FROM: STATE DEPARTMENT
Remarks at the 15th Annual Awards for Corporate Excellence
Remarks
John Kerry
Secretary of State
Patrick F. Kennedy
Under Secretary for Management
Kris Urs, Acting Assistant Secretary for Economic and Business Affairs
Benjamin Franklin Room
Washington, DC
January 29, 2014
ASSISTANT SECRETARY URS: Well, I want to wish a very good morning to everyone this morning. I’m delighted to welcome you here to the Benjamin Franklin Room at the State Department. I’m Kris Urs, the acting Assistant Secretary of State for Economic and Business Affairs.
The Bureau of Economic and Business Affairs works closely with U.S. businesses across a wide-range of activities, including assisting companies in their efforts to operate responsibly and sustainably overseas, negotiating trade and other international economic agreements, and promoting democracy, free markets, fairness, and other American values.
In line with the Secretary of State’s focus on the importance of economics in our foreign diplomacy, we have made economic issues a core component of our foreign policy. Partnerships with companies are essential to promote U.S. interests and values. We are here today to honor U.S. companies that contribute to that mission through their exemplary corporate citizenship.
These three U.S.-based companies have done exceptional work in giving back to the communities where they do business. They are setting the highest standards for responsible business conduct through sustainable development and showing the world that it’s indeed possible to do well by doing good.
I want to emphasize the crucial role that American businesses play around the globe, representing our country and our values. The importance that we attach to the role of U.S. companies as global ambassadors for responsible and sustainable economic growth is reflected in Secretary Kerry’s presence here today, to announce the winners of the 2013 Secretary of State’s Award for Corporate Excellence. Now I would like to introduce Patrick Kennedy, the Under Secretary of State for Management.
Patrick Kennedy chaired the 2013 ACE Interagency Principle Selection Committee that reviewed the 43 nominations submitted by our embassies overseas for the Secretary’s Award for Corporate Excellence.
(Applause.)
UNDER SECRETARY KENNEDY: Thank you very much, Kris. I’d like to extend a warm welcome to our many distinguished guests who are here today, and a very, very special welcome to those joining us by satellite from Cameroon, Honduras, and Mexico.
In recognizing American firms for their exemplary corporate social responsibility, the Secretary of State’s Award for Corporate Excellence underpins an important aspect of America’s economic diplomacy. Secretary Kerry is committed to putting economic work squarely at the center of our foreign policy. Our active economic engagement ties to State Department toward Americans, whether they work on farms or in factories, offices and stores, care about jobs. We’re helping to create opportunities for upward mobility and economic growth for our nation and our children’s future. I can tell you the State Department is committed to those goals, and is working tirelessly to fulfill them. And as we continue this work, the State Department demonstrates to American businesses, workers, farmers, and innovators, that what we do in this Department, and in our embassies around the world, clearly and directly benefits them at home, and we will strive to make that link even more apparent.
Essential to supporting world-class U.S. businesses is cooperation with these firms, in stressing the commercial and technical merits of U.S. exports and the competitiveness of U.S. workers. And make no mistake: American firms active around the world represent America and its values. The quality of their products and people and the business practices they adopt overseas is for many millions of people abroad the face of America. And before we get to that, now we have the honor of hearing from Secretary Kerry, who has been a tireless advocate of American businesses abroad, and is the driving force for all that we do in this vital area of American policy.
Please join me in extending a warm welcome to our Secretary of State.
Mr. Secretary.
(Applause.)
SECRETARY KERRY: Thank you very much. Thank you. Thank you.
Thank you very, very much, Under Secretary Kennedy, Pat, thank you very, very much. I don't know how Pat does all he does for us, but he somehow juggles this magnificently large portfolio, and he does an incredible job for the Department and the country. And I appreciate his leadership and his partnership in so many different initiatives. I also want to thank Assistant Secretary Kris Urs and his team for the very important work that they have done around the ACE awards and that they do around them every year.
And I’m particularly pleased to welcome all of you here today to the State Department to this wonderful resplendent Ben Franklin room where we can share the significance of these three awards being made today.
I’m delighted to welcome Ambassador Bienvenu Foe-Atangana from Cameroon, Ambassador Milla from Honduras, and Ambassador Medina Mora from Mexico. And we’re very, very grateful for their presence here. And I’m also happy to see – somewhere, where – he was here a minute ago – Congressman Farr from California is here in the audience today because one of his constituents is receiving an award. And I assure you there was no collusion in that at all. (Laughter.)
I particularly want to welcome those who are joining us, participating via satellite in Mexico City, Tegucigalpa, and also Yaounde. They are part of the webcast, and we’re delighted to have them, which are locations of these plants. We’re happy to have them with us here today.
The Secretary’s Award for Corporate Excellence is a special event in my view, to underscore what both Kris and Pat Kennedy have emphasized to you. I do believe that increasingly in this globalized world of extraordinary voracious competition for resources, jobs, revenues, and everything else, economics plays a more and more significant role – the choices that we make in terms of helping our businesses, where our businesses locate, how they locate, what they’re doing, how they do it. All of these things have a profound impact on people’s lives and people’s perceptions of the United States and of other competitors.
There’s a difference between the way we do some business and the way a lot of other countries do some business, and I think we carry in our businesses and in our enterprises our values. And that is a huge part of American foreign policy, our values.
So this is important. It’s important because – it’s important anyway with a burgeoning youth population around the world, extraordinary explosion in numbers of people in various countries, so that 60, 65 percent of some countries are under the age of 30; 50 percent are under the age of 25 or 21; and 40 percent under the age of 18. If these people don’t have jobs, and if we don’t provide them with opportunity, then a lot of bad things can happen. And that affects our security, it affects our prosperity, it affects our choices. That is why it is so important.
It’s also important because in an age of diminishing budgets, being able to attract the private sector to help us leverage engagement in countries can sometimes be the difference between whether or not those countries will be stable or able to market to their populations the prospects of the future, which too many of their citizens, given the world of the internet, are aware of out there. There’s no lack of contact with the rest of the world with everybody nowadays. It’s changed leadership. It’s changed politics. And it has changed diplomacy. We need to change with it, and we need to adopt policies that reflect this.
I also want you to know I have a special appreciation for what it takes to run a small business, or any business. I was chairman of the Small Business Committee for a number of years in the Senate, but more importantly, I started a small business. When I was a board attorney in Boston, I walked out of a restaurant one night with a friend of mine, probably having had too much of a good bottle of wine, and looked out and saw an empty space in Faneuil Hall marketplace. And desperately craving a good chocolate chip cookie at that hour of night, I decided that I was going to make sure they were available for the future. And so within a week, I found myself negotiating with The Rouse Company, then the landlord of Faneuil Hall marketplace, and next thing I knew, I was opening a gourmet food store in Faneuil Hall marketplace in addition to my law practice.
And I learned firsthand just how complicated it is with all of the health requirements and certifications and lease and part-time employees and tax forms, and you name it, to do this simple enterprise. More importantly, I learned about a week before I opened that if I was going to sell cookies I needed a recipe, and I better make some cookies pretty quickly. (Laughter.)
So I want you to know that I turned up the stove at home and I learned about the chemistry of food as I magnified my recipes many times over, and proudly can tell you that in the first year of our existence, we won the Best of Boston, as we did for a number years thereafter until I sold the store so nobody would accuse me of having conflict of interest or anything. But I am proud to tell you – I think I started this in 1980, 1981 – it’s still there today. And I’m very proud of that. (Applause.)
So I have a lot of respect for business, and I think it’s hard enough to do well; it’s even harder to do good as you’re doing well. And those are important choices that we are celebrating here today. Every single one of the winners today have set a high standard, and they’ve all done really remarkable work in communities around the world as a result of the choices that they have made in the corporate board room.
There’s a reason that this award comes from the Secretary of State, because here at the State Department, our mission is to create more secure, democratic, and prosperous – a more prosperous world. But obviously, everywhere that we are in our 275 posts, this is our mission. And we want to benefit the American people and the international community by exemplifying the role that U.S. businesses play in helping our businesses to be able to play this role. I talked earlier about all of the stakes and what it means.
We can only do what we do with the cooperation of the private sector. And through innovative business models and investment in local communities around the world, countless United States businesses are today markedly improving the ability of our nation to continue advancing our economic leadership around the world. We are working hand in hand. We are linked hand to hand, toe to toe. This is really a partnership.
The State Department wants to tell America’s story, and we want to promote our values at the same time. And as I have underscored to you, the relationship with all of our companies around the world is critical in the end to doing that. If people feel they’re just exploited, we lose. If people feel we’re there working with them and for them in a joint effort and respecting their lives, as these companies have chosen to and as many companies do, it makes all the difference.
So let me begin with these awards with the small business category. This year, that award goes to a company that any serious guitar player or any faux guitar player like me knows well – (laughter) – and that is Taylor Guitars.
When Bob Taylor started Taylor Guitars back in 1974, he made a commitment to produce the best instruments from the best materials. And quality ebony is near the top of that list. You all know guitar necks and you see ebony on many of them, most of them. But over the years, ebony has become harder and harder to obtain, and it’s increasingly threatened with extinction because of the illegal harvesting practices that have become common throughout Central African forests. I might add, ebony is one example of this. There are a lot of hardwoods in the Philippines and Burma and other parts of the world where logging practices, illegal smuggling of forest and so forth, is destroying sustainable harvestry and ultimately making extinct various types of wood.
So instead of joining the race to the bottom, in order to procure as much ebony as was possible as cheaply as possible, which is sometimes an instinct people follow, Bob decided to change the race altogether. And what he did was he bought an ebony mill in Cameroon, the only country in the world where it’s still legal to harvest ebony. And through that mill, Bob and Taylor Guitars have fundamentally changed the entire ebony trade.
To start, today we can point to an ebony trade that is more sustainable than ever before. And Bob spent a year in Cameroon after purchasing the mill, and he found out that harvesters used to cut down 10 trees before they found one that contained the all-black wood, which was the kind that would sell internationally. So obviously, 10 for one is the definition of unsustainable. And today, Taylor Guitars uses, as Bob puts it, “the ebony that our forests give us,” and no matter what color it is. He has also gotten competitors on board, so that today guitar makers around the world are changing their definition of “usable” ebony in order to help ensure that it will still be available for decades to come.
The ebony trade is also, as a result of this, safer and more ethical, and – guess what – more lucrative than ever before. Taylor Guitars has become an effective advocate for legal and policy reforms to improve the permitting process around the ebony trade to better protect both the environment and the rights and needs of other forest users. Taylor ensures that its works are protected, and they ensure that their workers likewise benefit as a result of this. The 70 workers that they employ in Cameroon work with state-of-the-art equipment and machinery. This is a huge upgrade from the very dangerous and antiquated machinery that Bob found when he first went to the mill. And the company also provides education and training to its employees so they can make the most out of their skills and reap greater economic benefit from the local resources. And on top of all of that, they’ve doubled the wages that their employees receive.
So ladies and gentlemen, this is absolutely the example of how people ought to do business. We’re so proud to be able to tell this story, as each of these stories, because they’re a wonderful example of the best of corporate citizenship globally. It’s an honor for me to present the 2013 Award for Corporate Excellence to Taylor Guitars, and to invite their president Bob Taylor to the stage to say a few words. (Applause.)
MR. TAYLOR: Wow. Well, I came through these rooms 15 years ago as a tourist on a hot summer day, and it’s quite a different event today – and I’m not just talking about the weather. And Secretary Kerry, if you’d be so kind to travel with me and be my person that gives my speeches, you do a much better job than me. (Laughter.) Thank you very much.
Thank you, Secretary Kerry and Under Secretary Kennedy, Acting Assistant Secretary Urs, and the State Department and other U.S. Government agencies represented here, as well as His Excellency, the Ambassador of Cameroon to the United States. I would also like to extend my gratitude to Ambassador Robert Jackson, Deputy Chief of Mission Greg Thome, and the staff of the U.S. Embassy in Cameroon, who have proven vital in securing resources and offering guidance in navigating the cultural complexities of business abroad. I’d also like to recognize Kurt Listug, my business partner of 40 years in Taylor Guitars, and Vidal de Teresa, our business partner in Crelicam. Without their support and insight, this venture would not be possible and I would not be here before you today.
Three years ago, we began the difficult task of assuming ownership of Crelicam, a small sawmill that cuts ebony located just outside of Yaounde, the capital of Cameroon. We purchased the business to ensure the legal harvesting of this important species and to guarantee our compliance with the spirit and the law of recent legislation regarding wood harvesting. Our purchase of the business was underscored by the rapid decline of the world’s ebony forests, therefore making Cameroon one of the last places on Earth to harvest ebony.
But we shared a much larger vision, a vision which would serve both the forest and the people by providing business solutions to an environmental problem. Our vision was to transform the way that ebony is harvested, processed, and sold into a new model of responsible social forestry while enriching the lives of our 75 employees through meaningful work. To accomplish this, we assumed the role of guardian of the forest and we operate with the philosophy to use what the forest gives us. To us, this means using ebony of all colors and all variegations, including wood that features spotted or streaked coloring, wood which prior to our involvement would have been left to deteriorate on the forest floor.
In our ongoing work, we are achieving greater transparency in our supply chain through GPS tracking and traceability programs, and establishing ethical sourcing requirements for our suppliers, thereby setting new standards for harvesting ebony. In our mill, we are mentoring sawyers who have previously not been taught to consider preservation of the resource and installing better machinery to maximize yield and minimize waste with the ultimate result of keeping more trees in the forest.
By banishing accepted quid pro quo practices and combatting corruption, we are able to operate transparently and with integrity, demonstrating respect for the forest, our employees, and clients of Crelicam. We have worked with Cameroon forestry officials to strengthen the local forestry laws, and more importantly, to enforce them. Rather than allow illegal operators to contribute to the degradation of the species, Crelicam prides itself on being a part of the solution to the long-term sustainability of the ebony trade and to retain the value of the wood in Cameroon for the Cameroonian people.
Although our primary focus is to harvest ebony, we recognize our moral duty to act in the spirit of compassionate capitalism, to enrich the lives of our employees, and to instill their ownership in the natural resources that their country offers us. As part of this, we have made considerable investments in our employees, offering technical training led by staff from Taylor Guitars in California and Madinter Trade in Spain. We have doubled employee salaries and we offer lunch prepared on an onsite kitchen, clean drinking water, and two breaks per day. Basic safety gear, a standard in Western factories, is now provided and required. Opportunities for teambuilding through recreational activities and monthly birthday celebrations demonstrate our appreciation and have helped to establish an open dialogue between employees and mill leadership, thereby making them partners in our vision. In the words of one of our sawyers, “We have a strong team with open, respectful dialogue, and the management keeps their word. Thus, the working man finds his joy.”
Nonetheless, operating in Cameroon has presented a myriad of complex cultural and business difficulties. The lack of basic infrastructure, from running water to stable electricity, has altered our production goals and the timeline by which we are able to make needed improvements. Continued development of employee skillsets through workforce education and training has been a top priority for us. Machinery and tools, custom designed at our headquarters in California, have been brought in to make improvements in our operations. However, we still find there is need for so much more. Yet with great difficulty comes great reward. And while many more challenges await us, it is with firm resolve that we hold true to our vision, and it is vital to the health of the forest and the people of Cameroon. We say to ourselves that we like to get in for more rather than to get out for less.
The reception of the Award for Corporate Excellence is a wonderful recognition of our accomplishments to date, and I am tremendously honored to accept this award on behalf of my business partner, Madinter Trade, our employees, and the forests of Cameroon. Thank you very much. (Applause.)
SECRETARY KERRY: Bob, thank you very, very much, and thank you to all of your workers and partners and – we are enormously appreciative.
Next up we have the ACE in the large business category, and this year that honor goes to Fruit of the Loom for its efforts in Honduras. Fruit of the Loom first opened its doors in Honduras because they saw the country as a promising place to complement the company’s textile production and distribution facilities in the southeastern United States. But the company, it had to overcome some pretty formidable challenges over the years, and that included the long history of management-labor strife throughout the country – again, one of the reasons that investment in corporate behavior is so critical.
After a contentious labor dispute in 2009 at one of the factories, Fruit of the Loom recognized it was time for a major change. So they partnered with civil society groups in order to develop a groundbreaking collective bargaining agreement with their employees. And this agreement is widely regarded as the most progressive in Honduran labor history. It includes investments in better machinery, free transportation to and from work, free lunches, wage increases – the list goes on. It’s a 180 from the widely accepted unfortunate standards of the past which created a lot of strife and tension, and obviously, difficult perceptions between countries.
It’s become the norm at every single Fruit of the Loom factory in Honduras. And today, the firm’s approach to organized labor and company management has become a model, not just in Honduras but throughout Central America. Let me also add that they’re also making remarkable strides on the environmental front. They currently operate a biomass energy generation plant in Honduras and purchase additional electricity from a hydroelectric facility. Thanks to these and other efforts, they are on track to have 100 percent of their electricity supply for Honduran operations come from renewable sources.
Now, these are truly remarkable achievements, and I am very, very delighted to present the 2013 Large Business Award for Corporate Excellence to Fruit of the Loom. And I would like to welcome Rick Medlin here, the CEO, to come up and accept the award on behalf of Fruit of the Loom. Thank you, Rick. (Applause.) He’s a former Clemson football player, folks. (Laughter.)
MR. MEDLIN: That’s why the orange. (Laughter.) Good morning. It’s my honor this morning on behalf of all of the Fruit of the Loom employees, but especially for our many employees in Honduras. I want to thank Secretary Kerry, the State Department staff, and other members of the selection committee for this prestigious award. We were honored to have been selected as a finalist for the Secretary’s Award for Corporate Excellence, but to actually have been chosen as a winner from amongst such esteemed group of U.S. companies is something that we will celebrate with 32,000 employees in 75 locations around the world.
As Fruit of the Loom – at Fruit of the Loom, our operational guidance is driven by our core values, the basic premise of which is respect for people. We believe that our employees are our most valued asset, and that each and every one of us has a shared responsibility to each other and to the company’s success. Several years ago, when employees in one of our Honduran facilities elected to organize, we knew we needed to forge a new model of labor-management relations if we were going to ensure the long-term sustainability of our operations in Honduras and the many jobs that those operations provide.
Working together with our local Honduran management, the local union board, the CGT labor Federation in Honduras, and labor experts in the U.S., we set about to create that model which had to include the principles of freedom of association, labor’s recognition of the role of management in operating the company’s factories, and responsible collective bargaining on both sides. In order to ensure bipartisan guidance, we established an oversight committee made up of outstanding third-party leaders from labor and business.
As a result of this model, we completed the first real collective bargain agreement in the apparel sector in Central America in 2011. We have now replicated that model successfully in a second Honduran plant, and we are currently in collective bargaining for a third plant. We know that creating the model does not reflect the completion of our journey. We face challenges every day. But the true belief that the model we have created with our Honduran associates and our oversight committee provides a framework for long-term success.
Environmental sustainability is another of our core values at Fruit of the Loom. Mitigating the impact of our operations on the environment has been one of our goals for as long as I can remember. We have almost totally eliminated the waste we send to landfills and have substantially reduced the use of hazardous chemicals throughout our supply chain. But two years ago, we undertook our most ambitious sustainability project to date when we began construction of a biomass electric generation facility in Honduras to supply renewable energy to our plants. This facility will be fueled by king grass grown locally in Honduras.
By the end of this year, we anticipate that our biomass plant, along with our commitment to purchase energy from a hydroelectric facility being built in Honduras, will allow us to transition our entire electric supply for our Honduran operations to renewable resources. These initiatives will also allow us to reach a global corporate goal of reducing our carbon dioxide emissions by 40 percent worldwide.
We’re fortunate to have customers who believe in and support the commitments we have made to people and the environment. Receiving the ACE Award represents, for our company, the validation that the hard work and dedication to the values we believe in are recognized and appreciated.
I cannot even attempt to name all the people who have made this recognition possible. I will say a special thanks to our people in Honduras, who have shown great leadership in forging new models of success for the future. We are extremely proud of their accomplishments, and I wish every one of them could be here to accept this award. But on their behalf, I want to express our appreciation for being recognized of this award. Thank you. (Applause.)
SECRETARY KERRY: Rick, thank you very, very much. Appreciate the accomplishment and your comments very much.
I’m going to have to exit out of here for a phone call with a foreign minister that is coming up momentarily, and I hope you will all forgive me for doing that. But I will introduce our speaker and try and stay through as much of his comments as I can.
I am really pleased to be able to announce that our first ever ACE award for a medium-sized business will be awarded to Plantronics for its work in Tijuana, Mexico. Plantronics – many of you may have used their product; I have. It’s a leader when it comes also to environmental responsibility. And their plant in Tijuana today contains the largest rooftop solar facility in Latin America, which generates enough power to meet 70 percent of the company’s Mexican operating needs. The premium that Plantronics places on environmental stewardship alone probably would be enough to earn them the award of the ACE. But it’s what they do with their employees that really sets them apart. Plantronics does not just value their associates; they invest in them in every way – in their health, in their success, and in their happiness. Their workforce can take advantage of the preventative health care services that Plantronics offers its employees. They can pursue vocational training and career development. More than 2,300 associates have already received master’s degrees and other formal education thanks to programs that Plantronics subsidizes.
One employee, a woman by the name of Cristina Morales, finished high school, got her bachelor’s degree, and today is hard at work on her master’s – all with funding from Plantronics. And I understand that Plantronics even helps its staff get married. (Laughter.) Every year, the company helps dozens of couples to navigate the bureaucracy around getting married in Mexico and hosts a Valentine’s Day wedding ceremony at its offices. They provide invitations, photos – even a wedding gift. And Plantronics helps the newlyweds even apply for housing as a married couple.
Folks, that’s a full-service company. (Laughter.) If that isn’t going above and beyond, I don’t know.
It’s really no wonder that the company has been named the best place to work in Mexico three years in a row. I am really proud that today the State Department can add another title to that list. It’s an honor to present Plantronics with the 2013 Award for Corporate Excellence. And as I welcome Ken Kannappan up here, the CEO, really you ought to applaud for all three of these companies because what you’re seeing here today really is the future now. And it’s exemplary. We are so honored by all of them. But Ken, come on up here and share your thoughts. Congratulations to you. (Applause.)
MR. KANNAPPAN: Thank you, Secretary Kerry, Under Secretary Kennedy, and Acting Assistant Secretary Urs. Good morning, everyone. It is an honor for me to be able to represent the 3,500 men and women of Plantronics. And it’s a privilege to be able to accept this award on their behalf.
There are many remarkable things about Plantronics, but as Secretary Kerry said, it is really our people and our culture that set us apart. I remember when business was booming and the unemployment rate in Tijuana was 0.2 percent. We had 50 openings, and overnight we had 2,000 people applying for positions just through word of mouth. Because people need jobs, but they want careers, and they want an opportunity to contribute something meaningful.
There’s an old story about a couple of workers in a quarry. Somebody comes by and says, “What are you doing?” The first one says, “I’m digging rocks.” The second one says, “I’m building a cathedral.” The difference between perspiration and inspiration is vast. The people at Plantronics are not just making the world’s greatest headsets. We’re helping business people exchange ideas, we’re helping friends to catch up, we’re having families share their love, and if you’re driving in a car, we’re helping you to do it more safely.
The inspiration this has given our team in Tijuana has given us literally hundreds of ideas that we implement each year to improve our quality and to reduce our costs. We know our headsets have to be depended on, whether it is someone working at a 911 station dispatching fire, police, or emergency medical, or someone from the moon. When Neil Armstrong said “That’s one small step for man, one giant leap for mankind” with a Plantronics headset, the headset had to work. (Laughter.) The FAA told me that as a matter of public safety, they considered it crucial that air traffic controllers use Plantronics headsets.
Mexico has a national quality award. Plamex entered that competition and won. And as a national quality award winner, we were eligible to compete in two international competitions against over 50 other country national award winners, including the Malcolm Baldridge Award winner from the United States, and the Deming Award winner from Japan. We won both of those competitions, which is a real testimony to the extraordinary quality of our products as well as the Plamex organization that produces them.
But of course, whether you’re a Fortune 100 company or somebody looking to play games on your computer, you want great products but you want them at an affordable price. The team at Plamex has come up with ideas that have saved us over $100 million through improvements in product cost and processes. But it isn’t just our existing products that they contribute to. We have a team of over 120 people in Tijuana in our design and develop center that are developing us new products that have added to our revenues, including one that won a Best of Innovations Award at the Consumer Electronics Show in Las Vegas. This has also, in turn, helped us add to our resources, including in California and the United States, increasing our staffing levels.
Secretary Kerry was kind enough to mention some of the things that we do for our people, and it really is what sets us apart. And as I said, it is that focus combined with our policies towards community engagement, which Alejandro Bustamante will talk about, as well as environmental stewardship that really set us apart.
Across the globe, we are very careful with our conservation of water, of energy, and our waste production. Globally, we have solar facilities in Santa Cruz, in Chattanooga, in the United Kingdom, and in Tijuana. Seventy percent of our power comes from solar. You, hopefully, have seen some images of our plant in the background. Let me tell you that there are very few factory floors with ceilings that are at the lowest point – 35 feet high – with louvered roofs to provide natural light, much less where you can get health services and have sports facilities.
The opportunity for Plantronics to work with our associates and become a global communications leader has really set us apart. Our shareholders have benefited from record levels of revenue and profit; our customers from phenomenal quality and innovation; and our associates in Mexico who help us develop, produce, support, and sell our products. I am very, very fortunate to be able to work with such talented people. The cross-border partnerships that we’ve established with Plamex is a win-win for our customers, for Tijuana, for Santa Cruz, for Mexico, and for the United States.
Thank you very, very much. (Applause.)
MODERATOR: Thank you very much, Ken. Congratulations again to Taylor Guitars, Plantronics, and Fruit of the Loom, and to everyone tuning in from Mexico, from Honduras, and from Cameroon. Thank you all for setting such an exemplary example.
As our 2013 ACE winners have shown, American corporate leadership isn’t only about selling guitars or headphones or t-shirts. It’s about bringing our values and our standards to every corner of the world, and that’s what our winners and so many other American businesses are doing every day. Thank you all very much, and let me pass the microphone back to Kris. Thank you. (Applause.)
ASSISTANT SECRETARY URS: I wanted just to start by thanking Secretary Kerry and Under Secretary Kennedy for joining us this morning. Thanks very much for their participation. And I want to just reiterate once again, for the guests of honor, congratulations – really marvelous, marvelous achievements.
Ladies and gentlemen, I’d now like to turn your attention to one of the three screens in the room. Our chief of missions in the winning countries have been watching the ceremony, and you may have seen them. They’ve peeked on to the coverage from here from moment to moment. Now we’re going to ask them and the local representative of each company to offer a few remarks.
First, I’d like to introduce Greg Thome – Gregory Thome, our Charge d’Affaires at the U.S. Embassy in Cameroon. Greg, will you take it away?
MR. THOME: (Inaudible) play guitar all over the world. We are very – just absolutely thrilled that the committee chose Taylor Guitars as one of the recipients of the Secretary’s Award for Corporate Excellence. Of course, everyone knows that Cameroon is blessed with ebony trees, but we all know that ebony is under threat from overexploitation all over the world. We’re very encouraged in Cameroon that one of the most important guitar makers in the world is doing its part to help conserve this species for the production of musical instruments and for other things for generations to come.
Bob Taylor and Secretary Kerry spoke very eloquently about the risks that Taylor took in coming to Cameroon, and about the great things they’ve done not just to help conserve ebony, but also to better the lives of their workers. We’re very proud of them for that. And I can say for those of us who have seen Taylor and Crelicam’s operations up close, it’s no exaggeration to say that this is really what the Secretary’s Award for Corporate Excellence is all about. Taylor exemplifies responsible corporate governance, creating decent jobs and paying fair wages in a developing country, honestly and sustainably harvesting endangered tropical wood, and even ensuring that local communities share in the profit.
But outside of Cameroon, if I could also add, Taylor’s really changing the worldwide conversation about how we use ebony. Everyone understands that ebony-producing countries like Cameroon need to take responsibility for sustainably harvesting this valuable wood. But Taylor is also teaching musicians and guitar players and guitar buyers and hopefully those who listen to the guitar that if the countries where guitars are consumed don’t play a role, the countries where the ebony is produced can’t succeed.
As was mentioned earlier, Bob Taylor has been sending a message out that different varieties of ebony can be used and still produce the world’s best guitars, and as we know, when Bob Taylor talks to guitar players, we all listen. So to this end, this ACE award does more than just honor the good work that Taylor’s doing in Cameroon. It also strengthens Taylor’s efforts to protect ebony far into the future.
So with that, again, congratulations to Taylor, and if I could, I’d like to turn it over to Anne Middleton, who operates the Crelicam plant here, and have her say a few words.
MS. MIDDLETON: Thanks, Greg. I would also like time to personally thank Ambassador Robert Jackson and his wife, and Deputy Chief of Mission Greg Thome and his wife, and the staff at the U.S. Embassy in Cameroon, who have not only tirelessly supported our business endeavors, but have also become great allies and great friends.
Despite the many challenges, we have an excellent team of people working to make this project succeed. And it is with great honor that we are here today to accept this award. Included on that team, of course, are the 75 employees here in Yaounde whose indefatigable work ethic and playful spirit have helped shape what this company is today and what it will be tomorrow.
Businesses can help become solutions to environmental and economic problems, especially if a business is willing to put in the extra effort and investment. We are. And we are very proud to be the recipient of this prestigious award. Thank you to all involved, especially you, Bob. Merci beaucoup. (Applause.)
MR. THOME: Thank you, and with that, we turn it back over to you, Secretary Urs.
ASSISTANT SECRETARY URS: (Inaudible) to Taylor Guitars and to our Embassy in Yaounde and thanks very much for joining us.
Let me now turn, if I can, by phone, I believe, to Ambassador Lisa Kubiske who is our Ambassador at the U.S. Embassy in Tegucigalpa, Honduras. Lisa, are you there?
AMBASSADOR KUBISKE: I am here. Thank you very much, Secretary Urs. The – it’s very exciting and wonderful for Fruit of the Loom to be one of the winners of the ACE Award this year. It is a company that is doing things that help both its own bottom line and the security in Honduras and our message about the importance of good working conditions for workers as a way of recognizing them as people, and also contributing to the stability of the country.
So the Fruit of the Loom operates in a sector called the maquila sector, which is manufacturing for export that provides more than 120,000 jobs in Honduras. So it has an enormous impact. It started with its own companies – or its own plants in Honduras, but now the model is resonating and it’s quite possible that other companies will adopt it as well. So the power of what they have done goes far beyond their own plants.
I want to also recognize the labor confederation with which they were negotiating in the local plant. I’ve spoken to them many times, as I have with the Fruit of the Loom managers, and I can tell you that they have an enormous sense of satisfaction and pride in having been able to show a model in which there are profits for the company and the shareholders, but also workers’ rights according to the ILO’s definition of decent work.
So just to close this out, what Fruit of the Loom has done absolutely, as the Secretary said at the beginning, reflects U.S. values. It’s one of the best things that we can do to recognize the great work that they and their workers have done. Thank you. (Applause.)
ASSISTANT SECRETARY URS: Ambassador Kubiske, thanks very much for those remarks, and congratulations to Fruit of the Loom and to our Embassy in Honduras.
And then, finally, I’d like ask Ambassador Anthony Wayne in Mexico to make some remarks. Tony, are you there?
AMBASSADOR WAYNE: Can you hear us yet? Okay, good.
It’s a great pleasure to join all of you and to offer my congratulations to Plantronics for winning this year’s Award for Corporate Excellence from the Secretary of State. It’s a special pleasure that they have won the first ever ACE for medium-sized businesses. Having participated in this process for six years, I know a lot about the excellence of American companies operating overseas, and this recognition is very close to my heart.
When I first heard about all that Plantronics is doing, I knew they were in the top category up there with the best the U.S. shares around the world. Plamex, which is the name of the company in Mexico, is really living the best practices of policies that U.S. companies bring to their communities. Felicidades and congratulations to Ken Kannappan, to Alejandro Bustamante with me here today, to Rosa Ruvalcaba, who’s with you, and to all of the employees of Plantronics, Mexico. This is a very special opportunity.
When I visited the plant recently, I could really see all that you’ve heard a little bit about that they’re putting into practice. They are building high-quality products and creating a workplace that really takes care of its employees, that serves its community, and that’s working comprehensively for a better world. Plantronics’ innovative manufacturing practices have moved operations well beyond the traditional maquiladora assembly in Mexico to a high-tech manufacturing and innovation model with just-in-time production that allows for a highly diverse mix of products. From partnerships with Baja, California’s best universities, to the environmentally responsible practices that you heard about in its newly inaugurated LEED-certified plant, they produce 14 million headset devices annually.
They’re demonstrating every day this exemplary commitment to socially responsible corporate practices. They’ve been an innovator in implementing self-improvement and morale-building opportunities for their employees, as the Secretary mentioned. That includes the career development programs that he cited of continuing in education and includes onsite healthcare for the whole family; it includes parenting classes; it includes a workplace art program that features opera singers and orchestra performances on the assembly floor. And as the Secretary very generously pointed out, it includes supporting employee weddings and wedding receptions and much more.
During my visit to Plamex, I also learned that they have an employee-led committee to decide on what corporate social responsibility efforts they are going to make. And they choose the NGOs and other institutions that they’re supporting based on what causes matter to the employees.
So Plantronics and its workers in Tijuana have given time, effort, and funds to supporting the training center for the visually impaired, a foundation for special-needs children, the Children’s Hospital, the Red Cross, the Tijuana Fire Department, several local orphanages and homes for the elderly, and going out and cleaning up the beaches of Tijuana. These are just some of the examples of all the innovative employment practices that brought Plantronics the honor of three years in a row of Best Place to Work in Mexico.
Congratulations again to Ken, Alejandro, Rosa, and the 2,200 associates who work in Tijuana for demonstrating the very best that U.S. companies can operate when operating overseas. I wish you all continued success in Mexico, around the world, and in the United States. And I want to turn now to Alejandro and ask him to share a few thoughts with us.
MR. BUSTAMANTE: Thank you, Ambassador. Thank you to the State Department, to Ambassador Wayne, to Consul General Erickson. We are very honored for this award. Thank you, Ken, and all Plantronics associates around the world for their support.
Our team in Mexico has done extraordinary work in finding the right balance for us in meeting our stakeholders’ requirements. While creating programs that promote and improve the quality of life of our associates, engaging and exciting associates means that they in turn generate the productivity and efficiencies that our stockholders expect: building systems and processes the delivered products that – and services that delight our customers, and also creating the programs that generate value to our community.
The Plantronics, Mexico operation has become a worldwide benchmark in the fields of manufacturing, customer service, human resources, logistics, technology, environmental protection, and corporate social responsibility, winning more than 200 national or international awards during the last ten years. Our work culture is based on living our values, and for the three consecutive years, we have been named the Best Place to Work in Mexico.
We have developed 188 programs focused on the well-being of our associates, their families, and our community. For example, every year we sponsor a local orphanage with programs focused on bringing to them love and compassion that might be in short supply in their lives. We take these young people to the movies, we take them camping, to pro sports, and also do more activities. One of our associates becomes, in fact, the godfather, buying them gifts, and spending time with them. We talk about values, we buy them school uniforms and books, we go and improve their housing infrastructure. So far, more than 1,600 kids have been benefitted by this program.
Twice a year, our associates and their families volunteer to go participate in cleaning the beaches of Tijuana. Over the last few years, over 1,500 associates have participated in this program. Plantronics (inaudible) environmental best practices with more than 260,000 people in universities, schools, environmental seminars, expos and conferences.
To change the image of Tijuana, we helped coordinated the first (inaudible) conference, a 14-day event attended by more than 600,000 people, that highlighted the best the city has to offer. Our medical services offer professional care to our associates and their families to promote good health and to prevent illness. We also offer 32 different health campaigns such as lose weight and gain health. Our blood donors club and influenza prevention programs have been modeled for other companies in the community.
We offer a career plan for associates so they can prepare for the future, and also look for new opportunities. During the last five years, more than 1,000 associates have been able to grow to a new position within Plantronics, not needing to go outside and find new opportunities to grow.
We created and supported the kids symphony orchestra with our associates’ children. This program was created in conjuncture with the Baja, California Symphony Orchestra, where 32 children are taught to play different musical instruments and playing community events. Our associates’ children learn how to say no to drugs, alcoholism, and smoking, in our annual D.A.R.E program, offered in conjunction with the Tijuana police department. Kids go 30 – through 30 consecutive weeks of lectures of being able to finish the program. As of today, we have graduated 454 kids.
We truly believe that these activities and progress make Plantronics Mexico not only a great place to work; they make us a better business, able to consistently provide to our customers the most innovative and reliable products on the market. Congratulations Plantronics, and thank you all.
(Applause.)
PARTICIPANT: Thank you, Alejandro.
UNDER SECRETARY KENNEDY: Thank you Embassy Mexico, and congratulations to Plantronics and also to the Embassy for preparing the – one of the winning submissions.
Guests of honor, ladies and gentlemen, friends and colleagues in Cameroon, Honduras, and Mexico, thank you for joining us today for the Secretary’s Award for Corporate Excellence ceremony. I’m sorry I can’t invite our guests who are participating by either teleconference or phone in Cameroon, Honduras, and Mexico to join us, but I do invite all of us here, everyone here in the Benjamin Franklin Room, to our reception downstairs in the Exhibit Hall, which will begin as soon as we leave. So thank you very much for participating in today’s ceremony, and congratulations to all the winners. Thank you.
(Applause.)
Thursday, January 30, 2014
GSA, DOD REPORT ON ACQUISITION AND CYBERSECURITY ALIGNMENT
FROM: GENERAL SERVICES ADMINISTRATION
GSA and DoD Announce Acquisition Cybersecurity and Resilience Recommendations
Washington, DC --- The U.S. General Services Administration (GSA) Administrator Dan Tangherlini, and the Secretary of Defense, Chuck Hagel, today announced six planned reforms to improve the cybersecurity and resilience of the Federal Acquisition System.
The jointly issued Department of Defense (DoD) and GSA report, Improving Cybersecurity and Resilience through Acquisition, was submitted to the President in accordance with Section 8(e) of Executive Order (EO) 13636.
Recommended Reforms
The report provides a path forward to aligning Federal cybersecurity risk management and acquisition processes. It provides strategic recommendations for addressing relevant issues, suggests how challenges might be resolved, and identifies important considerations for the implementation of the recommendations.
The six recommended reforms are the following:
Institute baseline cybersecurity requirements as a condition of contract award for appropriate acquisitions
Include cybersecurity in acquisition trainings
Develop common cybersecurity definitions for federal acquisitions
Institute a federal acquisition cyber risk management strategy
Include a requirement to purchase from original equipment manufacturers, their authorized resellers, or other trusted sources
Increase government accountability for cyber risk management
The report is one component of the government-wide implementation of EO 13636 and Presidential Policy Directive (PPD) 21, and was prepared by a working group comprised of subject matter experts selected from across the Federal government.
The working group benefitted from a high level of engagement from public and private sector stakeholders, and the report provides realistic recommendations that will improve the cybersecurity and resilience of the nation when implemented.
DoD and GSA are committed to implementing the recommendations through integration with the numerous ongoing related activities like supply chain threat assessments and anti-counterfeiting.
The agencies will use a structured approach, with continued dedication to stakeholder engagement, and develop a repeatable process to address cyber risks in the development, acquisition, sustainment, and disposal lifecycles for all Federal procurements. The implementation will also harmonize the recommendations with existing risk management processes under Federal Information Security Management Act and OMB guidance.
GSA Administrator Dan Tangherlini weighs in:
“The ultimate goal of the recommendations is to strengthen the federal government’s cybersecurity by improving management of the people, processes, and technology affected by the Federal Acquisition System. GSA and the Department of Defense will use continue to engage stakeholders to develop a repeatable process to address cyber risks in the development, acquisition, sustainment, and disposal lifecycles for all Federal procurements.”
A request for public comment on the draft implementation plan will be published in the Federal Register next month.
GSA and DoD Announce Acquisition Cybersecurity and Resilience Recommendations
Washington, DC --- The U.S. General Services Administration (GSA) Administrator Dan Tangherlini, and the Secretary of Defense, Chuck Hagel, today announced six planned reforms to improve the cybersecurity and resilience of the Federal Acquisition System.
The jointly issued Department of Defense (DoD) and GSA report, Improving Cybersecurity and Resilience through Acquisition, was submitted to the President in accordance with Section 8(e) of Executive Order (EO) 13636.
Recommended Reforms
The report provides a path forward to aligning Federal cybersecurity risk management and acquisition processes. It provides strategic recommendations for addressing relevant issues, suggests how challenges might be resolved, and identifies important considerations for the implementation of the recommendations.
The six recommended reforms are the following:
Institute baseline cybersecurity requirements as a condition of contract award for appropriate acquisitions
Include cybersecurity in acquisition trainings
Develop common cybersecurity definitions for federal acquisitions
Institute a federal acquisition cyber risk management strategy
Include a requirement to purchase from original equipment manufacturers, their authorized resellers, or other trusted sources
Increase government accountability for cyber risk management
The report is one component of the government-wide implementation of EO 13636 and Presidential Policy Directive (PPD) 21, and was prepared by a working group comprised of subject matter experts selected from across the Federal government.
The working group benefitted from a high level of engagement from public and private sector stakeholders, and the report provides realistic recommendations that will improve the cybersecurity and resilience of the nation when implemented.
DoD and GSA are committed to implementing the recommendations through integration with the numerous ongoing related activities like supply chain threat assessments and anti-counterfeiting.
The agencies will use a structured approach, with continued dedication to stakeholder engagement, and develop a repeatable process to address cyber risks in the development, acquisition, sustainment, and disposal lifecycles for all Federal procurements. The implementation will also harmonize the recommendations with existing risk management processes under Federal Information Security Management Act and OMB guidance.
GSA Administrator Dan Tangherlini weighs in:
“The ultimate goal of the recommendations is to strengthen the federal government’s cybersecurity by improving management of the people, processes, and technology affected by the Federal Acquisition System. GSA and the Department of Defense will use continue to engage stakeholders to develop a repeatable process to address cyber risks in the development, acquisition, sustainment, and disposal lifecycles for all Federal procurements.”
A request for public comment on the draft implementation plan will be published in the Federal Register next month.
KENTUCKY HOSPITAL SETTLES ALLEGATIONS OF PERFORMING MEDICALLY UNNECESSARY CARDIAC PROCEDURES
FROM: JUSTICE DEPARTMENT
Wednesday, January 29, 2014
Kentucky Hospital Agrees to Pay Government $16.5 Million to Settle Allegations of Unnecessary Cardiac Procedures
Saint Joseph Health System Inc. has agreed to pay $16.5 million to resolve allegations that Saint Joseph Hospital violated the False Claims Act by submitting false claims to the Medicare and Kentucky Medicaid programs for a variety of medically unnecessary cardiac procedures, the Justice Department announced today. Saint Joseph Health System operates numerous hospitals statewide, including Saint Joseph Hospital, which is based in London, Ky.
“Hospitals that place their financial interests above the well-being of their patients will be held accountable,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery. “ The Department of Justice will not tolerate those who abuse federal health care programs and put the beneficiaries of these programs at risk.”
The government alleged that doctors working at Saint Joseph Hospital performed numerous invasive cardiac procedures, including coronary stents, pacemakers, coronary artery bypass graft surgeries and diagnostic catheterizations, on Medicare and Medicaid patients who did not need them, and that the hospital was aware of these unnecessary procedures. These doctors were affiliated with Cumberland Clinic which is a physician group that entered an exclusive arrangement with Saint Joseph Hospital in 2008 to provide cardiology services to the hospital’s patients. Cumberland Clinic is owned by two London-based cardiologists, Satyabrata Chatterjee and Ashwini Anand.
The settlement also resolves allegations that Saint Joseph Hospital violated the federal Stark Law and Anti-Kickback Statute by entering into sham management agreements that financially benefitted Chatterjee and Anand as an inducement for Chatterjee and Anand to direct more Cumberland Clinic patients to the hospital.
Dr. Sandesh Patil, one of the Cumberland Clinic cardiologists working at the hospital, performed many of the medically unnecessary coronary stents. Patil has since pleaded guilty to a federal health care fraud offense and has been sentenced to serve 30 months in prison.
“We all rely on health care providers to make treatment decisions based on clinical, not financial, considerations,” said U.S. Attorney for the Eastern District of Kentucky Kerry Harvey. “The conduct alleged in this case violates that fundamental trust and squanders scarce public resources set aside for legitimate health care needs. We will use every available tool to protect our federal health care programs and the patients who they serve.”
In connection with this settlement, Saint Joseph Hospital has agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG), which obligates the hospital to undertake substantial internal compliance reforms and to commit to a third-party review of its claims to federal health care programs for the next five years.
"Cases such as this threaten both the health of patients and the financial integrity of the Medicare and Medicaid programs," said Special Agent in Charge at the U.S. Department of Health and Human Services Office of Inspector General in Atlanta Derrick L. Jackson. "This settlement is another example of the OIG’s commitment to protecting our beneficiaries and to recovering any money that has been improperly paid as a result of medically unnecessary procedures."
In addition to the settlement with Saint Joseph Health System, the government announced its intervention in a lawsuit alleging False Claims Act violations by Chatterjee and Anand, who referred patients for and performed the unnecessary procedures and tests, and their practice group, Cumberland Clinic, as well the practice groups each of them owned before forming Cumberland Clinic.
The government actions announced today stem in large part from a whistleblower complaint filed by three Lexington, Ky., cardiologists pursuant to the qui tam provisions of the False Claims Act, which permit private persons to bring a lawsuit on behalf of the government and to share in the proceeds of the suit. The Act also permits the government to intervene in the lawsuit and take over the allegations as it has done in this case. Drs. Michael Jones, Paula Hollingsworth and Michael Rukavina will receive a total of $2.46 million of the $16.5 million settlement with Saint Joseph Hospital.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $17.1 billion through False Claims Act cases, with more than $12.2 billion of that amount recovered in cases involving fraud against federal health care programs.
The investigation was conducted by the FBI, HHS-OIG, the Kentucky Office of Attorney General, Medicaid Fraud and Abuse Control Unit, the Commercial Litigation Branch of the Department of Justice Civil Division and the U.S. Attorney’s Office for the Eastern District of Kentucky. The claims settled by this agreement are allegations only, and there has been no determination of liability.
The lawsuit is captioned United States ex rel. Jones, Hollingsworth and Rukavina v. Saint Joseph Health System et al., no. 11-cv-81-GFVT (E.D.Ky.)
Wednesday, January 29, 2014
Kentucky Hospital Agrees to Pay Government $16.5 Million to Settle Allegations of Unnecessary Cardiac Procedures
Saint Joseph Health System Inc. has agreed to pay $16.5 million to resolve allegations that Saint Joseph Hospital violated the False Claims Act by submitting false claims to the Medicare and Kentucky Medicaid programs for a variety of medically unnecessary cardiac procedures, the Justice Department announced today. Saint Joseph Health System operates numerous hospitals statewide, including Saint Joseph Hospital, which is based in London, Ky.
“Hospitals that place their financial interests above the well-being of their patients will be held accountable,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery. “ The Department of Justice will not tolerate those who abuse federal health care programs and put the beneficiaries of these programs at risk.”
The government alleged that doctors working at Saint Joseph Hospital performed numerous invasive cardiac procedures, including coronary stents, pacemakers, coronary artery bypass graft surgeries and diagnostic catheterizations, on Medicare and Medicaid patients who did not need them, and that the hospital was aware of these unnecessary procedures. These doctors were affiliated with Cumberland Clinic which is a physician group that entered an exclusive arrangement with Saint Joseph Hospital in 2008 to provide cardiology services to the hospital’s patients. Cumberland Clinic is owned by two London-based cardiologists, Satyabrata Chatterjee and Ashwini Anand.
The settlement also resolves allegations that Saint Joseph Hospital violated the federal Stark Law and Anti-Kickback Statute by entering into sham management agreements that financially benefitted Chatterjee and Anand as an inducement for Chatterjee and Anand to direct more Cumberland Clinic patients to the hospital.
Dr. Sandesh Patil, one of the Cumberland Clinic cardiologists working at the hospital, performed many of the medically unnecessary coronary stents. Patil has since pleaded guilty to a federal health care fraud offense and has been sentenced to serve 30 months in prison.
“We all rely on health care providers to make treatment decisions based on clinical, not financial, considerations,” said U.S. Attorney for the Eastern District of Kentucky Kerry Harvey. “The conduct alleged in this case violates that fundamental trust and squanders scarce public resources set aside for legitimate health care needs. We will use every available tool to protect our federal health care programs and the patients who they serve.”
In connection with this settlement, Saint Joseph Hospital has agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG), which obligates the hospital to undertake substantial internal compliance reforms and to commit to a third-party review of its claims to federal health care programs for the next five years.
"Cases such as this threaten both the health of patients and the financial integrity of the Medicare and Medicaid programs," said Special Agent in Charge at the U.S. Department of Health and Human Services Office of Inspector General in Atlanta Derrick L. Jackson. "This settlement is another example of the OIG’s commitment to protecting our beneficiaries and to recovering any money that has been improperly paid as a result of medically unnecessary procedures."
In addition to the settlement with Saint Joseph Health System, the government announced its intervention in a lawsuit alleging False Claims Act violations by Chatterjee and Anand, who referred patients for and performed the unnecessary procedures and tests, and their practice group, Cumberland Clinic, as well the practice groups each of them owned before forming Cumberland Clinic.
The government actions announced today stem in large part from a whistleblower complaint filed by three Lexington, Ky., cardiologists pursuant to the qui tam provisions of the False Claims Act, which permit private persons to bring a lawsuit on behalf of the government and to share in the proceeds of the suit. The Act also permits the government to intervene in the lawsuit and take over the allegations as it has done in this case. Drs. Michael Jones, Paula Hollingsworth and Michael Rukavina will receive a total of $2.46 million of the $16.5 million settlement with Saint Joseph Hospital.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $17.1 billion through False Claims Act cases, with more than $12.2 billion of that amount recovered in cases involving fraud against federal health care programs.
The investigation was conducted by the FBI, HHS-OIG, the Kentucky Office of Attorney General, Medicaid Fraud and Abuse Control Unit, the Commercial Litigation Branch of the Department of Justice Civil Division and the U.S. Attorney’s Office for the Eastern District of Kentucky. The claims settled by this agreement are allegations only, and there has been no determination of liability.
The lawsuit is captioned United States ex rel. Jones, Hollingsworth and Rukavina v. Saint Joseph Health System et al., no. 11-cv-81-GFVT (E.D.Ky.)
ASSISTANT AG DELERY'S ADDRESSES CBI PHARMACEUTICAL COMPLIANCE CONGRESS
FROM: JUSTICE DEPARTMENT
Assistant Attorney General Stuart F. Delery Delivers the Keynote Address at the CBI Pharmaceutical Compliance Congress
Washington, DC ~ Wednesday, January 29, 2014
Thank you, Cindy [Cetani, Chief Compliance Officer of Novartis Pharmaceuticals Corporation]. And thank you to the Pharma Congress co-chairs and organizers for inviting me to be here this morning.
I am especially pleased to have the chance to speak to you at a gathering dedicated to compliance in the pharmaceutical industry. As head of the Civil Division at the Department of Justice, I oversee much of the federal government’s civil litigation in courts across the country. Attorneys in the Civil Division litigate cases involving national security and immigration policy. They defend federal statutes, regulations, and programs, ranging from the Affordable Care Act to actions taken in response to the financial crisis.
Yet among these significant matters, one of my top priorities is the work the Civil Division does to enforce the Food, Drug, and Cosmetic Act; the False Claims Act; and other laws protecting the safety and well-being of patients and the general public.
Why is health care enforcement so important? A major reason is the importance of the health care industry itself. From compliance officers to physicians, from corporate executives to nurses and researchers, you contribute to producing the drugs and medical devices on which we and our loved ones rely. Your efforts help to ensure that, when we are sick, the medicines we take will heal us effectively; that when we are in pain, we can obtain relief safely.
This Administration shares your commitment to improving the nation’s health care system. It has undertaken a comprehensive effort to ensure that more people have access to quality coverage, and that treatments are available at a lower cost to all of us – to patients, to health care providers, and to taxpayers. The innovative reforms and anti-fraud measures under the Affordable Care Act are a part of this effort.
So, too, is the Health Care Fraud Prevention and Enforcement Action Team, or HEAT, a cabinet-level initiative to increase coordination between the Civil Division and our partners at the Food and Drug Administration, the Centers for Medicare and Medicaid Services, and U.S. Attorneys’ offices around the country. This coordination has produced historic results. Since 2009, judgments and settlements under the FCA and FDCA have totaled over $20 billion.
But monetary results tell only part of the story.
Through our enforcement efforts, the government aims to promote an environment in which all of us can count on the soundness and efficiency of the health care system. If a pharmaceutical company pays kickbacks to physicians who prescribe its drugs, patients lose confidence that their doctors are making independent judgments about treatment options. If a Medicare provider bills for unnecessary services, taxpayers lose faith that our money is being well spent and health care becomes more expensive for everyone. If a manufacturer markets its products for uses that were never approved as safe and effective by the FDA, we worry that our loved ones might be receiving treatments that will harm them rather than help them, and that they may not elect the treatment with the best chance for a cure.
We are pursuing a broader range of health care fraud matters than ever before. We have cracked down on elder abuse in nursing homes, bringing criminal and civil cases against companies that harm seniors by providing grossly deficient care. We have pursued doctors who put patients at risk by performing unnecessary procedures to increase their bills, like a Florida dermatologist who performed thousands of unnecessary skin surgeries, participated in an illegal kickback scheme, and ultimately paid one of the largest False Claims Act settlements ever by an individual – $26.1 million. We have gone after the manufacturers of defective medicines or medical devices, as in our criminal and civil cases against a Boston Scientific subsidiary for knowingly selling defective cardiac defibrillators. We have sued companies that produce sterile products in non-sterile conditions, risking contamination and threatening patients with the possibility of dangerous infections. In short, we have demonstrated a commitment to targeting health care fraud and abuse wherever we find it.
By going after the practices that shake our trust in the marketplace and risk harm to us when we need medical care, we seek to make our health care system work better.
And in that respect, we all need to be allies and partners. When the focus is on financial recoveries, or on a specific investigation, it is easy to think of government and industry as adversaries. But when the goal is ensuring that Americans can trust the drugs they take and the medical advice they receive, it is clear that we are on the same side, attempting to stop unlawful practices that affect the safety and affordability of pharmaceuticals and medical devices.
And so I want to focus my remarks on three ways in which I believe the Civil Division’s anti-fraud enforcement interests align with your interests as corporate compliance officers, executives, and advisors.
First, we have a common interest in promoting an ethical corporate culture instead of maintaining a compliance program in name only.
No matter how well-designed a compliance program is, it cannot achieve its goals without achieving buy-in at all levels of the company. People must have the right incentives to see, report, and fix problems.
A common thread in many of our cases is that numerous individuals – ranging from executives to safety technicians – saw signs that misconduct was taking place and did not act. For example, in May 2013 the generic drug manufacturer Ranbaxy pleaded guilty to felony charges relating to producing and distributing adulterated drugs from two of its manufacturing facilities in India. Ranbaxy acknowledged that it had continued to distribute drugs that had failed critical tests, violated current Good Manufacturing Practices, and falsified records to cover up systematically incomplete testing, sometimes performing stability tests weeks or months after the dates reported to the FDA.
The conduct that gave rise to Ranbaxy’s guilty plea took place over a period of years, during which the company received early warnings that something was wrong. The company hired auditors and started to investigate evidence of abuses. But its actions never translated into real change. Four years after the first signs of trouble, those problems led the company to distribute an epilepsy drug that failed tests, had unknown impurities, and would not maintain its expected shelf life. The ultimate result was a $500 million resolution – the largest drug safety settlement ever with a generic drug manufacturer.
A scenario like this is, in many ways, a compliance officer’s worst nightmare. And it demonstrates how a company can have the tools it needs to avoid violations of law, and yet have such violations happen anyway. To be sure, Ranbaxy’s compliance operation could have done more than it did – its auditors, for instance, said that the company badly needed cGMP training; that training never happened. But policies alone are not enough.
That is why we have put a renewed emphasis on identifying non-monetary measures that will help us to prevent the recurrence of misconduct. That happened with Ranbaxy, where an earlier civil consent decree called, among other things, for the company to establish an Office of Data Reliability that would work with its manufacturing, testing, approval, and compliance operations to ensure that all future drug applications are audited for accuracy before submission. Indeed, just last week, the consent decree allowed FDA to move swiftly and respond forcefully when it learned of problems at yet another Ranbaxy facility.
Non-monetary measures were also a key feature of our $1.5 billion criminal and civil resolution in 2012 with Abbott Laboratories for conduct relating to its epilepsy drug Depakote. Working with the company and with our partners in Office of the Inspector General of the Department of Health and Human Services, we crafted a resolution designed to ensure high-level accountability for the company’s compliance efforts. It imposes a term of probation for five years which requires Abbott to report any probable violations of the FDCA, and requires that its CEO personally certify compliance with this reporting requirement. It contains a corporate integrity agreement with the HHS-OIG that requires, among other things, Abbott’s board of directors to review the efficacy of the company’s compliance effort. And it demands that Abbott institute policies to ensure that its scientific research and publications foster increased understanding of scientific, clinical, or healthcare issues.
As these settlements have made clear, we are not interested in merely collecting a large fine and moving on to the next case. We strive to give companies the incentives – and the tools – to craft better compliance practices in the future. And we want to work together with you, the people most responsible for compliance, to achieve real change.
The second common interest between the government and industry that I want to highlight is transparency about the conduct we investigate.
The impact of the cases we bring extends beyond the individuals and companies whose wrongdoing is at issue. Given the size, scope and reach of the pharmaceutical industry, we recognize that our efforts can have a profound impact, not only on the pharmaceutical industry, but also on the lives of countless Americans. Each victory we achieve in fighting a single instance of fraud helps to deter others from following the same path.
In order for this comprehensive approach to be successful, we must be clear about what misconduct gave rise to a criminal or civil resolution. As a result, we continue to emphasize the importance of explaining the conduct that has given rise to the settlements we negotiate.
That kind of transparency benefits the industry by clarifying the factual basis for the actions we take. And it benefits the American people by maximizing the impact of each dollar spent on health care fraud prevention and by prompting other companies to avoid the same risks to patient health and safety.
Being transparent about our enforcement efforts also means distinguishing conduct that is lawful and even beneficial from conduct that is illegal and harmful. For example, we recognize the value of giving doctors the freedom to decide, in consultation with their patients, what treatments to use. And we acknowledge the importance of an open dialogue in which pharmaceutical companies and physicians share truthful information about a product’s likely effects.
That said, where a company crosses the line and distributes its products intending them to be used in ways that are not approved as safe and effective by the FDA, we will act aggressively.
Many of you are familiar with November’s $2.2 billion settlement with Johnson & Johnson. In that case, the government alleged, among other things, that a J&J subsidiary, Janssen Pharmaceuticals, distributed the antipsychotic drug Risperdal to the nation’s most vulnerable patients – elderly nursing home residents, children, and individuals with mental disabilities – for uses that the FDA had never approved. Indeed, according to the government, Janssen distributed the drug to health care providers for elderly, non-schizophrenic dementia patients despite knowing that those uses were not approved and that the drug posed serious health risks to the elderly, including an increased risk of stroke.
Misbranding like this undermines the regulatory regime that we rely on to ensure that medicines and medical devices are safe. And it can have catastrophic consequences for patients. That is why the government will continue to bring these cases, and why we think it is so important that the public – and the industry in particular – understand the conduct at issue.
Finally, third, we have a common interest in ensuring that corporate compliance not only is the right thing to do but also is a winning business strategy.
That means pursuing companies that seek an unfair advantage by breaking the law. The World Health Organization, for example, estimates that more than half of the drugs sold online are counterfeit and contain useless or even harmful ingredients. And so the Civil Division has a team of attorneys who pursue counterfeit pharmaceutical fraud. These efforts are critical to protecting the millions of Americans who purchase their medications through online pharmacies. But they are also critical to protecting the legitimate businesses that suffer when fraudulent conduct distorts the marketplace. We want to ensure that companies that are committed to doing things right have the opportunity to compete on a level playing field.
Rewarding compliance also means acknowledging when companies and individuals do the right thing and voluntarily disclose wrongdoing. We recognize that most pharmaceutical companies are trying to play by the rules, that navigating the health care landscape is not always easy, and that many companies and individuals do their best to get it right.
We want to make clear that the decision to come forward is the right one. When a company or individual acts responsibly by timely and voluntarily disclosing unlawful conduct, we will give serious consideration to that disclosure in deciding whether or how to charge or resolve the matter. Likewise, we will credit actions taken once the government has started to investigate.
Of course, each case is unique, so there is no one formula for cooperation – just as there is no formula for the penalty for wrongdoing. But if we all aim to encourage a culture of compliance, to implement policies that can identify problems early, and to work together when fraud is found, your companies and your customers will be in the best possible position.
I want to close by emphasizing how seriously the Justice Department takes its responsibility to ensure that fraud does not pay – to ensure that all of you who encourage your organizations to act ethically are rewarded for doing so.
We reject the pernicious idea that a company can succeed by violating the law and treating health care fraud enforcement as a cost of doing business. We continue to insist on resolutions that eliminate any economic incentive to engage in and attempt to conceal unlawful conduct. We continue to seek criminal penalties, against both companies and individuals, under appropriate circumstances. We continue to demand accountability by vigilantly enforcing federal laws against those who seek an unfair advantage at the expense of patients and taxpayers.
A competitive health care marketplace, undistorted by fraud, is good for providers as well as patients. That is why I am so pleased to be here and so convinced that events such as this are vital. These gatherings enhance our respective practices and our understanding of our respective positions. They allow all of us to consider new ideas and varying perspectives. And they allow us to explore new ways to work together to enhance Americans’ trust in their health care systems.
I thank the organizers for the chance to address these issues with you, and I look forward to continuing to work with all of you in the future.
Thank you.
Assistant Attorney General Stuart F. Delery Delivers the Keynote Address at the CBI Pharmaceutical Compliance Congress
Washington, DC ~ Wednesday, January 29, 2014
Thank you, Cindy [Cetani, Chief Compliance Officer of Novartis Pharmaceuticals Corporation]. And thank you to the Pharma Congress co-chairs and organizers for inviting me to be here this morning.
I am especially pleased to have the chance to speak to you at a gathering dedicated to compliance in the pharmaceutical industry. As head of the Civil Division at the Department of Justice, I oversee much of the federal government’s civil litigation in courts across the country. Attorneys in the Civil Division litigate cases involving national security and immigration policy. They defend federal statutes, regulations, and programs, ranging from the Affordable Care Act to actions taken in response to the financial crisis.
Yet among these significant matters, one of my top priorities is the work the Civil Division does to enforce the Food, Drug, and Cosmetic Act; the False Claims Act; and other laws protecting the safety and well-being of patients and the general public.
Why is health care enforcement so important? A major reason is the importance of the health care industry itself. From compliance officers to physicians, from corporate executives to nurses and researchers, you contribute to producing the drugs and medical devices on which we and our loved ones rely. Your efforts help to ensure that, when we are sick, the medicines we take will heal us effectively; that when we are in pain, we can obtain relief safely.
This Administration shares your commitment to improving the nation’s health care system. It has undertaken a comprehensive effort to ensure that more people have access to quality coverage, and that treatments are available at a lower cost to all of us – to patients, to health care providers, and to taxpayers. The innovative reforms and anti-fraud measures under the Affordable Care Act are a part of this effort.
So, too, is the Health Care Fraud Prevention and Enforcement Action Team, or HEAT, a cabinet-level initiative to increase coordination between the Civil Division and our partners at the Food and Drug Administration, the Centers for Medicare and Medicaid Services, and U.S. Attorneys’ offices around the country. This coordination has produced historic results. Since 2009, judgments and settlements under the FCA and FDCA have totaled over $20 billion.
But monetary results tell only part of the story.
Through our enforcement efforts, the government aims to promote an environment in which all of us can count on the soundness and efficiency of the health care system. If a pharmaceutical company pays kickbacks to physicians who prescribe its drugs, patients lose confidence that their doctors are making independent judgments about treatment options. If a Medicare provider bills for unnecessary services, taxpayers lose faith that our money is being well spent and health care becomes more expensive for everyone. If a manufacturer markets its products for uses that were never approved as safe and effective by the FDA, we worry that our loved ones might be receiving treatments that will harm them rather than help them, and that they may not elect the treatment with the best chance for a cure.
We are pursuing a broader range of health care fraud matters than ever before. We have cracked down on elder abuse in nursing homes, bringing criminal and civil cases against companies that harm seniors by providing grossly deficient care. We have pursued doctors who put patients at risk by performing unnecessary procedures to increase their bills, like a Florida dermatologist who performed thousands of unnecessary skin surgeries, participated in an illegal kickback scheme, and ultimately paid one of the largest False Claims Act settlements ever by an individual – $26.1 million. We have gone after the manufacturers of defective medicines or medical devices, as in our criminal and civil cases against a Boston Scientific subsidiary for knowingly selling defective cardiac defibrillators. We have sued companies that produce sterile products in non-sterile conditions, risking contamination and threatening patients with the possibility of dangerous infections. In short, we have demonstrated a commitment to targeting health care fraud and abuse wherever we find it.
By going after the practices that shake our trust in the marketplace and risk harm to us when we need medical care, we seek to make our health care system work better.
And in that respect, we all need to be allies and partners. When the focus is on financial recoveries, or on a specific investigation, it is easy to think of government and industry as adversaries. But when the goal is ensuring that Americans can trust the drugs they take and the medical advice they receive, it is clear that we are on the same side, attempting to stop unlawful practices that affect the safety and affordability of pharmaceuticals and medical devices.
And so I want to focus my remarks on three ways in which I believe the Civil Division’s anti-fraud enforcement interests align with your interests as corporate compliance officers, executives, and advisors.
First, we have a common interest in promoting an ethical corporate culture instead of maintaining a compliance program in name only.
No matter how well-designed a compliance program is, it cannot achieve its goals without achieving buy-in at all levels of the company. People must have the right incentives to see, report, and fix problems.
A common thread in many of our cases is that numerous individuals – ranging from executives to safety technicians – saw signs that misconduct was taking place and did not act. For example, in May 2013 the generic drug manufacturer Ranbaxy pleaded guilty to felony charges relating to producing and distributing adulterated drugs from two of its manufacturing facilities in India. Ranbaxy acknowledged that it had continued to distribute drugs that had failed critical tests, violated current Good Manufacturing Practices, and falsified records to cover up systematically incomplete testing, sometimes performing stability tests weeks or months after the dates reported to the FDA.
The conduct that gave rise to Ranbaxy’s guilty plea took place over a period of years, during which the company received early warnings that something was wrong. The company hired auditors and started to investigate evidence of abuses. But its actions never translated into real change. Four years after the first signs of trouble, those problems led the company to distribute an epilepsy drug that failed tests, had unknown impurities, and would not maintain its expected shelf life. The ultimate result was a $500 million resolution – the largest drug safety settlement ever with a generic drug manufacturer.
A scenario like this is, in many ways, a compliance officer’s worst nightmare. And it demonstrates how a company can have the tools it needs to avoid violations of law, and yet have such violations happen anyway. To be sure, Ranbaxy’s compliance operation could have done more than it did – its auditors, for instance, said that the company badly needed cGMP training; that training never happened. But policies alone are not enough.
That is why we have put a renewed emphasis on identifying non-monetary measures that will help us to prevent the recurrence of misconduct. That happened with Ranbaxy, where an earlier civil consent decree called, among other things, for the company to establish an Office of Data Reliability that would work with its manufacturing, testing, approval, and compliance operations to ensure that all future drug applications are audited for accuracy before submission. Indeed, just last week, the consent decree allowed FDA to move swiftly and respond forcefully when it learned of problems at yet another Ranbaxy facility.
Non-monetary measures were also a key feature of our $1.5 billion criminal and civil resolution in 2012 with Abbott Laboratories for conduct relating to its epilepsy drug Depakote. Working with the company and with our partners in Office of the Inspector General of the Department of Health and Human Services, we crafted a resolution designed to ensure high-level accountability for the company’s compliance efforts. It imposes a term of probation for five years which requires Abbott to report any probable violations of the FDCA, and requires that its CEO personally certify compliance with this reporting requirement. It contains a corporate integrity agreement with the HHS-OIG that requires, among other things, Abbott’s board of directors to review the efficacy of the company’s compliance effort. And it demands that Abbott institute policies to ensure that its scientific research and publications foster increased understanding of scientific, clinical, or healthcare issues.
As these settlements have made clear, we are not interested in merely collecting a large fine and moving on to the next case. We strive to give companies the incentives – and the tools – to craft better compliance practices in the future. And we want to work together with you, the people most responsible for compliance, to achieve real change.
The second common interest between the government and industry that I want to highlight is transparency about the conduct we investigate.
The impact of the cases we bring extends beyond the individuals and companies whose wrongdoing is at issue. Given the size, scope and reach of the pharmaceutical industry, we recognize that our efforts can have a profound impact, not only on the pharmaceutical industry, but also on the lives of countless Americans. Each victory we achieve in fighting a single instance of fraud helps to deter others from following the same path.
In order for this comprehensive approach to be successful, we must be clear about what misconduct gave rise to a criminal or civil resolution. As a result, we continue to emphasize the importance of explaining the conduct that has given rise to the settlements we negotiate.
That kind of transparency benefits the industry by clarifying the factual basis for the actions we take. And it benefits the American people by maximizing the impact of each dollar spent on health care fraud prevention and by prompting other companies to avoid the same risks to patient health and safety.
Being transparent about our enforcement efforts also means distinguishing conduct that is lawful and even beneficial from conduct that is illegal and harmful. For example, we recognize the value of giving doctors the freedom to decide, in consultation with their patients, what treatments to use. And we acknowledge the importance of an open dialogue in which pharmaceutical companies and physicians share truthful information about a product’s likely effects.
That said, where a company crosses the line and distributes its products intending them to be used in ways that are not approved as safe and effective by the FDA, we will act aggressively.
Many of you are familiar with November’s $2.2 billion settlement with Johnson & Johnson. In that case, the government alleged, among other things, that a J&J subsidiary, Janssen Pharmaceuticals, distributed the antipsychotic drug Risperdal to the nation’s most vulnerable patients – elderly nursing home residents, children, and individuals with mental disabilities – for uses that the FDA had never approved. Indeed, according to the government, Janssen distributed the drug to health care providers for elderly, non-schizophrenic dementia patients despite knowing that those uses were not approved and that the drug posed serious health risks to the elderly, including an increased risk of stroke.
Misbranding like this undermines the regulatory regime that we rely on to ensure that medicines and medical devices are safe. And it can have catastrophic consequences for patients. That is why the government will continue to bring these cases, and why we think it is so important that the public – and the industry in particular – understand the conduct at issue.
Finally, third, we have a common interest in ensuring that corporate compliance not only is the right thing to do but also is a winning business strategy.
That means pursuing companies that seek an unfair advantage by breaking the law. The World Health Organization, for example, estimates that more than half of the drugs sold online are counterfeit and contain useless or even harmful ingredients. And so the Civil Division has a team of attorneys who pursue counterfeit pharmaceutical fraud. These efforts are critical to protecting the millions of Americans who purchase their medications through online pharmacies. But they are also critical to protecting the legitimate businesses that suffer when fraudulent conduct distorts the marketplace. We want to ensure that companies that are committed to doing things right have the opportunity to compete on a level playing field.
Rewarding compliance also means acknowledging when companies and individuals do the right thing and voluntarily disclose wrongdoing. We recognize that most pharmaceutical companies are trying to play by the rules, that navigating the health care landscape is not always easy, and that many companies and individuals do their best to get it right.
We want to make clear that the decision to come forward is the right one. When a company or individual acts responsibly by timely and voluntarily disclosing unlawful conduct, we will give serious consideration to that disclosure in deciding whether or how to charge or resolve the matter. Likewise, we will credit actions taken once the government has started to investigate.
Of course, each case is unique, so there is no one formula for cooperation – just as there is no formula for the penalty for wrongdoing. But if we all aim to encourage a culture of compliance, to implement policies that can identify problems early, and to work together when fraud is found, your companies and your customers will be in the best possible position.
I want to close by emphasizing how seriously the Justice Department takes its responsibility to ensure that fraud does not pay – to ensure that all of you who encourage your organizations to act ethically are rewarded for doing so.
We reject the pernicious idea that a company can succeed by violating the law and treating health care fraud enforcement as a cost of doing business. We continue to insist on resolutions that eliminate any economic incentive to engage in and attempt to conceal unlawful conduct. We continue to seek criminal penalties, against both companies and individuals, under appropriate circumstances. We continue to demand accountability by vigilantly enforcing federal laws against those who seek an unfair advantage at the expense of patients and taxpayers.
A competitive health care marketplace, undistorted by fraud, is good for providers as well as patients. That is why I am so pleased to be here and so convinced that events such as this are vital. These gatherings enhance our respective practices and our understanding of our respective positions. They allow all of us to consider new ideas and varying perspectives. And they allow us to explore new ways to work together to enhance Americans’ trust in their health care systems.
I thank the organizers for the chance to address these issues with you, and I look forward to continuing to work with all of you in the future.
Thank you.
FORMER CORRECTIONS OFFICER SENTENCED FOR PROVIDING DRUG DEAL ARMED SECURITY
FROM: JUSTICE DEPARTMENT
Tuesday, January 28, 2014
Former Corrections Officer Sentenced for His Role in Providing Armed Security for Drug Transactions
A former Puerto Rico Department of Corrections officer was sentenced today to serve 811 months in prison for his role in providing armed security for three drug transactions.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Rosa E. Rodriguez-Velez of the District of Puerto Rico, and Special Agent in Charge Carlos Cases of the FBI’s San Juan Field Office made the announcement.
Bernis Gonzalez Miranda, 27, was sentenced by U.S. District Judge Juan Perez Gimenez of the District of Puerto Rico. He was charged in a superseding indictment unsealed on Oct. 28, 2010, along with 89 law enforcement officers in Puerto Rico and 44 other individuals, as part of the FBI undercover operation known as Guard Shack.
In April 2012, a federal jury in San Juan found Gonzalez Miranda guilty of three counts of conspiracy to possess with intent to distribute more than five kilograms of cocaine, three counts of attempting to possess with the intent to distribute more than five kilograms of cocaine and three counts of possessing a firearm in furtherance of a drug transaction. According to the evidence presented in court, Gonzalez Miranda provided security for what he believed were illegal cocaine deals on June 15, July 2, and July 7, 2010. In fact, the purported drug transactions were part of an undercover FBI operation. On those days, the defendant’s actions included providing armed protection for the deals and escorting the buyer into and out of the transaction.
In return for the security he provided, Gonzalez Miranda received a cash payment of $2,000 for each transaction, and at sentencing he was ordered to forfeit the $6,000 he received.
The case was investigated by the FBI. The case was prosecuted by Trial Attorneys Kevin Driscoll and Monique Abrishami of the Criminal Division’s Public Integrity Section. The U.S. Attorney’s Office for the District of Puerto Rico also participated in the investigation and prosecution of this case.
Tuesday, January 28, 2014
Former Corrections Officer Sentenced for His Role in Providing Armed Security for Drug Transactions
A former Puerto Rico Department of Corrections officer was sentenced today to serve 811 months in prison for his role in providing armed security for three drug transactions.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Rosa E. Rodriguez-Velez of the District of Puerto Rico, and Special Agent in Charge Carlos Cases of the FBI’s San Juan Field Office made the announcement.
Bernis Gonzalez Miranda, 27, was sentenced by U.S. District Judge Juan Perez Gimenez of the District of Puerto Rico. He was charged in a superseding indictment unsealed on Oct. 28, 2010, along with 89 law enforcement officers in Puerto Rico and 44 other individuals, as part of the FBI undercover operation known as Guard Shack.
In April 2012, a federal jury in San Juan found Gonzalez Miranda guilty of three counts of conspiracy to possess with intent to distribute more than five kilograms of cocaine, three counts of attempting to possess with the intent to distribute more than five kilograms of cocaine and three counts of possessing a firearm in furtherance of a drug transaction. According to the evidence presented in court, Gonzalez Miranda provided security for what he believed were illegal cocaine deals on June 15, July 2, and July 7, 2010. In fact, the purported drug transactions were part of an undercover FBI operation. On those days, the defendant’s actions included providing armed protection for the deals and escorting the buyer into and out of the transaction.
In return for the security he provided, Gonzalez Miranda received a cash payment of $2,000 for each transaction, and at sentencing he was ordered to forfeit the $6,000 he received.
The case was investigated by the FBI. The case was prosecuted by Trial Attorneys Kevin Driscoll and Monique Abrishami of the Criminal Division’s Public Integrity Section. The U.S. Attorney’s Office for the District of Puerto Rico also participated in the investigation and prosecution of this case.
Wednesday, January 29, 2014
SECRETARY OF STATE KERRY MAKES REMARKS WITH PORTUGUESE FOREIGN MINISTER MACHETE
FROM: STATE DEPARTMENT
Remarks With Portuguese Foreign Minister Rui Machete Before Their Meeting
Remarks
John Kerry
Secretary of State
Treaty Room
Washington, DC
January 29, 2014
SECRETARY KERRY: Good afternoon, everybody. It’s my great privilege to welcome the Foreign Minister of Portugal Rui Machete. We are very old friends – that is to say, Portugal and the United States. We are --
FOREIGN MINISTER MACHETE: We are young.
SECRETARY KERRY: I am young. Together, we are young. But coming from Massachusetts, I have a very, very long history with the American Portuguese community. We have very, very strong ties with Portugal and a great affection for the relationship in those ties. And Portugal obviously has the longest historical links with the United States, and they have been a strong and important ally to us in many, many ways. Most recently, we have been joined by our friends from Portugal in the efforts in Afghanistan, and we’re very grateful to them for their commitment and for their willingness to really take risks and to be part of this significant effort.
In addition, Portugal has been working very, very hard to address significant economic challenges, and we applaud the work that they have done, the reforms and efforts they have put in place. We’re very hopeful that the TTIP, the Transatlantic Trade and Partnership Investment Act[1], will have an opportunity to be able to really make a difference. And we’re trying to close the gap on those negotiations and hope that they will be completed in the near term.
So, my pleasure to welcome you. We have a number of things to discuss. But I think the foreign minister knows I am married to a woman of Portuguese descent, and I hear Portuguese in my house every single day, so Muito Obrigado, thank you for coming, and happy to have you with us.
FOREIGN MINISTER MACHETE: You can speak Portuguese. (Laughter.)
I am particularly pleased and honored to have this opportunity in my – when I pay my first visit, official visit, to the United States to meet with Secretary of State John Kerry. We have some links. One of them is the fact that you are married with a magnificent woman and beautiful woman of Portuguese descent. And as the Secretary of State has said, we are allies many – along many, many years. We have been founders of NATO, and since then, we have cooperated in matters of defense. We have more than half a million Portuguese or people of Portuguese descent working in the United States. This is another link, a very important link that can contribute to this reinforcement of our friendship.
We have, too, strong bilateral relations that now are growing and that have surpassed the five billion euros, which is a bit more in dollars. And we have in common the certain preoccupations about the defense of the values of the West and about the defense (inaudible) of the West. And we hope that we can review the major issues that you have now to face in order to exchange views and to reinforce our cooperation, which is something that we consider very much and is very, very important in our relationship with the United States.
And I think that the United States can continue to count with Portugal as a reliable, reliant friend, along this world – that it is not flat, but it is (inaudible). Thank you very much.
SECRETARY KERRY: Thank you, Minister. Thank you very much. Appreciate it. Thank you, sir. Thank you.
QUESTION: Mr. Secretary, what did you think of the State of the Union last night?
SECRETARY KERRY: Beg your pardon?
QUESTION: What did you think of the State of the Union?
SECRETARY KERRY: I thought it was excellent. The President did a great job. Thank you.
FOREIGN MINISTER MACHETE: Thank you.
Remarks With Portuguese Foreign Minister Rui Machete Before Their Meeting
Remarks
John Kerry
Secretary of State
Treaty Room
Washington, DC
January 29, 2014
SECRETARY KERRY: Good afternoon, everybody. It’s my great privilege to welcome the Foreign Minister of Portugal Rui Machete. We are very old friends – that is to say, Portugal and the United States. We are --
FOREIGN MINISTER MACHETE: We are young.
SECRETARY KERRY: I am young. Together, we are young. But coming from Massachusetts, I have a very, very long history with the American Portuguese community. We have very, very strong ties with Portugal and a great affection for the relationship in those ties. And Portugal obviously has the longest historical links with the United States, and they have been a strong and important ally to us in many, many ways. Most recently, we have been joined by our friends from Portugal in the efforts in Afghanistan, and we’re very grateful to them for their commitment and for their willingness to really take risks and to be part of this significant effort.
In addition, Portugal has been working very, very hard to address significant economic challenges, and we applaud the work that they have done, the reforms and efforts they have put in place. We’re very hopeful that the TTIP, the Transatlantic Trade and Partnership Investment Act[1], will have an opportunity to be able to really make a difference. And we’re trying to close the gap on those negotiations and hope that they will be completed in the near term.
So, my pleasure to welcome you. We have a number of things to discuss. But I think the foreign minister knows I am married to a woman of Portuguese descent, and I hear Portuguese in my house every single day, so Muito Obrigado, thank you for coming, and happy to have you with us.
FOREIGN MINISTER MACHETE: You can speak Portuguese. (Laughter.)
I am particularly pleased and honored to have this opportunity in my – when I pay my first visit, official visit, to the United States to meet with Secretary of State John Kerry. We have some links. One of them is the fact that you are married with a magnificent woman and beautiful woman of Portuguese descent. And as the Secretary of State has said, we are allies many – along many, many years. We have been founders of NATO, and since then, we have cooperated in matters of defense. We have more than half a million Portuguese or people of Portuguese descent working in the United States. This is another link, a very important link that can contribute to this reinforcement of our friendship.
We have, too, strong bilateral relations that now are growing and that have surpassed the five billion euros, which is a bit more in dollars. And we have in common the certain preoccupations about the defense of the values of the West and about the defense (inaudible) of the West. And we hope that we can review the major issues that you have now to face in order to exchange views and to reinforce our cooperation, which is something that we consider very much and is very, very important in our relationship with the United States.
And I think that the United States can continue to count with Portugal as a reliable, reliant friend, along this world – that it is not flat, but it is (inaudible). Thank you very much.
SECRETARY KERRY: Thank you, Minister. Thank you very much. Appreciate it. Thank you, sir. Thank you.
QUESTION: Mr. Secretary, what did you think of the State of the Union last night?
SECRETARY KERRY: Beg your pardon?
QUESTION: What did you think of the State of the Union?
SECRETARY KERRY: I thought it was excellent. The President did a great job. Thank you.
FOREIGN MINISTER MACHETE: Thank you.
U.S. DEFENSE DEPARTMENT CONTRACTS FOR JANUARY 29, 2014
FROM: DEFENSE DEPARTMENT
CONTRACTS
DEFENSE LOGISTICS AGENCY
AMI Industries, Inc., doing business as Goodrich Interiors Specialty Seating, Colorado Springs, Colo., has been awarded a maximum $8,817,781 firm-fixed-price contract for installation of aircraft ejection seats. This contract is a sole-source acquisition. Locations of performance are Colorado, Oman, and Iraq with an Aug. 15, 2016 performance completion date. Using service is Oman and Iraq. Type of appropriation is fiscal year 2015 through fiscal year 2016 foreign military sales. The contracting activity is the Defense Logistics Agency Aviation, Robins Air Force Base, Ga., (SPRWA1-14-D-0001).
ARMY
Foresight Renewable Solutions, LLC, San Francisco, Calif. was awarded a $7,000,000,000 firm--fixed-price, indefinite-delivery/indefinite-quantity contract for use in completing and awarding power purchase agreement task orders. Funding and work performance location will be determined with each order. Estimated completion date is Jan. 28, 2014. Bids were solicited via the Internet with 114 received. Army Corps of Engineers, Huntsville, Ala. is the contracting activity (W912DY-14-D-0008).
Raytheon Co., Andover, Mass. was awarded a $107,918,011 modification (P00108) to contract W31P4Q-09-C-0057 for work on the Patriot missile system. Fiscal 2014 research, development testing and evaluation funds in the amount of $107,819,011 were obligated at the time of the award. Estimated completion date is July 31, 2014. Work will be performed at Andover, Billerica, Burlington, and Tewksbury, Mass; El Segundo Cal.; El Paso Texas; Huntsville Ala.; Norfolk Va.; Pelham N.H.; and White Sands, N.M. Army Contracting Command, Redstone Arsenal, Ala. is the contracting activity.
Trax International, Las Vegas, N.V. was awarded a $44,113,856 modification (P00119) to contract W9124R-09-C-0003 for non-personal test support services for Yuma Proving Ground, Ariz. Fiscal 2014 research, development, testing, and evaluation funds in the amount of $44,113,856 were obligated at the time of the award. Estimated completion date is Jun 30, 2014. Work will be performed at Yuma, Ariz. and Ft. Greely, Alaska. Army Contracting Command, Yuma Proving Ground, Yuma, Ariz. is the contracting activity.
Martinex Construction, Inc., Charleston, S.C. was awarded a $19,244,014 firm-fixed-price contract for dredging three-to six million cubic yards of material from the Savannah and Brunswick inner harbor. Fiscal 2014 other procurement funds in the amount of $2,500,000 were obligated at the time of the award. Estimated completion date is Feb 16, 2015. Bids were solicited via the Internet with two received. Work will be performed in Savannah and Brunswick, Ga. Army Corps of Engineers, Savannah, Ga. is the contracting activity (W912HN-14-C-0005).
Accenture Federal Service, Reston, Va. was awarded $7,523,792 modification (D00347) to contract N00104-04-A-ZF12 for general fund enterprise business system onsite support and change requests. Fiscal 2014 operations and maintenance (Army) funds in the amount of $7,523,792 were obligated at the time of the award. Estimated completion date is June 27, 2015. Work will be performed in Kingstowne, Va. Army Contracting Command, Rock Island Arsenal, Ill. is the contracting activity.
AIR FORCE
Garrett Container Systems, Accident, Md., has been awarded a $19,541,184 indefinite-delivery/indefinite-quantity contract for common Department of Defense civilian and military items. This contract includes nine distinctive pieces of equipment that all security forces personnel utilize on a daily basis, including concealable body armor, Safariland 6005 SLS M-9 Berretta drop leg holster system (with Quick Locking System (QLS), mid-ride belt loop adapter, and small MOLLE adapter plate); nickel plated steel handcuffs, 21-inch expandable baton, mini-flashlight with holder, and whistle. Work will be performed at Accident, Md., and is expected to be complete by March 2, 2019. This award is the result of a competitive acquisition and all offerors were solicited using Federal Business Opportunities and three offers were received. Fiscal 2014 operations and maintenance funds in the amount of $3,000 will be awarded for a post award. 771st Enterprise Sourcing Squadron, Joint Base San Antonio, Texas, is the contracting activity (FA8054-14-D-0002).
SelectTech Services Corp., Centerville, Ohio, has been awarded a $7,680,250 firm-fixed-price contract for engineering technical support services. This contract is to provide personnel, equipment, tools, materials, and other items and services necessary to perform maintenance and fabrication of experimental processing and test equipment. The technical support shall consist of preventive and remedial maintenance, inspection, modification, overhaul, fabrication, repair, calibration, certification and transport of experimental/test equipment, and laboratory instrumentation. Work will be performed at Wright-Patterson Air Force Base, Ohio, and is expected to be complete by Jan. 28, 2015. This award is the result of a competitive acquisition and five offers were received. Fiscal 2014 research and development funds in the amount of $111,000 are being obligated at time of award. Air Force Research Laboratory/RQKE, Enterprise Contracting Branch, Wright-Patterson AFB, Ohio, is the contracting activity (FA8650-14-4016).
NAVY
Lockheed Martin Corp., Lockheed Martin Aeronautics Co., Ft. Worth, Texas, is being awarded a $35,781,319 modification to a previously awarded cost-plus-fixed-fee contract (N00019-02-C-3002) to develop a Universal Armament Interface capability in the F-35 software for Small Diameter Bomb II F-35 Mission Systems Integration Laboratory, ground test only. Work will be performed in Fort Worth, Texas, and is expected to be completed in April 2018. Fiscal 2014 research, development, test and evaluation, Navy funds in the amount of $4,000,000 will be obligated at time of award, none of which will expire at the end of the current fiscal year. The Naval Air Systems Command, Patuxent River, Md., is the contracting activity.
Raytheon Technical Services Co., LLC, Indianapolis, Ind., is being awarded a $17,257,960 firm-fixed-price delivery order against a previously issued basic ordering agreement (N00019-10-G-0006) for the procurement of 28 LAU-115D/A missile launchers for the Government of Australia and 64 LAU-116-B/A missile launchers for the U.S. Navy (34) and the Government of Australia (30). These missile launchers are in support of the F/A-18E/F and EA-18G aircraft. Work will be performed in Indianapolis, Ind., and is expected to be completed in September 2016. Foreign military sales and fiscal 2013 and 2014 aircraft procurement, Navy funds in the amount of $17,257,960 are being obligated on this contract, none of which will expire at the end of the current fiscal year. This contract combines purchases for the U.S. Navy ($5,819,780; 34 percent) and the Government of Australia ($11,438,180; 66 percent) under the Foreign Military Sales Program. The Naval Air Systems Command, Patuxent River, Md., is the contracting activity.
CoSTAR Services, Inc.*, San Antonio, Texas, is being awarded a $9,865,087 modification under a previously awarded firm-fixed-price, indefinite-delivery/indefinite-quantity contract (N69450-13-D-7700) to exercise option one for regional base operations support services at Naval Air Station, Jacksonville, Naval Station Mayport, Naval Operational Support Center (NOSC) Atlanta, Ga., NOSC Augusta, Ga., NOSC Columbus, Ga., NOSC Bessemer, Ala., NOSC Greenville, S.C., NOSC Miami, Fla., NOSC Tallahassee, Fla., NOSC West Palm Beach, Fla., and Marine Corps Reserve Center Jacksonville, Fla. Services include, but are not limited to facility investment, custodial, pest control, integrated solid waste management, and grounds maintenance and landscaping. This contract contains options, which if exercised, will bring the contract value to $14,483,217. Work will be performed in Jacksonville, Fla. (90 percent); West Palm Beach, Fla. (2 percent); Atlanta, Ga. (2 percent); Augusta, Ga. (1 percent); Columbus, Ga. (1 percent); Bessemer, Ala. (1 percent); Miami, Fla. (1 percent); Tallahassee, Fla. (1 percent); and Greenville, S.C. (1 percent). Work is expected to be completed in January 2015. Fiscal 2014 operation and maintenance, Navy; Fiscal 2014 operation and maintenance, Navy Reserve; Fiscal 2014 operation and maintenance, Marine Corps; Fiscal 2014 Navy working capital funds; Fiscal 2014 Defense health program funds; and Fiscal 2014 family housing operation and maintenance, Navy contract funds in the amount of $5,648,935 are being obligated on this award and will expire at the end of the current fiscal year. The Naval Facilities Engineering Command, Southeast, Jacksonville, Fla., is the contracting activity.
Detyens Shipyards, Inc., North Charleston, S.C. is being awarded a $9,654,055 firm-fixed-price contract for a 55-calendar day regular overhaul and dry docking of fleet replenishment oiler USNS Leroy Grumman (T-AO 195). Work will include port main engine clutch and coupling overhaul; antenna cleaning, inspecting and refurbishing; helicopter deck sprinkler and hose reel piping renewal; fall blocks and fairlead sheaves; hull painting and cleaning; and flight deck non-skid renewal. The ship’s primary mission is to provide fuel to U.S. Navy ships at sea and jet fuel to aircraft assigned to aircraft carriers. The contract includes options, which, if exercised, would bring the cumulative value of this contract to $11,349,714. Work will be performed in Charleston, S.C., and is expected to be completed by April 2014. Fiscal 2014 working capital contract funds in the amount of $9,654,055 are being obligated at the time of award and will expire at the end of the current fiscal year. This contract was competitively procured with proposals solicited via the Federal Business Opportunities website, with one offer received. The U.S. Navy’s Military Sealift Command Norfolk, Norfolk, Va., is the contracting activity (N32205-14-C-1001).
Vigor Marine LLC, Portland, Ore., is being awarded a $6,655,679 firm-fixed-price contract for a 55-calendar day regular overhaul and dry docking availability of fleet replenishment oiler USNS Yukon (T-AO 202). Work will include port main engine overhaul, gyro replacement, number four ship’s service diesel generator overhaul, docking and undocking and underwater hull cleaning and painting. Yukon’s primary mission is to provide fuel to U.S. Navy ships at sea and jet fuel to aircraft assigned to aircraft carriers. The contract includes options which, if exercised, would bring the total contract value to $8,092,975. Work will be performed in Portland, Ore., and is expected to be completed by April 2014. Fiscal 2014 working capital contract funds in the amount of $6,655,679 are being obligated at the time of award and will expire at the end of the current fiscal year. This contract was competitively procured with proposals solicited via the Federal Business Opportunities website, with two offers received. The U.S. Navy’s Military Sealift Command Norfolk, Norfolk, Va., is the contracting activity (N32205-14-C-1009).
*Small Business
CONTRACTS
DEFENSE LOGISTICS AGENCY
AMI Industries, Inc., doing business as Goodrich Interiors Specialty Seating, Colorado Springs, Colo., has been awarded a maximum $8,817,781 firm-fixed-price contract for installation of aircraft ejection seats. This contract is a sole-source acquisition. Locations of performance are Colorado, Oman, and Iraq with an Aug. 15, 2016 performance completion date. Using service is Oman and Iraq. Type of appropriation is fiscal year 2015 through fiscal year 2016 foreign military sales. The contracting activity is the Defense Logistics Agency Aviation, Robins Air Force Base, Ga., (SPRWA1-14-D-0001).
ARMY
Foresight Renewable Solutions, LLC, San Francisco, Calif. was awarded a $7,000,000,000 firm--fixed-price, indefinite-delivery/indefinite-quantity contract for use in completing and awarding power purchase agreement task orders. Funding and work performance location will be determined with each order. Estimated completion date is Jan. 28, 2014. Bids were solicited via the Internet with 114 received. Army Corps of Engineers, Huntsville, Ala. is the contracting activity (W912DY-14-D-0008).
Raytheon Co., Andover, Mass. was awarded a $107,918,011 modification (P00108) to contract W31P4Q-09-C-0057 for work on the Patriot missile system. Fiscal 2014 research, development testing and evaluation funds in the amount of $107,819,011 were obligated at the time of the award. Estimated completion date is July 31, 2014. Work will be performed at Andover, Billerica, Burlington, and Tewksbury, Mass; El Segundo Cal.; El Paso Texas; Huntsville Ala.; Norfolk Va.; Pelham N.H.; and White Sands, N.M. Army Contracting Command, Redstone Arsenal, Ala. is the contracting activity.
Trax International, Las Vegas, N.V. was awarded a $44,113,856 modification (P00119) to contract W9124R-09-C-0003 for non-personal test support services for Yuma Proving Ground, Ariz. Fiscal 2014 research, development, testing, and evaluation funds in the amount of $44,113,856 were obligated at the time of the award. Estimated completion date is Jun 30, 2014. Work will be performed at Yuma, Ariz. and Ft. Greely, Alaska. Army Contracting Command, Yuma Proving Ground, Yuma, Ariz. is the contracting activity.
Martinex Construction, Inc., Charleston, S.C. was awarded a $19,244,014 firm-fixed-price contract for dredging three-to six million cubic yards of material from the Savannah and Brunswick inner harbor. Fiscal 2014 other procurement funds in the amount of $2,500,000 were obligated at the time of the award. Estimated completion date is Feb 16, 2015. Bids were solicited via the Internet with two received. Work will be performed in Savannah and Brunswick, Ga. Army Corps of Engineers, Savannah, Ga. is the contracting activity (W912HN-14-C-0005).
Accenture Federal Service, Reston, Va. was awarded $7,523,792 modification (D00347) to contract N00104-04-A-ZF12 for general fund enterprise business system onsite support and change requests. Fiscal 2014 operations and maintenance (Army) funds in the amount of $7,523,792 were obligated at the time of the award. Estimated completion date is June 27, 2015. Work will be performed in Kingstowne, Va. Army Contracting Command, Rock Island Arsenal, Ill. is the contracting activity.
AIR FORCE
Garrett Container Systems, Accident, Md., has been awarded a $19,541,184 indefinite-delivery/indefinite-quantity contract for common Department of Defense civilian and military items. This contract includes nine distinctive pieces of equipment that all security forces personnel utilize on a daily basis, including concealable body armor, Safariland 6005 SLS M-9 Berretta drop leg holster system (with Quick Locking System (QLS), mid-ride belt loop adapter, and small MOLLE adapter plate); nickel plated steel handcuffs, 21-inch expandable baton, mini-flashlight with holder, and whistle. Work will be performed at Accident, Md., and is expected to be complete by March 2, 2019. This award is the result of a competitive acquisition and all offerors were solicited using Federal Business Opportunities and three offers were received. Fiscal 2014 operations and maintenance funds in the amount of $3,000 will be awarded for a post award. 771st Enterprise Sourcing Squadron, Joint Base San Antonio, Texas, is the contracting activity (FA8054-14-D-0002).
SelectTech Services Corp., Centerville, Ohio, has been awarded a $7,680,250 firm-fixed-price contract for engineering technical support services. This contract is to provide personnel, equipment, tools, materials, and other items and services necessary to perform maintenance and fabrication of experimental processing and test equipment. The technical support shall consist of preventive and remedial maintenance, inspection, modification, overhaul, fabrication, repair, calibration, certification and transport of experimental/test equipment, and laboratory instrumentation. Work will be performed at Wright-Patterson Air Force Base, Ohio, and is expected to be complete by Jan. 28, 2015. This award is the result of a competitive acquisition and five offers were received. Fiscal 2014 research and development funds in the amount of $111,000 are being obligated at time of award. Air Force Research Laboratory/RQKE, Enterprise Contracting Branch, Wright-Patterson AFB, Ohio, is the contracting activity (FA8650-14-4016).
NAVY
Lockheed Martin Corp., Lockheed Martin Aeronautics Co., Ft. Worth, Texas, is being awarded a $35,781,319 modification to a previously awarded cost-plus-fixed-fee contract (N00019-02-C-3002) to develop a Universal Armament Interface capability in the F-35 software for Small Diameter Bomb II F-35 Mission Systems Integration Laboratory, ground test only. Work will be performed in Fort Worth, Texas, and is expected to be completed in April 2018. Fiscal 2014 research, development, test and evaluation, Navy funds in the amount of $4,000,000 will be obligated at time of award, none of which will expire at the end of the current fiscal year. The Naval Air Systems Command, Patuxent River, Md., is the contracting activity.
Raytheon Technical Services Co., LLC, Indianapolis, Ind., is being awarded a $17,257,960 firm-fixed-price delivery order against a previously issued basic ordering agreement (N00019-10-G-0006) for the procurement of 28 LAU-115D/A missile launchers for the Government of Australia and 64 LAU-116-B/A missile launchers for the U.S. Navy (34) and the Government of Australia (30). These missile launchers are in support of the F/A-18E/F and EA-18G aircraft. Work will be performed in Indianapolis, Ind., and is expected to be completed in September 2016. Foreign military sales and fiscal 2013 and 2014 aircraft procurement, Navy funds in the amount of $17,257,960 are being obligated on this contract, none of which will expire at the end of the current fiscal year. This contract combines purchases for the U.S. Navy ($5,819,780; 34 percent) and the Government of Australia ($11,438,180; 66 percent) under the Foreign Military Sales Program. The Naval Air Systems Command, Patuxent River, Md., is the contracting activity.
CoSTAR Services, Inc.*, San Antonio, Texas, is being awarded a $9,865,087 modification under a previously awarded firm-fixed-price, indefinite-delivery/indefinite-quantity contract (N69450-13-D-7700) to exercise option one for regional base operations support services at Naval Air Station, Jacksonville, Naval Station Mayport, Naval Operational Support Center (NOSC) Atlanta, Ga., NOSC Augusta, Ga., NOSC Columbus, Ga., NOSC Bessemer, Ala., NOSC Greenville, S.C., NOSC Miami, Fla., NOSC Tallahassee, Fla., NOSC West Palm Beach, Fla., and Marine Corps Reserve Center Jacksonville, Fla. Services include, but are not limited to facility investment, custodial, pest control, integrated solid waste management, and grounds maintenance and landscaping. This contract contains options, which if exercised, will bring the contract value to $14,483,217. Work will be performed in Jacksonville, Fla. (90 percent); West Palm Beach, Fla. (2 percent); Atlanta, Ga. (2 percent); Augusta, Ga. (1 percent); Columbus, Ga. (1 percent); Bessemer, Ala. (1 percent); Miami, Fla. (1 percent); Tallahassee, Fla. (1 percent); and Greenville, S.C. (1 percent). Work is expected to be completed in January 2015. Fiscal 2014 operation and maintenance, Navy; Fiscal 2014 operation and maintenance, Navy Reserve; Fiscal 2014 operation and maintenance, Marine Corps; Fiscal 2014 Navy working capital funds; Fiscal 2014 Defense health program funds; and Fiscal 2014 family housing operation and maintenance, Navy contract funds in the amount of $5,648,935 are being obligated on this award and will expire at the end of the current fiscal year. The Naval Facilities Engineering Command, Southeast, Jacksonville, Fla., is the contracting activity.
Detyens Shipyards, Inc., North Charleston, S.C. is being awarded a $9,654,055 firm-fixed-price contract for a 55-calendar day regular overhaul and dry docking of fleet replenishment oiler USNS Leroy Grumman (T-AO 195). Work will include port main engine clutch and coupling overhaul; antenna cleaning, inspecting and refurbishing; helicopter deck sprinkler and hose reel piping renewal; fall blocks and fairlead sheaves; hull painting and cleaning; and flight deck non-skid renewal. The ship’s primary mission is to provide fuel to U.S. Navy ships at sea and jet fuel to aircraft assigned to aircraft carriers. The contract includes options, which, if exercised, would bring the cumulative value of this contract to $11,349,714. Work will be performed in Charleston, S.C., and is expected to be completed by April 2014. Fiscal 2014 working capital contract funds in the amount of $9,654,055 are being obligated at the time of award and will expire at the end of the current fiscal year. This contract was competitively procured with proposals solicited via the Federal Business Opportunities website, with one offer received. The U.S. Navy’s Military Sealift Command Norfolk, Norfolk, Va., is the contracting activity (N32205-14-C-1001).
Vigor Marine LLC, Portland, Ore., is being awarded a $6,655,679 firm-fixed-price contract for a 55-calendar day regular overhaul and dry docking availability of fleet replenishment oiler USNS Yukon (T-AO 202). Work will include port main engine overhaul, gyro replacement, number four ship’s service diesel generator overhaul, docking and undocking and underwater hull cleaning and painting. Yukon’s primary mission is to provide fuel to U.S. Navy ships at sea and jet fuel to aircraft assigned to aircraft carriers. The contract includes options which, if exercised, would bring the total contract value to $8,092,975. Work will be performed in Portland, Ore., and is expected to be completed by April 2014. Fiscal 2014 working capital contract funds in the amount of $6,655,679 are being obligated at the time of award and will expire at the end of the current fiscal year. This contract was competitively procured with proposals solicited via the Federal Business Opportunities website, with two offers received. The U.S. Navy’s Military Sealift Command Norfolk, Norfolk, Va., is the contracting activity (N32205-14-C-1009).
*Small Business
SEC CHARGES SCOTTRADE WITH FAILING TO PROVIDE COMPLETE INFORMATION ON TRADES
FROM: SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today charged Scottrade with failing to provide the agency with complete and accurate information about trades done by the firm and its customers, which is commonly called “blue sheet” data.
Scottrade, which is headquartered in St. Louis, agreed to settle the charges by paying a $2.5 million penalty and admitting it violated the recordkeeping provisions of the federal securities laws.
According to the SEC’s order instituting settled administrative proceedings, broker-dealers like Scottrade are required upon request to electronically provide the SEC with blue sheet data so the agency can use it to identify and analyze trades in the course of investigations and other work. Blue sheets contain the details of each equity or options trade that is routed through clearing broker-dealers. The term “blue sheet” stems from the color of the forms originally mailed to broker-dealers to complete and return to the SEC. The process shifted to an electronic format in the 1980s.
“Blue sheet information is the lifeblood of many SEC investigations and examinations,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “When firms fail to provide us with accurate or complete trade data, it risks compromising our ability to detect and investigate securities law violations.”
According to the SEC’s order, the SEC staff sent electronic blue sheet requests to Scottrade in December 2011 in connection with an investigation the agency was conducting into suspicious trades made in a Scottrade online brokerage account that was the apparent victim of account intrusion. After receiving the blue sheet information, SEC staff discovered that Scottrade’s submission was incomplete as it failed to include data from a number of trades that resulted from unauthorized account intrusions. After the SEC staff contacted Scottrade questioning the data, the firm informed the agency that a computer coding error had resulted in the inadvertent omission of the trades.
The SEC’s order finds that Scottrade’s computer coding error resulted in the omission of trades from blue sheet responses it made to the SEC from March 2006 to April 2012. During that time, Scottrade failed to provide the required blue sheet information on 1,231 occasions. Scottrade has corrected the deficient code responsible for its inaccurate and incomplete blue sheet responses.
“Scottrade’s failure over six years to provide accurate and complete blue sheet trading data was egregious and violated its obligations under the securities laws,” said Daniel M. Hawke, director of the SEC’s Philadelphia Regional Office and chief of the Enforcement Division’s Market Abuse Unit. “Firms need to ensure that that they comply with their blue sheet production obligations or, as in Scottrade’s case, they will pay a heavy price if they fail to do so.”
Scottrade admits the facts underlying the charges made in the SEC’s order, which requires Scottrade to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Exchange Act of 1934 and Rules 17a-4(j), 17a-25, and 17a-4(f)(3)(v). In addition to the $2.5 million penalty, Scottrade has agreed to undertake such remedial measures as retaining an independent consultant to review its supervisory, compliance, and other policies and procedures designed to detect and prevent securities laws violations related to blue sheet submissions.
The SEC’s investigation was conducted by Lawrence Parrish and Daniel Koster of the Philadelphia Regional Office. The case was supervised by Kingdon Kase. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.
The Securities and Exchange Commission today charged Scottrade with failing to provide the agency with complete and accurate information about trades done by the firm and its customers, which is commonly called “blue sheet” data.
Scottrade, which is headquartered in St. Louis, agreed to settle the charges by paying a $2.5 million penalty and admitting it violated the recordkeeping provisions of the federal securities laws.
According to the SEC’s order instituting settled administrative proceedings, broker-dealers like Scottrade are required upon request to electronically provide the SEC with blue sheet data so the agency can use it to identify and analyze trades in the course of investigations and other work. Blue sheets contain the details of each equity or options trade that is routed through clearing broker-dealers. The term “blue sheet” stems from the color of the forms originally mailed to broker-dealers to complete and return to the SEC. The process shifted to an electronic format in the 1980s.
“Blue sheet information is the lifeblood of many SEC investigations and examinations,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “When firms fail to provide us with accurate or complete trade data, it risks compromising our ability to detect and investigate securities law violations.”
According to the SEC’s order, the SEC staff sent electronic blue sheet requests to Scottrade in December 2011 in connection with an investigation the agency was conducting into suspicious trades made in a Scottrade online brokerage account that was the apparent victim of account intrusion. After receiving the blue sheet information, SEC staff discovered that Scottrade’s submission was incomplete as it failed to include data from a number of trades that resulted from unauthorized account intrusions. After the SEC staff contacted Scottrade questioning the data, the firm informed the agency that a computer coding error had resulted in the inadvertent omission of the trades.
The SEC’s order finds that Scottrade’s computer coding error resulted in the omission of trades from blue sheet responses it made to the SEC from March 2006 to April 2012. During that time, Scottrade failed to provide the required blue sheet information on 1,231 occasions. Scottrade has corrected the deficient code responsible for its inaccurate and incomplete blue sheet responses.
“Scottrade’s failure over six years to provide accurate and complete blue sheet trading data was egregious and violated its obligations under the securities laws,” said Daniel M. Hawke, director of the SEC’s Philadelphia Regional Office and chief of the Enforcement Division’s Market Abuse Unit. “Firms need to ensure that that they comply with their blue sheet production obligations or, as in Scottrade’s case, they will pay a heavy price if they fail to do so.”
Scottrade admits the facts underlying the charges made in the SEC’s order, which requires Scottrade to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Exchange Act of 1934 and Rules 17a-4(j), 17a-25, and 17a-4(f)(3)(v). In addition to the $2.5 million penalty, Scottrade has agreed to undertake such remedial measures as retaining an independent consultant to review its supervisory, compliance, and other policies and procedures designed to detect and prevent securities laws violations related to blue sheet submissions.
The SEC’s investigation was conducted by Lawrence Parrish and Daniel Koster of the Philadelphia Regional Office. The case was supervised by Kingdon Kase. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.
PRESS STATEMENT ON NEW TUNISIAN GOVERNMENT
FROM: STATE DEPARTMENT
Formation of New Tunisian Government
Press Statement
John Kerry
Secretary of State
Washington, DC
January 29, 2014
The ratification of a new democratic constitution and the installation of an independent government to lead the country towards new elections are historic milestones in Tunisia’s democratic transition.
Three years ago this month, Tunisians inspired the world when a brave fruit vendor sparked a revolution that set the country on a path to democracy. While Tunisia’s transition to democracy is not yet complete, these are very important steps. They are proof positive that Tunisia’s democratic transition can succeed.
Tunisia’s new constitution enshrines universal human rights for all Tunisians. It continues Tunisia’s long tradition of respect for the rights of women and minorities, and it will allow the Tunisian people to realize the aspirations they expressed during their revolution three years ago: democracy, rule of law, personal security, and economic opportunity.
The installation of a new, independent government under the leadership of Prime Minister Mehdi Jomaa is an important step to ensure that the country has competent and non-partisan leadership during the period leading to the next election. I look forward to working with Prime Minister Jomaa and his colleagues during this critical period.
The United States also welcomes the establishment of the Independent Elections Commission, and we encourage the new government to move quickly to set a date for early elections so that Tunisian citizens can choose their new leaders and determine the country’s future. Just as men and women made their voices heard on the streets of Tunis, their voices must also be heard in the halls of government.
The United States will continue to support Tunisia’s transition to an enduring democracy in which the rights of all Tunisians are respected and protected.
Formation of New Tunisian Government
Press Statement
John Kerry
Secretary of State
Washington, DC
January 29, 2014
The ratification of a new democratic constitution and the installation of an independent government to lead the country towards new elections are historic milestones in Tunisia’s democratic transition.
Three years ago this month, Tunisians inspired the world when a brave fruit vendor sparked a revolution that set the country on a path to democracy. While Tunisia’s transition to democracy is not yet complete, these are very important steps. They are proof positive that Tunisia’s democratic transition can succeed.
Tunisia’s new constitution enshrines universal human rights for all Tunisians. It continues Tunisia’s long tradition of respect for the rights of women and minorities, and it will allow the Tunisian people to realize the aspirations they expressed during their revolution three years ago: democracy, rule of law, personal security, and economic opportunity.
The installation of a new, independent government under the leadership of Prime Minister Mehdi Jomaa is an important step to ensure that the country has competent and non-partisan leadership during the period leading to the next election. I look forward to working with Prime Minister Jomaa and his colleagues during this critical period.
The United States also welcomes the establishment of the Independent Elections Commission, and we encourage the new government to move quickly to set a date for early elections so that Tunisian citizens can choose their new leaders and determine the country’s future. Just as men and women made their voices heard on the streets of Tunis, their voices must also be heard in the halls of government.
The United States will continue to support Tunisia’s transition to an enduring democracy in which the rights of all Tunisians are respected and protected.
SPYEYE MALWARE DISTRIBUTOR PLEADS GUILTY TO FRAUD CHARGES
FROM: JUSTICE DEPARTMENT
Tuesday, January 28, 2014
Cyber Criminal Pleads Guilty to Developing and Distributing Notorious Spyeye Malware
Aleksandr Andreevich Panin, a Russian national also known as “Gribodemon” and “Harderman,” has pleaded guilty to conspiracy to commit wire and bank fraud for his role as the primary developer and distributor of the malicious software known as “SpyEye,” which, according to industry estimates, has infected over 1.4 million computers in the United States and abroad.
Acting Assistant Attorney General Mythili Raman of the Department of Justice’s Criminal Division, U.S. Attorney Sally Quillian Yates of the Northern District of Georgia and Acting Special Agent in Charge Ricky Maxwell of the FBI’s Atlanta Field Office made the announcement.
“Given the recent revelations of massive thefts of financial information from large retail stores across the country, Americans do not need to be reminded how devastating it is when cyber criminals surreptitiously install malicious codes on computer networks and then siphon away private information from unsuspecting consumers,” said Acting Assistant Attorney General Raman. “Today, thanks to the tireless work of prosecutors and law enforcement agents, Aleksandr Panin has admitted to his orchestration of this criminal scheme to use ‘SpyEye’ to invade the privacy of Americans by infecting their computers through a dangerous botnet. As this prosecution shows, cyber criminals – even when they sit on the other side of the world and attempt to hide behind online aliases – are never outside the reach of U.S. law enforcement.”
“As several recent and widely reported data breaches have shown, cyber-attacks pose a critical threat to our nation’s economic security,” said U.S. Attorney Yates. “Today’s plea is a great leap forward in our campaign against those attacks. Panin was the architect of a pernicious malware known as ‘SpyEye’ that infected computers worldwide. He commercialized the wholesale theft of financial and personal information. And now he is being held to account for his actions. Cyber criminals be forewarned: you cannot hide in the shadows of the Internet. We will find you and bring you to justice.”
“This investigation highlights the importance of the FBI’s focus on the top echelon of cyber criminals,” said Acting FBI SAC Maxwell. “The apprehension of Mr. Panin means that one of the world’s top developers of malicious software is no longer in a position to create computer programs that can victimize people around the world. Botnets such as SpyEye represent one of the most dangerous types of malicious software on the Internet today, which can steal people’s identities and money from their bank accounts without their knowledge. The FBI will continue working with partners domestically and internationally to combat cyber-crime.”
According to the charges and other information presented in court, SpyEye is a sophisticated malicious computer code that is designed to automate the theft of confidential personal and financial information, such as online banking credentials, credit card information, usernames, passwords, PINs, and other personally identifying information. The SpyEye virus facilitates this theft of information by secretly infecting victims’ computers, enabling cyber criminals to remotely control the infected computers through command and control (C2) servers. Once a computer is infected and under their control, cyber criminals can remotely access the infected computers, without authorization, and steal victims’ personal and financial information through a variety of techniques, including “web injects,” “keystroke loggers,” and “credit card grabbers.” The victims’ stolen personal and financial data is then surreptitiously transmitted to the C2 servers, where it is used to steal money from the victims’ financial accounts.
Panin was the primary developer and distributor of the SpyEye virus. Operating from Russia from 2009 to 2011, Panin conspired with others, including codefendant Hamza Bendelladj, an Algerian national also known as “Bx1,” to develop, market and sell various versions of the SpyEye virus and component parts on the Internet. Panin allowed cyber criminals to customize their purchases to include tailor-made methods of obtaining victims’ personal and financial information, as well as marketed versions that specifically targeted designated financial institutions. Panin advertised the SpyEye virus on online, invitation-only criminal forums. He sold versions of the SpyEye virus for prices ranging from $1,000 to $8,500. Panin is believed to have sold the SpyEye virus to at least 150 “clients,” who, in turn, used them to set up their own C2 servers. One of Panin’s clients, “Soldier,” is reported to have made more than $3.2 million in a six-month period using the SpyEye virus.
According to industry estimates, the SpyEye virus has infected more than 1.4 million computers in the United States and abroad, and it was the preeminent malware toolkit used from approximately 2009 to 2011. Based on information received from the financial services industry, over 10,000 bank accounts have been compromised by SpyEye infections since 2013 alone. Some cyber criminals continue to use SpyEye today, although its effectiveness has been limited since software makers have added SpyEye to malicious software removal programs.
In February 2011, pursuant to a federal search warrant, the FBI searched and seized a SpyEye C2 server allegedly operated by Bendelladj in the Northern District of Georgia. That C2 server controlled over 200 computers infected with the SpyEye virus and contained information from numerous financial institutions.
In June and July 2011, FBI covert sources communicated directly with Panin, who was using his online nicknames “Gribodemon” and “Harderman,” about the SpyEye virus. FBI sources then purchased a version of SpyEye from Panin that contained features designed to steal confidential financial information, initiate fraudulent online banking transactions, install keystroke loggers, and initiate distributed denial of service (DDoS) attacks from computers infected with the malware.
On Dec. 20, 2011, a Northern District of Georgia grand jury returned a 23-count indictment against Panin, who had yet to be fully identified, and Bendelladj. The indictment charged one count of conspiracy to commit wire and bank fraud, 10 counts of wire fraud, one count of conspiracy to commit computer fraud, and 11 counts of computer fraud. A superseding indictment was subsequently returned identifying Panin by his true name.
Bendelladj was apprehended at Suvarnabhumi Airport in Bangkok, Thailand, on Jan. 5, 2013 and was extradited from Thailand to the United States on May 2, 2013. His charges are currently pending in the Northern District of Georgia.
Panin was arrested by U.S. authorities on July 1, 2013, when he flew through Hartsfield-Jackson Atlanta International Airport.
The investigation also has led to the arrest of four of Panin’s SpyEye clients and associates in the United Kingdom and Bulgaria.
On Jan. 28, 2014, Panin pleaded guilty to conspiring to commit wire and bank fraud. Sentencing for Panin is scheduled for April 29, 2014, before United States District Judge Amy Totenberg of the Northern District of Georgia.
The case is being investigated by the FBI. Assistant United States Attorney Scott Ferber of the Northern District of Georgia, Trial Attorney Ethan Arenson of the Criminal Division’s Computer Crime and Intellectual Property Section and Senior Litigation Counsel Carol Sipperly of the Criminal Division’s Fraud Section are prosecuting the case. Former Assistant United States Attorney Nicholas Oldham also participated in the prosecution while with the Criminal Division.
Valuable assistance was provided by the Criminal Division’s Office of International Affairs and the following international law enforcement agencies: The United Kingdom’s National Crime Agency, the Royal Thai Police-Immigration Bureau, the National Police of the Netherlands - National High Tech Crime Unit (NHTCU), Dominican Republic’s Departamento Nacional de Investigaciones (DNI), the Cybercrime Department at the State Agency for National Security-Bulgaria and the Australian Federal Police (AFP).
Valuable assistance also was provided by the following private sector partners: Trend Micro’s Forward-looking Threat Research (FTR) Team, Microsoft’s Digital Crimes Unit, Mandiant, Dell SecureWorks, Trusteer and the Norwegian Security Research Team known as “Underworld.no”.
Tuesday, January 28, 2014
Cyber Criminal Pleads Guilty to Developing and Distributing Notorious Spyeye Malware
Aleksandr Andreevich Panin, a Russian national also known as “Gribodemon” and “Harderman,” has pleaded guilty to conspiracy to commit wire and bank fraud for his role as the primary developer and distributor of the malicious software known as “SpyEye,” which, according to industry estimates, has infected over 1.4 million computers in the United States and abroad.
Acting Assistant Attorney General Mythili Raman of the Department of Justice’s Criminal Division, U.S. Attorney Sally Quillian Yates of the Northern District of Georgia and Acting Special Agent in Charge Ricky Maxwell of the FBI’s Atlanta Field Office made the announcement.
“Given the recent revelations of massive thefts of financial information from large retail stores across the country, Americans do not need to be reminded how devastating it is when cyber criminals surreptitiously install malicious codes on computer networks and then siphon away private information from unsuspecting consumers,” said Acting Assistant Attorney General Raman. “Today, thanks to the tireless work of prosecutors and law enforcement agents, Aleksandr Panin has admitted to his orchestration of this criminal scheme to use ‘SpyEye’ to invade the privacy of Americans by infecting their computers through a dangerous botnet. As this prosecution shows, cyber criminals – even when they sit on the other side of the world and attempt to hide behind online aliases – are never outside the reach of U.S. law enforcement.”
“As several recent and widely reported data breaches have shown, cyber-attacks pose a critical threat to our nation’s economic security,” said U.S. Attorney Yates. “Today’s plea is a great leap forward in our campaign against those attacks. Panin was the architect of a pernicious malware known as ‘SpyEye’ that infected computers worldwide. He commercialized the wholesale theft of financial and personal information. And now he is being held to account for his actions. Cyber criminals be forewarned: you cannot hide in the shadows of the Internet. We will find you and bring you to justice.”
“This investigation highlights the importance of the FBI’s focus on the top echelon of cyber criminals,” said Acting FBI SAC Maxwell. “The apprehension of Mr. Panin means that one of the world’s top developers of malicious software is no longer in a position to create computer programs that can victimize people around the world. Botnets such as SpyEye represent one of the most dangerous types of malicious software on the Internet today, which can steal people’s identities and money from their bank accounts without their knowledge. The FBI will continue working with partners domestically and internationally to combat cyber-crime.”
According to the charges and other information presented in court, SpyEye is a sophisticated malicious computer code that is designed to automate the theft of confidential personal and financial information, such as online banking credentials, credit card information, usernames, passwords, PINs, and other personally identifying information. The SpyEye virus facilitates this theft of information by secretly infecting victims’ computers, enabling cyber criminals to remotely control the infected computers through command and control (C2) servers. Once a computer is infected and under their control, cyber criminals can remotely access the infected computers, without authorization, and steal victims’ personal and financial information through a variety of techniques, including “web injects,” “keystroke loggers,” and “credit card grabbers.” The victims’ stolen personal and financial data is then surreptitiously transmitted to the C2 servers, where it is used to steal money from the victims’ financial accounts.
Panin was the primary developer and distributor of the SpyEye virus. Operating from Russia from 2009 to 2011, Panin conspired with others, including codefendant Hamza Bendelladj, an Algerian national also known as “Bx1,” to develop, market and sell various versions of the SpyEye virus and component parts on the Internet. Panin allowed cyber criminals to customize their purchases to include tailor-made methods of obtaining victims’ personal and financial information, as well as marketed versions that specifically targeted designated financial institutions. Panin advertised the SpyEye virus on online, invitation-only criminal forums. He sold versions of the SpyEye virus for prices ranging from $1,000 to $8,500. Panin is believed to have sold the SpyEye virus to at least 150 “clients,” who, in turn, used them to set up their own C2 servers. One of Panin’s clients, “Soldier,” is reported to have made more than $3.2 million in a six-month period using the SpyEye virus.
According to industry estimates, the SpyEye virus has infected more than 1.4 million computers in the United States and abroad, and it was the preeminent malware toolkit used from approximately 2009 to 2011. Based on information received from the financial services industry, over 10,000 bank accounts have been compromised by SpyEye infections since 2013 alone. Some cyber criminals continue to use SpyEye today, although its effectiveness has been limited since software makers have added SpyEye to malicious software removal programs.
In February 2011, pursuant to a federal search warrant, the FBI searched and seized a SpyEye C2 server allegedly operated by Bendelladj in the Northern District of Georgia. That C2 server controlled over 200 computers infected with the SpyEye virus and contained information from numerous financial institutions.
In June and July 2011, FBI covert sources communicated directly with Panin, who was using his online nicknames “Gribodemon” and “Harderman,” about the SpyEye virus. FBI sources then purchased a version of SpyEye from Panin that contained features designed to steal confidential financial information, initiate fraudulent online banking transactions, install keystroke loggers, and initiate distributed denial of service (DDoS) attacks from computers infected with the malware.
On Dec. 20, 2011, a Northern District of Georgia grand jury returned a 23-count indictment against Panin, who had yet to be fully identified, and Bendelladj. The indictment charged one count of conspiracy to commit wire and bank fraud, 10 counts of wire fraud, one count of conspiracy to commit computer fraud, and 11 counts of computer fraud. A superseding indictment was subsequently returned identifying Panin by his true name.
Bendelladj was apprehended at Suvarnabhumi Airport in Bangkok, Thailand, on Jan. 5, 2013 and was extradited from Thailand to the United States on May 2, 2013. His charges are currently pending in the Northern District of Georgia.
Panin was arrested by U.S. authorities on July 1, 2013, when he flew through Hartsfield-Jackson Atlanta International Airport.
The investigation also has led to the arrest of four of Panin’s SpyEye clients and associates in the United Kingdom and Bulgaria.
On Jan. 28, 2014, Panin pleaded guilty to conspiring to commit wire and bank fraud. Sentencing for Panin is scheduled for April 29, 2014, before United States District Judge Amy Totenberg of the Northern District of Georgia.
The case is being investigated by the FBI. Assistant United States Attorney Scott Ferber of the Northern District of Georgia, Trial Attorney Ethan Arenson of the Criminal Division’s Computer Crime and Intellectual Property Section and Senior Litigation Counsel Carol Sipperly of the Criminal Division’s Fraud Section are prosecuting the case. Former Assistant United States Attorney Nicholas Oldham also participated in the prosecution while with the Criminal Division.
Valuable assistance was provided by the Criminal Division’s Office of International Affairs and the following international law enforcement agencies: The United Kingdom’s National Crime Agency, the Royal Thai Police-Immigration Bureau, the National Police of the Netherlands - National High Tech Crime Unit (NHTCU), Dominican Republic’s Departamento Nacional de Investigaciones (DNI), the Cybercrime Department at the State Agency for National Security-Bulgaria and the Australian Federal Police (AFP).
Valuable assistance also was provided by the following private sector partners: Trend Micro’s Forward-looking Threat Research (FTR) Team, Microsoft’s Digital Crimes Unit, Mandiant, Dell SecureWorks, Trusteer and the Norwegian Security Research Team known as “Underworld.no”.
MAN CONVICTED OF TAX FRAUD FACES UP TO 23 YEARS IN PRISON, $1.2 MILLION IN FINES
FROM: JUSTICE DEPARTMENT
Wednesday, January 22, 2014
Florida Man Convicted of Tax Fraud
The Justice Department and the Internal Revenue Service (IRS) announced today that on Jan. 21, 2014, a federal jury in Palm Beach, Fla., convicted Paul F. Wrubleski, a resident of Weston, Fla., of one count of corruptly impeding the due administration of the internal revenue laws and four counts of filing false claims for tax refunds. Wrubleski was remanded into custody yesterday.
According to court documents and the evidence presented at trial, Wrubleski had a decade-long pattern of filing false documents with the IRS. Wrubleski impeded the IRS by filing false W-4 forms that claimed he was exempt from income tax withholding and by filing false tax returns, including four tax returns that requested over $1.5 million in federal refunds. Wrubleski also sent obstructive letters, tax returns and other false documents to the IRS between 1999 and 2010. In addition, the indictment alleged and the evidence proved that Wrubleski filed for bankruptcy in 2006 in order to impede IRS collection actions.
Sentencing is scheduled for April 3, 2014. Wrubleski faces a statutory maximum potential sentence of 23 years in prison and faces a fine of up to $1.2 million.
Assistant Attorney General Kathryn Keneally of the Tax Division commended the efforts of special agents of IRS – Criminal Investigation who investigated the case, as well as Tax Division Trial Attorneys Charles Edgar Jr. and Jed Silversmith, who prosecuted the case, with local assistance from the U.S. Attorney’s Office for the Southern District of Florida.
Wednesday, January 22, 2014
Florida Man Convicted of Tax Fraud
The Justice Department and the Internal Revenue Service (IRS) announced today that on Jan. 21, 2014, a federal jury in Palm Beach, Fla., convicted Paul F. Wrubleski, a resident of Weston, Fla., of one count of corruptly impeding the due administration of the internal revenue laws and four counts of filing false claims for tax refunds. Wrubleski was remanded into custody yesterday.
According to court documents and the evidence presented at trial, Wrubleski had a decade-long pattern of filing false documents with the IRS. Wrubleski impeded the IRS by filing false W-4 forms that claimed he was exempt from income tax withholding and by filing false tax returns, including four tax returns that requested over $1.5 million in federal refunds. Wrubleski also sent obstructive letters, tax returns and other false documents to the IRS between 1999 and 2010. In addition, the indictment alleged and the evidence proved that Wrubleski filed for bankruptcy in 2006 in order to impede IRS collection actions.
Sentencing is scheduled for April 3, 2014. Wrubleski faces a statutory maximum potential sentence of 23 years in prison and faces a fine of up to $1.2 million.
Assistant Attorney General Kathryn Keneally of the Tax Division commended the efforts of special agents of IRS – Criminal Investigation who investigated the case, as well as Tax Division Trial Attorneys Charles Edgar Jr. and Jed Silversmith, who prosecuted the case, with local assistance from the U.S. Attorney’s Office for the Southern District of Florida.
FTC ISSUES CONSUMER GUIDE ON TALKING TO KIDS ABOUT THE INTERNET
FROM: FEDERAL TRADE COMMISSION
FTC’s ‘Net Cetera’ Advises Parents on How to Talk to Their Kids About Internet Use
Newly Released Update Includes Advice on Mobile Apps, Wi-Fi, Text Message Spam and More
The Federal Trade Commission has issued an updated version of the popular free consumer guide, “Net Cetera: Chatting with Kids About Being Online.” The revised booklet contains updated information for parents and other adults to use when talking with kids about how to be safe, secure and responsible online.
The revision adds new topics that reflect changes in the online world since the guide was first issued in 2009. In the revised booklet, adults can find advice on how to talk with kids about mobile apps, using public Wi-Fi securely and how to recognize text message spam. The booklet also includes information about the recent changes to the Children’s Online Privacy Protection Act Rule.
“We’re pleased to put this incredibly popular free booklet back in the hands of parents, teachers and others who can help kids make good decisions about their online habits,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “If the last version is any indication, this booklet will inspire good discussions with children about this important issue.”
More than 9.3 million copies of the original version of the booklet were distributed, making it one of the Commission’s most-requested publications. The new version can be ordered for free on the FTC’s bulk order site.
Information from the booklet is also available online at OnGuardOnline.gov, the federal government’s website to help Americans be safe, secure and responsible online, as well as on consumer.ftc.gov, the FTC’s consumer information site.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.
FTC’s ‘Net Cetera’ Advises Parents on How to Talk to Their Kids About Internet Use
Newly Released Update Includes Advice on Mobile Apps, Wi-Fi, Text Message Spam and More
The Federal Trade Commission has issued an updated version of the popular free consumer guide, “Net Cetera: Chatting with Kids About Being Online.” The revised booklet contains updated information for parents and other adults to use when talking with kids about how to be safe, secure and responsible online.
The revision adds new topics that reflect changes in the online world since the guide was first issued in 2009. In the revised booklet, adults can find advice on how to talk with kids about mobile apps, using public Wi-Fi securely and how to recognize text message spam. The booklet also includes information about the recent changes to the Children’s Online Privacy Protection Act Rule.
“We’re pleased to put this incredibly popular free booklet back in the hands of parents, teachers and others who can help kids make good decisions about their online habits,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “If the last version is any indication, this booklet will inspire good discussions with children about this important issue.”
More than 9.3 million copies of the original version of the booklet were distributed, making it one of the Commission’s most-requested publications. The new version can be ordered for free on the FTC’s bulk order site.
Information from the booklet is also available online at OnGuardOnline.gov, the federal government’s website to help Americans be safe, secure and responsible online, as well as on consumer.ftc.gov, the FTC’s consumer information site.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.
POLICY UPDATE ON WORLD WITHOUT NUCLEAR WEAPONS
FROM: U.S. STATE DEPARTMENT
Next Steps in U.S. Arms Control Policy
Remarks
Frank A. Rose
Deputy Assistant Secretary, Bureau of Arms Control, Verification and Compliance
Stockholm, Sweden
January 17, 2014
Thank you for that kind introduction.
Today, I would like to provide an update on our work on implementing the agenda laid out nearly four years ago by President Obama in Prague, when he committed the United States to seek the peace and security of a world without nuclear weapons, a goal that he reaffirmed in his speech in Berlin this past June.
As President Obama noted in Prague and repeated in Berlin, this will not be easy. It will require persistence and patience, and may not happen in his lifetime. Still, over the last four years we have succeeded in moving closer to this goal.
In 2010, the Administration concluded a Nuclear Posture Review, or NPR, which outlines the President’s agenda for reducing nuclear dangers, as well as advancing the broader security interests of the United States and its allies. As the NPR states, the international security environment has changed dramatically since the end of the Cold War: the threat of global nuclear war has become remote, but the risk of nuclear attack has increased. The traditional concept of nuclear deterrence — the idea that a country would not initiate a nuclear war for fear of nuclear retaliation — does not apply to terrorists. While our nuclear arsenal has little relevance in deterring this threat, concerted action by all states to uphold their NPT obligations – including those related to disarmament – is important for building a sense of common purpose that helps maintain support from partners around the world to uphold and strengthen the nuclear nonproliferation regime. Securing sensitive nuclear materials worldwide will also make it harder for terrorists to acquire those materials.
Russia has been a key partner in our efforts to secure or eliminate these materials. For instance, the downblending of highly enriched uranium (HEU) to low enriched uranium (LEU) by Russia under the 1993 U.S.-Russia HEU Purchase Agreement has now been completed. The final delivery of the resultant LEU to the United States took place in December. Under this agreement, 500 metric tons of HEU from dismantled Russian weapons has been converted into LEU and delivered to the United States to fuel U.S. commercial nuclear power plants. The HEU that was converted by downblending was enough to produce approximately 20,000 nuclear warheads.
In the United States, an additional 374 metric tons of U.S. HEU has been declared excess to nuclear weapons needs; most of which will be downblended or used as fuel in naval or research reactors. In 2011, the United States and Russia brought into force the Plutonium Management and Disposition Agreement and its 2006 and 2010 protocols, which require each side to dispose of 34 metric tons of weapons-grade plutonium – enough in total for about 17,000 nuclear weapons – and thus permanently remove this material from military programs. Russia has also been an essential partner in the U.S. Global Threat Reduction Initiative efforts to convert research reactors worldwide from HEU to LEU and repatriate those reactors’ HEU to the country of origin. These efforts have now converted or verified the shutdown of over 88 research and test reactors and isotope production facilities, and removed over 5,017 kg of HEU for secure storage, downblending and disposition.
In addition to working on the prevention of nuclear proliferation and nuclear terrorism, we have taken steps to reduce the role of nuclear weapons in U.S. national security strategy. We are not developing new nuclear weapons or pursuing new nuclear missions; we have committed not to use or threaten to use nuclear weapons against nonnuclear weapon states that are party to the NPT and in compliance with their nuclear nonproliferation obligations; and we have clearly stated that it is in the U.S. interest and that of all other nations that the 68-year record of nonuse of nuclear weapons be extended forever.
In June of 2013, in conjunction with his Berlin speech, President Obama issued new guidance that aligns U.S. nuclear policies to the 21st century security environment. This was the latest concrete step the President has taken to advance his Prague agenda and the long-term goal of achieving the peace and security of a world without nuclear weapons. After a comprehensive review, the President determined that we can ensure the security of the United States and our allies and maintain a strong and credible strategic deterrent while safely pursuing up to a one-third reduction in deployed strategic nuclear weapons from the level established in the New START Treaty.
Let me now address what we believe our next steps should be.
The United States and Russia still possess the vast majority of nuclear weapons in the world, and we have a shared responsibility to continue the process of reducing our nuclear arms. With that in mind, we have a great example in the New START Treaty. The implementation of New START, now in its third year, is going well. When New START is fully implemented, the United States and the Russian Federation will each have no more than 1,550 deployed strategic nuclear warheads – the lowest levels since the 1950s. Our overall nuclear stockpile is 85% below Cold War levels.
Going forward, the United States has made it clear that we are committed to continuing a step-by-step process to further reduce nuclear arsenals.
To this end, we are engaged in a bilateral dialogue with Russia to promote strategic stability and increase transparency on a reciprocal basis. We are hopeful our dialogue will lead to greater reciprocal transparency and negotiation of even further nuclear weapons reductions.
The President also said in Berlin, that we will work with our NATO Allies to seek bold reductions in U.S. and Russian nonstrategic nuclear weapons in Europe. The NPR underscores the U.S. position that decisions on NATO’s nuclear posture should be made by consensus among Allies. As you may know, NATO has already dramatically reduced its holdings of, and reliance on, nuclear weapons since the end of the Cold War. Allies made clear in the 2012 Deterrence and Defense Posture Review that NATO is prepared to consider further reducing its requirement for nonstrategic nuclear weapons assigned to the Alliance in the context of reciprocal steps by Russia, taking into account the greater Russian stockpiles of nonstrategic nuclear weapons stationed in the Euro-Atlantic area. Allies have also affirmed their desire to work with Russia on reciprocal transparency steps. While seeking to create the conditions for further nuclear reductions, NATO will continue to ensure that the Alliance’s nuclear deterrent remains safe, secure, and effective, as NATO is committed to remaining a nuclear alliance for as long as nuclear weapons exist.
There are still further initiatives that are part of this Administration’s nuclear agenda. In Berlin, President Obama called on all nations to begin negotiations on a treaty that ends the production of fissile materials for use nuclear weapons. A Fissile Material Cutoff Treaty or FMCT would codify an end to the production of weapons-grade fissile material needed to create nuclear weapons, cap stockpiles worldwide, and provide the basis for further, deeper, reductions in nuclear arsenals.
Beginning multilateral negotiations on the FMCT is a priority objective for the United States and for the vast majority of states, and we have been working to initiate such negotiations at the Conference on Disarmament in Geneva. An overwhelming majority of nations support the immediate commencement of FMCT negotiations. The United States is consulting with China, France, Russia, and the United Kingdom, as well as others, including India and Pakistan, to find a way to commence negotiations of an FMCT. And we will, of course, participate in the upcoming Group of Government Experts, which will begin its work this Spring.
In 2009, the five nuclear-weapon states, or “P5,” began to meet regularly for discussions on issues of transparency, mutual confidence, and verification. Since the 2010 NPT Review Conference, these discussions have expanded to address P5 implementation of our commitments under the NPT and the 2010 Review Conference Action Plan. Russia hosted the most recent P5 conference in Geneva, Switzerland in April 2013, where the P5 reviewed progress towards fulfilling the commitments made at the 2010 NPT Review Conference, and continued discussions on issues related to all three pillars of the NPT: nonproliferation, disarmament, and the peaceful uses of nuclear energy, including confidence-building, transparency, and verification experiences. We are looking forward to continued discussions at a fifth P5 conference in 2014 in Beijing.
In addition to providing a senior level policy forum for discussion and coordination among the P5, this process has spawned a series of discussions among policymakers and government experts on a variety of issues. China is leading a P5 working group on nuclear definitions and terminology. The P5 are discussing approaches to a common format for NPT reporting, and we are also beginning to engage at expert levels on some important verification and transparency issues. As we proceed, we would like the P5 conferences and intersessional meetings to develop further practical transparency measures that build confidence and predictability.
I should add at this point that when discussing areas to broaden and deepen our cooperation and to advance our common interests, it’s necessary to address the question of missile defense. Over the past twenty years, both Democratic and Republican administrations have concluded it is in our national interest to cooperate with Russia on missile defense.
While the United States and Russia continue to have our differences on this issue, the United States remains convinced that missile defense cooperation and transparency between the United States and Russia (and between NATO and Russia) is in the national security interests of all countries involved. For that reason, the United States remains open to missile defense cooperation with Russia. To be clear, U.S. missile defense efforts are focused on defending our homeland as well as our European, Middle Eastern, and Asian allies against ballistic missile threats coming from regional actors. These are threats that are growing, and must be met.
In meeting those threats, it is important to note that U.S. missile defenses are not designed for, or capable of, undermining the Russian or Chinese strategic deterrents. For its part, Russia has been insistent on receiving legally binding guarantees that our missile defenses will not threaten its strategic deterrent. The United States has been clear that we cannot agree to limit our missile defenses, but we believe that cooperation and transparency can provide Russia the visibility and predictability it seeks to confirm that U.S. and NATO missile defenses in Europe do not and will not undermine Russia’s strategic deterrent. In addition to making all of us safer, cooperation on missile defense would send a strong message to proliferators that the United States, NATO, and Russia are working together to counter proliferation. With regard to China, the United States welcomes the opportunity to engage in a more robust dialogue about strategic stability, including missile defense.
As our work together with Russia over the past four years has shown, we can produce significant results that benefit both countries. Our ongoing cooperation in implementing the New START Treaty is a great example of this.
None of this will be easy, but the policies the Administration is pursuing are suited for our security needs and tailored for the global security threats of the 21st century. By maintaining and supporting a safe, secure and effective stockpile — sufficient to deter any adversary and guarantee the defense of our allies — at the same time that we pursue responsible verifiable reductions through arms control, we will make this world a safer place.
Thank you and I look forward to your questions.
Next Steps in U.S. Arms Control Policy
Remarks
Frank A. Rose
Deputy Assistant Secretary, Bureau of Arms Control, Verification and Compliance
Stockholm, Sweden
January 17, 2014
Thank you for that kind introduction.
Today, I would like to provide an update on our work on implementing the agenda laid out nearly four years ago by President Obama in Prague, when he committed the United States to seek the peace and security of a world without nuclear weapons, a goal that he reaffirmed in his speech in Berlin this past June.
As President Obama noted in Prague and repeated in Berlin, this will not be easy. It will require persistence and patience, and may not happen in his lifetime. Still, over the last four years we have succeeded in moving closer to this goal.
In 2010, the Administration concluded a Nuclear Posture Review, or NPR, which outlines the President’s agenda for reducing nuclear dangers, as well as advancing the broader security interests of the United States and its allies. As the NPR states, the international security environment has changed dramatically since the end of the Cold War: the threat of global nuclear war has become remote, but the risk of nuclear attack has increased. The traditional concept of nuclear deterrence — the idea that a country would not initiate a nuclear war for fear of nuclear retaliation — does not apply to terrorists. While our nuclear arsenal has little relevance in deterring this threat, concerted action by all states to uphold their NPT obligations – including those related to disarmament – is important for building a sense of common purpose that helps maintain support from partners around the world to uphold and strengthen the nuclear nonproliferation regime. Securing sensitive nuclear materials worldwide will also make it harder for terrorists to acquire those materials.
Russia has been a key partner in our efforts to secure or eliminate these materials. For instance, the downblending of highly enriched uranium (HEU) to low enriched uranium (LEU) by Russia under the 1993 U.S.-Russia HEU Purchase Agreement has now been completed. The final delivery of the resultant LEU to the United States took place in December. Under this agreement, 500 metric tons of HEU from dismantled Russian weapons has been converted into LEU and delivered to the United States to fuel U.S. commercial nuclear power plants. The HEU that was converted by downblending was enough to produce approximately 20,000 nuclear warheads.
In the United States, an additional 374 metric tons of U.S. HEU has been declared excess to nuclear weapons needs; most of which will be downblended or used as fuel in naval or research reactors. In 2011, the United States and Russia brought into force the Plutonium Management and Disposition Agreement and its 2006 and 2010 protocols, which require each side to dispose of 34 metric tons of weapons-grade plutonium – enough in total for about 17,000 nuclear weapons – and thus permanently remove this material from military programs. Russia has also been an essential partner in the U.S. Global Threat Reduction Initiative efforts to convert research reactors worldwide from HEU to LEU and repatriate those reactors’ HEU to the country of origin. These efforts have now converted or verified the shutdown of over 88 research and test reactors and isotope production facilities, and removed over 5,017 kg of HEU for secure storage, downblending and disposition.
In addition to working on the prevention of nuclear proliferation and nuclear terrorism, we have taken steps to reduce the role of nuclear weapons in U.S. national security strategy. We are not developing new nuclear weapons or pursuing new nuclear missions; we have committed not to use or threaten to use nuclear weapons against nonnuclear weapon states that are party to the NPT and in compliance with their nuclear nonproliferation obligations; and we have clearly stated that it is in the U.S. interest and that of all other nations that the 68-year record of nonuse of nuclear weapons be extended forever.
In June of 2013, in conjunction with his Berlin speech, President Obama issued new guidance that aligns U.S. nuclear policies to the 21st century security environment. This was the latest concrete step the President has taken to advance his Prague agenda and the long-term goal of achieving the peace and security of a world without nuclear weapons. After a comprehensive review, the President determined that we can ensure the security of the United States and our allies and maintain a strong and credible strategic deterrent while safely pursuing up to a one-third reduction in deployed strategic nuclear weapons from the level established in the New START Treaty.
Let me now address what we believe our next steps should be.
The United States and Russia still possess the vast majority of nuclear weapons in the world, and we have a shared responsibility to continue the process of reducing our nuclear arms. With that in mind, we have a great example in the New START Treaty. The implementation of New START, now in its third year, is going well. When New START is fully implemented, the United States and the Russian Federation will each have no more than 1,550 deployed strategic nuclear warheads – the lowest levels since the 1950s. Our overall nuclear stockpile is 85% below Cold War levels.
Going forward, the United States has made it clear that we are committed to continuing a step-by-step process to further reduce nuclear arsenals.
To this end, we are engaged in a bilateral dialogue with Russia to promote strategic stability and increase transparency on a reciprocal basis. We are hopeful our dialogue will lead to greater reciprocal transparency and negotiation of even further nuclear weapons reductions.
The President also said in Berlin, that we will work with our NATO Allies to seek bold reductions in U.S. and Russian nonstrategic nuclear weapons in Europe. The NPR underscores the U.S. position that decisions on NATO’s nuclear posture should be made by consensus among Allies. As you may know, NATO has already dramatically reduced its holdings of, and reliance on, nuclear weapons since the end of the Cold War. Allies made clear in the 2012 Deterrence and Defense Posture Review that NATO is prepared to consider further reducing its requirement for nonstrategic nuclear weapons assigned to the Alliance in the context of reciprocal steps by Russia, taking into account the greater Russian stockpiles of nonstrategic nuclear weapons stationed in the Euro-Atlantic area. Allies have also affirmed their desire to work with Russia on reciprocal transparency steps. While seeking to create the conditions for further nuclear reductions, NATO will continue to ensure that the Alliance’s nuclear deterrent remains safe, secure, and effective, as NATO is committed to remaining a nuclear alliance for as long as nuclear weapons exist.
There are still further initiatives that are part of this Administration’s nuclear agenda. In Berlin, President Obama called on all nations to begin negotiations on a treaty that ends the production of fissile materials for use nuclear weapons. A Fissile Material Cutoff Treaty or FMCT would codify an end to the production of weapons-grade fissile material needed to create nuclear weapons, cap stockpiles worldwide, and provide the basis for further, deeper, reductions in nuclear arsenals.
Beginning multilateral negotiations on the FMCT is a priority objective for the United States and for the vast majority of states, and we have been working to initiate such negotiations at the Conference on Disarmament in Geneva. An overwhelming majority of nations support the immediate commencement of FMCT negotiations. The United States is consulting with China, France, Russia, and the United Kingdom, as well as others, including India and Pakistan, to find a way to commence negotiations of an FMCT. And we will, of course, participate in the upcoming Group of Government Experts, which will begin its work this Spring.
In 2009, the five nuclear-weapon states, or “P5,” began to meet regularly for discussions on issues of transparency, mutual confidence, and verification. Since the 2010 NPT Review Conference, these discussions have expanded to address P5 implementation of our commitments under the NPT and the 2010 Review Conference Action Plan. Russia hosted the most recent P5 conference in Geneva, Switzerland in April 2013, where the P5 reviewed progress towards fulfilling the commitments made at the 2010 NPT Review Conference, and continued discussions on issues related to all three pillars of the NPT: nonproliferation, disarmament, and the peaceful uses of nuclear energy, including confidence-building, transparency, and verification experiences. We are looking forward to continued discussions at a fifth P5 conference in 2014 in Beijing.
In addition to providing a senior level policy forum for discussion and coordination among the P5, this process has spawned a series of discussions among policymakers and government experts on a variety of issues. China is leading a P5 working group on nuclear definitions and terminology. The P5 are discussing approaches to a common format for NPT reporting, and we are also beginning to engage at expert levels on some important verification and transparency issues. As we proceed, we would like the P5 conferences and intersessional meetings to develop further practical transparency measures that build confidence and predictability.
I should add at this point that when discussing areas to broaden and deepen our cooperation and to advance our common interests, it’s necessary to address the question of missile defense. Over the past twenty years, both Democratic and Republican administrations have concluded it is in our national interest to cooperate with Russia on missile defense.
While the United States and Russia continue to have our differences on this issue, the United States remains convinced that missile defense cooperation and transparency between the United States and Russia (and between NATO and Russia) is in the national security interests of all countries involved. For that reason, the United States remains open to missile defense cooperation with Russia. To be clear, U.S. missile defense efforts are focused on defending our homeland as well as our European, Middle Eastern, and Asian allies against ballistic missile threats coming from regional actors. These are threats that are growing, and must be met.
In meeting those threats, it is important to note that U.S. missile defenses are not designed for, or capable of, undermining the Russian or Chinese strategic deterrents. For its part, Russia has been insistent on receiving legally binding guarantees that our missile defenses will not threaten its strategic deterrent. The United States has been clear that we cannot agree to limit our missile defenses, but we believe that cooperation and transparency can provide Russia the visibility and predictability it seeks to confirm that U.S. and NATO missile defenses in Europe do not and will not undermine Russia’s strategic deterrent. In addition to making all of us safer, cooperation on missile defense would send a strong message to proliferators that the United States, NATO, and Russia are working together to counter proliferation. With regard to China, the United States welcomes the opportunity to engage in a more robust dialogue about strategic stability, including missile defense.
As our work together with Russia over the past four years has shown, we can produce significant results that benefit both countries. Our ongoing cooperation in implementing the New START Treaty is a great example of this.
None of this will be easy, but the policies the Administration is pursuing are suited for our security needs and tailored for the global security threats of the 21st century. By maintaining and supporting a safe, secure and effective stockpile — sufficient to deter any adversary and guarantee the defense of our allies — at the same time that we pursue responsible verifiable reductions through arms control, we will make this world a safer place.
Thank you and I look forward to your questions.
DEFENSE OFFICIAL SAYS MILITARY COMPENSATION GROWTH RATE MUST BE SLOWED
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| DOD photo by Erin A. Kirk-Cuomo. |
FROM: DEFENSE DEPARTMENT
Fox Says DOD Must Slow Growth of Military Compensation
By Jim Garamone
American Forces Press Service
WASHINGTON, Jan. 28, 2014 – The Defense Department must slow the rate of growth in military pay and compensation or the organization will not be able to fight and win the nation’s wars, Acting Deputy Defense Secretary Christine H. Fox said here today.
Fox, testifying before the Senate Armed Services Committee, said DOD must get a handle on pay and benefits or risk sending service members into harm’s way unprepared.
The deputy thanked the senators for supporting the Bipartisan Budget Act, which she said mitigates the worst of the problems DOD faces under the Budget Control Act of 2011. Still, she added, it only goes through the next two years, and this is a long-term problem.
“Beyond those two years, the BCA remains the law of the land,” she said. “If sequestration is allowed to persist, our analysis shows that it will lead to a force that is too small, inadequately equipped and insufficiently trained to fully defend the nation’s interests.”
Given this budgetary background, DOD civilian and military leaders have said time and again that the one-third of the defense budget consumed by military compensation cannot be exempt as an area of defense savings. “We must find ways to slow the rate of growth,” Fox told the committee.
Inflation-adjusted pay and benefit costs are 40 percent higher than in 2001, even though the active force today is just slightly larger. Defense health care costs alone have grown from less than $20 billion in 2001 to nearly $50 billion in 2013. Payments for housing costs also have increased faster than inflation.
“If this department is going to maintain a future force that is properly sized, modern and ready, we clearly cannot maintain the last decade’s rate of military compensation growth,” Fox said.
Military service is about more than just a paycheck. The jobs and service military personnel perform are as important. If the department doesn’t have money to maintain equipment, or supply the latest technology, or get service members the latest and best training “then they are being done a disservice,” the deputy said.
“When they’re sent into harm’s way, this disservice can quickly transition into a breach of trust,” Fox said. “Here I am referring to our collective, sacred obligation to provide our troops with the finest training and equipment possible, so that they can deploy to combat able to accomplish their mission and return to their families.”
The department does have recommendations for slowing the growth of compensation fairly and effectively, Fox said. “Most notably, just this year, Congress accepted a 1 percent basic pay raise, even though the employment cost index called for an increase of 1.8 percent. We are currently reviewing all military pays and benefits, and may offer further proposals.”
Fox spoke directly to the “COLA-minus-one” or “CPI-minus-one” provision included as part of the Bipartisan Budget Act. The provision required capping cost-of-living raises in retirement pay for working-age military retirees at 1 percent below inflation, as measured by the Consumer Price Index.
“To my knowledge, no DOD officials were consulted on the details of the BBA, including the CPI-minus-one provision,” she said. “The department fully supported the changes made to the provision to exempt military disability retirement and survivors.”
The department does support a comprehensive review of this provision, the acting deputy defense secretary said, including its effect on retirees not currently exempted. “If the Congress decides to retain the CPI-minus-one approach, we strongly recommend it be modified to include ‘grandfathering,’” she said.
Fox called on Congress to refrain from changing military retirement until the Military Compensation and Retirement Modernization Commission presents its final report in February 2015.
“There are many ways we might change military retirement, including more fundamental reforms,” she said. “Because the CPI-minus-one provision does not go into effect until December 2015, there is ample time for such a careful review, including waiting for the commission to provide its input.”
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