ship program, officials said.

Next month, Freedom will participate in the International Maritime Defence Exhibition and Conference here. In the following months, Freedom will join regional navies and other 7th Fleet units in select phases of exercises Cooperation Afloat Readiness and Training and Southeast Asia Cooperation and Training. Occurring throughout Southeast Asia, both exercises provide Freedom opportunities to train extensively with comparable-sized ships.

"We plan on spending most of our time here in Southeast Asia. This will be Freedom's neighborhood for the next eight months," Wilke said. "We are eager to get out and about, work with other regional navies and share best practices during exercises, port visits and maritime security operations."

Fast, agile, and mission-focused, littoral combat ship platforms are designed to employ modular mission packages that can be configured for three separate purposes: surface warfare, mine countermeasures, or anti-submarine warfare. Freedom will be initially manned by its "Gold" crew of 91 sailors, including mission package personnel and an aviation detachment to operate an embarked MH-60 helicopter.

Freedom will remain homeported in San Diego throughout this rotational deployment to Southeast Asia. Midway through the deployment, the ship’s "Blue" crew, commanded by Navy Cmdr. Patrick C. Thien, will take over.

CHAIRMAN JOINT CHIEFS OF STAFF WANTS MORE STRATEGIC DIALOGUE WITH CHINA

FROM: U.S. DEPARTMENT OF DEFENSE

Dempsey Urges More Strategic Dialogue Between China, U.S.
By Karen Parrish
American Forces Press Service

BEIJING, April 22, 2013 - The strategic rebalance to the Asia-Pacific doesn't mean deploying high numbers of U.S. troops into the region, but it does involve more interest, more engagement and more quality in equipment and capabilities, America's senior military officer said here today.

Army Gen. Martin E. Dempsey, chairman of the Joint Chiefs of Staff, and Gen. Fang Fenghui, chief of the general staff for the Chinese army, spoke to reporters here during a news conference following about three hours of meetings at the Bayi Building, China's ministry of national defense.

"My theme [on this visit] is quite simple, actually -- a stable and prosperous region is in everyone's best interest," Dempsey said.

The two leaders met before the news conference during a small-group meeting for about an hour, then moved to a larger group meeting. As translators rendered Dempsey's remarks in Mandarin and Fang's in English at the news conference, the pair spoke with similar voices on topics including terrorism, North Korea, disaster relief and cyberattacks.

Responding to a reporter's question asking his stance on North Korean nuclear capability, Fang said he always has maintained that the Korean Peninsula should be free of nuclear weapons.

"We are thoroughly opposed to the nuclear test conducted by the [North Korean government]," he said. "We support the U.N. Security Council in appropriate and reasonable sanctions against North Korea."

Fang said he thinks peaceful dialogue is the most desirable approach to resolving multinational concerns about North Korea's nuclear ambitions. The last round of six-party talks aimed at the issue -- involving North and South Korea, the United States, China, Japan and Russia -- was in 2009.

"We ask all sides to work actively ... [to persuade] the North Koreans to stop the nuclear tests and to stop producing nuclear weapons," he said.

Fang also answered a question about cyberattacks in the wake of recent reports that many are launched from within China's army and said cyberattacks are a concern for all "big cyber countries."

If the Internet is not managed well, he said, "it may bring damaging consequences." He added, "If the security of the Internet cannot be guaranteed, then ... results may be as serious as a nuclear bomb."

China is a major victim of cyberattacks, he said, and the nation's leaders have no tolerance for it. Fang pointed out, however, that pinpointing the source of attacks can be very difficult, as the Internet is open to everyone and attacks can be launched from anywhere.

"General Dempsey and I have already talked about the importance of maintaining cybersecurity," he said. "I believe it is important that we check out the idea that we should jointly work on this issue."

Dempsey responded to a reporter's assertion that three obstacles inhibit U.S.-Chinese relations: U.S. arms sales to Taiwan, reconnaissance by U.S. ships and aircraft, and "the discriminatory laws against China." The reporter asked what the United States can do to improve the relationship.

"We talked about all three of those issues today, and another three, four or five beyond that," the chairman said. "And maybe isn't that the point? It's the first time we've spoken about these issues."

The two nations have frequent military-to-military contact on the tactical level, Dempsey said, but could benefit by more frequent senior-leader engagement. "It's our desire, both of us, that we maintain dialogue at the strategic level. ... We are committed to building a better, deeper, more enduring relationship," the chairman added.

It's important that each side do that while keeping in mind the other side's commitments to other nations, Dempsey said. The United States considers its relationship with China in the context of historic and enduring alliances in the region, he noted.

"This isn't about choosing any one or the other," he said. "We have some treaty obligations, but we will build this relationship by increasing our contact at the strategic level and recognizing [those alliances]."

The final question was to Dempsey, asking why the United
States conducts military exercises in China's vicinity. Dempsey said the answer "is probably at the core of why I've made this visit."

The United States is and has been a Pacific power, and while its military has been particularly active and busy in the Middle East, it has never left and will not leave the Asia-Pacific, the chairman said.

"Our intention, of course, is to contribute to stability in a way that protects our national interests, which are very much tied to this region," he said.

Dempsey said the United States seeks to be a stabilizing influence in the region. "We believe that it would be our absence that would be a destabilizing influence on the region, not our presence," he added.

Fang led the news conference by welcoming Dempsey and his delegation, and said he hopes the chairman's visit furthers the exchange of ideas between the two nations' militaries.

In his opening remarks, Dempsey thanked Fang for his hospitality and offered his condolences for the victims of the April 21 Sichuan magnitude 7.0 earthquake, a temblor that left a reported 189 people dead and injured more than 11,000. The chairman also complimented Fang on the Chinese army's quick response after the earthquake, and the general's leadership of that effort.

The chairman also expressed sympathy for the family of Lu Lingzi, a Chinese graduate student who had been pursuing a master's degree at Boston University when she was killed in the Boston Marathon bombings April 15.

She "was a gifted student, tragically killed," he said. "Our thoughts and prayers go out to her grieving family."

Dempsey arrived in Beijing yesterday after a stop in South Korea. Later this week, he will continue his Asia trip with a visit to Japan.

SPECIAL OPERATIONS COMMANDER LAUDS NEW COMMAND STRUCTURE

FROM: U.S. DEFENSE DEPARTMENT

New Command Structure Fortifies Special Operations Partnerships
By Amaani Lyle
American Forces Press Service

WASHINGTON, April 18, 2013 – The commander of the U.S. Special Operations Command yesterday lauded a new command structure that aligns various NATO and U.S. special operations forces elements under two-star headquarters.

In testimony before the House Armed Services Committee’s emerging threats and capabilities subcommittee, Navy Adm. William H. McRaven said the new structure supports the defense strategic guidance, which outlines efforts to build partnership capacity.

"Socom is working to strengthen these international partnerships and to build lasting networks, both formally and informally, so that we or our allies can create a secure environment in unstable areas and, if necessary, react to emerging crises rapidly and effectively," McRaven said.

U.S. special operations forces are in about 78 countries around the world, helping to build partner capacity so that the host nation can tackle its own security problems, the admiral said.

"We have continued [to] trick enemy leadership, while at the same time building and training Afghan security forces so they can stand on their own against this very determined threat," he said.

McRaven recalled recent visits to Colombia and the Philippines, where he said the long-term U.S. investment with those nations’ special operations forces has helped to change the security situation dramatically.

"Building allied [special operations forces] capacity and capability represents the best approach to dealing with some of the world's more complex security problems," he said. "In all cases, those special operations forces deployed to foreign lands are working for the geographic combatant commander, with the approval of the chief of the mission and always in support of U.S. policy goals."

U.S. RELEASES OSPREY, OTHER ADVANCED MILITARY SYSTEMS TO ISRAEL

Defense Secretary Chuck Hagel, left, holds a joint news conference with Israeli Defense Minister Moshe Yaalon in Tel Aviv, Israel, April 22, 2013. DOD photo by Erin A. Kirk-Cuomo

FROM: U.S. DEPARTMENT OF DEFENSE,
Hagel, Yaalon Finalize New Israel Military Capabilities

By Cheryl Pellerin
American Forces Press Service

TEL AVIV, Israel, April 22, 2013 - In what Defense Secretary Chuck Hagel called "a significant step in U.S.-Israeli defense cooperation," he and his Israeli counterpart finalized an agreement today on a package of new defense capabilities the United States is offering Israel.

Hagel and Israeli Defense Minister Moshe Yaalon held a joint news conference at Israel's defense headquarters, known as the Kirya, following talks here that both men characterized as positive.

"Minister Yaalon and I agreed that the United States will make available to Israel a set of advanced new military capabilities, ... including antiradiation missiles and advanced radars for its fleet of fighter jets, KC-135 refueling aircraft, and most significantly, the V-22 Osprey, which the U.S. has not released to any other nation," Hagel said.

The new radar and antiradiation missiles, along with Israel's participation in the joint strike fighter program -- a single-seat, single-engine, fifth-generation fighter under development to perform ground attack, reconnaissance and air defense missions with stealth capability -- ensures that Israel will maintain air superiority for the next generation, Hagel said.

Introducing the V-22 into the Israeli air force, he added, will give that service long-range, high-speed maritime search-and rescue-capabilities to deal with a range of threats and contingencies.

"These decisions underscore that military-to-military cooperation between the U.S. and Israel is stronger than ever," the secretary said, "and that defense cooperation will only continue to deepen in the future."

In his remarks, Yaalon, appointed defense minister March 17, said the United States and Israel face common threats and challenges "in our tough neighborhood in the Middle East -- above all, from Iran." Iran threatens the security and stability of the Middle East and the entire world, he added.

"Iran threatens to wipe Israel off the map, it backs Hezbollah in Lebanon and Hamas in Gaza, and it is assisting the Syrian regime to kill tens of thousands of innocent civilians," the Israeli defense minister said. "The Iran regime is involved in Afghanistan, Iraq, Yemen, Sudan and more, and Iran is developing nuclear weapons."

Today's talks continue what Yaalon called an intimate dialogue between the United States and Israel on the best ways to meet such challenges.

"In every case, Israel prefers diplomatic solutions," he said, "though as President [Barack] Obama stated, Israel has a right to defend itself, by itself" against any adversary.

Addressing Hagel, Yaalon noted U.S. support for Israel. "We see your commitment in Iron Dome and other antimissile systems that save lives," he said. "We see your commitment in the joint strike fighter program and the presidential approval of other advanced capabilities such as the V-22 for Israel. We see your commitment in our joint military maneuvers and our extensive intelligence sharing -- all part of our comprehensive security cooperation and dialogue. We see your commitment in your determination to uphold Israel's qualitative military edge.

"We see it all, Mr. Secretary, and we are deeply grateful," he added.

Hagel said the United States and Israel share values, common interests and an unbreakable bond that grows stronger over time.

"These common interests include security for our citizens, a peaceful and stable Middle East, countering terrorism, and countering nonproliferation, particularly our efforts to prevent Iran from obtaining a nuclear weapon," he said.

The United States is committed to providing Israel with whatever support it needs to maintain military superiority over any state, coalition of states or nonstate actors, the secretary added.

"Despite fiscal pressures, President Obama has ensured that Israel receives an all-time high of $3.1 billion in foreign military financing this year," Hagel said. "Last month in Jerusalem, President Obama announced that the United States and Israel would begin work on a new multiyear memorandum of understanding."

The memorandum would extend security funding for Israel beyond 2017, when the current agreement expires, he noted.

DOD and Israel's Defense Ministry work together routinely to ensure that both forces have capabilities in place to deal with changing security environments, the secretary said.

The capabilities include major advances in cooperative rocket and missile defense efforts between the United States and Israel, including Iron Dome, a system that counters rockets, artillery and mortars; the Arrow, a family of anti-ballistic missiles; and David's Sling, an inside-the-atmosphere, two-stage weapon built to counter ballistic missiles, medium-range rockets, cruise missiles and other aircraft and weapons.

"Since its deployment, the Iron Dome system has saved many lives, and we are continuing to build on the program's success," Hagel said. "To date, the United States has provided more than $460 million to support [that] program, and we are requesting another $220 million in our fiscal year 2014 defense budget request for Israel to acquire additional Iron Dome batteries."

The secretary added that he and Obama are committed to a strong and secure Israel, and to deepening the historic security cooperation between the two nations.

Later today, Hagel will meet with Israeli President Shimon Peres, and tomorrow he will meet with Prime Minister Benjamin Netanyahu.

Today's visit was part of a six-day trip to the Middle East, Hagel's first as defense secretary. He will make stops in Jordan, Egypt, Saudi Arabia and the United Arab Emirates before returning to the United States on April 26.

REMARKS ON IMPLIMENTATION OF EUROPEAN PHASED ADAPTIVE APPROACH

FROM: U.S. DEPARTMENT OF STATE EUROPEAN

Implementation of the European Phased Adaptive Approach
Remarks
Frank A. Rose
Deputy Assistant Secretary, Bureau of Arms Control, Verification and Compliance
Polish National Defense University
Warsaw, Poland
April 18, 2013

Thank you so much for inviting me to join you today. At the State Department, I am responsible for overseeing a wide range of defense policy issues, including missile defense policy. In that capacity, it was my responsibility and privilege to negotiate the details of the Ballistic Missile Defense (BMD) agreements with Poland, Romania, and Turkey that will enable the United States to implement the European Phased Adaptive Approach (or EPAA), the U.S. contribution to NATO missile defense. Poland is a strong ally and valued friend of the United States. Our bilateral defense ties run deep and are growing -- our new Aviation Detachment and Poland's agreement to host an EPAA missile defense site are but two recent examples of our partnership.

Implementation of the European Phased Adaptive Approach

Since 2009, the United States Government has focused on carrying out the vision articulated by President Obama when he announced that the EPAA would "provide stronger, smarter, and swifter defenses of American forces and America's Allies," while relying on "capabilities that are proven and cost-effective."

As you know, we have made great progress in implementing the President’s vision in Europe.

EPAA Phase One gained its first operational elements in 2011 with the start of a sustained deployment of an Aegis BMD-capable multi-role ship to the Mediterranean and the deployment of an AN/TPY-2 radar in Turkey. With the declaration of Interim Operational Capability at the NATO Summit in Chicago, this radar transitioned to NATO operational control.

Demonstrating their support for both NATO and the EPAA, Spain agreed in 2011 to host four U.S. Aegis-capable ships at the existing naval facility at Rota. These ships will arrive in the 2014- 2015 timeframe, in time for EPAA Phase Two.

For Phase Two of the EPAA, we have an agreement with Romania that was ratified in December of 2011 to host a U.S. land-based SM-3 interceptor site beginning in the 2015 timeframe. 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.

And finally there is Phase 3, which is centered on the first of the three host nations to ratify their hosting agreement – Poland. The Ballistic Missile Defense Agreement between the U.S. and Poland entered into force in September of 2011. This agreement places a land-based interceptor site, similar to Phase 2, in Redzikowo, and includes the SM-3 Block IIA interceptor. This EPAA Phase 3 site is on schedule and on budget for deployment in the 2018 timeframe. The interceptor site here in Poland will be key to the EPAA. Not only will it protect Poland itself, but when combined with the rest of the EPAA assets, Phase 3 will be able to protect all of NATO Europe against ballistic missile threats from the Middle East.

On March 15, Secretary Hagel announced changes to U.S. missile defense policy to strengthen U.S. homeland missile defenses due to the growing ballistic missile threat from Iran and North Korea. One of these policy changes is that the SM-3 IIB missile defense interceptor program - the core element of EPAA Phase 4 - is being restructured into a technology development program.

With the SM-3 IIB interceptor, Phase 4 would have provided an intercept capability against ICBMs launched at the U.S. homeland from the Middle East. But the SM-3 IIB program also experienced significant delays, in part due to the U.S. Congress underfunding this interceptor. So as you know, the SM-3 IIB interceptor will no longer be developed or procured. The United States will instead strengthen its homeland defense by procuring additional Ground Based Interceptors – GBIs- for deployment at our existing missile defense site in Fort Greely, Alaska.

As Secretary Hagel announced, we will increase the number of deployed GBIs from the current 30 to 44, providing a nearly 50 percent increase in our capability.

The other two steps that Secretary Hagel announced include:
Deploying, with the support of the Japanese Government, an additional AN/TPY-2 radar in Japan. This will provide improved early warning and tracking of any missile launched from North Korea at the United States and/or Japan; and
Conducting studies for a potential additional GBI site in the United States. While the Obama Administration has not made any decision on whether to proceed with an additional site, conducting these studies would shorten the timeline for construction should that decision be made.
Finally, let me emphasize that the U.S. commitment to Phases One through Three of the EPAA and NATO missile defense remains ironclad, including the planned sites in Poland and Romania. Like the Administration, the U.S. Congress has supported, and continues to support full funding for Phases 1 through 3.

These U.S. missile defense deployments to Europe will provide the necessary capabilities to provide ballistic missile defense coverage of all NATO European territory in the 2018 timeframe.

I know that some may believe that not fielding Phase 4 may weaken the Transatlantic connection of the EPAA. I would tell you that the connection is still strong. I would emphasize that Phases One through Three of the EPAA will continue to provide important contributions to the defense of the United States homeland and U.S. deployed forces in Europe. For example, the radar deployed in Turkey as part of EPAA can provide important early tracking data on any Iranian missile launches against the United States. The interceptor site to be deployed in Poland, as well as BMD-capable ships at sea, will also be key to protecting the U.S. radar at Fylingdales, which is important to the defense of the U.S. homeland.

Cooperation With NATO Allies

Beyond our bilateral cooperation, we have also worked with our NATO Allies, including Poland, to implement a NATO missile defense effort.

After thorough and steady progress within NATO, on May 20-21 of 2012, the NATO Heads of State and Government met in Chicago for a NATO Summit and announced that NATO had achieved an interim BMD capability. This means that the Alliance has an operationally meaningful, standing peacetime BMD capability. NATO also agreed on the BMD-related command and control procedures, designated the Supreme Allied Commander Europe as the commander for this mission, and announced an interoperable command and control capability.

To support this interim BMD capability, the United States has offered EPAA assets to the Alliance as our voluntary national contributions to the BMD mission. The AN/TPY-2 radar deployed in Turkey is under NATO operational control. In addition, U.S. BMD-capable Aegis ships in Europe are also now able to operate under NATO operational control when threat conditions warrant.

These decisions have created a framework for allies to contribute and optimize their own BMD assets for our collective self-defense, and the United States welcomes and encourages such contributions from Allies. NATO BMD will be more effective should Allies provide sensors and interceptors to complement the U.S. EPAA contributions. Several NATO Allies already possess land- and sea-based sensors that could potentially be linked into the system, as well as lower tier systems that can be integrated and used to provide point defense such as PATRIOT. It is important that the systems contributed by Allies be interoperable with NATO’s Active Layered Theater Ballistic Missile Defense – or ALTBMD – command and control capability.

Cooperation With the Russian Federation

At the same time as we are developing this missile defense cooperation with NATO, we also seek to work cooperatively with Russia. We remain convinced that missile defense cooperation between the United States and Russia (and between NATO and Russia) is in the national security interests of all countries involved. For that reason, missile defense cooperation with Russia remains a Presidential priority for this Administration.

In Chicago, the NATO Allies made a very clear statement of our intent regarding strategic stability and Russia’s strategic deterrent. NATO declared in the Chicago Summit Declaration that "…the NATO missile defense in Europe will not undermine strategic stability. NATO missile defense is not directed against Russia and will not undermine Russia’s strategic deterrence capabilities." Through transparency and cooperation with the United States and NATO, Russia would see firsthand that this system is designed for ballistic missile threats from outside the Euro-Atlantic area, and that NATO missile defense systems can neither negate nor undermine Russia’s strategic deterrent capabilities.

While we seek to develop ways to cooperate with Russia on missile defense, it is important to remember that in keeping with its collective security obligations, NATO alone bears responsibility for defending the Alliance from ballistic missile threats. This is why the United States and NATO cannot agree to Russia’s proposals for "sectoral" or "joint" missile defense architectures. Just as Russia must ensure the defense of Russian territory, NATO must ensure the defense of NATO territory. NATO cannot and will not outsource its Article 5 commitments. As ballistic missile threats continue to evolve, we cannot place limits or constraints on our ability to defend ourselves, our allies, and our partners. This includes any limitations on the operating areas of our BMD-capable multi-mission Aegis ships.

Cooperation With Poland

We can’t talk about BMD cooperation without talking about our cooperation right here with the Republic of Poland.

We also now have an enduring Aviation Detachment deployed in Lask, which supports the joint training of U.S. and Polish Air Forces. And I also have to mention our vibrant and longstanding cooperation with Poland on other efforts to combat the threat of WMD and their missile delivery systems. For example, former President Bush chose Warsaw as the site of his May 2003 public call to create a common global effort to stop WMD- and missile-related shipments to and from states of proliferation concern. Poland and the United States then worked closely to heed that call by establishing the Proliferation Security Initiative. Over the following decade, 100 other nations from every part of the world joined our two countries in the PSI to improve our common efforts to take action against WMD shipments. Next month, Acting Under Secretary Gottemoeller will have the great pleasure of leading the U.S. delegation to the PSI Tenth Anniversary meeting in Warsaw not only to mark the occasion, but to continue efforts to meet the call that President Obama made in the 2009 Prague speech to ensure the PSI is a durable international effort.

I commend my Polish colleagues for their leadership within NATO and domestically on defense modernization which will lead to new and valuable skill sets for NATO. As everyone knows, Poland is leading by example. Where many NATO countries are reducing their defense modernization, Poland is focusing on it – and the "it" that I follow most closely is the Polish efforts to upgrade its Integrated Air and Missile Defense System. This has been a topic of considerable discussion with my Polish counterparts. I expect it will be a topic of continued discussion. It is clear to me that the Government of Poland intends to embark upon a substantial effort that will provide for a greater national expertise which can contribute to NATO air and missile defense capabilities.

And Poland is not only working on defense modernization – it is also a participant in the U.S. Strategic Command’s NIMBLE TITAN multinational missile defense wargame. Polish military, Ministry of Defense and Ministry of Foreign Affairs officials are working closely with over 20 countries and NATO to collaboratively think through how regional and global coalitions might be able to innovate with equipment, tactics, techniques and procedures to provide the best and most agile defense. In a world where the threats and the technology to defend are constantly evolving, it is our responsibility to think through the problems to reach the best and most efficient solutions.

Conclusion
We are proud of how much we have already achieved by working with our allies and partners to counter the threat from ballistic missiles, but admittedly, there is still much to do – and we are looking forward to achieving higher levels of BMD cooperation and effectiveness.

I am very pleased to be here today, and I look forward to your questions.


Thank you.

PROGRESS ON PRESIDENT OBAMA'S SPACE EXPLORATION VISION VIDEO

FROM: NASA

NASA Shows Progress of President's Space Exploration Vision

On the third anniversary of President Obama's visit to NASA's Kennedy Space Center in Florida, where he set his space exploration vision for the future, news media representatives were given an opportunity to see up close the Orion spacecraft that could take astronauts on an asteroid sampling mission as early as 2021. Key leaders from across the agency shared progress being made on the spacecraft and infrastructure that will send humans to the asteroid, and eventually to Mars. Orion currently is being prepared in Kennedy's Operations and Checkout Building (O&C) for its first flight test, Exploration Flight Test (EFT)-1, in 2014.

CFTC CHAIRMAN GENSLER'S REMARKS ON BENCHMARK INTEREST RATES

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION

Remarks of Chairman Gary Gensler at London City Week on Benchmark Interest Rates
April 22, 2013


Good afternoon. Thank you, Anthony, for that kind introduction. I’m honored to be joining you for City Week.

I’d like to talk about one of the most significant risks facing the capital markets today. That is the risk to market integrity as well as financial stability of the continued use of LIBOR, Euribor and similar benchmark interest rates.

Given their fundamental role in the capital markets and our economy, such benchmark rates must be based on facts, not fiction.

Coordinating with the FCA

The U.K. Financial Conduct Authority (FCA) (along with its predecessor the Financial Services Authority (FSA)) and Martin Wheatley have been valued partners of the U.S. Commodity Futures Trading Commission (CFTC) on this matter.

The CFTC initiated an investigation in 2008 related to the London Interbank Offered Rate (LIBOR). It is the reference rate for 70 percent of the U.S. futures market. It is also referenced by over half of the swaps market, which the CFTC was recently tasked to oversee.

The FCA has been instrumental in the CFTC’s investigations, leading to charges against Barclays and other banks for manipulative conduct regarding LIBOR and similar benchmarks.

Following the Barclays announcement, the international community asked Martin Wheatley and me to co-chair the International Organization of Securities Commissions (IOSCO) Task Force on Financial Market Benchmarks.

Last week, the task force published its second consultation paper outlining a set of international principles to enhance the integrity, reliability and oversight of benchmarks.

The IOSCO principles state that for benchmarks to be robust and reliable, among other things, they must have two essential elements: be anchored in observable transactions and supported by appropriate governance structures.

The IOSCO report further notes that in order to provide confidence that the price discovery system is reliable, benchmarks must be based on prices and rates formed by the competitive forces of supply and demand entered into at arm’s length between buyers and sellers in the market.

Unsecured, Interbank Market: Essentially Nonexistent

LIBOR, Euribor and similar interest rate benchmarks purport to represent the rate at which unsecured borrowing occurs between large banks.

The challenge we face, however, is that banks simply are not lending to each other as they once did. As Mervyn King, governor of the Bank of England, said in 2008 of LIBOR: "It is, in many ways, the rate at which banks do not lend to each other." He went on further to say: "[I]t is not a rate at which anyone is actually borrowing."

The lack of transactions in the unsecured, interbank lending market along with weak governance structures for related benchmarks undermines market integrity.

The dearth of transactions in this market is a result of many factors: the 2008 crisis, the continuing European debt crisis, the downgrading of large banks’ credit ratings, as well as central banks providing significant funding directly to banks.

There has been a significant structural shift in how financial market participants finance their balance sheets and trading positions. There is an increasing move from borrowing unsecured (without posting collateral) toward borrowings that are secured by posting collateral. In particular, this shift has occurred within the funding markets between banks.

In the aftermath of the financial crisis, for understandable reasons, banks have been hesitant to take on each other’s credit risk.

Recent changes to Basel capital rules further suggest that banks are unlikely to return to interbank lending on an unsecured basis.

Basel III includes a new asset correlation factor, which requires additional capital when a bank is exposed to another bank. This was included in the new standards to reduce financial system interconnectedness.

Basel III also includes a new requirement called the liquidity coverage ratio (LCR). Banks will have to hold a sufficient amount of high quality liquid assets to cover their projected net outflows over 30 days.

A number of major banks have indicated that this new LCR requirement alone would make it prohibitively expensive for banks to lend to each other in the interbank market for tenors greater than 30 days. Thus, it is unlikely that banks will return to the days when they would lend to each other for three months, six months or a year.

The shift away from banks funding each other in the unsecured market has led to a scarcity or outright absence of actual transactions underpinning LIBOR and other interest rate benchmarks.

Enforcement Actions

This situation – having benchmark rates that are not anchored in actual transactions – undermines market integrity and leaves the financial system with benchmarks that are prone to misconduct.

Further, significant incentives for misconduct exist when hundreds of trillions of dollars of financial instruments reference benchmarks based on essentially nonexistent markets.

Indeed, as law enforcement actions brought by the CFTC, the FCA and the U.S. Justice Department, among others, have shown, LIBOR and other benchmark rates have been readily and pervasively rigged.

Barclays, UBS and RBS paid fines of approximately $2.5 billion for manipulative conduct relating to these rates.

At each bank, the misconduct spanned many years.

At each bank it took place in offices in several cities around the globe.

At each bank it included numerous people – sometimes dozens, among them senior management.

Each case involved multiple benchmark rates and currencies. In one case, there were over 2,000 instances of misconduct during a six-year period.

And in each case, there was evidence of collusion with other banks.

In the UBS and RBS cases, one or more inter-dealer brokers painted false pictures to influence submissions of other banks, i.e., to spread the falsehoods more widely.

Barclays and UBS also were reporting falsely low borrowing rates in an effort to protect their reputations.

Thus we find ourselves in a situation where there are both the incentives and ability to manipulate a critical rate in our markets.

Market Data

Beyond these cases, there is a significant amount of publicly available market data that calls into question the integrity of LIBOR today.

Let’s take a look at what happened just in the last few weeks as the Cyprus crisis infected the Eurozone. Here is a view of one Eurozone bank’s one-year credit default swap (CDS) spread versus that same bank’s daily submissions to the U.S. dollar LIBOR panel (Slide 1).

The bank’s CDS spread, one market measure of its credit risk, widened dramatically. The bank, however, didn’t change its submission as to where it could borrow from other banks. Though CDS trade in a different market and are for a bank’s holding company, the disconnect, as shown in this slide, raises questions about the credibility of LIBOR.

In Slide 2, we look at the average of all five Eurozone banks that submit to LIBOR. The picture is similar.

Next, let’s turn to the volatility of three-month U.S. dollar LIBOR in comparison with the volatility of other short-term interest rates. LIBOR, the blue line, is far more stable than any other comparable rate. Other short-term rates have much higher volatility (Slide 3).

Also of note, is that the 18 banks submitting to U.S. dollar LIBOR collectively did not change their submissions on 85 percent of the 252 submission days in 2012. You can see in Slide 4 just how few times the banks actually changed their submissions over the course of last year.

In fact, some of the banks didn’t change their submissions for four to five straight months. This was during a period when there were a number of uncertainties in the market driven by elections, changing economic outlook and other events. And yet somehow these banks said they could still borrow at exactly the same rate for four to five months. Slide 5 represents the longest consecutive period last year that the submissions remained unchanged.

Taking another look at CDS spreads versus LIBOR submissions, this time over the last three years, highlights another query. As we see in Slides 6 and 7, during significant market upheavals in the second half of 2011, the market’s views of these two banks’ credit risk changed dramatically. Yet their LIBOR submissions moved only modestly.

While we’re done with slides today, two last points reflected in market data:

There is a well-known concept in finance called interest rate parity, basically that currency forward rates will align with interest rates in two different economies. Since the financial crisis, that has not been the case, whether looking at the dollar versus the euro, sterling or yen. Theory hasn’t been aligning with practice. The borrowing rate implied in the currency markets is quite different than LIBOR.

Lastly, why are the results of two leading interbank benchmark surveys – one done for LIBOR and the other for Euribor – so different when each asks about U.S, dollar borrowing? The same difference occurs in the surveys for euro borrowing. These rates are calculated on the basis of the banks’ answers to roughly the same question. For LIBOR, a bank is asked at what rate it thinks it can borrow, while for Euribor, a bank is asked at what rate it thinks other banks are able to borrow.

Promoting Market Integrity and Financial Stability

Whether we consider the broad structural shift away from unsecured, interbank lending; the recent enforcement actions; or questions that arise from current market data, I believe that LIBOR, Euribor and other similar interest rate benchmarks are unsustainable in the long run.

These benchmarks – referencing markets with insufficient transactions, particularly in longer tenors – undermine market integrity and threaten financial stability.

Market integrity

For capital and risk to be efficiently allocated within the economy, interest rate benchmarks should reflect actual price discovery anchored in observable transactions.

Without transactions in the underlying market, the situation is similar to trying to buy a house, when your estate agent can’t give you comparable transaction prices in the neighborhood – because no houses were sold in the neighborhood in years.

As IOSCO notes, a benchmark should derive its value from the competitive forces of buyers and sellers meeting in an underlying cash market.

Derivatives derive their value from an underlying cash market. Market integrity dictates that whether that underlying cash market is oil, corn or the rate at which banks are borrowing, it must be based on something that is real. It should be anchored in observable transactions.

Further, these rates were readily and pervasively rigged in the past, and incentives for and ability to rig it in the future remain.

When market integrity is compromised, this also undermines the public’s confidence in the financial system.

Financial stability

The financial system’s reliance on interest rate benchmarks, such as LIBOR and Euribor, leaves the system in a fragile state.

Further, continuing to support LIBOR and Euribor in the name of stability may have the opposite effect. Using benchmarks that threaten market integrity may create more instability in the long run.

Given the structural changes in the interbank market, a number of banks have withdrawn from Euribor and some other interest rate benchmarks. Though IOSCO’s task force recommends that users of benchmarks have robust fallback provisions in contracts, many contracts do not currently have such fallback provisions. Thus, there is a risk to financial stability absent a planned, smooth and orderly transition.

I believe to promote market integrity as well as financial stability, we must move forward in a coordinated global effort to identify alternative interest rate benchmarks anchored in observable transactions and plan a smooth and orderly transition from benchmarks referencing unsecured, interbank markets.

Moving Forward

There is no doubt there will be challenges to transitioning from these rates.

But the market does have experience with transitioning from benchmarks that have become obsolete in the past. When the euro was created, a number of interest rate benchmarks were discontinued. How many of you remember PIBOR, RIBOR, MIBOR and FIBOR? Transitions also have occurred for energy and shipping rate benchmarks.

Further Canadian dollar LIBOR and Australian dollar LIBOR will be discontinued this year, leading to necessary transitions in those markets.

The basic components of past transitions include: first, identifying a new and reliable benchmark, one that is anchored in transactions.

Market participants and regulators are currently considering alternative interest rate benchmarks anchored in observable transactions. For instance, the Bank of International Settlements’ (BIS) Economic Consultative Committee’s March report lists possible alternatives anchored in observable transactions: the overnight swaps rate (OIS) and short-term collateralized financing rates such as general collateral repo rates (GC repo).

Second, the new and existing benchmarks run in parallel for a period of time allowing market participants to see and compare the price or rate of the alternative benchmark versus the soon-to-be-discontinued benchmark. This period of the two benchmarks running in parallel has been used to facilitate a smooth transition.

Third, a date is announced well in advance of when the old or obsolete benchmark will be discontinued.

Conclusion

While ongoing international efforts targeting benchmarks have focused on governance principles, these efforts cannot address the central vulnerability of LIBOR, Euribor and similar interest rate benchmarks: the lack of transactions in the underlying market.

Given the known issues with these benchmarks, their scale and effect on market integrity, it is critical that international regulators work with market participants to promptly identify alternative interest rate benchmarks anchored in observable transactions with appropriate governance, as well as determine how to best smoothly transition to such alternatives.

Just as Canadian dollar LIBOR and Australian dollar LIBOR are being discontinued due to the lack of an underlying interbank market, U.S. dollar, sterling, yen and euro LIBOR face similar underlying market challenges. The scope, as we all know, is bigger.

But it’s best that we not fall prey to accepting that LIBOR or any benchmark is "too big to replace."

Just imagine if the quality and integrity of the drinking water across the globe had been compromised. Then, the official sector and the utilities react by addressing the problem in Australia and Canada, but not in England or the United States. They say that there are too many people relying on the current drinking water in those countries.

If this were to occur, how could the public be confident in continuing to drink this water?

I believe market participants and regulators around the globe do have the ability and the ingenuity to tackle the challenges of benchmark interest rates, even in the face of their scale, to restore integrity and promote financial stability.

U.S. Department of State Daily Press Briefing - April 22, 2013

Daily Press Briefing - April 22, 2013

Press Briefing | The White House

Press Briefing | The White House

SECRETARY OF DEFENSE HAGEL SAYS U.S. COMMITTED TO ISRAEL

FROM: U.S. DEFENSE DEPARTMENT
Hagel: United States Committed to Israel's Security
By Cheryl Pellerin
American Forces Press Service

ABOARD A MILITARY AIRCRAFT, April 21, 2013 - Israel is Defense Secretary Chuck Hagel's first stop during his inaugural trip to the Middle East this week, a visit he said will let the people of Israel know the United States is committed to their security.

The 6-day trip will take Hagel to Israel, Jordan, Saudi Arabia, Egypt and the United Arab Emirates to discuss common threats and interests in the region, and to finalize agreements that will boost a range of military capabilities for Israel, Saudi Arabia and the UAE.

"I'm going to Israel first because it is a nation that has had a very special relationship with the United States," Hagel said on his way to that nation during a briefing with reporters traveling with him.

"It is a nation today in a very dangerous, combustible region of the world, that in many ways finds itself isolated," he said, adding, "The other countries I'll be visiting are also allies of the United States, and the common threats that face [them and] Israel ... should be seen in a regional context."

Each nation has its own set of challenges, the secretary said, but overall the challenges are regional and include terrorism and the threat of nonstate actors who would bring down governments and impact societies.

"Those common threats certainly should build a set of common interests, with these countries working together," Hagel said, "and that's part of what I will be talking about as I visit each [nation].'

During a presidential trip in March to Israel and Jordan, Barack Obama delivered the same message, the secretary said, adding that during a visit to Turkey this weekend, Secretary of State John Kerry "will be talking about some of the same issues in a different kind of way, but essentially with the same focus of common interests."

As he spoke with reporters, Hagel extended his thoughts and prayers to victims of the Boston Marathon bombing and acknowledging the tireless work of law enforcement agencies in capturing one of the men suspected in the act of terrorism.

"I say this because we are on our way to a very troubled region ... but it reminds us that [no] region of the world is ... safe from these terrible acts," the secretary observed, adding, "If nothing else, it reminds us that all 7 billion of us are global citizens and many of us are confronted by the same kinds of threats and insecurities."

Among the region's most long-term threats is Iran, Hagel said.

"The Iranians must be prevented from developing the capacity to build a nuclear weapon and deliver it," he added. "The United States' policy has been very clear on this and everyone knows it."

Iran is also a state sponsor of terrorism, the secretary said, "[and] that in itself is a threat not just to the region but to our interests in the region and around the world. When you further expand that threat to the possibility of acquiring nuclear weapons," he added, the dimensions of the threat become pretty clear.

Hagel said he thinks Israel and the United States "see the threat of Iran exactly the same, as do many other countries," not just those in the Middle East, although the United States seeks more time for diplomacy and sanctions to work to stop Iran from pursuing nuclear capabilities.

"If you stop just for a moment and look at the U.N. sanctions, the international sanctions on Iran, I don't know of an international regime of sanctions that have been more effective and more unified and tougher than what's being applied to Iran," the secretary said.

The sanctions are hurting Iran significantly, he added, but if they don't work, "... I've said, the president's said, all the leaders of the last couple of administrations have said, that the military option is one option that must remain on the table ... but the military option I think most of us feel should be the last option."

In response to a question about whether Israel could decide to strike out alone against Iran's nuclear aspirations, Hagel replied that Israel is a sovereign nation and every sovereign nation has the right to defend itself.

"It is clear that Iran presents a threat in its nuclear program," the secretary said, "and Israel will make the decisions that Israel must make to protect itself and defend itself."

Certainly Israel has every right and responsibility to make their assessments, Hagel added, "but we're working very closely and will continue to work very closely with them."

NAVY UNDERWATER PHOTOGRAPHY TRAINING AND MV-22 OSPREY LANDING

 

 

FROM:  U.S. NAVY

Mass Communication Specialist 3rd Class Nicholas Tenorio, left, photographs Mass Communication Specialist 3rd Class Wyatt Huggett during underwater photography training off the coast of Guantanamo Bay, Cuba. Expeditionary Combat Camera's Underwater Photo Team conducts semi-annual training to hone its divers' specialized skill set and ensure valuable support of Department of Defense activities worldwide. U.S. Navy photo by Chief Mass Communication Specialist Shane Tuck (Released) 130417-N-IZ904-032

An MV-22 Osprey from Marine Aircraft Group (MAG) 26 lands on the flight deck of the multipurpose amphibious assault ship USS Bataan (LHD 5) during flight operations. MSG-26 is performing launches and recoveries from the flight deck in order to complete required qualifications. Bataan is underway conducting training operations and qualifications. U.S. Navy photo by Mass Communication Specialist 2nd Class Gary A Prill (Released) 130410-N-RB564-029

CFTC CHARGES ACCOUNTING FIRM WITH IMPROPERLY AUDITING REGISTERED FUTURES COMMISSION MERCHANT

FROM: COMMODITY FUTURES TRADING COMMISSION

April 18, 2013

CFTC Charges Accounting Firm Tunney & Associates, P.C. and Its Sole Owner Michael Tunney with Failing to Properly Audit a Registered Futures Commission Merchant

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a Complaint against Tunney & Associates, P.C. (Tunney & Associates), an accounting firm with offices in Hammond, Indiana and Orland Park, Illinois, and Michael Tunney (Tunney), its sole owner and a certified public accountant (CPA) licensed in Illinois and Indiana, alleging violations of the CFTC’s Regulations related to conducting audits for The Linn Group, Inc. (TLG), a registered Futures Commission Merchant (FCM).

According to the Complaint, filed in the U.S. District Court for the Northern District of Illinois, Tunney & Associates served as TLG’s independent auditor and conducted TLG’s required year-end audits for 2007 through 2011. The Complaint alleges, however, that neither Tunney & Associates nor Tunney had any experience auditing FCMs or any entity that holds customer segregated accounts, and neither was qualified to conduct an FCM audit, and that Tunney had no understanding of the applicable Commodity Exchange Act or CFTC regulatory provisions prior to accepting any of the audit engagements. The Complaint states that Tunney & Associates and Tunney improperly relied on a non-employee, non-CPA, to perform all of the work on TLG’s 2007 through 2010 audits, and that Tunney conducted TLG’s 2011 audit on his own, despite the fact that he was not qualified to conduct an FCM audit.

The Complaint also alleges, among other things, that Tunney & Associates’ audits did not comport with Generally Accepted Auditing Standards (GAAS) or CFTC Regulations. For example, there was no planning for the auditing of TLG, and the audits failed to include appropriate tests of TLG’s accounting system, internal accounting controls, and procedures for safeguarding customer and firm assets.

TLG has entered into a settlement with the CFTC in connection with its failure to properly handle, monitor, and report customer funds it maintained as required by the Commodity Exchange Act (Act) and Regulations, and for supervision failures. As part of the settlement, TLG agreed to a $400,000 civil monetary penalty and retention of a consultant to review and improve TLG’s procedures as necessary to comply with the Act and Regulations TLG terminated the services of Tunney & Associates prior to entering into a settlement with the CFTC.

David Meister, the CFTC’s Director of Enforcement, stated, "Auditors are gatekeepers who perform a key role in a system designed to promote market integrity and protect market participants. An accountant who assumes the role of independent auditor for a CFTC registrant must be capable of satisfying his professional obligations. The audit function is meant to do more than earn the auditor a paycheck."

In the litigation, the CFTC seeks disgorgement of all benefits Tunney & Associates and Tunney received as a result of their conduct, civil monetary penalties, and permanent injunctions against further violations of the Commodity Exchange Act and Regulations, as charged.

The CFTC appreciates the assistance of the Division of Swap Dealer and Intermediary Oversight. The CFTC also appreciates the assistance of the National Futures Association.

The CFTC Division of Enforcement staff members responsible for this matter are Allison Passman, Joseph Patrick, Susan Gradman, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.

EPA ANNOUNCES PROPOSAL TO REDUCE TOXIC DISCHARGES INTO WATERWAYS BY POWER PLANTS

Lake Superior.  Credit:  Wikimedia.

FROM: U.S. ENVIRONMENTAL PROTECTION AGENCY

EPA Proposes to Reduce Toxic Pollutants Discharged into Waterways by Power Plants

WASHINGTON — In accordance with a consent decree and in line with requirements under the Clean Water Act, the U.S. Environmental Protection Agency (EPA) today will propose a range of options to help reduce dangerous pollutants, including mercury, arsenic, lead, and selenium that are released into America’s waterways by coal ash, air pollution control waste and other waste from steam electric power plants. Today’s proposal includes a variety of options for whether and how these different waste streams should be treated. EPA will take comment on all of these options, which it will use to help inform the most appropriate final standard.

Steam electric power plants currently account for more than half of all toxic pollutants discharged into streams, rivers and lakes from permitted industrial facilities in the United States. High exposure to these types of pollutants has been linked to neurological damage and cancer as well as damage to the circulatory system, kidneys and liver.Toxic heavy metals do not break down in the environment and can also contaminate sediment in waterways and impact aquatic life and wildlife, including large-scale die-offs of fish.

"America’s waterways are vital to the health and well-being of our communities," said Acting Administrator Bob Perciasepe. "Reducing the pollution of our waters through effective but flexible controls such as we are proposing today is a win-win for our public health and our economic vitality. We look forward to hearing from all stakeholders on the best way forward."

EPA has put a focus on ensuring any final rule would protect public health while being sensible and achievable, and in line with that goal, under every preferred option proposed by EPA today, more than half of America’s coal fired power plants would be in compliance without incurring any additional cost.

The proposal updates standards that have been in place since 1982, incorporating technology improvements in the steam electric power industry over the last three decades as required by the Clean Water Act. The proposed national standards are based on data collected from industry and provide flexibility in implementation through a phased-in approach and use of technologies already installed at a number of plants. Under the proposed approach, new requirements for existing power plants would be phased in between 2017 and 2022, and would leverage flexibilities as necessary.

Fewer than half of coal-fired power plants are estimated to incur costs under any of the proposed preferred options, because many power plants already have the technology and procedures in place to meet the proposed pollution control standards.

The four preferred options differ in the number of waste streams covered (such as fly ash handling systems, treatment of air pollution control waste and bottom ash), the size of the units controlled and the stringency of the treatment controls to be imposed. EPA estimates that the regulations would reduce pollutant discharges by 470 million to 2.62 billion pounds annually and reduce water use by 50 billion to 103 billion gallons per year.

EPA also announced its intention to align this Clean Water Act rule with a related rule for coal combustion residuals (CCRs, also known as "coal ash") proposed in 2010 under the Resource Conservation and Recovery Act. The two rules would apply to many of the same facilities and would work together to reduce pollution associated with coal ash and related wastes. EPA is seeking comment from industry and other stakeholders to ensure that both final rules are aligned to reduce pollution efficiently and minimize regulatory burdens.

There are approximately 1,200 steam electric power plants that generate electricity using nuclear fuel or fossil fuels such as coal, oil, and natural gas in the U.S. Approximately 500 of these power plants are coal fired units which are the primary source of the pollutants being addressed by the proposed regulation. Power plants that are smaller than 50 megawatts would not be impacted by these new standards, and the majority of coal-fired power plants would incur no costs under the proposed standards.

The public comment period on the proposed rule will be open for 60 days after publication in the Federal Register. The agency is under a consent decree to take final action by May 22, 2014.

New Drinking Water Advisory Communication Toolbox

New Drinking Water Advisory Communication Toolbox