FROM: U.S. DEFENSE DEPARTMENT
CONTRACTS
NAVY
General Electric Co., General Electric Aircraft Engines, Lynn, Massachusetts, is being awarded a $220,684,090 ceiling-priced indefinite-delivery/indefinite-quantity contract for commercial depot level services for T700-GE-401 and T700-GE-401C turbo shaft engines, cold section modules and power turbine modules in support of H-60, H-1, AH-1W and AH-1Z aircraft. This contract provides for rework and testing, receiving, packing, shipping, and reporting of the engines and modules. Work will be performed in Arkansas City, Kansas, and is expected to be completed in May 2019. No funds are being obligated at time of award. Funds will be obligated against individual task orders as they are issued. This contract was competitively procured via an electronic request for proposals; one offer was received. The Naval Air Warfare Center Training Systems Division, Orlando, Florida, is the contracting activity (N61340-14-D-0004).
Raytheon Co., McKinney, Texas, is being awarded a $50,121,721 modification to a previously awarded firm-fixed-price, cost-plus-fixed-fee contract (N00019-13-C-0161) to exercise an option for the procurement of 16 APY-10 radar kits for full rate initial production Lot I P-8A Poseidon aircraft. In addition, this option provides for installation and checkout technical support, configuration management, reliability and maintainability failure reporting and corrective actions, engineering change orders/proposals, integrated logistics support, technical data, and repair of repairables. Work will be performed in McKinney, Texas (53.38 percent), Reston, Virginia (8.35 percent); Little Falls, New Jersey (7.78 percent); Spring Valley, California (6.51 percent); Black Mountain, North Carolina (4.24 percent); Etobicoke, Ontario, Canada (2.73 percent); Poway, California (2.50 percent); Simsbury, Connecticut (2.43 percent); Leesburg, Virginia (2.33 percent), and various locations throughout the United States (9.75 percent), and is expected to be completed in November 2016. Fiscal 2014 aircraft procurement, Navy funds in the amount $50,121,721 will be obligated at time of award; none of which expire at the end of the current fiscal year. The Naval Air Systems Command, Patuxent River, Maryland, is the contracting activity.
Guam MACC Builders a Joint Venture, Honolulu, Hawaii, is being awarded $42,393,740 for firm-fixed-price task order 0005 under a previously awarded multiple award construction contract (N62742-10-D-1309) for the construction of 28 modular storage magazines at Naval Base, Guam. The work to be performed also provides for security fencing, electrical power, security lighting, communication and emergency generator building, clearing and grubbing, grading, paving and site improvements to include access roads, concrete aprons, circulation roadways, drainage, percolation basins, waterlines, and incidental related work. Work will be performed in Santa Rita, Guam, and is expected to be completed by June 2016. Fiscal 2014 military construction, Navy contract funds in the amount of $42,393,740 are being obligated on this award and will not expire at the end of the current fiscal year. Six proposals were received for this task order. The Naval Facilities Engineering Command, Pacific, Joint Base Pearl Harbor-Hickam, Hawaii, is the contracting activity.
C&N Universe Inc.*, National City, California, is being awarded a five-year $7,200,590 hybrid firm-fixed-price, cost-plus-fixed fee, and cost reimbursement contract to provide organizational level maintenance and repairs, service call repairs and operational support services for the Commander, Pacific Fleet Berthing and Messing Barge Program. This contract contains four option years, which if exercised, would bring the contract value to a maximum ceiling of $40,261,768. Work will be performed in San Diego, California (31.50 percent), Puget Sound, Washington (28.91 percent), Pearl Harbor, Hawaii (22.24 percent), Yokosuka, Japan (7 percent), Sasebo, Japan (5.35 percent), Guam (5 percent), and is expected to be completed by May 2015. If all options are exercised, work will continue through May 2019. Fiscal 2014 operations and maintenance, Navy contract funds in the amount of $7,200,590 will be obligated at contract award and expire at the end of the current fiscal year. This requirement was a Small Business Administration, Section 8(a) set-aside competitively procured via the Federal Business Opportunities website, with three offers received. The Southwest Regional Maintenance Center, San Diego, California, is the contracting activity (N55236-14-C-0006).
DEFENSE LOGISTICS AGENCY
The Boeing Co., St. Louis, Missouri, has been awarded a maximum $42,500,000 firm-fixed-price, undefinitized delivery order against the current Boeing basic ordering agreement (SPA4A1-14-G-0007) for F-15 vertical stabilizers. Location of performance is Missouri, with a March 2019 performance completion date. Using service is Air Force. Type of appropriation is fiscal 2016 through fiscal 2019 defense working capital funds. The contracting activity is the Defense Logistics Agency Aviation, Richmond, Virginia (SPE4A1-14-G-0007).
ARMY
Olsson Industrial Electric, Springfield, Oregon, was awarded a $34,990,238 firm-fixed-price incrementally funded contract for the replacement of the 4160/480 volt station service electrical system at McNary Lock and Dam, Umatilla, Oregon. Work will be performed in Umatilla, Oregon, with an estimated completion date of June 10, 2018. Bids were solicited via the Internet with five received. Fiscal 2014 other procurement funds in the amount of $840,000 are being obligated at the time of the award. U.S. Army Corps of Engineers, Walla Walla, Washington, is the contracting activity (W912EF-14-C-0011).
Edifice-Schlosser Joint Venture,* Hyattsville, Maryland, was awarded a $17,891,000 firm-fixed-price contract for the Joint Land Attack Cruise Missile Defense Elevated Netted Sensor System. Work will be performed at Aberdeen Proving Ground, Maryland, with an estimated completion date of March 8, 2015. Bids were solicited via the Internet with four received. Fiscal 2014 military construction funds in the amount of 17,891,000 are being obligated at the time of the award. U.S. Army Corps of Engineers, Baltimore, Maryland, is the contracting activity (W912DR-14-C-0017).
Great Lakes Dredge & Dock Co., Oak Brook, Illinois, was awarded a $17,731,250 firm-fixed-price contract for shore protection from hurricane and storm damage. Work will be performed at Port Monmouth, New Jersey, with an estimated completion date of June 26, 2015. Bids were solicited via the Internet with three received. Fiscal 2014 other procurement funds in the amount of $17,731,250 are being obligated at the time of the award. U.S. Army Corps of Engineers, New York, New York, is the contracting activity (W912DS-14-C-0015).
Academi Training Center, Inc, Moyock, North Carolina was awarded an $8,801,172 modification (P00012) to contract W5J9JE-12-C-0087 for camp integrity and life support and private security services. Fiscal 2014 funds are being obligated at the time of the award. Cumulative total for prior modifications is $16,104,831. Estimated completion date is May 14, 2015. Work will be performed Afghanistan. CENTCOM Joint Theater Support Contracting Command, Phoenix, APO AE is the contracting activity.
AIR FORCE
Lockheed Martin Aeronautics Co., Fort Worth, Texas, has been awarded a $7,253,896 modification (P00068) to FA8615-07-C-6032 for F-16 production contracts. The total cumulative face value of the contract is $430,377,045. This modification incorporates a solution to solve a radar interoperability issue affecting F-16 aircraft produced for Pakistan and Thailand under the basic contract. Work will be performed at Fort Worth, Texas, and is expected to be completed by April 30, 2016. The contract supports 100 percent foreign military sales for Thailand and Pakistan. Air Force Life Cycle Management Center/WWMK, Wright-Patterson Air Force Base, Ohio, is the contracting activity.
*Small Business
Monday, May 12, 2014
REMARKS: SECRETARY OF STATE KERRY WITH SINGAPOREAN FOREIGN MINISTER SHANMUGAM
FROM: U.S. STATE DEPARTMENT
Remarks With Singaporean Foreign Minister K. Shanmugam Before Their Meeting
Remarks
John Kerry
Secretary of State
Treaty Room
Washington, DC
May 12, 2014
I want to thank him and Singapore for their strong strategic partnership with the United States. There are many issues of concern where we think alike and we work in partnership. One of the most recent, obviously, is the Chinese challenge to the Paracel Islands. And we are particularly concerned – all nations that are engaged in navigation and traffic within the South China Sea, the East China Sea, are deeply concerned about this aggressive act. We want to see a code of conduct created; we want to see this resolved peacefully through the Law of the Sea, through arbitration, through any other means, but not direct confrontation and aggressive action.
In addition, we have enormous interests in terms of our economies and other interests. We work on counternarcotics, we work on counterterrorism, and particularly of great interest to both of us is the economic relationship. We have some 2,000 American businesses that are based in Singapore. Singapore is an enormous port, as everybody knows. It’s critical to the trade and commerce in the region. We have had a free trade agreement with Singapore for some period of time now, and that really was the precursor to the thinking about the TPP, Trans-Pacific Partnership, where again, Singapore has been deeply engaged, very involved in helping to shape it, showing leadership for which we are very appreciative.
In addition to that, we are engaged with the U.S.-Asia Pacific Comprehensive Energy Pact Partnership. And this is vital to our ability to be able to attract capital and fund renewable fuel projects, long-term clean energy projects for the future.
So I’m delighted to welcome the foreign minister here today, and we look forward to having a fruitful conversation. Thank you very much.
FOREIGN MINISTER SHANMUGAM: Thank you, Secretary Kerry. We have had – I met Secretary Kerry last year. We have had a great set of interactions. Singapore and U.S., we are old friends. Very strong partnership, very strong security relationship, and we have very similar ideas on a broad range of issues, as Secretary Kerry has said.
I want to talk to Secretary Kerry about both our bilateral issues – there are no issues, but how to take the partnership further, and also on regional issues, and also on the TPP, which Secretary Kerry spoke about. Today, 560,000 American jobs are dependent on exports to ASEAN alone, and ASEAN attracts nearly U.S. $200 billion of investments, the largest in all of Asia. One in three American jobs are dependent on exports to Asia. So the TPP has tremendous economic consequences for the U.S. and for our region, and I hope to speak with Secretary Kerry and others on the importance of making substantial progress, which is the President’s determination.
And on regional issues, on South China Sea issues, we have – I’ve just come from the ASEAN meeting. ASEAN foreign ministers issued a statement. We do not want tension. We want a code of conduct to be progressed with. We need a situation where parties resolve their disputes and differences in a way that’s acceptable to all, and I’m sure we’ll have good discussions. Thank you.
SECRETARY KERRY: Thank you.
FOREIGN MINISTER SHANMUGAM: Thank you.
CONSUMERS DEFRAUDED BY BOGUS '$10,000 CREDIT LINE' TO RECEIVE REFUNDS FROM FTC
FROM: FEDERAL TRADE COMMISSION
FTC Sends Full Refunds to Consumers Duped by Marketers of Bogus ‘$10,000 Credit Line’
“The FTC strives to return as much money as possible to defrauded consumers;” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “It is particularly gratifying when we can make consumers whole again.”
In 2011, a federal district court ordered the defendants to pay more than $3.7 million after finding that the defendants were in contempt of court for violating a 2008 court order by selling a bogus “$10,000 credit line”, and a “no cost” prepaid debit card with hidden fees, to consumers who were unemployed or had poor credit.
After obtaining this judgment, the FTC collected it in full. Many affected consumers will receive more than $100; the amounts vary based upon the victim’s loss. Those who receive the checks from the FTC’s refund administrator should cash them within 60 days of the mailing date. The FTC never requires consumers to pay money or to provide information before refund checks can be cashed.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.
DEFENSE SECRETARY HAGEL SAYS U.S. IS DOMINANT FORCE IN THE WORLD
FROM: U.S. DEFENSE DEPARTMENT
Hagel: The United States Remains an Unrivaled Power
By Terri Moon Cronk
American Forces Press Service
WASHINGTON, May 11, 2014 – While some around the world believe the United States is a weakening superpower, Defense Secretary Chuck Hagel today defended America as the world’s dominant force.
“I have seen some of [that perception], yes,” Hagel said, during an interview on the ABC program “This Week with George Stephanopoulos”. “But we are still the dominant power. No one’s in our universe, whether you apply a metric or measurement of an economic power or military power.”
But that doesn’t mean the United States can solve every problem alone, he said.
“No nation can do that. I do think there’s a sense out there by some that somehow America has powers eroding, or we’re not going to use our power, or we’re too timid about our power. I think we have been wise on how we use our power.”
“I don’t think you can run foreign policy or lead a nation and be president of the United States based on what other people think of you,” he added.
Hagel was asked about several issues in the news, including the kidnapping of more than 200 schoolgirls by the Boko Haram terrorist group in Nigeria, the situation in Ukraine and problems at the Veterans Affairs Department, in addition to cyber security threats, and questions regarding transgender people serving in the military.
The United States has sent a team of experts from the FBI, the intelligence community and the military to Nigeria to help authorities in the West African nation find the girls, kidnapped in the remote northeast last month.
“It’s a vast country, so this is not going to be an easy task, but we’re going to bear every asset we could possibly use to help the Nigerian government.” However, he said the United States has no plans to put American troops on the ground.
On the crisis in Ukraine, Hagel said even though Russian President Vladimir Putin said last week that Moscow was withdrawing tens of thousands of its troops from along the border with Ukraine, Russian forces appear to be still there.
“Russia continues to isolate itself for a short-term gain,” he said. “The Russians may feel they’re somehow winning, but the world is not just about short term,” Hagel noted.
Regarding the growing threat of cyber attacks, Hagel said the United States is paying full attention to cyber security threats, but added it’s difficult to be confident.
“You can’t be,” he said. “The fact is, [cyber security issues] are as dangerous a threat as the world is dealing with, especially the United States. It’s quiet, it’s insidious, it’s deadly.”
Hagel was also asked whether department policy regarding transgender individuals serving in the military should be revisited now that gays and lesbians are allowed to serve openly. He called the issue complicated because of its medical component.
“These issues require medical attention. In austere locations where we put our men and women in many cases [those military posts] don’t always offer that kind of opportunity,” he explained.
“I do think it should continually be reviewed … because the bottom line [is] every qualified American who wants to serve our country should have an opportunity, if they fit the qualifications and can do it. This is an area we’ve not defined enough,” Hagel said.
Hagel also said he continues to support Department of Veterans Affairs Secretary Eric K. Shinseki amid reports that some veterans have died because they were unable to receive timely medical care through the VA system.
“There’s no one who understands accountability more than [retired Army] Gen. Shinseki,” Hagel said. “I do support [him], but there’s no margin here.”
The Defense secretary said if these reports prove accurate, “Accountability is going to have to be upheld, because we can never let this kind of outrage, if all of this is true, stand in this country.”
But the situation didn’t start with Shinseki’s term at VA, Hagel emphasized. “This is something that should have been looked at years and years ago. Yes, we missed it.”
Hagel: The United States Remains an Unrivaled Power
By Terri Moon Cronk
American Forces Press Service
WASHINGTON, May 11, 2014 – While some around the world believe the United States is a weakening superpower, Defense Secretary Chuck Hagel today defended America as the world’s dominant force.
“I have seen some of [that perception], yes,” Hagel said, during an interview on the ABC program “This Week with George Stephanopoulos”. “But we are still the dominant power. No one’s in our universe, whether you apply a metric or measurement of an economic power or military power.”
But that doesn’t mean the United States can solve every problem alone, he said.
“No nation can do that. I do think there’s a sense out there by some that somehow America has powers eroding, or we’re not going to use our power, or we’re too timid about our power. I think we have been wise on how we use our power.”
“I don’t think you can run foreign policy or lead a nation and be president of the United States based on what other people think of you,” he added.
Hagel was asked about several issues in the news, including the kidnapping of more than 200 schoolgirls by the Boko Haram terrorist group in Nigeria, the situation in Ukraine and problems at the Veterans Affairs Department, in addition to cyber security threats, and questions regarding transgender people serving in the military.
The United States has sent a team of experts from the FBI, the intelligence community and the military to Nigeria to help authorities in the West African nation find the girls, kidnapped in the remote northeast last month.
“It’s a vast country, so this is not going to be an easy task, but we’re going to bear every asset we could possibly use to help the Nigerian government.” However, he said the United States has no plans to put American troops on the ground.
On the crisis in Ukraine, Hagel said even though Russian President Vladimir Putin said last week that Moscow was withdrawing tens of thousands of its troops from along the border with Ukraine, Russian forces appear to be still there.
“Russia continues to isolate itself for a short-term gain,” he said. “The Russians may feel they’re somehow winning, but the world is not just about short term,” Hagel noted.
Regarding the growing threat of cyber attacks, Hagel said the United States is paying full attention to cyber security threats, but added it’s difficult to be confident.
“You can’t be,” he said. “The fact is, [cyber security issues] are as dangerous a threat as the world is dealing with, especially the United States. It’s quiet, it’s insidious, it’s deadly.”
Hagel was also asked whether department policy regarding transgender individuals serving in the military should be revisited now that gays and lesbians are allowed to serve openly. He called the issue complicated because of its medical component.
“These issues require medical attention. In austere locations where we put our men and women in many cases [those military posts] don’t always offer that kind of opportunity,” he explained.
“I do think it should continually be reviewed … because the bottom line [is] every qualified American who wants to serve our country should have an opportunity, if they fit the qualifications and can do it. This is an area we’ve not defined enough,” Hagel said.
Hagel also said he continues to support Department of Veterans Affairs Secretary Eric K. Shinseki amid reports that some veterans have died because they were unable to receive timely medical care through the VA system.
“There’s no one who understands accountability more than [retired Army] Gen. Shinseki,” Hagel said. “I do support [him], but there’s no margin here.”
The Defense secretary said if these reports prove accurate, “Accountability is going to have to be upheld, because we can never let this kind of outrage, if all of this is true, stand in this country.”
But the situation didn’t start with Shinseki’s term at VA, Hagel emphasized. “This is something that should have been looked at years and years ago. Yes, we missed it.”
PRESIDENT OBAMA, PRESIDENT MUJICA OF URUGUAY MAKE REMARKS BEFORE MEETING
FROM: THE WHITE HOUSE PRESIDENT
Remarks by President Obama and President Mujica of Uruguay Before Bilateral Meeting
Oval Office
11:06 A.M. EDT
PRESIDENT OBAMA: I want to welcome President Mujica and his delegation to the Oval Office. I have had the pleasure on several occasions of having discussions with President Mujica, and have been consistently impressed with the progress that Uruguay has been making under his presidency.
The United States and Uruguay has developed a strong relationship across a wide spectrum of issues. Our trade and commerce has expanded significantly. On the international front, we are very grateful that Uruguay is one of the largest contributors to U.N. peacekeeping in places like Haiti and Africa, and has been responsible for helping to facilitate peace in some very volatile regions.
President Mujica personally has extraordinary credibility when it comes to issues of democracy and human rights given his strong values and personal history, and is a leader on these issues throughout the hemisphere. And we share an interest in strengthening further the people-to-people bonds between our two countries, particularly around the issues of science, technology and education.
So this gives us an opportunity to find ways that we can further deepen this relationship. We both think that there’s room for additional work to expand trade and commerce between our countries. We want to see if we can expand exchanges, particularly for teachers and students. I want to hear from President Mujica additional ideas of how we can strengthen the broad trends of democratization and human rights in the hemisphere.
And we have a shared interest in social inclusion. Economically and socially, in both Uruguay and the United States, we have a potential great strength of a diverse population, and we want to exchange ideas about how we can make sure that our societies are open and benefiting all people and not just some.
So I very much appreciate the President’s visit, although I will say the first thing he said to me was that my hair has become much grayer since the last time he saw me. (Laughter.)
Welcome.
Welcome.
PRESIDENT MUJICA: (As interpreted.) Thank you. First let me recognize the American people and its institutions that are represented by you, Mr. President Obama.
We live in the south. We have a soul of the south. We belong to a continent where our mother tongue is more or less Spanish. And we live in a time where we need to learn English -- yes or yes. And you will have to become a bilingual country -- yes or yes. Because the strength of Latin women is admirable and they will fill this country with people who speak Spanish and Portuguese, too.
We have been looking toward everywhere, but towards ourselves a bit also. And from the humbleness of my little Uruguay, my people, who are there amongst an enormous area of fertile and much water, come here to seek out knowledge and research in all groups of the biological sciences, particularly in land that require local research, because the continent must produce much food for the world. And besides, this is the most advanced country in the world for biological sciences, but we don't want to merely send students out because they get married -- (laughter) -- and the American corporations pay more money, so we lose these qualified people. We have to bring teachers so then can come, but we need to make arrangements so that they can continue to contribute to Social Security here. Wisdom must be looked for there where it is.
And I must tell you that in Germany I asked the same thing from Mrs. Merkel, and with the efficiency that Germans have she set up a plan for 10,000 qualified retirees that are on call to spend some time and convey knowledge. And that I believe that in the long term that's worth much more than money, everything that is being asked for. We must fight to get our children in the new generation’s new capacities, new knowledge. And that is going to be the best way to spread freedom, independence, rights.
Mr. President, who is speaking is an old smoker. But in the world, per year, 8 million people are dying from smoking. And that is more than World War I, World War II. It’s murder. We are in an arduous fight -- very arduous -- and we must fight against very strong interests. Governments must not be involved in private litigation, but here we're fighting for life. And nobody must be distracted in this fight for life, because out of all values, the most important one is life itself.
Well, thank you. I'm wholeheartedly grateful. And I am getting old, and to be old means you don't want to leave home. I would like to be a little bit younger to see Mississippi, know the ranches -- in Los Angeles, the milk farms, other things. But please convey a hug -- I embrace all agriculturalists of this nation.
PRESIDENT OBAMA: All right. Thank you.
Thank you, everybody.
END
11:20 A.M. EDT
11:20 A.M. EDT
TAX LIENS INVESTMENT COMPANY EXECUTIVE PLEADS GUILTY TO RIGGING MUNICIPAL TAX LIEN AUCTIONS IN NEW JERSEY
FROM: U.S. JUSTICE DEPARTMENT
Monday, May 12, 2014
Former New York Tax Liens Investment Company Executive Pleads Guilty for Role in Bid Rigging Scheme at Municipal Tax Lien Auctions
Investigation Has Yielded 15 Guilty Pleas to Date
Vinaya K. Jessani, of New York City, entered a guilty plea in the U.S. District Court for the District of New Jersey in Newark to felony charges filed today. Under the plea agreement, Jessani has agreed to cooperate with the department’s ongoing investigation.
According to the charge, from at least as early as 1994 until as late as February 2009, Jessani, a former senior vice president who supervised the purchasing of municipal tax liens at auctions in New Jersey for the company he worked for, participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey by agreeing to, and instructing others to, allocate among certain bidders which liens each would bid on. The department said that Jessani and those under his supervision submitted bids in accordance with the agreements and purchased tax liens at collusive and non-competitive interest rates.
“Today’s guilty plea demonstrates the Antitrust Division’s continuing effort to prosecute those who manipulate the competitive process in order to harm home and property owners,” said Brent Snyder, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “The division will continue to be vigilant in rooting out conspiracies that harm already distressed property owners.”
The department said that the primary purpose of the conspiracy was to suppress and restrain competition in order to obtain selected municipal tax liens offered at public auctions at non-competitive interest rates. When the owner of real property fails to pay taxes on that property, the municipality in which the property is located may attach a lien for the amount of the unpaid taxes. If the taxes remain unpaid after a waiting period, the lien may be sold at auction. New Jersey state law requires that investors bid on the interest rate delinquent property owners will pay upon redemption. By law, the bid opens at 18 percent interest and, through a competitive bidding process, can be driven down to zero percent. If a lien remains unpaid after a certain period of time, the investor who purchased the lien may begin foreclosure proceedings against the property to which the lien is attached.
According to court documents, the conspiracy permitted the conspirators to purchase tax liens with limited competition and each conspirator was able to obtain liens which earned a higher interest rate. Property owners were therefore made to pay higher interest on their tax debts than they would have paid had their liens been purchased in open and honest competition, the department said.
A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act violation may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than the $1 million statutory maximum.
Today’s plea is the 15th guilty plea resulting from an ongoing investigation into bid rigging or fraud related to municipal tax lien auctions. Including Jessani, 12 individuals and three companies have pleaded guilty. Additionally, four individuals and two entities have been indicted for their roles in the conspiracy to rig bids at tax lien auctions.
Today’s case was done in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.
LEARNING TO WALK IN SPACE
FROM: NASA
Spacewalk Training at the Neutral Buoyancy Laboratory
PRESIDENT OBAMA'S REMARKS ON ENERGY AT WALMART IN MOUNTAIN VIEW, CALIFORNIA
FROM: THE WHITE HOUSE
May 9, 2014
Remarks by the President on American Energy
Walmart
Mountain View, California
Mountain View, California
9:48 A.M. PDT
THE PRESIDENT: Hello, Mountain View! (Applause.) It’s good to be in California. Everybody, have a seat. Have a seat. This is actually my third day on the West Coast. On Wednesday, we went to L.A., then we went to San Diego, we’re here in the Bay Area. But I have to get back because Sunday is what?
AUDIENCE: Mother’s Day!
THE PRESIDENT: It is Mother’s Day. That is a public service announcement -- do not forget. (Laughter.) It’s Mother’s Day.
I told Michelle one time, I said, how come people put so much emphasis on Mother’s Day, and Father’s day not so much? (Laughter.) She said every day other than Mother’s Day is Father’s Day. (Laughter and applause.) Which I thought kind of quieted me down.
I want to thank your mayor, Chris Clark, for hosting us. (Applause.) I want to thank the folks at Walmart. And I know this looks like a typical Walmart, but it is different -- and that’s why I’m here. A few years ago, you decided to put solar panels on the roof of the store. You replaced some traditional light bulbs with LEDs. You made refrigerator cases more efficient. And you even put in a charging station for electric vehicles. And all told, those upgrades created dozens of construction jobs and helped this store save money on its energy bills. And that’s why I’m here today -- because more and more companies like Walmart are realizing that wasting less energy isn’t just good for the planet, it’s good for business. It’s good for the bottom line.
AUDIENCE MEMBER: (Inaudible.)
THE PRESIDENT: Yes, see, he agrees. (Applause.) And it means jobs.
Changing the way we use energy is just one of the ways Americans have been working so hard to move this country forward. In the wake of the worst financial and economic crisis in generations, our businesses now have created over 9.2 million new jobs. A housing market that was reeling is rebounding. An auto industry that was flat-lining is now booming. You’ve got a manufacturing sector that had lost a third of its jobs during the ‘90s and now is adding jobs for the first time. More than 8 million Americans have now signed up for health care coverage through the Affordable Care Act. (Applause.) Troops that were fighting two wars are coming home. And rather than create jobs in other countries, more companies are actually choosing to create jobs and invest right here in the United States of America.
But we’ve got a long way to go before we get to where we need to be -- which is an economy where everybody who works hard, everybody who takes responsibility has a chance to get ahead, and that we have a chance to build an economy that works not just for a few at the top, but for everybody. That’s our goal -- the idea that no matter who you are, no matter what you look like, no matter where you come from, what your last name is, if you work hard, if you take responsibility, you can make it here in America.
And that starts with helping businesses create more good jobs. One of the biggest factors in bringing jobs back to America has been our commitment to American energy over the last five years. When I took office, we set out to break our dependence on foreign oil. Today, America is closer to energy independence than we have been in decades. We generate more renewable energy than ever, with tens of thousands of good American jobs to show for it. We produce more natural gas than anyone -- and nearly everybody’s energy bill is lower because of it. So are our carbon emissions that cause climate change.
We set new fuel standards for our cars and trucks so that they’ll go twice as far on a gallon of gas by the middle of the next decade. That saves the typical family about $8,000 at the pump. And for the first time in nearly 20 years, America produces more oil here at home than we buy from other countries.
So we’re producing more traditional energy, but we’re also becoming a leader in the energy sources of the future. We’re becoming a global leader in solar, thanks in part to the investments we’ve made in the Recovery Act. Over the past few years, the cost of solar panels have fallen by 60 percent; solar installations have increased by 500 percent. Every four minutes, another American home or business goes solar, and every panel is pounded into place by a worker whose job cannot be overseas.
So today, no matter where you live or where you do business, solar is getting cheaper and is getting easier to use than before. And with more businesses and rural cooperatives and homes choosing solar, prices keep coming down, manufacturers keep getting more innovative, and more jobs are created. Last year, jobs in the solar industry increased by 20 percent.
But we’ve got more work to do. And I want to work with Congress to do it. Unfortunately, Congress has not always been as visionary on these issues as we would like. It can be a little frustrating. But in this Year of Action, wherever I can go ahead and create my own opportunities for new jobs, I'm going to take it.
But we’ve got more work to do. And I want to work with Congress to do it. Unfortunately, Congress has not always been as visionary on these issues as we would like. It can be a little frustrating. But in this Year of Action, wherever I can go ahead and create my own opportunities for new jobs, I'm going to take it.
And so far, I’ve taken more than 20 executive actions -- from launching new hubs to attracting more high-tech manufacturing jobs to America, to reforming our job training programs to make sure more Americans are getting the skills they need to get the jobs that exist right now.
And so today, here at Walmart, I want to announce a few more steps that we’re taking that are going to be good for job growth and good for our economy, and that we don't have to wait for Congress to do. They are going to be steps that generate more clean energy, waste less energy overall, and leave our kids and our grandkids with a cleaner, safer planet in the process.
So let me list these out. Number one, we know that making buildings more energy efficient is one of the easiest, cheapest ways to create jobs, save money, and cut down on harmful pollution that causes climate change. It could save our businesses tens of billions of dollars a year on their energy bills -- and they can then use that money to grow and hire more folks. It would put construction workers back to work installing new systems and technologies. So this is what you call a win-win-win.
So that’s why, three years ago, I announced what we called the Better Buildings Initiative. It's an ambitious plan to improve the energy efficiency of America’s commercial buildings by 20 percent by the year 2020. And already we've got 190 businesses and organizations that have signed on. On average, they’re on track to meet their goal -- cutting energy use by 2.5 percent every single year. Together, they’ve already saved $300 million in energy costs. So we know it works.
And that’s why, over the past few months, I’ve been picking up the phone and reaching out to more leaders to get them on board. And today, they’re stepping up -- from cities, school districts, businesses, universities, you're seeing folks move on energy efficiency. GM is pledging to improve energy efficiency in 31 plants. The University of Virginia is doing the same thing in its buildings. Cities like Little Rock, Kansas City and Detroit are replacing regular street lights with more efficient LEDs.
And at Walmart, you’ve committed to reducing energy consumption across 850 million square feet of space. That's a lot. That's enough to cover more than half of the city of San Francisco. Taken together, this is going to make a difference, and it's the right thing to do for the planet, but it’s also the right thing to do for the bottom line. Because when you save that money you can pass that money back to consumers in the form of lower prices, or you can use it to create more jobs.
So folks in the private sector are doing their part to create jobs and reduce pollution and cut waste. I’m making sure the federal government does its part. Two years ago, I ordered $2 billion in energy upgrades to federal buildings. Today, I’m ordering an additional $2 billion in upgrades over the next three years. And these upgrades will create tens of thousands of construction jobs and save taxpayers billions of dollars.
The Department of Energy is putting a new efficiency standard -- set of efficiency standards in place that could save businesses billions of dollars in energy costs and cut carbon pollution -- and it's the equivalent of taking about 80 million cars off the road. And I want to thank Ernie Moniz, Secretary of Energy, and Secretary Donovan -- Shaun Donovan of HUD -- who are here today because they’ve shown extraordinary leadership on these issues. That's worth applauding. (Applause.)
So that’s the first announcement. Cities, schools, businesses, the federal government -- we’re all going to pledge to waste less energy and we’ve got concrete strategies that we know work.
The second announcement is about more Americans coming together to use more clean energy. Last month, I called up leaders from a whole range of industries and made the economic case for why solar is a good idea. And they listened. And today, more than 300 organizations -- from homebuilders, to affordable housing owners, to companies like Home Depot and Apple -- announced that they are going to expand the use of solar energy, thereby creating more jobs and cutting carbon pollution.
We’ve got public banks like Connecticut’s Green Bank and private banks like Goldman Sachs ready to invest billions of dollars in renewable energy. The Treasury Department and the IRS are making it easier for renewable energy companies to operate and attract investment. And we’re going to support training programs at community colleges across the country that will help 50,000 workers earn the skills that solar companies are looking for right now.
Walmart has already got the most installed on-site solar capacity of any company in America. And now you’ve announced plans to double that capacity. And it’s all part of your goal to buy or produce 7 billion kilowatt hours of renewable energy by 2020 -- something that could save Walmart $1 billion a year in energy costs.
So we know that generating more clean energy, using less dirty energy, and wasting less energy overall can be good for business and consumers. And it’s also good for the world that we leave for our children.
So together, the commitments we’re announcing today prove that there are cost-effective ways to tackle climate change and create jobs at the same time. So often, when we hear about how we’re going to deal with this really serious issue, people say we can’t afford to do it; it won’t be good for the economy. It will be good for the economy long term -- and if we don’t, that will be bad for the economy. Rising sea levels, drought, more wildfires, more severe storms -- those are bad for the economy. So we can’t afford to wait. And there’s no reason why we can’t even go further than we are so far by working with states and utilities, and other organizations to change the way we power our economy. Climate change is real and we have to act now.
Earlier this week, I issued -- or we issued a report that was years in the making called the National Climate Assessment. Hundreds of scientists, experts and businesses, not-for-profits, local communities all contributed over the course of four years. What they found was unequivocally that climate change is not some far-off problem in the future. It’s happening now. It’s causing hardship now. It’s affecting every sector of our economy and our society -- more severe floods, more violent wildfires. It’s already costing cities and states and families and businesses money.
Here in California, you’ve seen these effects firsthand. You know what’s happening. And increasingly, more and more Americans do -- including, by the way, many Republicans outside of Washington.
So unfortunately, inside of Washington we’ve still got some climate deniers who shout loud, but they’re wasting everybody’s time on a settled debate. Climate change is a fact.
And while we know the shift to clean energy won’t happen overnight, we’ve got to make some tough choices along the way. And we know that if we do, it’s going to save us ultimately money and create jobs over the long term. That's what Walmart understands, and Walmart is pretty good at counting its pennies.
So that’s why this fight is so important. That’s why the sooner we work together to adapt the economy to this reality of climate change, the more likely it is that we do right by our kids and leave a more stable world. And ultimately that's what motivates a whole lot of us.
As Americans, we don’t look backwards. We look forward. We don’t fear the future, we seize it. We shape it. And when it comes to energy, we have a chance to shape that sector that is probably going to have more to do with how well our economy succeeds than just about any other. We are blessed when it comes to energy, but we’re much more blessed when it comes to the innovation and the dynamism and the creativity of our economy.
If we do our part right now to rebuild an economy and transition to a clean energy future, we will create new jobs, we will reduce our dependence on foreign oil, we will leave our children with a better America and a better future.
So thank you very much, everybody. God bless you. (Applause.) Thanks to all the companies who are doing the great work, and the not-for-profits. We appreciate your leadership.
Thank you, guys. Happy Mother’s Day, moms! (Applause.)
END
10:02 A.M. PDT
10:02 A.M. PDT
STATE DEPARTMENT OFFICIAL'S CONGRESSIONAL TESTIMONY ON INTERNATIONAL CRIME
FROM: U.S. STATE DEPARTMENT
United States Assistance to Combat Transnational Crime
William R. Brownfield
Assistant Secretary, Bureau of International Narcotics and Law Enforcement Affairs
Assistant Secretary, Bureau of International Narcotics and Law Enforcement Affairs
Statement before the House Appropriations Subcommittee on State, Foreign Operations, and Related Programs
Washington, DC
May 7, 2014
If I were sitting before you 35 years ago, when the predecessor to INL—the Bureau of International Narcotics Matters—was first established and you asked me what transnational organized crime would look like in the year 2014, I might have informed you of the violent and hierarchical structure of the drug cartels and various mafias and have foretold the success of U.S. counternarcotics assistance to Colombia or the expansion of our anti-drug trafficking efforts worldwide. I might have accurately predicted the efforts of some cartels to move across the Caribbean and destabilize communities across the hemisphere. I might have surmised that, criminals being opportunists, they would diversify and seek out not only new markets but also new forms of criminality with minimal risk and high rewards. And I would have assumed—accurately—that certain elements of illicit trafficking would remain the same regardless of the product being trafficking: demand for the product, which produces a market; a producer at the source; the need for a logistics network to move the product across international borders, a system to market or distribute the product at its destination, and the need to convert the product into cash or some other marketable commodity usable in the licit market. But I could not have predicted the extent to which globalization, coupled with dramatic improvements in technology, would turn criminal organizations that had once had only a domestic or regional impact into networked enterprises posing threats to our and our partners interests across the globe.
Today’s reality is that criminal and illicit networks have expanded their tentacles to all parts of the world, corrupting public and market-based institutions alike. Their activities threaten not only the interdependent commercial, transportation, and transactional systems that facilitate free trade and the movement of people throughout the global economy, but are jeopardizing governance structures, economic development, security, and supply chain integrity. Their penetration of state institutions and financial and security sectors is particularly concerning.
Recognizing the expanding size, scope, and influence of transnational organized crime and its impact on U.S. and international security and governance, in July 2011, the White House released theStrategy to Combat Transnational Organized Crime. The Strategy calls on all departments and agencies to "build, balance, and integrate the tools of American power to combat transnational organized crime…and urge our foreign partners to do the same." The Strategy also calls for the U.S. government and our international partners to work together to combat transnational illicit networks, and take that fight to the next level by breaking their corruptive power, attacking their financial underpinnings, stripping them of their illicit wealth, and severing their access to the financial system.
With our diplomatic reach and foreign assistance authorities, INL is strengthening partner nation capacity to deal with these emerging transnational criminal threats including by combating corruption and targeting the illicit wealth of criminal entrepreneurs. INL’s programs promote regional capacity-building to mitigate the famous "balloon effect" we saw in South America in the 1980s and 1990s, whereby criminal groups jump from one country to another as pressure was applied. Through the Central America Regional Security Initiative, the Merida Initiative, the Caribbean Basin Security Initiative, the West Africa Cooperative Security Initiative, and other programs you have supported, we are focused on coordinating investigations, supporting prosecutions, and facilitating the sharing of information across borders.
Many of the approaches and methods we have refined over the past three decades to reduce the harm of narcotics trafficking are transferable to new and urgent threats – and I will focus on one such threat today -- wildlife trafficking. It is fueled by high demand for wildlife products, high profits -- an ounce of rhino horn is worth more than gold, cocaine, or heroin in weight -- and low risk for detection or meaningful punishment. Its impact on the planet’s natural resources is as obvious as it is devastating – entire animal species are at risk. But even setting aside the risk to wildlife, the United States has cause to be seriously concerned about this criminal enterprise: the corruption that it both encourages and benefits from undermines good governance, the rule of law, and citizens’ confidence in their government institutions; the high tech weaponry and aggressive tactics used by poachers and the syndicates and corrupt officials that support them threaten civilian populations; the crime creates and exacerbates border insecurity; wildlife trafficking can weaken financial stability and economic growth, particularly in countries for which tourism is a major revenue source; and we have seen some evidence of involvement by terrorist entities and armed groups.
For these reasons, we need to address wildlife trafficking not only as a conservation issue but also a national security issue. The President issued an Executive Order calling for a whole of government response to combat wildlife trafficking on July 1, 2013 and on February, 11, 2014, the White House released a National Strategy for Combating Wildlife Trafficking. The Strategy calls on agencies and departments to strengthen domestic and global enforcement, reduce demand for illegal wildlife products, and build international cooperation and public-private partnerships.
INL is playing a significant programmatic and diplomatic role in implementing the National Strategy. For over a decade, we have provided wildlife investigative training delivered by the U.S. Fish and Wildlife Service as part of our International Law Enforcement Academy (ILEA) program. Within the last year, with strong support of this Committee and this Congress, we have begun to greatly expand our assistance, drawing on our experience in addressing other forms of transnational criminal activity. We have organized our work abroad around four key areas that support the enforcement and international cooperation goals of the National Strategy.
First, we will strengthen legislative frameworks to make wildlife trafficking a serious crime with strong penalties to give investigators and prosecutors the legal tools they need to put the traffickers behind bars.
Second, we will improve law enforcement and investigative capabilities -- including intelligence, evidence collection and analysis, investigative skills and methods, and collaboration across agencies and governments – to promote intelligence-led investigations and operations that strive not simply to pick up individual poachers but rather to better understand and begin to dismantle the organizations for which they work.
Third, we will build prosecutorial and judicial capacities. As we have learned, rangers and police will not continue to pick up the bad guys if they believe prosecutors or judges will just let them go so, as we improve legislative frameworks and offer up new tools, we need to ensure prosecutors and judges know how to use those tools effectively and creatively.
And fourth, we will enhance cross-border law enforcement cooperation, particularly by working with the regional Wildlife Enforcement Networks (WENs). There is much that we do not know about how wildlife trafficking organizations operate – but we do know that illegal wildlife products often make their way through multiple transit points as they move from supply – or "range" – states to demand markets. So we need to build alliances and processes across borders for sharing information and intelligence and collaborating on operations.
Our work in these areas will be done on a bilateral basis. A portion of our overall assistance is dedicated towards our programming in Kenya ($3 million in FY13) and South Africa ($3M in FY 2013); regionally in Africa ($4 million in FY 2013) and Asia ($1.45 million in FY 2012); and globally ($4.3 million in FY 2012) through organizations including INTERPOL, the United Nations Office on Drugs and Crime (UNODC), and the World Customs Organizations, who are part of the International Consortium for Combating Wildlife Crime (ICCWC). Using $15 million in FY 2014 funds, we will expand efforts begun or piloted using prior year resources, such as training for customs officers at ports of entry, prosecutorial training, and joint capacity building-operational exercises across continents.
INL is also approaching the wildlife trafficking problem in new ways. We are using new tools such as the Transnational Organized Crime Rewards Program, which Congress, with your support, authorized in 2013. In November 2013, Secretary Kerry announced the first reward offer under the program of up to $1 million for information leading to the dismantling of the Xaysavang Network. The Xaysavang Network, based in Laos and operating across Africa and Asia, facilitates the illegal trade of endangered elephants, rhinos, and other species. This reward offer provides us with an additional tool to dismantle wildlife trafficking networks and bring its leaders and members to justice.
We are also using our diplomatic tools to build an international consensus around the importance of dismantling wildlife trafficking networks. For example, at the UN Crime Commission in April 2013, the United States introduced a successful joint resolution with Peru encouraging governments around the world to treat wildlife trafficking as a "serious crime" pursuant to the U.N. Convention against Transnational Organized Crime. Making it a serious crime unlocks new opportunities for international law enforcement cooperation, provided under the Convention, including mutual legal assistance, asset seizure and forfeiture, extradition, and other tools to hold criminals accountable for wildlife crime. The U.N. Economic and Social Council adopted the resolution in July 2013, further elevating wildlife trafficking as a major concern for the United Nations. These measures provide the mandate that we need, as members of a larger body of concerned nations, to harness our collective capabilities to learn more about these trafficking networks, share information, and collaborate on plans and programs that will undermine them.
The resolution was one of several early successes to which we can point. Another is a month-long global law enforcement cooperative effort that we helped to support in February known as "Cobra II." Participants from 28 countries, including representatives from the U.S. Fish and Wildlife Service and the Department of Justice, executed a global operation to combat wildlife trafficking and poaching that resulted in more than 400 arrests and 350 major seizures of wildlife and wildlife products across Africa and Asia and the U.S.
Although we have more to learn about the links that exist between wildlife trafficking organizations and other transnational criminal groups, we do know that wildlife traffickers do not operate in a vacuum. Like any legal enterprise that seeks to diversify its portfolio, criminal organizations tend to use the same routes and shipping methods as smugglers of weapons, drugs, and counterfeits. They bribe the same customs officials. They deploy poachers in the same restive regions where terrorists and other criminals may sow instability and conflict and exploit weak institutions and porous borders. Money and corruption are common denominators of all forms of transnational organized crime, and wildlife trafficking is no exception.
Corruption greases the wheels of illicit trade in everything from counterfeits to ivory. In the Sahel-Sahara region of Africa, for example, collusion between smugglers and state officials has eroded state authority and created lucrative funding channels for terrorists, militias, and criminal groups. INL is looking at ways to link up our anti-corruption and unit vetting programs used effectively in narcotics-producing regions, to support willing governments afflicted by illicit wildlife trade.
Following the money is equally important. All illicit criminal networks need money to finance their activities and as illicit funds move through the international financial system, they can be detected and monitored. In addition to exercising leadership within the Financial Action Task Force (FATF), we are promoting and applying tools like asset recovery and forfeiture to combat transnational organized crime and money laundering. Through the FATF style regional body for Eastern and Southern Africa, we are working with international partners to uncover and counter money laundering and other illicit financial flows related to wildlife trafficking. When it is finished, our capacity building projects will address the gaps identified.
Madam Chairwoman, Ranking Member Lowey, and distinguished Members, there is no doubt that transnational organized crime presents a growing and profound threat to international security. Illicit networks undercut the ability of law enforcement to protect citizens, deprive the state of vital revenues, promote corruption, and both thrive on and contribute to bad governance. But as organized crime has evolved and diversified, so has INL. Our programs are both tailored to specific threats, such as wildlife trafficking, and cross-cutting, to target the common facilitators of all types of crime.
Thank you, Chairwoman Granger and Ranking Member Lowey. I welcome your questions.
SEC COMMISSIONER GALLAGHER'S REMARKS AT ROCKY MOUNTAIN SECURITIES CONFERENCE
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Remarks at the 46th Annual Rocky Mountain Securities Conference
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Commissioner Daniel M. Gallagher
Denver, CO
May 9, 2014
Thank you, Julie [Lutz], for that kind introduction. I’m very pleased to be here today, and I’m proud to say that this will be my fourth time addressing this conference, the last three as a Commissioner. I am always happy to visit Denver, in large part given the presence of a key SEC regional office here. I am a big supporter of our regional offices, and I am very pleased to report that yesterday I made good on my oath to visit all of our offices when I made it to Fort Worth. Now I will try to pull off second visits before the end of my term.
* * *
Despite the onslaught of regulation over the past ten years and the consistency with which extremely costly and often frivolous plaintiff actions are brought, our capital markets continue to be the strongest and most vibrant in the world. As the primary U.S. capital markets regulator, the SEC administers a regulatory framework built upon our threefold mandate to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation.
Consistent with that framework, industry professionals such as registered representatives of broker-dealers and investment advisors are required by law to be licensed or registered and to subject themselves to the regulatory oversight, examination, and reporting requirements of the federal securities laws. In other words, we require market professionals, particularly those who interact with retail investors, to apply for, and prove themselves worthy of, the privilege of working in the industry.
Unfortunately, this privilege is all too often abused by scoundrels, including some that repeatedly engage in egregious misconduct that directly impacts retail “mom and pop” investors, destroying their nest eggs and financial security. These repeat offenders, despite accumulating dozens of customer complaints and disciplinary actions, have been able to remain in the industry by jumping from one disreputable firm to another and hiding behind false and misleading CRD filings and Form BD representations. They are, to be blunt, cockroaches, and it is in all of our interests to purge them from our markets.
This is, of course, not a new problem. After all, capital markets are risk-taking markets, and unfortunately a risk as old and as certain as time is that where there is opportunity, there will be unscrupulous characters trying to take advantage of the unwary. The SEC has been struggling for decades to find the best approach to rooting out recidivist misconduct by the worst of the bad apples, but unfortunately, there are no easy answers.
Illustrating this point, exactly 20 years ago this month, the SEC released a report in conjunction with the NASD and NYSE called the “Large Firm Project” that reviewed the hiring, retention, and supervisory practices of nine of the country’s largest broker dealers, which at the time were responsible for handling approximately 50% of all public customer securities accounts in the United States.[1] The report’s findings were grim, reflecting a number of significant concerns about the business activities and conduct of broker-dealers and their registered representatives. Some of the more noteworthy findings may sound depressingly familiar to you.
For example, the study found high turnover rates: over a third of the registered representatives selected as a sample set for the study had left the industry within the two-year examination period, including many who left involuntarily or were barred from the industry altogether.
It also reflected a high incidence of potential enforcement violations, with fully 25% of exams leading to enforcement referrals. The study showed that bad actors are concentrated in select firms: three of the nine firms examined accounted for 88% of the study group’s enforcement referrals. The study also revealed numerous findings of inadequate supervision. Perhaps most concerning is the fact that these bad actors were able to move between firms freely after customers registered complaints.
Do these findings—now two decades old—sound familiar to you? The sad truth is that these are exactly the same types of behavioral red flags we still see today. Only two months ago, for example, the Wall Street Journal reported the results of a study finding that more than 1,500 broker-dealer registered representatives had failed to report bankruptcy filings in their CRD disclosures, while over 150 had failed to report criminal charges or convictions.[2] In response, FINRA announced that it would perform a comprehensive vetting of public disclosures for the more than 600,000 investment professionals it oversees—brokers, not investment advisors—against public court records. FINRA will also propose rules requiring employee background checks.[3]
I recently asked staff in the Office of Compliance, Inspections, and Examinations to put together some statistics based on disclosure information submitted by broker-dealer registered representatives on FINRA’s BrokerCheck system. The results are eye-opening.
An astounding 20% of the 600,000 plus actively licensed registered representatives have between one and five disclosures for items such as customer complaints, regulatory violations, terminations, bankruptcy, judgments, and liens. One active—and currently employed—registered rep has disclosed a whopping 96 customer complaints and disputes. Another individual has made 21 financial disclosures relating to bankruptcies, yet still is licensed and working in the industry. At the firm level, 17% of broker-dealers had more than six total disclosures, and 5% had more than 20 disclosures.
These numbers illustrate a real and growing problem in the securities industry. These repeat offenders are swindling seniors out of their hard-earned retirement funds, looting our kids’ custodial accounts, and diverting assets from charities and religious organizations. But despite our best efforts, they manage to stay in the industry and continue to wreak havoc on the investing public.
I would be remiss if I did not point out that a common misconception is that this is exclusively or even primarily a broker-dealer problem rather than an investment adviser problem as well. In reality, there are plenty of repeat offenders at investment advisory firms who are engaging in misconduct. We’re just not finding them as quickly because the SEC allocates a disproportionate amount of resources to policing the activities of broker-dealers when compared to those we expend policing investment advisers. There are nearly three times as many investment advisors registered with the SEC than there are broker dealers: approximately 11,100 investment advisors versus about 4,300 broker-dealers. This is due in large part to unfunded mandates imposed upon the SEC by Title IV of Dodd-Frank. Even more importantly in the context of resource allocation, there is no SRO interposed between the adviser industry and the SEC like there is for broker-dealers.
I worry that this has created the unfortunate side effect of underreported investment advisor rule violations, inappropriately skewing our enforcement statistics by revealing a disproportionate amount of problems on the broker-dealer side. Simply put, it is impossible to separate the fact that we find many more broker-dealer violations than investment advisor violations from the fact that thanks to the assistance of the SROs, we examine a greater proportion of broker-dealers than investment advisors.
One way to address this imbalance would be to provide for third party examiners of investment advisors—including, potentially, defining the term “third party” to include SROs in order to allow the SROs currently involved in broker-dealer oversight to conduct examinations of “dual hatted” investment advisors as well.[4] In the past, questions regarding the wisdom of creating an SRO for investment advisors have been addressed in a binary sense: should the Commission push Congress to create an SRO for investment advisors, or keep things as they are? Leveraging the current resources and expertise of broker-dealer SROs to assist in investment advisor examinations could greatly facilitate our ability to examine advisors without undertaking the daunting project, with Congress, of creating a new investment advisor SRO out of whole cloth.
Regardless of how we do so, enhancing our ability to examine investment advisors would also serve the critical purpose of allowing us to have informed deliberations on Section 913 of Dodd-Frank Act. Section 913, as you may know, authorized, but did not require, the Commission to adopt rules establishing a duty of care for brokers-dealers that is no less stringent than that which applies to investment advisors and to undertake further efforts to harmonize the two regulatory regimes.[5]
Mind you, as with so many Dodd-Frank requirements, Section 913 has absolutely nothing to do with the financial crisis, but as we proved in the case of conflict mineral disclosure, that may not dissuade the Commission from pursuing a rulemaking. Indeed, it is becoming painfully obvious that many special interest groups and members of the Administration believe this is a terrific election year issue to pursue. As an independent agency, the SEC should never be persuaded by such political forces.
And, although many in Washington seem to have concluded after the high profile issuance of the Volcker Rule that Dodd-Frank rulemaking is “done,” the Commission still needs to complete almost 60 mandated Dodd-Frank rulemakings. In addition to these rulemakings, which include key elements of Title VII derivatives regulation and the removal of references to credit ratings from Commission rules, the Commission still has significant—and well overdue—work to do on implementing the JOBS Act. And, by the way, we still have eight decades worth of securities laws to administer on a daily basis and critical projects on the horizon such as a much needed holistic equity market structure review, and critical reforms in the fixed income markets, such as the disclosure of riskless principal markups.
In light of this agenda, I question the wisdom of rushing into purely discretionary Section 913 rulemaking, especially when the purported substantive impetus is the potentially false narrative that broker-dealers represent a greater potential threat to retail investors than investment advisors. The truth is that we simply don’t know whether or not that is the case. There have been far too many laws and regulations that stemmed directly from false narratives of the financial crisis and its causes. The Commission should slow down and get all of the facts before adding to the long list of rules resulting from these false narratives.
* * *
So what is the SEC doing to curb the abuses perpetrated by the recidivist bad actors I mentioned, whether on the broker-dealer or investment advisor side? I am pleased to report that in recent years, the agency has made great strides in developing programmatic and technological tools aimed at efficiently ferreting out the most egregious misconduct and identifying those individuals and firms most likely to be recidivists.
Some of the most exciting developments are coming out of OCIE under the able leadership of Drew Bowden. Drew’s dedicated and talented staff has developed a number of innovative tools that have moved the examination program into the 21st Century and enabled the staff to surgically and efficiently zero in on potential abuses.
For example, OCIE’s Risk Assessment and Surveillance group, which is responsible for identifying candidates for examination among registered entities, has developed new analytics to track the migratory patterns of registered representatives. Using public disclosures—including U4 and U5 filings and other data from the SROs—the team can track industry professionals who are hopping from firm to firm and single out firms that appear to be havens for individuals with long rap sheets of customer complaints and disciplinary actions. This targeted approach to risk assessment enables our examiners to immediately identify the statistical outliers who are most likely to engage in misconduct.
OCIE’s boots-on-the-ground examiners also have been deploying a new analytics tool, the National Exam Analytics Program, that allows them to review massive amounts of registrant data in a matter of minutes. Rather than relying on a small sample of activity for a few dozen accounts over a compressed time period, OCIE examiners can import a registrant’s entire trade blotter for multiple years and immediately generate over 50 types of customized reports identifying potential red flags for account churning, excessive commissions, P&L irregularities, suspect asset allocation, front running, and even insider trading.
Complementing these efforts is OCIE’s Risk Analysis Examination initiative, which uses advanced analytics to examine data from the largest clearing firms and broker-dealers to identify potentially problematic trends industry-wide. In 2013 alone, this group reviewed hundreds of millions of transactions by more than 500 firms, including trading data that enables OCIE to target for examination broker-dealer firms that appear to be systematically engaged in high pressure sales tactics and excessive trading. With this data, we are able to zero in on firms that are, in essence, nothing more than a criminal enterprise designed to separate investors from their money.
The best part of the story is that all of these tools were developed in-house by the SEC staff. They have revolutionized the way our teams conduct examinations and have done much to level the playing field in terms of our ability to root out potential misconduct by recidivists.
And, OCIE isn’t the only arm of the agency making progress in this area. Under the strong leadership of Director Andrew Ceresney, the Division of Enforcement has made several programmatic changes that have greatly enhanced the SEC’s efforts in identifying and combatting the worst recidivists.
Perhaps most noteworthy is the creation of a task force late last year, a group near and dear to me, to focus on broker-dealer enforcement issues. Among other initiatives, this new task force will coordinate with OCIE and FINRA to target misconduct by “rogue” registered representatives with prior disciplinary histories or customer complaints.
My hope and expectation is that the task force will complement the work of the two specialty units created by the Division of Enforcement in 2010: the Asset Management Unit, which investigates misconduct by investment advisors, investment companies, and private funds, and the Market Abuse Unit, which focuses on difficult-to-detect frauds in which honest investors are bilked without ever knowing anything is amiss. Working collaboratively both inside and outside of the agency, these groups are making substantial progress in identifying and rooting out misconduct by the worst of the bad actors.
* * *
There is no question that we are making real progress on these issues, but more needs to be done to send a forceful message to the bottom dwellers of the securities industry that their behavior will not be tolerated. As I’ve illustrated today, the SEC has a number of tools to combat abuses by recidivists, but we need to make sure that we are using them in the most efficient manner possible and that the tools we have are sufficient for the task.
Most importantly, the agency needs to take aggressive action aimed at permanently expelling the worst offenders from the securities industry. All too often, we see the same individuals and firms featured prominently in examination reports and enforcement actions. As an agency, we need to seek out the repeat offenders and revoke their licenses and registrations rather than repeatedly mete out injunctions that can be violated and penalties that can be paid from the fruits of misconduct. Unless we put these offenders out of the industry for good, they will continue to take advantage of retail investors.
With respect to the most egregious and recidivist violations of our securities laws and regulations, whether by broker-dealers or investment advisors, we need to ask ourselves a fundamental question: should the violating entity retain the privilege of participating in our capital markets? Unbeknownst to many, both the Exchange Act and the Investment Advisers Act authorize the Commission to deregister entities if it finds such action to be in the public interest, although we have rarely done so.[6] This authority, of course, should only be invoked after full due process has been afforded to the entity in question, but it should indeed be invoked when appropriate. I have seen several instances in which I believe it would be appropriate since I’ve been a Commissioner.
As a federal agency charged with protecting investors, the SEC needs to make such existential threats—and, where appropriate, deliver on them—in the most egregious circumstances. Otherwise, the cockroaches of the industry will continue to abuse the system, shrugging off the well-meaning but all too often ineffective remedial actions taken against them.
* * *
In closing, I want to convey my sincere belief that most of the men and women who work as professionals in the securities industry have proven themselves worthy of that privilege by conducting themselves with honesty and integrity. The unparalleled strength of our capital markets is in large part the product of the work ethic and high moral character of the professionals who work with the millions of individual and institutional investors that participate in those markets.
Unfortunately, the stability, security, and attractiveness of our markets are all too easily tainted by the misconduct of a handful of reprehensible miscreants who abuse the system time and time again. Working as a registered broker-dealer representative or an investment adviser representative, holding a securities license, or operating a securities firm are privileges that carry with them a heavy responsibility, privileges that can and should be taken away in cases of abuse. As an agency, the SEC needs to lead the way in targeting and eradicating the worst offenders from the markets altogether.
Once again, thank you for this opportunity to share my thoughts with you, and I wish you an enjoyable and productive conference.
[1] The Large Firm Project, A Review of Hiring, Retention and Supervisory Practices, Divisions of Market Regulation and Enforcement, United States Securities and Exchange Commission, May 1994, available at http://www.sec.gov/news/studies/rogue.txt.
[2] Regulator Deletes Red Flags From Brokers’ Records, Says Study, Wall St. Jrnl., March 7, 2014, available at http://online.wsj.com/news/articles/SB10001424052702304554004579423270046013550.
[3] Plan to Fix Cracks in Broker Records — Wall Street Regulator to Propose Rules for Background Checks, Measures to Identify Red Flags, Wall St. Jrnl., Apr. 16, 2014, available at http://online.wsj.com/news/articles/SB20001424052702303887804579503653564597512?mg=reno64-wsj%26url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB20001424052702303887804579503653564597512.html.
[4] See Jim Angel, On the Regulation of Investment Advisory Services: Where Do We Go from Here?, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1951991.
[5] Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 913, 124 Stat. 1376, 1824 (2010) (requiring analysis and rulemaking regarding fiduciary obligations of investment advisers and broker-dealers).
[6] See 15 U.S.C. 78o(b)(4) (stating that the Commission “shall . . . revoke the registration of any broker or dealer if it finds . . .[that such] revocation is in the public interest and that such broker or dealer” committed certain actions enumerated in the statute); 15 U.S.C. 80b-3(e) (stating that the Commission “shall . . . revoke the registration of any investment adviser if it finds . . .[that such] revocation is in the public interest and that such investment adviser” committed certain actions enumerated in the statute).
Sunday, May 11, 2014
DARPA SEEKS TECHNOLOGY THAT CHANGES OUTCOMES
Above: The Defense Advanced Research Projects Agency is seeking to develop the next generation of search technologies to revolutionize the discovery, organization and presentation of search results. The Memex program ultimately would apply to any public-domain content. Initially, DARPA plans to develop Memex to address a key Defense Department mission: fighting human trafficking. An index curated for the countertrafficking domain, along with configurable interfaces for search and analysis, would enable new opportunities to uncover and defeat trafficking enterprises, officials explained. DARPA photo.
FROM: U.S. DEFENSE DEPARTMENT
DARPA Sows Seeds of Technological Surprise, Director Says
By Cheryl Pellerin
American Forces Press Service
WASHINGTON, April 30, 2014 – Many of the advances that contribute to national security resulted from early investment in developing new technologies, the director of the Defense Advanced Research Projects Agency told Congress yesterday.
Dr. Arati Prabhakar represented the Defense Department at a Senate Appropriations Committee hearing called to address concern that the national investment in research and development had shrunk since 2001, along with the education pipeline for young scientists and engineers.
The directors of the Office of Science and Technology Policy of the Executive Office of the President, the National Science Foundation, the National Institutes of Health and the Energy Department also testified at the hearing.
“DARPA is part of Defense Department science and technology investments,” Prabhakar said. “We're also part of this much larger national ecosystem for R&D. But within those communities, we have one very specific role: to make the pivotal early investments that change what's possible so we can take big steps forward in our national security capabilities.”
DARPA’s output is technology, but the organization counts its mission complete only when the technologies change outcomes, she added.
“Every time a stealth fighter evades an air defense system, every time a soldier on the ground is able to place himself precisely with GPS and get the data he needs, every time a radar on an aircraft carrier allows us to see a threat to a carrier strike group before it sees us -- that's when we count our mission complete,” Prabhakar said.
In every case, DARPA made a pivotal early investment that showed the technologies were possible, and what followed from that, Prabhakar said, was equally important.
“That was the investment, often by our partners in other parts of the Defense Department and the military services -- their science and technology investments, their development investments or their acquisition programs,” the director said. “Of course,” she added, “many in industry were involved deeply in those efforts, and ultimately to make those technologies into real capabilities for our warfighters.”
Along the way, as DARPA focused on its mission of investments for national security, the organization’s scientists and engineers planted some of the seeds that formed the technology base that the U.S. commercial sector has built layer on layer above the foundation, Prabhakar said.
“Every time you pick up your cell phone and do something as mundane and miraculous as check a social networking site, you're living on top of a set of technologies that trace back to that early work we did,” she added. “Public investment laid that foundation. Billions of dollars of private investment and enormous entrepreneurship is what built those industries and ended up changing how we live and work with these technologies.”
DARPA’s mission of creating breakthrough technologies for national security is unchanged across more than five decades, she told the panel, but the world in which DARPA invests and pursues its mission continues to change, and so do the things DARPA does that reflect the national security and technology context in which the organization must operate today.
“In one arena, we see information at massive scale affecting every aspect of national security,” the director said. “So if you look in our portfolio today, you will find game-changing investments in cyber and in big-data programs.” One example is work DARPA is doing to tackle the networks that drive human trafficking around the world, she added.
In another arena, Prabhakar said, DARPA is looking at what's happening with the cost and complexity of military systems today.
“We recognize that [such systems] are becoming too costly and too inflexible to be effective for the next generation of threats we will face around the world,” Prabhakar explained, “so at DARPA we are investing in programs that are fundamentally rethinking complex military systems.”
DARPA is investing in technology its experts believe will lead to powerful new approaches for radar, communications, weapons and navigation, she said.
“And in a range of research areas, we can see the new seeds of technological surprise,” Prabhakar said. “One example is where biology is intersecting with engineering today, and in areas like that, we are making investments that will lead to new technologies like synthetic biology and neurotechnology.”
Another expert who testified before the committee, National Institutes of Health Director Dr. Francis S. Collins, mentioned a breakthrough neuroscience project that Stanford University is working on with funding from NIH and DARPA and the National Science Foundation.
“Traditionally, researchers have studied the postmortem brain by cutting a specimen into slim slices. While all that slicing generates neat, two-dimensional images, it also makes it impossible to reconstruct the connections of the brain's tens of billions of neurons,” Collins said. “What if we could study the details of the wiring and the location of specific proteins in transparent 3-D?
“Using a chemical cocktail,” he continued, “researchers at Stanford University -- supported by NIH, NSF and DARPA -- have figured out a way to do just that. They've dubbed their technique ‘Clarity,’ and in an extraordinary technical feat, the team made possible a 3-D tour of an intact mouse brain illuminated by a green dye that marks the neurons.”
Clarity is now being applied to human brains, he added, and undoubtedly will advance the BRAIN Initiative, a research effort unveiled by President Barack Obama and Collins in April 2013. In his State of the Union message last year, the president addressed research and development and its value to the nation.
“If we want to make the best products, we also have to invest in the best ideas,” Obama said. “Every dollar we invested to map the human genome returned $140 to our economy -- every dollar. Today, our scientists are mapping the human brain to unlock the answers to Alzheimer’s. They’re developing drugs to regenerate damaged organs, devising new material to make batteries 10 times more powerful.
“Now is not the time to gut these job-creating investments in science and innovation,” Obama added. “Now is the time to reach a level of research and development not seen since the height of the space race.”
During her testimony yesterday, Prabhakar also discussed the nature of the world today and its relation to research and development.
“In many ways we are living in very challenging times,” she said. “Technology is getting more and more complex, [and] it's moving at a very rapid pace. Other nations are jockeying for position in global affairs, and many of them … are making their own aggressive moves to build their own science and technology capabilities.”
Meanwhile, here at home, she added, many are dealing with constrained resources, and many agencies are dealing with the corrosive effects of sequestration.
“But when I step back and look at what we have done over many decades in this country, I would observe that we have had a long and very successful commitment to investing in R&D as a nation,” the director told the panel. “And when we make that investment in R&D, we are investing in two things that are deeply American.”
One is the kind of creativity sparked by the open society that is the hallmark of the United States, she said, and in this case the nation is investing in the creativity of its scientists and engineers.
“The second thing is this drive to create a better future,” Prabhakar added. “And in a sense, this is the most productive kind of restlessness you could possibly imagine.”
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