Thursday, March 6, 2014

SECRETARY KERRY'S REMARKS AFTER MEETING OF INTERNATIONAL SUPPORT GROUP ON LEBANON

FROM:  U.S. STATE DEPARTMENT 
Remarks After Meeting of International Support Group on Lebanon
Press Availability
John Kerry
Secretary of State
Chief of Mission Residence
Paris, France
March 5, 2014

SECRETARY KERRY: Well, good evening everybody. Thank you very much. I know you’ve all been extremely patient and it’s been a long day.

First of all, I want to thank Foreign Minister Fabius and the French Government for a tremendous job of hosting the International Support Group on Lebanon today. And I really don’t want – none of us want the importance of what we came here to talk about with respect to Lebanon to be lost in all of the obvious discussions that have taken place with respect to the question of Ukraine.

But the countries that came to Paris today for this very important and timely meeting are – all of us – bound together by a very strong commitment to Lebanon. As Syria’s conflict spills over Lebanon’s borders, and as the refugee crisis grows, we are deeply concerned for the security and the sovereignty of the people of Lebanon and for their simple ability to be able to chart their own futures and fulfill the same basic aspirations that they share with everybody else on this planet.

The president, President Suleiman, pulled out and showed me a very dramatic charting that goes for the last few years – four different charts that show you the extraordinary change in Lebanon of the numbers of refugees as every year upwards, the entire country has become a swatch of red. Instead of red dots, the entire border is really red today because there are almost a million refugees in Lebanon. This has an extraordinary impact on the internal dynamics of a country: people who are looking for work, people who work for less; it drives wages down; it changes the nature of that nation. So the United States is very proud to have provided Lebanon just in the last year or so with respect to its development process $340 million the last few years in humanitarian aid. And we will continue to support the Lebanese Armed Forces and other security institutions.

Of course, you can’t talk about the values of sovereignty, security, and determination, and economic opportunity without coming quickly back to the events of the last days in Ukraine. Ukrainians told me yesterday in Kyiv how desperately they want a government that has the consent of the people and an economy that gives them a chance to be able to live just like everybody else. I told the story of a person who had been to Australia who came back and said “We just want to be able to live the way other people live, the way we’ve seen them live.”

Well, today our fellow foreign ministers and I met separately with our Ukrainian counterpart Foreign Minister Deshchytsia and our Russian counterpart Foreign Minister Lavrov. And we met as a group also, a group of concerned countries. We agreed to continue intense discussions in the coming days with Russia, with the Ukrainians, in order to see how we can help normalize the situation, stabilize it, and overcome the crisis. And those intentions are intentions that are shared exactly as I have described them between Russia, the United States, the European countries, and Ukrainians who were here.

All parties agreed today that it is important to try to resolve these issues through dialogue. The United States, with our partners, is focusing intensely on a remedy. And I don’t believe as any of us believe – President Obama doesn’t believe it, I don’t believe, the other countries we’re working with I know they don’t believe – that any of us are served by greater or further confrontation. And also, we met today to discuss these issues because we cannot and will not allow the integrity of the sovereignty of the country of Ukraine to be violated and for those violations to go unanswered.

Russia’s violation of Ukraine’s sovereignty and territorial integrity has actually united the world in support of the Ukrainian people. And this morning, Secretary Hagel announced that the Defense Department is taking concrete steps to reassure our NATO allies, steps like expanding our aviation detachment in Poland and our contributions to NATO’s Baltic Air Policing Mission.

This is on top of other steps that the United States has already taken, steps like suspending our bilateral discussions with Russia on trade and investment, suspending U.S.-Russia military engagement, and suspending preparations for the G8 summit in Sochi.

As I said yesterday in Kyiv and as President Obama has said as well, and as I said to Foreign Minister Lavrov today, Russia made a choice, and we have clearly stated that we believe it is the wrong choice, that is, the choice to move troops into Crimea. Russia can now choose to deescalate this situation, and we are committed to working with Russia and together with our friends and allies in an effort to provide a way for this entire situation to find the road to de-escalation. The United States is ready to work with all parties to make that happen and to make it happen as soon as possible.

We renew our call for Russia to speak directly with the Government of Ukraine, to send troops back to their bases, and to welcome international observers and human rights monitors. And we’ve seen today with what happened with Special Envoy Serry just how important it is to ensure the safety of those monitors and of those observers. Ukraine’s territorial integrity must be restored and must be respected.

From Lebanon to Ukraine, the United States stands ready to help our friends in a time of need. And today, those needs obviously are great in different places, different kinds of needs in different places. We especially thank our friends here in France for their partnership as we work to address these challenges and many others. For instance, Iran’s nuclear program – we’re working together. Violence in the Central African Republic – we’re working together. In the pursuit of reconciliation in Mali, we are working together.

All of these efforts require international cooperation, so coming together as a community of nations, as we did today, is the best way to resolve these kinds of problems that concern us. And today, I believe we initiated a process that over the next couple of days we hope can bring us to that de-escalation and to a path for the protection of the integrity of a country and for the building of stronger relationships between other nations.

On that note, I’d be delighted to take any questions.

MS. HARF: Great. Our first question comes from Anne Gearan of The Washington Post (inaudible).

QUESTION: Thank you. Mr. Secretary, you just renewed the U.S. call to Russia to speak directly to the new Ukrainian Government. You were hoping that that would happen today, right, here between Lavrov and the Ukrainian foreign minister who accompanied you here, apparently for that purpose. Why did that effort fail, and what assurance did you get, if any, from the Russians that they might be willing to have that kind of conversation in the future?

SECRETARY KERRY: Well, Anne, let me make it absolutely crystal clear: I had no expectation, zero expectation, that today that kind of a meeting would take place. I did not expect it and we did not ask the foreign minister to come here for that purpose. So the premise of the question is really just not factual in terms of what we were expecting.

We brought him here because we knew that it was inappropriate for us to have discussions with Minister Lavrov, whom I knew I had a meeting with, without being able to consult with our Ukrainian friends. And it would have been inappropriate for us to come here to Paris and for a group of nations to join together and make some kind of an agreement without the appropriate consultation and engagement and involvement and signoff from the people who are concerned. This is a Ukrainian decision, and we respect that.

So we met – all of us – as a group of foreign ministers with the foreign minister from Ukraine. We went through the things that we have discussed today. We solicited opinion. I will be in touch later tonight with the foreign minister as well as with the prime minister of Ukraine. They’re traveling to Brussels for meetings tomorrow with the EU, and we will continue that discussion. I will also continue that discussion.

I will also continue the discussion with Foreign Minister Lavrov in Rome tomorrow. Foreign Minister Lavrov will then return to have discussions with President Putin, which he also did today. He will continue to have that discussion. And I will, obviously, have an opportunity to have a discussion with President Obama and with the team in the White House in order to discuss the road forward.

But we had very thorough discussions today, very extensive, exchanged ideas. We both have thoughts to take back to our capitals and to our respective bosses, and I intend to do that, and with hopes – with hopes – that the ideas that have been put on the table today can lead us to that place of de-escalation that I talked about.

MS. HARF: Great. Thank you. Our next question is from (inaudible) of Le Monde. And wait for the microphone. I think it’s right there. Thank you.

QUESTION: (In French.)

MS. HARF: Hold on one second.

SECRETARY KERRY: (In French.)

QUESTION: (In French.)

SECRETARY KERRY: (In French.)

QUESTION: (In French.)

SECRETARY KERRY: Well, the decisions for the Europeans are decisions for the Europeans, and they’re meeting tomorrow, and I don’t think it’s appropriate for me to weigh in publicly on their deliberations.

With respect to the premise, again, of your question, don’t assume that we did not make – have serious conversations which produced creative and appropriate ideas and possibilities for how we can resolve this. I think that we have a number of ideas on the table. I personally feel as if I have something concrete to take back and talk to President Obama about so that I can get his input and thinking, advice, on what he’s prepared to do. And I believe that Foreign Minister Lavrov is in exactly the same position with respect to President Putin.

I don’t think any of us had an anticipation that we were coming here, at this moment in this atmosphere of heightened tension and confrontation, that we were suddenly going to resolve that here this afternoon. But I believe we are doing what is appropriate and what offers the best chance of finding a way forward that the world would welcome that is without conflict. As we said, we agreed today, both sides, and the Ukrainians also, that we are all better served if this can be resolved through dialogue. That’s important. I think it was a strong indication in the conversations that took place, not just between us but between us and our capitals, that everybody is taking seriously the effort to try to find a way forward, but a way forward that satisfies the needs, that protects the integrity and the sovereignty of the state of Ukraine, and one that obviously charts a path forward that has respect for the people of Ukraine and the direction that they have chosen to move in.

So I look forward to the conversations over the course of the next days, and we’ll see where we are. But I think today was very constructive, without promising something that is not defined yet, without raising hopes that are inappropriate to raise. I want to be realistic. This is hard, tough stuff and a very serious moment, but I’d rather be where we are today than where we were yesterday.

MS. HARF: Great. And the final question comes from Margaret Brennan of CBS.

QUESTION: Thank you. Thank you very much, Mr. Secretary. Was there anything in your direct conversation with Sergey Lavrov today that makes you believe that Russia is no longer creating a pretext for further invasion? And did you hear anything that would assure you – make you re-think the U.S. threat to put sanctions on Russia? That threat seems to have been weakened by European reluctance.

SECRETARY KERRY: I don’t think it’s been weakened at all by what you call European reluctance. The conversations I had today with the foreign minister of Germany, the foreign minister of France, the foreign minister of Great Britain, with the EU representative, and with a number of other foreign ministers, indicated to me that people are very serious about that. There’s been no movement away from the possibility.

And everything I said yesterday and the day before and through the week stands. That is where we are. But we are pursuing, as President Obama indicated he would like to in his comments yesterday and the day before, as I indicated on Sunday in my comments on television shows, we would prefer to find an appropriate, diplomatic solution to this, and I think everybody is better served through that.

But we’ve also made it clear our determination to stand up for the integrity and the sovereignty of this nation, our disagreement with the choice that Russia has made, and our hope that we can find a way forward that respects the rights and aspirations of the people of Ukraine writ large – east, west, south, all of Ukraine. That’s our goal. Nothing has changed with respect to that. And what the Europeans choose to do is obviously their choice. And we’ve made it clear that the decision to go into Crimea is not without cost. And now we need to go forward and see if we can avoid everybody being put in a corner where it’s more and more difficult to find a path that presents you with the solution of dialogue.

I was encouraged today that Russia indicated that they would prefer to see us be able to find that path. That’s the beginning of a negotiation. And as I said, this will belong in this discussion for whatever period of time to come. But our position has not changed one bit.

Thank you all very much. Appreciate it.

QUESTION: Did you all discuss the February 21st initiative, the February 21st agreement? Did you all discuss it with Lavrov?

SECRETARY KERRY: Nothing is agreed – nothing is agreed on that. There is no agreement at all. (Inaudible) discussion about having him in it, but nothing’s been agreed.

QUESTION: So you refute Sergey Lavrov’s comments about --

SECRETARY KERRY: I don’t think there was an agreement. There’s no agreement.

MS. HARF: Thank you, guys.

QUESTION: Thank you.

RECENT U.S. DOD PHOTOS FROM AFGHANISTAN



FROM:  U.S. DEFENSE DEPARTMENT 

As seen through a night-vision device, a U.S. CH-47 Chinook helicopter takes off as Afghan commandos and U.S. Special Forces soldiers move toward Kharkrezwal village in Afghanistan's Kandahar province, Feb. 14, 2014. The U.S. soldiers, assigned to Special Forces Operational Detachment Afghanistan, assisted the Afghan commandos with clearing operations to disrupt insurgents from using Kharkrezwal village as a safe haven. U.S. Army photo by Staff Sgt. Bertha A. Flore.



As seen through a night-vision device, Afghan commandos walk toward a compound during a clearing operation in Galenketcha village in Afghanistan's Kandahar province, Feb. 16, 2014. U.S. Army photo by Staff Sgt. Bertha A. Flores.

REMARKS AT EXECUTIVE COUNCIL ORGANIZATION FOR THE PROHIBITION OF CHEMICAL WEAPONS

United States Delegation to the Seventy-Fifth Session of the Executive Council Organization for the Prohibition of Chemical Weapons


Remarks
Robert P. Mikulak
U.S. Permanent Representative to the Organization for the Prohibition of Chemical Weapons 
Meeting of the Organization for the Prohibition of Chemical Weapons Executive Committee
The Hague, Netherlands
March 4, 2014


At the opening of this Seventy-Fifth Session of the Executive Council, Mr. Chairman, I would like to assure you of the continued support of my Delegation to the OPCW. We look forward to your leadership of the Council as we maneuver through these challenging times.

Mr. Chairman, Mr. Director-General, Distinguished Delegates,
Over the last few weeks we all have witnessed two extraordinary meetings of the Council. On January 30, delegation after delegation after delegation expressed concern about the slow pace of removal of chemicals from Syria and called for acceleration of the CW removal process. Again, on February 21, delegation after delegation after delegation – nearly the entire Council, in fact, – repeated and strengthened their expressions of concern. Now, due to the insistence of members of the Council that Syria meet its commitments, there is the possibility that Syria may at last be starting to take its removal obligations seriously. Syria has now withdrawn its 100-day removal plan, which was indefensible, and presented a 65-day removal plan. Although, this is useful, the Operational Planning Group had earlier recommended steps that would allow all the chemicals to be removed in just 37 days. Moreover, the revised Syrian plan appears vulnerable to quickly expanding back to its original length since the gains were made by simply shrinking the original time devoted to packaging the chemicals at each site. There are few or no gains made by other means, for example consolidating movements into fewer than 24 missions. The Director-General made it clear that the OPG plan offered a faster timeline while also addressing Syrian concerns regarding security and the availability of equipment and personnel.

The United States believes that Syria should implement and, with the assistance of the Operational Planning Group, accelerate the new Syrian plan immediately to ensure that these deadly chemicals are out of Syria as soon as possible. We look forward to learning the Director-General’s detailed assessment, and the further recommendations of the OPCW.
To any members of this Council who might be flush with optimism over the new Syrian plan, a word of caution is appropriate and necessary. What counts is not a plan on paper, but actual performance on the ground. This Council should resist any temptation to simply assume that the government of Syria will follow through on its new plan to remove chemicals from its territory. Syria’s dismal record of compliance to date with the Council’s removal decisions should belie any such assumption. Now is not the time for complacency, but rather for circumspection and diligent exercise of the oversight responsibilities of this Council.

As it has repeatedly done, after weeks of inaction, Syria has moved chemicals just before an Executive Council session. Perhaps more will be moved while the Council is in session this week. What counts is what happens on a consistent and regular basis going forward. The Council needs to see a systematic, sustained, and accelerated series of movements of chemicals to Latakia for removal.

This Council should consider the acceleration of the new plan to be a test of Syria’s commitment to finally comply with its elimination obligations under Executive Council Decisions and UN Security Council Resolution 2118. Syria should be held to account for the plan it has put forward and directed to work with the Joint Mission to substantially accelerate the timeline for completing removal. It should immediately begin to make substantial and regular deliveries of chemicals, particularly Priority One chemicals, to Latakia. We request that the Director-General provide the Council with a chart showing the aggregate amount of chemicals to be moved each week under the plan so that the Council can monitor Syria’s efforts. Weekly reports on removal actions should be provided to the Council by the Technical Secretariat. This Council should not tolerate any slippage on removal actions or political backsliding by the Syrian government.

Mister Chairman,
As you are well aware, this Council has held two successive meetings to discuss the Syria CW situation – on January 30th and February 21st – without issuing a report, unfortunately, because consensus could not be achieved. On September 27th, this Council put politics aside and let itself be guided by the moral compass of the Chemical Weapons Convention. Every State Party on this Council has pledged through the Convention’s preamble “for the sake of all mankind to exclude completely the possibility of the use of chemical weapons ...” So long as those chemicals remain in Syria, the possibility of use remains. For the sake of the Syrian people, let us once again put politics aside and ensure through the actions of this Council that the Syrian government completes, with urgency and dispatch, the removal effort it has begun. To that honorable end, the report of this session should unequivocally reflect the Council’s determination and commitment to closely monitor the government of Syria’s efforts to implement and accelerate its new removal plan.

Mister Chairman,
Let us also not forget that Syria is about to disregard yet another deadline set by this Council. The date set by this Council for completing destruction of Syria’s twelve chemical weapons production facilities is March 15 – two weeks from today. The United States has made every effort to work with Syria to reach an understanding on a destruction plan. Syria has refused to negotiate, and has adamantly clung to its proposal to inactivate, rather than destroy, these CW production facilities.

Mister Chairman,
The Convention is clear with respect to the physical destruction requirement and this Council should also be clear. Since Syria has failed to propose destruction methods that meet the Convention’s requirements, the United States has tabled a draft decision for this Council’s consideration for addressing Syria’s inertia and calculated misreading of the Convention. In our view, a Council decision should have two principal components:
-- First, with respect to the seven hardened aircraft shelters, this Council should require that Syria by March 15 collapse the roofs using precision explosives. The United States and a number of Council members have carefully analyzed this approach, and concluded that it would meet the Convention standard for physical destruction in an expedited and cost-effective manner that ensures the safety of the population and the protection of the environment.
-- Second, with respect to the five underground structures, this Council, noting the additional technical challenges they entail, should extend the deadline for destruction but only on the condition that specified measures be undertaken by Syria first to inactivate them and then to physically destroy the entire underground structure.

Mister Chairman,
The physical destruction of CW production facilities is a fundamental requirement of the Convention, and a prudent protection against the retainment or restart of a chemical weapons program. The seriousness attached to this requirement by the Council is attested to by the past practice of completely leveling all such facilities to the ground. Given the extraordinary circumstances associated with Syria’s accession to the Convention, it would be irresponsible for this Council to exhibit the same inertia and disregard for the Convention as the Syrian government has on this issue. This Council needs to summon the same resolve it evinced in December when it categorically rejected Syria’s request to convert these CW production facilities to allegedly peaceful uses.
Mister Chairman,

In closing, let me emphasize that March will be a critical test for the international effort to eliminate Syria’s chemical weapons program. Syrian action – or inaction -- will tell the international community whether Syria is truly committed to giving up its CW arsenal or choosing instead to play political games. As the world waits to see what path Syria takes, this Council, along with its members, should work to ensure that Syria remains committed to giving up its chemical weapons. Every step that Syria has taken has been the result of international monitoring and prodding, not because of Syria’s moral abhorrence of chemical weapons. Indeed, less than a month before it announced its intent to accede to the Chemical Weapons Convention, Syria on August 21 launched a brutal chemical attack in the suburbs of Damascus. Let us not be swayed by any illusions about the nature or good faith of the Assad regime. Four-and-a-half months after Syria’s accession, we are here in this Council talking about Syria’s failure to meet two deadlines on the path that was set before it by this Council to eliminate the Syrian chemical weapons program. This Council has an essential role to play in keeping the pressure on the Syrian government to ensure that Syria is completely disarmed of its chemical arsenal. Syria is testing the resolve of this Council to defend its own decisions – we as a Council should not fail this test.

Mister Chairman,
As all of us walked into this room today, we passed the Nobel Prize for Peace awarded to the OPCW. That prize honors what this Organization has accomplished and also challenges us to remain a force for peace in the future. The historic effort in which this Organization embarked on September 27, 2013, to eliminate the Syrian chemical weapons program, is not finished; in fact, the end is regrettably not yet in sight. Let us continue to remain a force for peace and finish what we have started. Let us end the silence of this Council and speak loudly and clearly so that the Assad regime knows that we will not relent until Syria’s chemical weapons program – and the threat it poses to peace and security - has been completely eliminated.
I ask that this statement be considered an official document of this Executive Council session and placed on the OPCW website and external server.

Thank you, Mister Chairman.

PRESIDENT OBAMA'S REMARKS IN NEW BRITAIN, CONNECTICUT ON MINIMUM WAGE

FROM:  THE WHITE HOUSE 
Remarks by the President to the Traveling Press at Café Beauregard -- New Britain, CT
Café Beauregard
New Britain, Connecticut

THE PRESIDENT:  I’ll have a chance to talk to everybody a little bit later, but obviously part of the reason that we’re here is because we’ve got a group of outstanding Democratic governors here in the Northwest [sic] that are committed to making sure that work pays.

And we were just talking to the owners of this establishment, who pay their employees more than the minimum wage because, as the owner put it, he knows what’s it like to work all his life and understands that if people are working hard, they shouldn’t be in poverty and that we should be able to do everything we can to make sure that happens.

And Dan Malloy here in Connecticut is making this a top priority.  I know Pete Shumlin, Lincoln Chafee, and Deval Patrick are all -- are working with Tom Perez, our Secretary of Labor.  And this is an important tool for us to help create more pathways into the middle class and make sure that if you work hard in this country, you can succeed.

There are other tools that are reflected in my budget like the Earned Income Tax Credit expansion that we’ve proposed that will also make a difference.  But I’m just very proud of these governors for the work they're doing.  So thank you.

COURT ACTS TO STOP FRAUDULENT PYRAMID SCHEME ON FACEBOOK, TWITTER

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission announced an emergency enforcement action to stop a fraudulent pyramid scheme by phony companies masquerading as a legitimate international investment firm.

The SEC has obtained a federal court order to freeze accounts holding money stolen from U.S. investors by Fleet Mutual Wealth Limited and MWF Financial – collectively known as Mutual Wealth.  The SEC alleges that Mutual Wealth has been exploiting investors through a website and social media accounts on Facebook and Twitter, falsely promising extraordinary returns of 2 to 3 percent per week for investors who open accounts with the firm.  Mutual Wealth purports to invest customer funds using an “innovative” high-frequency trading strategy that allows “capital to be invested into securities for no more than a few minutes.”  In classic pyramid scheme fashion, Mutual Wealth encourages existing investors to become “accredited advisors” and recruit new investors in exchange for a referral fee or commission.

According to the SEC’s complaint filed in U.S. District Court for the Central District of California, almost nothing that Mutual Wealth represents to investors is true.  The company does not purchase or sell securities on behalf of investors, and instead merely diverts investor money to offshore bank accounts held by shell companies.  Mutual Wealth’s purported headquarters in Hong Kong does not exist, nor does its purported “data-centre” in New York.  Mutual Wealth also lists make-believe “executives” on its website, and falsely claims in e-mails to investors that it is “registered” or “duly registered” with the SEC.  Approximately 150 U.S. investors have opened accounts with Mutual Wealth and collectively invested a total of at least $300,000.

“Mutual Wealth used Facebook and Twitter as well as a team of recruiters to spread a steady stream of lies that tricked investors out of their money,” said Gerald W. Hodgkins, an associate director in the SEC’s Division of Enforcement.  “Fortunately we were able to quickly trace the fraud overseas and obtain a court order requiring Mutual Wealth to shut down its website before the scheme gains more momentum.”

According to the SEC’s complaint, Mutual Wealth operates through entities in Panama and the United Kingdom and uses offshore bank accounts in Cyprus and Latvia and offshore “payment processors” to divert money from investors.  Mutual Wealth’s sole director and shareholder presented forged and stolen passports and a bogus address to foreign government authorities and payment processors.

The SEC alleges that Mutual Wealth leverages the scope and reach of social media to solicit investors with its fraudulent pitch.  Mutual Wealth maintains Facebook and Twitter accounts that link to its website and serve as platforms through which it lures new investors.  Some of Mutual Wealth’s “accredited advisors” then use social media channels ranging from Facebook and Twitter to YouTube and Skype to recruit additional investors and earn referral fees and commissions.  Mutual Wealth’s Facebook page spreads such misrepresentations as “HFT portfolios with ROI of up to 250% per annum.  Income yield up to 8% per week.”  A Facebook post on Aug. 12, 2013, boasted “$1000 investment into the Growth and Income Portfolio made on April 8th, 2013 is now worth $2,112.77.”  Mutual Wealth regularly posts status updates for investors on its Facebook page, and the comment sections beneath the posts are often filled with solicitations by the accredited advisors.  Mutual Wealth also tweets announcements posted on its Facebook page.

The SEC’s complaint charges Mutual Wealth with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  For the purposes of recovering investor money in their possession, the complaint names several relief defendants linked to offshore accounts to which investor funds were diverted from the scheme: Risort Partners Inc., Hullstar Capital LLP, Camber Alliance LLP, Kimrod Estate LLP, and Midlcorp Trade LTD.

The Honorable Dolly M. Gee has granted the SEC’s request for a court order deactivating Mutual Wealth’s website and freezing assets in all accounts at any bank, financial institution, brokerage firm, or third-payment payment processor (including those commercially known as SolidTrust Pay, EgoPay, and Perfect Money) maintained for the benefit of Mutual Wealth.

The SEC’s investigation, which is continuing, has been conducted by H. Norman Knickle and Mark M. Oh and supervised by Conway T. Dodge.  The SEC’s litigation will be led by Melissa Armstrong and Mr. Knickle.  The SEC appreciates the assistance of the Federal Bureau of Investigation, Financial and Capital Market Commission of Latvia, Ontario Securities Commission, and Cyprus Securities and Exchange Commission.

DEFENSE SECRETARY, CHAIRMAN JOINT CHIEFS TESTIFY ON BUDGET BEFORE SENATE ARMED SERVICES COMMITTEE

FROM:  DEFENSE DEPARTMENT 
Hagel: Severe Budget Cuts Will Compromise National Security
By Cheryl Pellerin
American Forces Press Service

WASHINGTON, Mar. 5, 2014 – Congressional failure to fund the Defense Department above levels required by sequestration in fiscal years 2015, 2016 and beyond will compromise national security, Defense Secretary Chuck Hagel said here today.

The secretary testified with Chairman of the Joint Chiefs of Staff Army Gen. Martin E. Dempsey this morning before the Senate Armed Services Committee on the president’s fiscal year 2015 budget request.

The abrupt and severe budget cuts known as sequestration would result in “a military that could not fulfill its defense strategy, putting at risk America’s traditional role as guarantor of global security and, ultimately, our own security,” Hagel told the panel.

The president’s defense budget is responsible, balanced and realistic, he said, supporting the U.S. defense strategy, defending the nation and keeping Defense Department’s compensation and training commitments to its people.

“These commitments will be seriously jeopardized by a return to sequestration-level spending,” the secretary said. “That is not the military the president and I want for America’s future. I don’t think that’s the military this committee wants for America’s future, but it’s the path we’re on.”

Hagel called the defense budget far more than a set of numbers or a list of decisions.

“It is a statement of values and priorities,” the secretary said. “It is a budget grounded in reality … that prepares the U.S. military to defend our national security in a world that is becoming less predictable, more volatile and, in some ways, more threatening to our country and our interests.”

The department’s fiscal 2015 base budget request is about $496 billion and includes an extra $26 billion, a proposal called the president’s Opportunity Growth and Security Initiative that DOD would use next year to improve readiness and modernization.

“That $26 billion represents an effort that would help dig us back out of the hole that we have been in for the last two years on readiness, and particularly focused on modernization,” Hagel said.

And the president’s five-year plan offers what the secretary called a realistic alternative to sequestration, projecting $115 billion more than the current law allows.

DOD requires the added funding to implement its updated defense strategy as outlined in the 2014 Quadrennial Defense Review, a study by the department undertaken every four years that analyzes strategic objectives and potential military threats.

“The strategic priorities articulated in the QDR represent America’s highest security interests -- defending the homeland, building security globally, deterring aggression and being ready and capable to win decisively against the adversary,” Hagel said.

In December, the Bipartisan Budget Act passed by Congress gave the department temporary relief from sequestration and a year of budget certainty, Hagel said, but it still imposes more than $75 billion in cuts over the next two years. Unless Congress changes the law, sequestration will cut another $50 billion from the budget beginning in fiscal 2016.

“Even though we are requesting spending levels above sequestration, we have maintained flexibility in our budget to respond immediately to the lower topline should sequestration be reimposed,” the secretary said, noting that this was done by reprogramming some of the sequestration-level force-structure reductions that take longer to plan and implement, such as the decommissioning of the aircraft carrier USS George Washington.

Hagel also issued formal guidance to the service leadership that these reductions will not be made if Congress indicates it will make future appropriations at topline levels in the five-year plan.

Addressing for the panel critical issues in the budget request, Hagel said that to meet national security needs under a constrained budget the department focused on the balance among readiness, capability and capacity.

“After more than a decade of large stability operations, we traded some capacity to protect the readiness and modernization capabilities as we shift the focus on future requirements. These are shaped by enduring and emerging threats. We have to be able to defeat terrorist threats and deter adversaries with increasingly modern weapons and technological capabilities,” he said.

“We must also assure that America’s economic interests are protected through open sea lanes, freedom of the skies and space, and deal with one of the most urgent and real threats facing all nations – cyberattacks,” the secretary added. “That’s why we protected funding for cyber and special operations forces.”
For the active-duty Army, the department proposed drawing down to 440,000 or 450,000 soldiers, less than 10 percent below its size before the attacks of 9/11. And the department will continue investing in high-end ground capabilities to keep its soldiers the most advanced on earth, Hagel said.

Army National Guard and Army Reserve units will draw down by 5 percent, and the Army’s helicopter force structure will be reduced by 8 percent. The active Army’s helicopter fleet will be cut by 25 percent while keeping the aircraft modernized as the fleet moves from seven models to four.

The decisions, including the department’s recommendation to trade out Apaches in the Army National Guard for Black Hawks were driven by strategic evaluations, Hagel added.

The Navy will take 11 ships out of its operational inventory, and these will be modernized and returned to service with greater capability and longer lifespans, he said.

The Marine Corps will continue its planned drawdown to 182,000, but will devote 900 more Marines to increased embassy security. Hagel said the Marine Corps will remain ready and postured for crisis response as it moves back to its expeditionary, amphibious roots.

The Air Force will retire the A-10, replacing it with more modern sophisticated multi-mission aircraft such as the joint strike fighter, he said.
On compensation reform, Hagel said, under a restricted budget the department needs modest adjustments to the growth in pay and benefits, and the savings will be reinvested in training and equipping the troops. There are no proposals to change military retirement in this budget, he added.

The department will continue to recommend pay increases, the secretary said, but they won’t be as substantial as in past years. The Defense Department will continue subsidizing off-base housing costs, he added, but at 95 percent rather than 100 percent, and the decrease will be phased in over the next several years.
The department will not close commissaries, Hagel said, but it recommends gradually phasing out some subsidies for domestic commissaries that are not in remote locations. And the department recommends simplifying and modernizing its three TRICARE health care plan systems. It will do this by merging them into one system, with modest increases in copays and deductibles that encourage using the most affordable means of care.

“Active duty personnel will still receive health care that is entirely free,” the secretary said. “This will be more effective and more efficient and will let us focus more on quality. Overall, everyone’s benefits will remain substantial, affordable and generous, as they should be.”

The fiscal 2015 proposed defense budget will allow the military to meet America’s future challenges and threats, he said, and it matches resources to strategy.

“As we end our second war of the last decade, our longest ever, this budget adapts and adjusts to new strategic realities and fiscal constraints while preparing for the future,” Hagel told the panel.

“This is not a business-as usual-presentation,” he added. “It is a budget that begins to make the hard choices that will have to be made. The longer we defer these difficult decisions, the more risk we will have down the road, and the next DOD leaders and Congress will have to face more complicated and difficult choices.”

OVER $458 MILLION FROZEN BY U.S. IN KLEPTOCRACY FORFEITURE ACTION AGAINST NIGERIAN DICTATOR

FROM:  U.S. JUSTICE DEPARTMENT 
Wednesday, March 5, 2014
U.S. Freezes More Than $458 Million Stolen by Former Nigerian Dictator in Largest Kleptocracy Forfeiture Action Ever Brought in the U.S.

The Department of Justice has frozen more than $458 million in corruption proceeds hidden in bank accounts around the world by former Nigerian dictator Sani Abacha and conspirators.  A civil forfeiture complaint unsealed today in the United States District Court in the District of Columbia seeks recovery of more than $550 million in connection with the largest kleptocracy forfeiture action brought in the department’s history.

The restraint of funds announced today includes approximately $313 million in two bank accounts in the Bailiwick of Jersey and $145 million in two bank accounts in France.   In addition, four investment portfolios and three bank accounts in the United Kingdom with an expected value of at least $100 million have also been restrained, but the exact amounts in the accounts will be determined at a later date.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.

“General Abacha was one of the most notorious kleptocrats in memory, who embezzled billions from the people of Nigeria while millions lived in poverty,” said Acting Assistant Attorney General Raman.  “This is the largest civil forfeiture action to recover the proceeds of foreign official corruption ever brought by the department.  Through our Kleptocracy Initiative, we are seizing the assets of foreign leaders who steal funds that properly belong to the citizens they serve.  Today’s action sends a clear message: we are determined and equipped to confiscate the ill-gotten riches of corrupt leaders who drain the resources of their countries.”

“We will not let the U.S. banking system be a tool for dictators to hide their criminal proceeds,” said Assistant Director in Charge Parlave.  “This action demonstrates the FBI’s ability to combat international corruption and money laundering by seizing the assets of those involved.   I want to thank the special agents, financial analysts and prosecutors whose hard work over the years resulted in today’s announcement.”

The over $458 million in frozen funds and the additional assets named in the complaint represent the proceeds of corruption during and after the military regime of General Abacha, who assumed the office of the president of the Federal Republic of Nigeria through a military coup on Nov. 17, 1993, and held that position until his death on June 8, 1998.   The complaint alleges that General Abacha, his son Mohammed Sani Abacha, their associate Abubakar Atiku Bagudu and others embezzled, misappropriated and extorted billions from the government of Nigeria and others, then laundered their criminal proceeds through the purchase of bonds backed by the United States using U.S. financial institutions.

As alleged in the complaint, General Abacha and others systematically embezzled billions of dollars in public funds from the Central Bank of Nigeria on the false pretense that the funds were necessary for national security.   The conspirators withdrew the funds in cash and then moved the money overseas through U.S. financial institutions.  General Abacha and his finance minister also allegedly caused the Government of Nigeria to purchase Nigerian government bonds at vastly inflated prices from a company controlled by Bagudu and Mohammed Abacha, generating an illegal windfall of more than $282 million.  In addition, General Abacha and his associates allegedly extorted more than $11 million from a French company and its Nigerian affiliate in connection with payments on government contracts.   Funds involved in each of these schemes were allegedly laundered through the United States.

The complaint seeks to forfeit bank accounts and investment portfolios with funds located in Bailiwick of Jersey, France and the United Kingdom.   On Feb. 25 and 26, 2014, U.S. arrest warrants for the assets were enforced in Jersey and France though mutual legal assistance requests and in the United Kingdom through litigation brought pursuant to the U.K. Civil Jurisdiction and Judgments Act.   The complaint also seeks to forfeit five corporate entities registered in the British Virgin Islands.

This case was brought under the Kleptocracy Asset Recovery Initiative by a team of dedicated prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section, working in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, return those proceeds to benefit the people harmed by these acts of corruption and abuse of office.   Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov.

The investigation was conducted by the FBI.   The case is being prosecuted by Trial Attorney Elizabeth Aloi and Assistant Deputy Chief Daniel Claman of the Criminal Division’s Asset Forfeiture and Money Laundering Section, with substantial support from the Criminal Division’s Office of International Affairs.   The department appreciates the extensive assistance provided by the Governments of Jersey, France and the United Kingdom in this investigation.

EUROPA AND THE SEARCH FOR WATER


FROM:  NASA 
This reprojection of the official USGS basemap of Jupiter's moon Europa is centered at the estimated source region for potential water vapor plumes that might have been detected using the Hubble Space Telescope. The view is centered at -65 degrees latitude, 183 degrees longitude. In addition to the plume source region, the image also shows the hemisphere of Europa that might be affected by plume deposits. This map is composed of images from NASA's Galileo and Voyager missions. The black region near the south pole results from gaps in imaging coverage. Image Credit: NASA/JPL-Caltech/SETI Institute.

Wednesday, March 5, 2014

READOUT: PRESIDENT OBAMA'S CALL WITH UNITED KINGDOM PRIME MINISTER CAMERON

FROM:  THE WHITE HOUSE 
Readout of the President’s Call with Prime Minister Cameron of the United Kingdom

As part of our continuing close consultations on shared security challenges, the President spoke to Prime Minister Cameron today regarding the events unfolding in Ukraine  The leaders expressed their grave concern over Russia’s clear violation of Ukrainian sovereignty and territorial integrity, and both noted that the current circumstances are unacceptable.  Russia has already started to pay a cost for its actions, such as reducing investor confidence in Russia. The two leaders welcomed the military observer mission being undertaken by Organization for Security and Cooperation in Europe at the request of the Government of Ukraine.   They also discussed support for the government of Ukraine as it works to stabilize its economy and makes preparations for elections in May.  The leaders agreed to stay in close contact in the days ahead.

U.S. DEFENSE DEPARTMENT CONTRACTS FOR MARCH 5, 2014

FROM:  U.S. DEFENSE DEPARTMENT
CONTRACTS

 MISSILE DEFENSE AGENCY

Raytheon Missile Systems Co., Tucson, Ariz., is being awarded a not-to-exceed $350,178,300 sole-source modification to the undefinitized contract action announced Jan. 9, 2014. The modification will increase the quantity of Standard Missile-3 Block IB missile material and all up round build up procured from eight to 44.  The work will be performed in Tucson, Ariz., with an estimated completion date of September 2016.  Fiscal 2014 Defense wide procurement funds will be used to fund this effort.  The Missile Defense Agency, Dahlgren, Va., is the contracting activity (HQ0276-13-C-0001).

ARMY

Loyal Source Government Services*, Orlando, Fla. (W91YTZ-14-D-0003); Aliron International, Inc.*, Bethesda, Md. (W91YTZ-14-D-0004); Magnificus Corp.*, Washington, D.C. (W91YTZ-14-D-0005); Arora Group Inc.*, Gaithersburg, Md. (W91YTZ-14-D-0006); The Royster Group, Inc.*, Atlanta, Ga. (W91YTZ-14-D-0007); Protege Health Services*, Newington, Va., (W91YTZ-14-D-0008); Franklin Government Services*, Austin, Texas (W91YTZ-14-D-0009), were awarded a $381,000,000 firm-fixed-price, multi-year contract for nursing services for the Northern Regional Medical Command.  Funding and work performance locations will be determined with each order.  Estimated completion date is March 4, 2019.  Bids were solicited via the Internet with 28 received.  Army Medical Command, Washington, D.C., is the contracting activity.

Colt Defense LLC, West Hartford, Conn. (W15QKN-14-D-0024), and Manroy USA, Spindale, N.C. (W15QKN-14-D-0025), were awarded a $54,491,305 firm-fixed-price contract for the M4 replacement barrel and front sight assembly (heavy variant) for the M4 Carbine Product Improvement Program.  The M4 replacement barrel will be combined with other weapon components to form a single modification work order kit to convert fielded M4 carbines to M4A1 carbines.  Funding and work location will be determined with each order.  Estimated completion date is Feb. 27, 2018.  Bids were solicited via the Internet with six received.  Army Contracting Command, Picatinny Arsenal, N.J., is the contracting activity.

BAE Systems Land and Armaments L.P., York, Pa., was awarded a $6,935,513 modification (P00006) to contract W56HZV-14-C-0002 for spare parts for self-propelled howitzers and eighteen ammunition carrier tracked vehicles.  Fiscal 2014 other procurement funds in the amount of $6,935,513 were obligated at the time of the award. Estimated completion date is Sept. 30, 2015.  Work will be performed in York, Pa.  Army Contracting Command, Warren, Mich. is the contracting activity.

DEFENSE LOGISTICS AGENCY

Tullahoma Industries, LLC.,** Tullahoma, Tenn., has been awarded a maximum $25,482,000  modification (P00103) exercising the first option year on a one-year base contract (SPM1C1-13-D-1033) with four one-year option periods for various permethrin army combat uniform trousers.  This is a firm-fixed-price, indefinite-delivery/indefinite-quantity contract.  Locations of performance are Tennessee, Alabama, and North Carolina with a March 12, 2015 performance completion date.  Using military service is Army.  Type of appropriation is fiscal year 2014 through fiscal year 2015 defense working capital funds.  The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pa.


U.S. SENDS BEST WISHES TO PEOPLE OF REPUBLIC OF GHANA ON THEIR NATIONAL DAY

FROM:  U.S. STATE DEPARTMENT 

On the Occasion of the Republic of Ghana's National Day

Press Statement
John Kerry
Secretary of State
Washington, DC
March 5, 2014


On behalf of President Obama and the people of the United States, I send best wishes to the people of Ghana as you celebrate 57 years of independence on March 6.

I saw the strength of our partnership firsthand when I met with President Mahama at the UN General Assembly last year. Our partnership is strong because we share a commitment to democratic values, the rule of law, and economic development.

Together, we are translating those shared values into action.  Through President Obama’s Young African Leaders, Power Africa, and Partnership for Growth initiatives, the United States is advancing Ghana’s millennium development goals.  We are improving global security through our support for peacekeeping operations.  We are also working together closely on human rights, trade and maritime security.  On this special anniversary, I wish all Ghanaians a healthy, joyful, and festive celebration. The United States looks forward to building on our strong partnership in the years to come.

REMARKS AT TOP OF TRIPARTITE AGREEMENT MINISTERIAL

FROM:  U.S. STATE DEPARTMENT 

Remarks With British Foreign Secretary William Hague, and Ukrainian Foreign Minister Andrii Deshchytsia at Top of Tripartite Agreement Ministerial


Remarks
John Kerry
Secretary of State
Chief of Mission Residence
Paris, DC, France
March 5, 2014


SECRETARY KERRY: Well, we’re glad to have our friends here from Ukraine and from Great Britain, partners in the Budapest Agreement of 1994, regrettably missing one member, but we will be meeting, hopefully this afternoon, with that additional member. So we look forward to our own discussion this morning. We appreciate you being here. Thank you.
William, do you want to say anything?

FOREIGN SECRETARY HAGUE: Well, it is absolutely right that we have met for consultations under the 1994 Budapest Memorandum. And that is provided for in Article 6 of the memorandum, and in such a crisis it’s absolutely right to meet. It is regrettable – exactly as you said, John – that Russia is not here with us. But we will make every diplomatic effort today to bring Russia and Ukraine into direct contact at ministerial level with the support of other nations. And this is one opportunity to do that; we will try to create other opportunities later today.

FOREIGN MINISTER DESHCHYTSIA: I’ll say a few words also?

SECRETARY KERRY: Of course, Andrii, absolutely.

FOREIGN MINISTER DESHCHYTSIA: As an equal partner in the Budapest Memorandum. (Laughter.)

SECRETARY KERRY: No, no, no.

FOREIGN MINISTER DESHCHYTSIA: And I’m very glad that we have these consultations here, and that during these days we’ve had so many consultations in Ukraine – your visit, and with Secretary Hague and with Secretary Kerry two days ago, yesterday, so now we have these consultations here. It’s very decisive and important moment, and we are looking very much forward that we will be also having consultations with Russia bilaterally and multilaterally.

SECRETARY KERRY: I’m just going to read two paragraphs from the Russian Federation Commission[i]: “The United States of America and the Russian Federation and the United Kingdom of Great Britain and Northern Ireland reaffirm their obligation to refrain from the threat or use of force against the territorial integrity or political independence of Ukraine, and none of their weapons will ever be used against Ukraine except in self-defense or otherwise in accordance with the Charter of the United Nations.”

It also says the same parties – the United States, the Russian Federation, et cetera – “In accordance with the principles of the CSCE Final Act” – that’s Helsinki – “to refrain from economic coercion designed to subordinate to their own interest the exercise by Ukraine of the rights inherent in its sovereignty.” So there are very clear legal obligations that are at risk in this, and we’re going to talk about those here this morning. So thank you all very much.

FOREIGN MINISTER DESHCHYTSIA: Thank you very much.

FOREIGN SECRETARY HAGUE: Thank you.


[i] 1994 Budapest Memorandum

CIA BACKGROUND ON UKRAINE

Ukraine Locator Map From CIA World Factbook
FROM:  CIA WORLD FACTBOOK
BACKGROUND:  UKRAINE
Ukraine was the center of the first eastern Slavic state, Kyivan Rus, which during the 10th and 11th centuries was the largest and most powerful state in Europe. Weakened by internecine quarrels and Mongol invasions, Kyivan Rus was incorporated into the Grand Duchy of Lithuania and eventually into the Polish-Lithuanian Commonwealth. The cultural and religious legacy of Kyivan Rus laid the foundation for Ukrainian nationalism through subsequent centuries. A new Ukrainian state, the Cossack Hetmanate, was established during the mid-17th century after an uprising against the Poles. Despite continuous Muscovite pressure, the Hetmanate managed to remain autonomous for well over 100 years. During the latter part of the 18th century, most Ukrainian ethnographic territory was absorbed by the Russian Empire.

Ukraine Map From CIA World Factbook
Following the collapse of czarist Russia in 1917, Ukraine was able to achieve a short-lived period of independence (1917-20), but was reconquered and forced to endure a brutal Soviet rule that engineered two forced famines (1921-22 and 1932-33) in which over 8 million died. In World War II, German and Soviet armies were responsible for some 7 to 8 million more deaths.

Although final independence for Ukraine was achieved in 1991 with the dissolution of the USSR, democracy and prosperity remained elusive as the legacy of state control and endemic corruption stalled efforts at economic reform, privatization, and civil liberties. A peaceful mass protest "Orange Revolution" in the closing months of 2004 forced the authorities to overturn a rigged presidential election and to allow a new internationally monitored vote that swept into power a reformist slate under Viktor YUSHCHENKO. Subsequent internal squabbles in the YUSHCHENKO camp allowed his rival Viktor YANUKOVYCH to stage a comeback in parliamentary elections and become prime minister in August of 2006. An early legislative election, brought on by a political crisis in the spring of 2007, saw Yuliya TYMOSHENKO, as head of an "Orange" coalition, installed as a new prime minister in December 2007. Viktor YANUKOVYCH was elected president in a February 2010 run-off election that observers assessed as meeting most international standards. The following month, Ukraine's parliament, the Rada, approved a vote of no-confidence prompting Yuliya TYMOSHENKO to resign from her post as prime minister.

In October 2012, Ukraine held Rada elections, widely criticized by Western observers as flawed due to use of government resources to favor ruling party candidates, interference with media access, and harassment of opposition candidates. President YANUKOVYCH's backtracking on a trade and cooperation agreement with the EU in November 2013 - in favor of closer economic ties with Russia - led to a three-month protest occupation of Kyiv's central square. The government's eventual use of force to break up the protest camp in February 2014 led to all out pitched battles, scores of deaths, international condemnation, and the president's abrupt ouster. An interim government under Acting President Oleksandr TURCHYNOV has called for new presidential elections on 25 May 2014.

BOGUS INVESTMENT OPPORTUNITY SCHEMER SETTLES WITH FTC

FROM:  FEDERAL TRADE COMMISSION 
FTC Settlement Bans Precious Metal Marketers from Selling Investment Opportunities
Court Orders Defendants to Pay $3.6 Million for Refunds to Consumers

The operator of a bogus precious metals investment scheme that bilked millions of dollars from investors, including many senior citizens, is permanently banned from selling any investment opportunities under a settlement with the Federal Trade Commission.

The settlement resolves FTC charges that Anthony J. Columbo and his companies, Premier Precious Metals Inc., Rushmore Consulting Group Inc., and PPM Credit Inc., conned consumers into buying precious metals on credit without clearly disclosing significant costs and risks, including the likelihood that consumers would subsequently have to pay more money or lose their investments.

In addition to banning the defendants from selling investment opportunities, the settlement order permanently prohibits them from misrepresenting material facts about any products and services, violating the FTC’s Telemarketing Sales Rule, failing to provide consumer information to the FTC so it can administer consumer redress, selling or otherwise benefiting from consumers’ personal information, and failing to properly dispose of customer information. The order also requires them to record all of their telemarketing calls for ten years.

The order imposes a judgment of more than $3.6 million against the defendants, which will be partially suspended after Columbo relinquishes to the FTC assets estimated to be worth about $3 million, including Florida real estate, personal property, and bank and investment accounts. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

For information about investing in precious metals, read the FTC’s Message sent, message received: Precious metal marketers agree to FTC settlement, Investing in Gold?, Investing in Bullion and Bullion Coins, and Investing in Collectible Coins.

The Commission vote authorizing the staff to file the proposed stipulated order was 4-0.  It was entered by the U.S. District Court for the Southern District of Florida on February 25, 2014.

NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.

FRUIT SMELLING BATS

FROM:  NATIONAL SCIENCE FOUNDATION 
By dark of night, how do bats smell their way to fruit?
Scientists find distinctive patterns of olfactory receptors in fruit-eating bats
March 3, 2014

How do we smell? The answer lies in the 1,000 or so genes that encode what's known as olfactory receptors inside our noses.

This gene superfamily constitutes 3 to 6 percent of a mammal's genes.

But scientists don't completely understand what odors bind to which receptors, and how this complex process translates into interpreting a particular smell.

In fact, little is known about how olfactory receptors function in mammals, or how this large gene family has evolved in response to different evolutionary challenges.

Specialized gene pattern in fruit-eating bats

Now scientists have identified a distinctive olfactory receptor gene pattern in fruit-eating bats, as well as the particular olfactory receptor gene families important to their fruit diets.

The findings offer new insights that link olfactory receptors with the odors they bind.

The research highlights the importance, the biologists say, of exploring diversity in nature to understand genome functions and evolutionary history in mammals.

Evolutionary biologists Liliana Davalos of Stony Brook University, Emma Teeling of University College Dublin and colleagues report their results in a paper published in this month's' issue of the journal Molecular Biology and Evolution.

"This study provides new insights into the mechanisms that have allowed bats to diversify their diets so extensively," says Simon Malcomber, a program director in the National Science Foundation's Division of Environmental Biology, which funded the research.

This research was also supported by the Science Foundation Ireland and the Irish Research Council.

"We knew that animals that live in various ecological environments--whales, bats, cows--have evolved different suites of olfactory receptors," says Davalos. "That suggests that the ability to smell different odors is important for survival."

Since these lifestyles evolved so long ago, she says, it's difficult to tell what forces have shaped the repertoire of olfactory receptors.

Bats hold key to evolution of smell receptors

Has the evolution of other sensory systems, changes in diet, or the random accumulation of changes through time driven the evolution of olfaction in mammals?

"Bats offer a prime opportunity to answer this question," says Davalos.

"They've evolved new sensory systems such as echolocation, and various bat species eat very different foods, including insects, nectar, fruit, frogs, lizards and even blood."

Two large groups of bats branched out since diverging about 64 million years ago. These groups separately evolved specialized echolocation and a diet based on fruit.

The patterns have arisen twice, once among New World leaf-nosed bats that feed primarily on figs and another among Old World fruit bats. The bats feed on variety of fruits, including figs, guavas, bananas, mangoes and other tropical fruits.

Could their evolutionary patterns help explain their olfactory receptors?

Finding fruit by dark of night

After sequencing thousands of olfactory receptors from dozens of bat species and analyzing an evolutionary tree including all the species, the researchers found distinctive patterns of olfactory receptors among bats that specialize in eating fruit.

Although the olfactory receptors are similar, the distinctive repertoires have arisen in different ways in New World and Old World bats.

That suggests, Davalos says, that independent mechanisms have shaped this part of the bat genome in response to the challenge of finding fruit by dark of night.

EPA SUPERFUND BID-RIGGER SENTENCED TO 14 YEARS IN PRISON

FROM:  U.S. JUSTICE DEPARTMENT 
Tuesday, March 4, 2014
Former Project Manager Sentenced to Serve Time in Prison for Role in Bid Rigging and Other Fraudulent Schemes Involving Two EPA Superfund Sites in New Jersey
Former Manager to Serve 14 Years in Prison

Gordon D. McDonald, a former project manager for a prime contractor at two U.S. Environmental Protection Agency (EPA) Superfund sites in New Jersey, was sentenced today to serve 14 years in prison for participating in multiple bid-rigging, fraud and kickback schemes, the Department of Justice announced.   The prison term, which takes into account the multiple crimes McDonald committed, represents the longest prison sentence ever imposed involving an antitrust crime.

In addition to the prison sentence, McDonald was sentenced in U.S. District Court for the District of New Jersey in Newark by Judge Susan D. Wigenton to pay a $50,000 fine.   The court will order restitution at a later date.

After a two week jury trial, ending on Sept. 30, 2013, McDonald was convicted of engaging in separate bid-rigging, kickback and fraud conspiracies with three subcontractors at two New Jersey Superfund sites - Federal Creosote in Manville, N.J., and Diamond Alkali in Newark, in return for kickbacks of more than $1.5 million. He was also convicted of engaging in an international money laundering scheme, major fraud against the United States, committing two tax violations and obstruction of justice. The various conspiracies took place at different time periods from approximately December 2000 until approximately April 2007. McDonald was initially charged in an indictment returned on Aug. 31, 2009.

“Today’s sentencing reflects the seriousness of the crimes committed,” said Bill Baer, Assistant Attorney General in charge of the Justice Department’s Antitrust Division. “The prison sentence imposed by the court shows that if you engage in bid-rigging, fraud and kickback schemes your illegal actions will result in a longer prison sentence.”

According to evidence presented at trial, McDonald accepted kickbacks from sub-contractors in exchange for the award of sub-contracts at Federal Creosote. McDonald provided co-conspirators at Bennett Environmental Inc., a Canadian-based company that treats and disposes of contaminated soil, with bid prices of their competitors, which allowed them to submit the highest possible bid prices and still be awarded the sub-contracts.

McDonald also accepted kickbacks in exchange for the award of sub-contracts at the Federal Creosote and Diamond Alkali sites from the owner of JMJ Environmental Inc., a wastewater treatment and chemical supply company, and the co-owner of National Industrial Supply LLC, an industrial pipe supplier. He also participated in a conspiracy with the owner of JMJ and co-conspirators to rig bids and allocate sub-contracts for wastewater treatment supplies and services at Federal Creosote.

Including McDonald, nine individuals and three companies have pleaded guilty or been convicted of charges arising out of this investigation. More than $6 million in criminal fines and restitution have been imposed and six of the individuals have been sentenced to serve prison sentences ranging from five to 168 months.   One individual was sentenced to six months home confinement and the remaining two were sentenced to pay criminal fines and restitution.   An additional individual, John A. Bennett, a Canadian citizen, was also charged on Aug. 31, 2009, and is facing extradition to the United States.

The cleanup at Federal Creosote is partly funded by the EPA. An interagency agreement between the EPA and the Army Corps of Engineers designated that the Army Corps hire the prime contractors at Federal Creosote. According to a settlement with the EPA and the New Jersey Department of Environmental Protection, Tierra Solutions was required to fund remedial action and maintenance of Diamond Alkali. Tierra Solutions hired the prime contractor for the remedial action and maintenance of Diamond Alkali.    

Today’s conviction is the result of an ongoing federal antitrust investigation being conducted by the Antitrust Division’s New York Office, the EPA Office of Inspector General and the Internal Revenue Service-Criminal Investigation.

SEC COMMISSIONER GALLAGHER'S REMARKS AT INSTITUTE OF INTERNATIONAL BANKERS CONFERENCE

FROM:  SECURITIES AND EXCHANGE COMMISSION 
Remarks Given at the Institute of International Bankers 25th Annual Washington Conference
 Commissioner Daniel M. Gallagher
U.S. Securities and Exchange Commission
Washington, D.C.

March 3, 2014

Thank you, Roger [Blissett].

Before I begin, I’d like to point out that two years ago, I spoke at this conference and discussed the Financial Stability Oversight Council, or FSOC, in great detail.  I spoke about the inherently political nature of FSOC, how it had been vested with tremendous power, and how it could threaten our capital markets.  So, given everything that has happened since then, I have to say: I told you so.[1]

Today, I’d like to share some thoughts about regulatory capital requirements.  I’ve spoken before about the significant differences between bank capital and broker-dealer capital, because I fear that these distinctions are all too often overlooked in the debates over regulatory capital.  After all, in order to come up with the right answers on how to set capital requirements, we need to ask the right questions – and that’s impossible without a proper understanding of the important differences between broker-dealer and bank capital requirements.  Those differences are fundamental, and we ignore them at our peril.

In many ways, the philosophy of bank capital is easier to understand.  In the banking sector, which features leveraged institutions operating in a principal capacity, capital requirements are designed with the goal of enhancing safety and soundness, both for individual banks and for the banking system as a whole.  Bank capital requirements serve as an important cushion against unexpected losses.  They incentivize banks to operate in a prudent manner by placing the bank owners’ equity at risk in the event of a failure.  They serve, in short, to reduce risk and protect against failure, and they reduce the potential that taxpayers will be required to backstop the bank in a time of stress.

Capital requirements for broker-dealers, however, serve a different purpose, one that, to be fair, can be somewhat counterintuitive.  The capital markets within which broker-dealers operate are premised on risk-taking – ideally, informed risks freely chosen in pursuit of a greater return on investments.  In the capital markets, there is no opportunity without risk – and that means real risk, with a real potential for losses.  Whereas bank capital requirements are based on the reduction of risk and the avoidance of failure, broker-dealer capital requirements are designed to manage risk – and the corresponding potential for failure - by providing enough of a cushion to ensure that a failed broker-dealer can liquidate in an orderly manner, allowing for the transfer of customer assets to another broker-dealer.

As I said, it’s counterintuitive, but the possibility – and the reality – of failure is part of our capital markets.  Indeed, our capital markets are too big – as well as vibrant, fluid, and resilient – not to allow for failure.  Our job as capital markets regulators is to accept the inevitability that some brokerage firms will fail and to craft a capital regime that fully protects customers in the event of such failures.  A safety-and-soundness bank-based capital regime simply doesn’t work in the context of capital markets.

To put it another way, when you deposit a dollar into a bank account, you expect to get that dollar back, plus a bit of interest.  We place our savings into bank accounts for safekeeping, and while we know that the bank makes use of our funds, we also know that we are entitled to receive all of our principal back – and bank capital requirements, along with government backstops, are designed to ensure the availability of that principal.  When you invest a dollar through a broker-dealer account, however, the market determines how much you get back.  You could break even, you could double your investment, or, of course, you could lose part or all of that initial investment.  The point is that when we make a bank deposit, we expect, at a minimum, to receive the entirety of our principal back, while when we make an investment, we expect the market to dictate what we receive in return. It stands to reason, therefore, that the capital requirements for broker-dealers must be tailored accordingly.

I’m sure you didn’t need an SEC Commissioner to explain to you the difference between a deposit and an investment.  And yet, when it comes to setting capital requirements, bank regulators seem increasingly determined to seek a one-size-fits-all regulatory construct for financial institutions.  In addition, as noted by my friend Peter Wallison in an important recent op-ed in The Hill, both the Dodd-Frank-created FSOC and the G-20-created – and bank regulator dominated – Financial Stability Board seem intent on applying the bank regulatory model to all financial institutions they deem to be systemically important.[2]

Traditionally, the Fed, as the nation’s central bank, has been known more for its role as the lender of last resort to banks than as a regulator.  By offering access to its discount window to illiquid, but not insolvent, banks offering good collateral, the Fed can provide crucial liquidity and stabilize otherwise solvent banks in times of difficulties.  During the recent financial crisis, however, the Fed went beyond offering access to the discount window to depository institutions in its capacity as the lender of last resort to serving as the investor of last resort.  The acquisition of almost 80 percent of AIG in exchange for an $85 billion loan, for example, as well as the ownership of $29 billion in former Bear Stearns assets, marked a fundamental departure from the Fed’s traditional role.  After Dodd-Frank, there is a confusion about the Fed’s lender of last resort function that is warping regulatory debates and is being used to the advantage of the Fed and central bankers around the world to increase their jurisdiction.  Policymakers today incorrectly conflate ‘lender of last resort’ with the rightly dreaded ‘bailout.’  This confusion must be addressed by policymakers before we can have a constructive discussion about capital and margin requirements for non-bank financial services firms.

The recent FSOC intervention in the money market mutual fund space shined a spotlight on this newly expansive vision of the role of banking regulators.  The money market mutual fund reform debates that raged through 2012 focused in large part on the concept of a “NAV buffer,” which effectively is a capital requirement for money market funds.  This debate culminated in the November 2012 issuance of a report by FSOC which incorporated the concept of a so-called “NAV buffer.”[3]

The reasoning behind capital buffer requirements for money market funds is that they would serve to mitigate the risk of investor panic leading to a run on a fund.  The figures under discussion, however, were far too low to promise any serious effect on panic, while the imposition of real, bank- or even broker-dealer-like capital requirements in this space, on the other hand, would simply kill the market for money market mutual funds.  A 50 basis point buffer, to be phased in over a several year period, would hardly stem investor panic, unless one believes that investors would be comforted by the knowledge that for every dollar they had on deposit, the money market fund had set aside half a penny as a capital buffer.

Crucially, as I’ve noted before, there is no limiting principle to the application of this bank-based view of capital – indeed, last September, Treasury’s Office of Financial Research issued a fatally-flawed “Asset Management and Financial Stability” report featuring similar reasoning, as reflected in its implied support for “liquidity buffers” for asset managers.[4]

It remains unclear as to whether the Fed is indeed seeking to impose bank-based capital charges on non-bank entities in conjunction with granting them access to the discount window - at the cost of submitting to prudential regulation - or whether it is instead proposing those additional capital charges in order to prevent non-prudentially regulated financial entities from ever relying upon the “government safety net” provided by the discount window.[5]

Dodd-Frank Act’s grants of authority and mandates to the Fed further expand its traditional role.  Section 165 of the Dodd-Frank Act requires, among other things, that the Fed’s Board of Governors establish enhanced prudential standards for bank holding companies with consolidated assets of greater than $50 billion.  Although Section 165 nowhere mentions broker-dealers or asset management firms, last month, the Fed issued a final rule under Section 165 that could have a profound impact on the SEC-regulated subsidiaries of large foreign banks, one that would ripple through our capital markets as a whole.[6]

The Fed’s new rule will require foreign banking organizations with U.S. non-branch assets of $50 billion or more to establish a U.S. intermediate holding company over their U.S. subsidiaries.  These new holding companies will be subject to the same risk-based and leverage capital standards that the Fed applies to U.S. bank holding companies. As such, they will be subject to the Fed’s rules requiring regular capital plans and stress tests and will be required to establish a U.S. risk committee and employ a U.S. chief risk officer.  The new holding companies will be required to meet enhanced liquidity risk-management standards, conduct liquidity stress tests, and hold a buffer of highly liquid assets based on projected funding needs during a 30-day stress event.  They will, in short, be subject to the same Fed requirements as domestic banks with assets totaling $50 billion or more.

Now, I should take a moment to make clear that I support stringent capital requirements for all financial institutions that pose risks to our financial system.  Furthermore, it’s certainly not unreasonable in theory to subject foreign bank holding companies operating in the U.S. to the same requirements as domestic ones.  That’s not, however, all that the Fed’s new rules do.  They also require a foreign entity operating non-bank subsidiaries in the U.S. to superimpose an entirely new organizational structure for those non-bank U.S. holdings – one that artificially brings those holdings under the jurisdiction of the Fed and subjects them to regulations crafted to ensure the safety and stability of banking entities.

There’s an old joke about a physicist, a chemist, and an economist finding themselves stranded on a desert island with a supply of canned food.  The physicist says, “Let’s drop the cans from the top of that tree over there – it will hit the rocks below and break open.”  The chemist counters, “No, that would spill too much of the food.  Let’s build a fire and place them in the flames until they burst open.”  As the physicist and chemist argue, the economist silently scratches out equations in the sand.  Finally, he looks up and exclaims, “I’ve got it! First, assume we have a can opener…”  Apologies to all of my economist friends!

The Fed’s new rules come a little too close to turning this joke into reality.  Broker-dealers, of course, are regulated by the SEC, as they have been for almost eight decades now.  The Fed, on the other hand, regulates banks, or more specifically, bank holding companies.  The Fed’s Section 165 rulemaking, in essence, forces a foreign bank organization to impose a bank holding company into existence over its non-bank holdings, thus subjecting those entities’ broker-dealer subsidiaries to regulation by the Fed.  In essence, by requiring a foreign bank to create a wholly new structure for its U.S. operations subject to new regulatory requirements that will have a direct impact on the liquidity available to those operations, including broker-dealers, the Fed in fact assumes a can into which the foreign bank’s U.S. operations must be packed.  Only then can the Fed employ its can opener of regulation to oversee those operations.

Among the other requirements to which these new intermediate holding companies will be subject is the Fed’s leverage ratio.  The Fed has proposed that the largest bank holding companies be subject to an additional 2% leverage buffer on top of the 3% mandated by Basel III.[7]  This will incentivize broker-dealers within bank holding companies to reduce the size of their balance sheets.  Specifically, it could induce broker-dealers to reduce the amount of seemingly highly leveraged but low risk and thin margin transactions in which they engage – most importantly, repo and stock loan activity.  In addition, Basel III contains a so-called net stable funding ratio, which, by favoring long term, “stable” assets, would further constrain the ability of broker-dealers to fund their day-to-day operations through the short-term wholesale funding markets.

The Fed has also proposed a new liquidity coverage ratio that would require a bank holding company to maintain a sufficient amount of high quality liquid assets that could immediately be converted into cash to meet liquidity needs in times of stress.  This could affect broker-dealer subsidiaries of large financial institutions organized as bank holding companies, in that the broker-dealers’ holdings would be taken into account when determining the parent holding company’s ratio.  The same reasoning applies to potential enhanced market risk standards under Basel 2.5 and Basel III, which could also affect the capital holdings of bank-affiliated broker-dealers.

Now, let’s be clear about one thing: whether or not you agree with these proposals and initiatives, their net effect will be a reduction in the amount of liquidity in the securities markets.  This, like the bailouts that led to this regulatory frenzy, is hardly something that Americans would vote for if they had the chance.  From the central banker’s perspective, however, this may be an acceptable cost to bring under its control the short-term wholesale funding markets I just referenced, which have long been a cause of concern for regulators.  

Bank regulators and their wide-eyed admirers have spoken at length about the risks of “shadow banking,” which they define broadly to include the types of “securities funding transactions,” such as repo and reverse repo, securities lending and borrowing, and securities margin lending, used by both banks and broker-dealers for short-term funding.[8]  The loaded term “shadow banking” isn’t exactly used as an honorific, and I find it concerning that so many bank regulators routinely use the term to describe the day-to-day transactions so crucial to ensuring the ongoing operations of our capital markets.

To me, this onslaught of bank regulator rulemaking impacting non-bank markets is the result of a central, albeit unannounced, pillar of Dodd-Frank: the institutionalization of “too big to fail.”  The continued focus on “going concern” capital for institutions like broker-dealers that should fail when they take on undue risk can mean only one thing – despite the lessons learned from the financial crisis, despite the rightful disgust the American people directed at the bailouts, the U.S. government is focused on propping up institutions instead of refining the processes by which their failures will be handled.  This betrays the tenets of Title II of Dodd-Frank and reflects the absurdity of that portion of the legislation.  Why, after the failure of Lehman, we aren’t focusing on bankruptcy code amendments and related regulatory refinements, as many experts have called for,[9] is beyond me.

To be clear, I respect the Fed’s concerns about capital requirements for bank affiliated non-bank financial institutions, notwithstanding my fears as to the steps the Fed might take to address those concerns.  Our financial institutions are interconnected as never before, increasing the importance of taking a holistic view of those institutions, subsidiaries and all.  In doing so, however, it is crucial that we bring to bear the specialized experience and expertise of the regulators with primary oversight responsibility over the constituent parts of those institutions.  In the case of broker-dealers, this means the Commission, with its nearly eight decades of experiences in this regulatory space.  Since taking the reins of the agency, Chair White has strived to return the SEC to the center of the policy debates taking place with respect to large, interconnected financial institutions, and I commend her for doing so.  For example, we’ve started the process of updating our broker-dealer capital rules, which I believe is particularly important for bank-affiliated broker-dealers.

It’s my hope that the bank regulators constructively participate in this dialogue as well.  The last thing anyone wants is the old Washington cliché of a “turf war.”  For one thing, we’d lose – the SEC will never have the resources of the banking agencies – after all, it’s hard to outspend agencies that can print their own money.  More to the point, however, we’d never want to “win” – not only are we busy enough as it is, with approximately sixty Dodd-Frank mandated rules yet to be completed along with the day-to-day, blocking-and-tackling work that’s so critical to the agency’s mission, but we recognize that the banking regulators are best situated to regulate banks.  When it comes to the broker-dealer subsidiaries of banks, however, we stand ready to work with the Fed and other banking regulators to ensure that any new rules applicable to those entities are enhancements to our existing regime, not duplicative, contradictory or counterproductive regulations inspired by a regulatory paradigm designed for wholly different entities.

Thank you all for your attention this afternoon.  I hope the conference is rewarding for all of you, and I’d be happy to take questions.


[1] See Daniel M. Gallagher, Commissioner, Sec. & Exch. Comm’n, “Ongoing Regulatory Reform in the Global Capital Markets,” March 5, 2012, available at http://www.sec.gov/News/Speech/Detail/Speech/1365171490004#.UxSSz_ldUdU.

[2] See Peter J. Wallison, “Congress should curb the power of the FSOC” (February 24, 2014), available at  http://thehill.com/blogs/congress-blog/economy-budget/198927-congress-should-curb-the-power-of-the-fsoc .

[3] Financial Stability Oversight Council, “Proposed Recommendations Regarding Money Market Mutual Fund Reform” (November 2012), available at http://www.treasury.gov/initiatives/fsoc/Documents/Proposed%20Recommendations%20Regarding%20Money%20Market%20Mutual%20Fund%20Reform%20-%20November%2013,%202012.pdf.

[4] U.S. Department of Treasury, Office of Financial Research, “Asset Management and Financial Stability,” (September 2013), available at http://www.treasury.gov/initiatives/ofr/research/Documents/OFR_AMFS_FINAL.pdf.

[5] See, e.g., William C. Dudley, President and Chief Executive Officer, Federal Reserve Bank of New York, “Fixing Wholesale Funding to Build a More Stable Financial System,” February 1, 2013, available at  http://www.newyorkfed.org/newsevents/speeches/2013/dud130201.html ; Daniel K. Tarullo, Governor, Board of Governors of the Federal Reserve System, “Shadow Banking and Systemic Risk Regulation,” November 22, 2013, available at http://www.federalreserve.gov/newsevents/speech/tarullo20131122a.htm.

[6] “Enhanced Prudential Standards for Bank Holding Companies and Foreign Banking Organizations,” February 18, 2014, available at http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20140218a1.pdf.

[7] “Regulatory Capital Rules: Regulatory Capital, Enhanced Supplementary Leverage Ratio Standards for Certain Bank Holding Companies and their Subsidiary Insured Depository Institutions,” August 20, 2013, available at http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20130709a1.pdf.

[8] See, e.g., Tarullo, “Shadow Banking and Systemic Risk Regulation.”

[9] See, e.g., Thomas H. Jackson, Kenneth E. Scott, Kimberly Anne Summe, and John B. Taylor, “Resolution of Failed Financial Institutions: Orderly Liquidation Authority and a New Chapter 14, Studies by the Resolution Project at Stanford University’s Hoover Institution Working Group on Economic Policy” (April 25, 2011), available at  http://media.hoover.org/sites/default/files/documents/Resolution-Project-Booklet-4-11.pdf .

THE QUADRENNIAL DEFENSE REVIEW

FROM:  U.S. DEFENSE DEPARTMENT 

Right:  Robert F. Hale, the Defense Department's comptroller; Christine E. Wormuth, deputy undersecretary for strategy, plans and force development; and Air Force Lt. Gen. Mark F. Ramsay, Joint Staff director for force structure, resources and assessments, respond to questions from reporters about the department's fiscal year 2015 budget request at the Pentagon, March 4, 2014. Wormuth also discussed the 2014 Quadrennial Defense Review. DOD photo by Glenn Fawcett.  

Quadrennial Defense Review Charts Strategy Evolution
By Jim Garamone
American Forces Press Service

WASHINGTON, Mar. 4, 2014 – The 2014 version of the Quadrennial Defense Review takes the defense strategic guidance formulated in 2012 and evolves it through the future, a senior Pentagon official said.

Christine E. Wormuth, deputy undersecretary of defense for strategy, plans and force development, said the congressionally mandated QDR is an opportunity for Defense Secretary Chuck Hagel to lay out his vision and for the department, to refine defense strategy and to tell how the Defense Department will adapt the joint force to support it.

“This QDR is an evolution in the defense strategy process we’ve had,” said Wormuth, who has been nominated to be undersecretary of defense for policy. “Having come out of Iraq and beginning the process of transitioning in Afghanistan, this QDR looks to the future and talks about how the strategy needs to evolve and how the department needs to rebalance in an era of fiscal restraint.”
The review lays out a complex and rapidly evolving security environment that includes changes in technology, demographic trends and other factors. The review stresses the importance of the Asia-Pacific region to the United States while acknowledging there are still many “friction points” in the Middle East, Wormuth said. “Terrorism remains a continuing, evolving, metastasizing threat,” she added.
The three “three muscle movements” for the department are protecting the homeland, building security globally, and projecting power and winning decisively, Wormuth noted, and another piece of the strategy is an increased emphasis on innovation and adaptability, particularly in a fiscally constrained environment.

“The review will tick through things we are looking at in terms of new paradigms for forward presence: How can we get more bang for our buck from our forward-deployed forces, and how can we work more closely with allies and partners?” she said. “The innovation piece will also talk about the department protecting its seed corn in science and technology to maintain our technological edge.”
The review says that at the funding level in President Barack Obama’s budget request, DOD can execute this strategy. “There will be some increased risk in some areas,” Wormuth said. In the near term, she added, there is concern about readiness, and in the long term, there is “a lot of uncertainty in a security environment as dynamic as the one we face with a smaller force.”
The QDR will cover balancing the force holistically, and will discuss the rationale behind reducing the size of the Army and Marine Corps. It also will lay out things the department is doing to protect investments and will put forward initiatives in key capability areas that support the strategy, she said. These include cyber, space, precision strike and special operations forces.

Another important piece of the review is the discussion about reforming and rebalancing the department itself. The QDR discusses the 20-percent reduction in DOD staffs, why the department needs a new round of base realignment and closure, what acquisition reform can bring to DOD and why the department needs to slow the growth of manpower costs.

The review also looks at what the implications are for the department if there is no relief from sequestration, Wormuth said. “If we return to sequester-level cuts in fiscal 2016, we will see significantly higher levels of risk across the board,” she added. The Army will be forced to pare another 20,000 to 40,000 soldiers. The Marine Corps would drop to 175,000. The Air Force would have to eliminate other platforms, and the Navy would eliminate an aircraft carrier.

Sequestration cuts would make the bedrock DOD strategy of fighting and winning two nearly simultaneous wars unworkable, Wormuth said.

“A smaller force cannot be as present around the world,” she said. “We would have to be very selective in the engagement and partner-building activities we would take.”

Readiness challenges would grow under sequestration, Wormuth added, virtually guaranteeing a hollow force.

The current strategy is the right one for the country, she said. “The additional resources the president has asked for above sequestration, we think, is sufficient to get the job done,” she said.

(Follow Jim Garamone on Twitter: @GaramoneAFPS)

Tuesday, March 4, 2014

U.S.-RUSSIA MILITARY-TO-MILITARY ACTIVITIES ON HOLD

FROM:  U.S. DEFENSE DEPARTMENT 
DOD Puts Military-to-military Activities With Russia on Hold
American Forces Press Service

WASHINGTON, Mar. 3, 2014 – The Defense Department has “put on hold” military-to-military activities with Russia, Pentagon Press Secretary Navy Rear Adm. John Kirby said this evening.

In a statement released to reporters, Kirby said the suspended activities include exercises, bilateral meetings, port visits and planning conferences.

Although the Defense Department finds value in the military-to-military relationship developed in recent years with the Russian Federation to increase transparency, build understanding and reduce the risk of military miscalculation, Kirby said, “we have, in light of recent events in Ukraine, put on hold all military-to-military engagements between the United States and Russia.”

The Defense Department is closely monitoring the situation and remains in close contact with the State Department and other government agencies, as well as with allies, partners and NATO, the admiral said. “We call on Russia to de-escalate the crisis in Ukraine and for Russian forces in Crimea to return to their bases, as required under the agreements governing the Russia Black Sea Fleet,” he added.
Though some media outlets are speculating on possible ship movements in the region, Kirby said, there has been no change to U.S. military posture in Europe or the Mediterranean Sea.

“Our Navy units continue to conduct routine, previously planned operations and exercises with allies and partners in the region," the press secretary said.

Search This Blog

Translate

White House.gov Press Office Feed