STUDENT LOAN DEFAULT RATES RISING

FROM:  U.S. DEPARTMENT OF EDUCATION 
Default Rates Continue to Rise for Federal Student Loans
SEPTEMBER 30, 2013


The U.S. Department of Education today announced the official FY 2011 two-year and official FY 2010 three-year federal student loan cohort default rates (CDR). The national two-year cohort default rate rose from 9.1 percent for FY 2010 to 10 percent for FY 2011. The three-year cohort default rate rose from 13.4 percent for FY 2009 to 14.7 percent for FY 2010.

The Department is replacing its CDR calculations from two-year to three-year calculations as required by the Higher Education Opportunity Act of 2008. Congress included this provision in the law because more borrowers default after the two-year monitoring period; thus, the three-year CDR better reflects the percentage of borrowers who ultimately default on their federal student loans.

The FY 2010 three-year cohort default rate is the second that the Department has issued, following the release of last year’s FY 2009 three-year cohort default rate. Under the law, only three-year rates will be calculated starting next year. At that time, three 3-year rates will have been calculated (FY 2009 published in 2012, FY 2010 published in 2013, and FY 2011 published in 2014).

“The growing number of students who have defaulted on their federal student loans is troubling,” U.S. Secretary of Education Arne Duncan said. “The Department will continue to work with institutions and borrowers to ensure that student debt is affordable. We remain committed to building a shared partnership with states, local governments, institutions, and students—as well as the business, labor, and philanthropic leaders—to improve college affordability for millions of students and families.”

To ensure that students are aware of the flexible income-driven loan repayment options available through Federal Student Aid (FSA), this fall the Department will expand its outreach efforts to struggling borrowers to inform them about the different plans. The Department has also released new loan counseling tools to help students and families make more informed decisions about planning for college. Students and families can visit www.studentaid.gov for more information.

Calculation and breakdown of the rates

For-profit institutions continue to have the highest average two- and three-year cohort default rates at 13.6 percent and 21.8 percent, respectively. Public institutions followed at 9.6 percent for the two-year rate and 13 percent for the three-year rate. Private non-profit institutions had the lowest rates at 5.2 percent for the two-year rate and 8.2 percent for the three-year rate.

The two-year CDR increased over last year’s two-year rates for both the public and for-profit sectors, rising from 8.3 percent to 9.6 percent for public institutions, and from 12.9 percent to 13.6 percent for for-profit institutions. CDRs held steady for private non-profit institutions at 5.2 percent. The three-year CDR increased over last year’s three-year rates for both the public and private non-profit sectors, rising from 11 percent to 13 percent for public institutions, and from 7.5 percent to 8.2 percent for private non-profit institutions. CDRs decreased for for-profit institutions, slipping from 22.7 percent to 21.8 percent.

The two-year default rates announced today were calculated based on a cohort of borrowers whose first loan repayments were due in FY 2011 (between Oct. 1, 2010 and Sept. 30, 2011), and who defaulted before Sept. 30, 2012. More than 4.7 million borrowers from nearly 6,000 postsecondary institutions entered repayment during this window of time, and more than 475,000 defaulted on their loans, for an average of 10 percent.

The three-year rates announced today were calculated based on the cohort of borrowers whose loans entered repayment during FY 2010 (between Oct. 1, 2009, and Sept. 30, 2010), and who defaulted before Sept. 30, 2012. More than 4 million borrowers from over 5,900 postsecondary institutions entered repayment during this window of time, and approximately 600,000 of them defaulted, for an average of 14.7 percent.

Sanctions

No sanctions will be applied to schools based on the three-year rates until the CDRs have been calculated for three fiscal years, which will be with the release of the FY 2012 rates next year. Until then, sanctions will continue to be based on the two-year CDR only.

Certain schools are subject to sanctions for having two-year default rates of 25 percent or more for three consecutive years, or over 40 percent for one year. As a result, these schools will face the loss of eligibility in federal student aid programs unless they bring successful appeals. Please click here for more information about possible sanctions: http://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr2yr.html

The Department provides extensive assistance to schools to help minimize institutional cohort default rates. FSA provides a variety of training opportunities to the higher education community, including webinars and online training, participation in state, regional and national association training forums, and through face-to-face training events such as the FSA Training Conference for Financial Aid Professionals. In addition, any school with a three-year CDR of 30 percent or more must establish a default prevention task force and submit a default management plan to the Department. There were 221 schools that had three-year default rates over 30 percent.

AEGIS MISSILE DEFENSE SYSTEM COMPLETES FLIGHT TESTS

FROM:  U.S. DEFENSE DEPARTMENT 
Aegis Ballistic Missile Defense System Completes Successful Intercept Flight Tests

The Missile Defense Agency (MDA), U.S. Pacific Command, and U.S. Navy sailors aboard the USS Lake Erie (CG 70) successfully conducted an operational flight test of the Aegis Ballistic Missile Defense (BMD) system, resulting in the intercept of a medium-range ballistic missile target over the Pacific Ocean by the Aegis BMD 4.0 Weapon System and a Standard Missile-3 (SM-3) Block IB guided missile.

At approximately 7:33 p.m. Hawaii Standard Time, Oct. 3 (1:33 a.m. EDT, Oct.4), a medium-range ballistic missile target was launched from the Pacific Missile Range Facility on Kauai, Hawaii. The target flew northwest towards a broad ocean area of the Pacific Ocean. Following target launch, the USS Lake Erie detected and tracked the missile with its onboard AN/SPY-1 radar. The ship, equipped with the second-generation Aegis BMD weapon system, developed a fire control solution and launched the SM-3 Block IB guided missile to engage the target. The SM-3 maneuvered to a point in space and released its kinetic warhead. The kinetic warhead acquired the target reentry vehicle, diverted into its path, and, using only the force of a direct impact, engaged and destroyed the target.

Program officials will assess and evaluate system performance based upon telemetry and other data obtained during the test.

This test exercised the latest version of the second-generation Aegis BMD Weapon System, capable of engaging longer range and more sophisticated ballistic missiles.

Today's event, designated Flight Test - Standard Missile-22 (FTM-22), was the fifth consecutive successful intercept test of the SM-3 Block IB guided missile with the Aegis BMD 4.0 Weapon System. Findings of operational tests, FTM-21 and 22 will support follow-on production decisions for the SM-3 Block IB guided missile.

FTM-22 is the 28th successful intercept in 34 flight test attempts for the Aegis BMD program since flight testing began in 2002. Across all Ballistic Missile Defense System programs, this is the 64th successful hit-to-kill intercept in 80 flight test attempts since 2001.

Aegis BMD is the naval component of the MDA's Ballistic Missile Defense System. The Aegis BMD engagement capability defeats short- to intermediate-range, unitary and separating, midcourse-phase ballistic missile threats with the SM-3, as well as short-range ballistic missiles in the terminal phase with the Standard Missile-2 (SM-2) Block IV missile. The MDA and the U.S. Navy cooperatively manage the Aegis BMD program.

SEC OBTAINS EMERGENCY RELIEF IN PONZI SCHEME THAT TARGETED JAPANESE INVESTORS

FROM:  U.S. SECURITY AD EXCHANGE COMMISSION 
SEC Obtains Asset Freeze and Other Emergency Relief in Ponzi Scheme Targeting Investors in Japan

The Securities and Exchange Commission announced an emergency action to freeze the assets of a Las Vegas resident and his companies in connection with a Ponzi scheme that defrauded thousands of investors living primarily in Japan.

The SEC alleges that Edwin Yoshihiro Fujinaga and his company MRI International, Inc. raised more than $800 million from investors who were told that their money would be used to buy medical accounts receivable (MARs) that medical providers in the United States held against insurance companies. Fujinaga and MRI represented that the company used investors' money to buy MARs from medical providers at a discount and tried to recover the full value of the MARs from the insurance companies. Fujinaga and MRI represented that they used investor money solely and exclusively to buy MARs.

According to the SEC's complaint, which was filed under seal on September 11, 2013 and unsealed last week in the U.S. District Court for the District of Nevada, MRI was a fraudulent Ponzi scheme designed to misappropriate money from investors. Fujinaga and MRI used investor money to pay the principal and interest due to earlier investors, for the expenses of MRI and other businesses owned by Fujinaga, and to buy luxury cars and pay Fujinaga's credit card bills, alimony, and child support.

The Honorable James C. Mahan for the U.S. District Court for the District of Nevada granted the SEC's request for a temporary restraining order, asset freeze and other emergency relief against MRI, Fujinaga, and CSA Service Center LLC, as a relief defendant.

The Commission's complaint alleges that Fujinaga and MRI violated Sections 17(a)(1), (2), and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and seeks disgorgement of ill-gotten gains from Fujinaga, MRI, and relief defendant CSA, as well as financial penalties, permanent injunctions and other emergency relief.

The SEC's investigation, which is continuing, has been conducted by Danette R. Edwards and Thomas C. Swiers and supervised by Gregory G. Faragasso. The JFSA's Yuichiro Enomoto, who was seconded to the SEC, provided valuable assistance. The SEC's litigation is being led by Richard E. Simpson and Robert I. Dodge. The SEC appreciates the assistance of the JFSA, SESC, and the State of Nevada Division of Mortgage Lending.

AG HOLDER MAKES REMARKS AT SUMMIT FOR PREVENTING YOUTH VIOLENCE

FROM:  U.S. JUSTICE DEPARTMENT
Attorney General Eric Holder Delivers Remarks at the Summit for Preventing Youth Violence
~ Thursday, September 26, 2013

Thank you, Karol [Mason], for those kind words; for your outstanding leadership of the Office of Justice Programs; and for your ongoing commitment to the cause that brings us together.  I’d like to extend a special welcome to the United States Attorneys who are with us today – including Barbara McQuade, Melinda Haag, and Kenneth Polite.

It is an honor to stand with you this morning – and to join so many dedicated leaders and passionate citizens from across the country in opening our third annual Summit on Preventing Youth Violence.  As Karol just said, we gather this year in a moment of tremendous challenge and great consequence – when resources are scarce, but the urgency of the problems before us has been brought into stark focus.

We know that the majority of America’s children – more than 60 percent of them – have been exposed to crime, violence, and abuse – as victims or as witnesses.  We’ve seen that violence among or directed toward our young people can take many forms.  And we understand that exposure can happen virtually anywhere: in our schools; on our streets; in our homes; and even online, where kids face new and evolving threats every day.  Studies have shown that young people who are exposed to violence can suffer a range of consequences that have the potential to cause long-term physical, psychological, and emotional harm.  These children often face elevated risks of failing in school, suffering from anxiety and depression, or turning to drug or alcohol abuse later in life.  They are more likely than their peers to develop chronic illnesses or have difficulty forming emotional attachments.  And far too many continue the cycle of violence by harming others.

Clearly, the consequences of inaction in the face of such trauma would be too great to ignore.  And the associated costs – in human, moral, and even economic terms – are far too much to bear.  In fact, the cost of failing to intervene in the life of a young person who’s at risk of becoming delinquent could add up to more than $3 million over the course of his or her lifetime.  And the incremental costs of violence and abuse on America’s health care system could amount to roughly 37.5 cents out of every dollar that’s spent on health care.

But this will always be about much more than simple dollars and cents.

As we speak, the Administration is working diligently to implement the Affordable Care Act – which will have a significant impact on the provision of physical, mental, and behavioral health services to young people who are at risk and in need.  And, while this is an important start, I’m pleased to say that it’s only the beginning.

Like many of you, I have seen the devastating impact that violence has on young people, on families, and on entire communities.  During my time as a judge on the Superior Court here in Washington – and later, as U.S. Attorney for the District of Columbia – I witnessed these consequences firsthand, as, day after day, lines of young men, young defendants, streamed into my courtroom.  In almost every case, these individuals had long histories of interactions with social services – and educational and juvenile justice systems – which had failed to interrupt the dangerous and potentially avoidable trajectory that had led them there.

I quickly learned that – as a nation, and as a people – we must resolve to do much better.  We must identify strategies for getting involved earlier; addressing the violence, the poverty, and the distress that takes too many kids off the track of normal development; and providing intervention resources at every phase of the “trauma-to-violence” process.

For me – and I know for all of you – this has always been much more than a professional obligation.  As our nation’s Attorney General – and as the father of three wonderful kids – it is also a personal priority.  Although we come together today as law enforcement executives, policymakers, public health professionals, educators, elected officials, and other community leaders – our actions must be rooted, first and foremost, in what we can accomplish as parents and as friends; as mentors and advocates; as Scout leaders and little league coaches.  Our efforts will only be successful if we can ensure that our kids grow up in neighborhoods where adults can reach out to them – and where moms and dads, teachers and faith leaders, grandparents and neighbors can be trusted and positive influences on their lives.

That’s why Summits like this one – and efforts like those you’re leading in each of our Forum cities – are so important.  It’s why the work you’re doing to rally local stakeholders to improve law enforcement, increase support for violence prevention efforts, and expand access to family and social services – is so critical.  And it’s why the Obama Administration – led, in part, by this Justice Department – has stepped to the forefront of these efforts, making an unprecedented commitment to help strengthen prevention, intervention, enforcement, and reentry programs in each of the communities represented here.

At the heart of this commitment is our National Forum on Youth Violence Prevention.  Thanks to your leadership – from Boston to Camden; from Chicago to Detroit; from Memphis to Minneapolis; from New Orleans to Philadelphia; and from Salinas to San Jose – we’re building a multidisciplinary approach, bringing together a range of allies – and applying innovative, data-driven strategies for contending with local challenges.  As you’re discussing this week, these efforts are showing tremendous promise – improving lives and winning praise from experts as well as local residents.  And today, we affirm that we must do more than just keep up the great work.  It’s time to take it to a new level.

I’m proud to report that my colleagues and I are taking a variety of steps to do just that.  And nowhere is this clearer than in the work of our Office of Justice Programs, under the leadership of Assistant Attorney General Mason – who’s been a strong voice on this issue for many years, ever since she helped create our Task Force on Children Exposed to Violence and led the Defending Childhood Initiative I launched in 2010.

Thanks to leaders like her, the Justice Department is moving aggressively to tackle the most serious problems and provide assistance to the most afflicted areas.  Last month – as part of the Department’s “Smart on Crime” initiative to strengthen America’s criminal justice system – I announced that we’ve convened a new Task Force to respond to the extreme levels of violence faced by far too many American Indian and Alaska Native children.  We’ve launched a national public awareness campaign to call attention to the challenges too many young people face.

We’re working hand-in-hand with partners across the federal government – and far beyond – to disrupt the so-called “school-to-prison pipeline.”  And we’re fighting to end the zero-tolerance school disciplinary policies that transform too many educational institutions from doorways of opportunity into gateways to the criminal justice system.  A child who has committed a minor disciplinary offense should end up in the principal’s office – and not in a police precinct.

Of course, my colleagues and I also recognize – as you do – that these problems can only be addressed cooperatively, by entire communities – through the kind of collective action and comprehensive effort that this Forum is helping to institutionalize.  By your presence here this morning, and the work you’re advancing across the country every day – all of you are proving that, despite the challenges before us, we’ll be able to keep making the positive difference, and securing the progress, that America’s young people deserve.  I’m confident in where these efforts will lead us in the critical days ahead.  I want you to know that I’m proud to count you as colleagues, and partners, in our efforts to prevent and respond to youth violence.  I thank you, once again, for your tireless work on behalf of our youngest citizens.  And I look forward to all that we must – and will – accomplish together in the months and years to come.

At this time, it’s my privilege to turn things over to Cecelia Muñoz.  Please join me in welcoming her to the stage.

FTC SAYS BUSINESS OPPORTUNITY SCHEME HALTED BY COURT

FROM:  FEDERAL TRADE COMMISSION 
U.S., Canadian Consumers Lost More Than $6 Million

At the Federal Trade Commission’s request, a federal court has halted an elusive business opportunity scheme that allegedly conned more than $6 million from American and Canadian consumers. The FTC has alleged that the defendants falsely promised consumers that they could make money by referring merchants in their area to the defendants’ non-existent money-lending service.
The court froze the defendants’ assets and appointed a receiver to take control of the operation, pending litigation. The FTC seeks to permanently shut down the operation and return money to consumers.

The FTC’s complaint, filed in August 2013, names 20 individuals and eight companies as defendants in the case against the enterprise, which started out doing business under the name “Money Now Funding.” To avoid detection by law enforcement, they often changed product names, office locations, and merchant identities, at one point changing the company’s name to “Cash4Businesses.”

According to the FTC, the defendants falsely claimed consumers would earn up to $3,000 per month by referring small businesses to the defendants to obtain an average loan or cash advance of $20,000, and that they could operate a profitable business from their home. Act quickly, they said, or the opportunity would go to someone else. Consumers paid from $299 to $499 to buy the business opportunity.

The FTC also charges that after the defendants allegedly promised consumers assistance in finding referrals in their area, the defendants then told consumers that, to succeed, they needed to buy business leads, that is, lists of “high quality” or “pre-approved” merchants supposedly obtained from well-known lenders. The leads provided to consumers were nothing but random names and email addresses, many with no apparent connection to any business. The total charge for the so-called leads often exceeded $10,000, and some consumers paid tens of thousands of dollars.

The FTC has alleged that the defendants violated the FTC Act by misrepresenting that consumers would earn substantial income, and violated the agency’s Telemarketing Sales Rule by calling phone numbers listed on the National Do Not Call Registry, calling consumers who had told them not to call, repeatedly calling consumers to annoy them, using obscenities and threats, and failing to pay the Registry access fee. The FTC also charged the defendants with violating the Commission’s Business Opportunity Rule, which requires business opportunity sellers to provide specific information to help consumers evaluate a business opportunity, and prohibits sellers from making earnings claims without substantiation.

On August 5, 2013, at the FTC’s request, the federal district court for the District of Arizona issued a temporary restraining order against all defendants, freezing assets, and appointing a receiver over the corporate entities. The court entered a preliminary injunction on August 19, 2013 against all the corporate entities and fifteen of the individual defendants, including Lukeroy Rose and Lance Himes. On September 13, the court entered a preliminary injunction against defendants Cordell Bess, Clinton Rackley, and Ronald W. Hobbs.

The corporate defendants are Money Now Funding LLC, also known as Money Now Funded, Cash4Businesses, and CashFourBusinesses; Rose Marketing LLC; DePaola Marketing LLC; Affiliate Marketing Group LLC; Legal Doxs LLC, a/k/a First Business LLC; US Doc Assist LLC, a/k/a First Business LLC; Affinity Technologies LLC; and Marketing Expert Solutions LLC.

The individual defendants are Lukeroy K. Rose, a/k/a Luke Rose; Cordell Bess, a/k/a Blaine Thompson, also doing business as JJB Marketing; Solana DePaola; Jennifer Beckman; William D. Claspell, a/k/a Bill Claspell; Richard Frost, a/k/a Richard Strickland; Dino Mitchell, a/k/a Dino Jones; Clinton Rackley, a/k/a Clinton Fosse; Lance Himes, a/k/a Lance R. Himes, a/k/a Raymond L. Himes, a/k/a Lance Haist; Leary Darling; Donna F. Duckett, also d/b/a D&D Marketing Solutions; Della Frost, also d/b/a ZoomDocs and Zoom Docs LLC; Christopher Grimes, also d/b/a Elite Marketing Strategies; Alannah M. Harre, also d/b/a National Marketing Group; Ronald W. Hobbs, a/k/a Ron Hobbs, also d/b/a Ron Hobbs & Associates and Sales Academy USA LLC; Janine Lilly, also d/b/a Doc Assistant; Michael McIntyre, also d/b/a McIntyre Marketing; Benny Montgomery, also d/b/a Montgomery Marketing; Virginia Rios, also d/b/a V&R Marketing Solutions; and Kendrick Thomas, also d/b/a KT Advertising.

The Commission acknowledges the assistance of the U.S. Postal Inspection Service, the Oregon Department of Justice, and the Better Business Bureau of Central, Northern, and Western Arizona.

The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the District of Arizona.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

SEC CHARGES STOCK-COLLATERALIZED LOAN COMPANIES AND OWNERS WITH FRAUD

FROM:  SECURITIES AND EXCHANGE COMMISSION 
SEC Charges Stock-Collateralized Loan Companies and Their Owner with Fraud

The Securities and Exchange Commission announced that, on September 26, 2013, it filed a civil action in the United States District Court for the Eastern District of Pennsylvania against William Dean Chapman, Jr. ("Chapman"), a resident of Sterling, Virginia, and his companies, Alexander Capital Markets, LLC and Alexander Financial, LLC (collectively, the "Alexander Companies"), charging them with operating a fraudulent stock-collateralized loan business.

The Commission's complaint alleges that, from at least June 2006 through June 2009, Chapman and the Alexander Companies raised money by inducing borrowers to transfer ownership of millions of shares of publicly traded securities to them as collateral for purported non-recourse loans based on false promises, including the promise to return the shares, or remit share profits in excess of accrued interest, to borrowers who repaid their loans. By no later than June 2006, Chapman and the Alexander Companies were doing nothing to ensure their ability to repurchase and return shares to borrowers who elected to repay their loans, or remit share profits in excess of accrued interest to borrowers. Instead they used the proceeds to pay other borrowers, for operating costs, and for their own benefit. This was despite the fact that many of the loan agreements entered into by Chapman and the Alexander Companies with borrowers assured borrowers that the defendants would engage in "hedging" strategies, would "hedge," or would enter into contracts with counterparties that would ensure that the portfolios could be returned. In so doing, they deliberately or recklessly misrepresented to new borrowers that, among other things, they could perform under new agreements. By early 2007, Chapman and the Alexander Companies were unable to honor maturing loan agreements, but continued to enter into new agreements under false pretenses. Defendants also fraudulently accepted over $2 million in loan repayments from at least two borrowers and used the funds to repay other borrowers and for Chapman's personal benefit.

As a result of the conduct described in the complaint, the Commission alleges that the defendants violated the antifraud provisions of the securities laws set forth in Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctions, disgorgement together with prejudgment interest, and civil monetary penalties from the defendants.

U.S.-JAPAN MAKE AGREEMENT ON SECURITY AND DEFENSE COOPERATION

FROM:  U.S. DEFENSE DEPARTMENT 

U.S., Japan Agree to Expand Security, Defense Cooperation

By Karen Parrish
American Forces Press Service

TOKYO, Oct. 3, 2013 - In a joint statement today, U.S. and Japanese diplomatic and military leaders agreed to revise the 1997 Guidelines for U.S.-Japan Defense Cooperation, increase security and defense collaboration in the Asia-Pacific region and beyond, and advance the realignment of American troops in Japan.

Secretary of State John F. Kerry and Defense Secretary Chuck Hagel met with their counterparts, Japanese Foreign Affairs Minister Fumio Kishida and Defense Minister Itsunori Onodera, in a series of meetings today that culminated in a "two-plus-two" engagement. At a news conference following the engagement, Hagle said all four discussed, "Our goal ... [of] a more balanced and effective alliance, where our two militaries are full partners working side-by-side with each other, and with other regional partners, to enhance peace and security."

Kerry and Hagel are the first U.S. secretaries of state and defense to attend such a meeting here together. The gathering was highlighted by intense interest in Japan as the nation's government is reportedly considering expanding the role of its self-defense forces.

Hagel said during the news conference that after 16 years, revising the defense guidelines makes sense. The close alliance between the two countries, rising security threats in the region and the increasingly global nature of those threats, he said, all urge a reexamination of the agreement governing each nation's roles and responsibilities in defense and contingency operations.

Other key agreements the four ministers announced include:

A second Army Navy Transportable Radar Surveillance system, or AN-TPY-2, will be placed at the Japanese Air Self-Defense Force base at Kyogamisaki, where it will augment one previously set up in Shariki on the northern part of Honshu Island.

-- The new radar will "close the gaps," a U.S. official said, and will increase protection for the United States while defending Japan against possible North Korean missile strikes.

The "Tippy-Two," as it's commonly known, is an X-band, high-resolution, phased-array radar designed specifically for ballistic missile defense. It searches for and tracks inbound threats, and can be integrated with the Aegis Ballistic Missile Defense system and ground-based interceptors.

-- Increase bilateral cooperation in the region on space and cyberspace; intelligence, surveillance and reconnaissance; planning, use of facilities, extended deterrence, information security, training and exercises.

-- Reinforce trilateral and multilateral cooperation "that preserves and promotes a peaceful, prosperous and secure Asia-Pacific region." The statement adds, "Our mutual cooperation is to expand over time, and we are committed to working in partnership with other like-minded countries to build sustainable patterns of cooperation."

-- Implement agreements on realignment of U.S. forces in Japan "as soon as possible while ensuring operational capability, including training capability, throughout the process."

The realignment plan will relocate U.S. Marine Corps Air Station Futenma, now in the center of Okinawa's Ginowan City, to a more remote area of the island. It also moves a Marine Corps squadron of KC-130 Hercules aircraft from Futenma to MCAS Iwakuni, transfers elements of the Navy's Carrier Air Wing 5 from Atsugi Air Facility to Iwakuni, and shifts thousands of Marines from Okinawa to Guam in the first half of the 2020s.

-- Deploy more advanced U.S. capabilities to Japan such as the U.S. Marines' MV-22 Osprey aircraft, two squadrons of which are here and will be training with Japanese self-defense forces. Other equipment headed to Japan in the coming years includes Navy P-8 maritime patrol aircraft, in what will be its first deployment outside the United States; rotational deployment of Global Hawk unmanned aircraft; and, in another first deployment outside the United States in 2017, the F-35B short takeoff and vertical landing joint strike fighter variant for the Marine Corps.

The four ministers also addressed territorial disputes in the East China Sea, where Japan and China both claim rights to the Senkaku Islands.

While U.S. policy is that sovereignty in such disputes is an issue for the disputing nations to resolve, Hagel reiterated a statement he made in April: since they are under the administrative control of Japan, they fall under U.S. treaty obligations to Japan.

"We strongly oppose any unilateral or coercive action that seeks to undermine Japan's administrative control," he said. "We will continue to consult especially closely on this issue."

Hagel closed his statement at today's news conference with a strong endorsement of the alliance.

"The United States-Japan relationship has underwritten the peace, stability, and prosperity of the Asia-Pacific region for more than half a century," he said. "Today, we have helped ensure this alliance continues to do so in the 21st century."

The secretary also thanked U.S. troops serving here. He will visit some of them tomorrow, before concluding his weeklong trip that also took him to South Korea.

Following the press conference, Hagel and Kerry were scheduled to meet with Japanese Prime Minister Shinzo Abe.

CFTC TAKES ACTION AGAINST OWNER AND COMPANY ENGAGED IN OFF-EXCHANGE PRECIOUS METALS TRANSACTIONS

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Charges New York-Based The Yorkshire Group Inc. and Its Owner, Scott Platto with Engaging in Illegal, Off-Exchange Precious Metals Transactions

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a civil injunctive enforcement action in the U.S. District Court for the Eastern District of New York against Defendants The Yorkshire Group Inc. (Yorkshire) of Staten Island, New York, and its sole owner, Scott Platto, also of Staten Island. The CFTC Complaint, filed on September 25, 2013, charges the Defendants with engaging in illegal, off-exchange financed transactions in precious metals with retail customers. The Complaint further alleges that Platto, as the owner, operator, and controlling person of Yorkshire, is liable for Yorkshire’s violations of the Commodity Exchange Act (CEA)

According to the Complaint, between September 2011 and August 2012, the Defendants solicited retail customers by telephone to buy physical precious metals such as silver and palladium in off-exchange leverage transactions. Retail customers engaging in financed transaction with Yorkshire were allegedly told that they were borrowing money to purchase precious metals. Customers paid Yorkshire a portion of the purchase price for the metals, and Yorkshire financed the remainder of the purchase price, while charging the customers interest on the amount they purportedly loaned to customers. The Complaint further alleges that Yorkshire’s customers never took delivery of the precious metals they purportedly purchased and that the Defendants neither bought, sold, loaned, stored, or transferred any physical metals for these transactions.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which expanded the CFTC’s jurisdiction over retail commodity transactions like these, prohibits fraud in connection with such transactions, and requires that these transactions be executed on or subject to the rules of a board of trade, exchange, or contract market. Thus, since Yorkshire’s and Platto’s transactions were executed off exchange, they were illegal, according to the Complaint.

When Yorkshire and Platto allegedly engaged in these illegal transactions, they were acting as a dealer for metals merchant Hunter Wise Commodities, LLC (Hunter Wise), which the CFTC charged with fraud and other violations in federal court in Florida on December 5, 2012 (see CFTC Press Release 6447-12). On February 25, 2013, the court granted a preliminary injunction against Hunter Wise, froze the firm’s assets, and appointed a corporate monitor to assume control over those assets (see CFTC Press Release 6522-13).

In its continuing litigation against Yorkshire and Platto, the CFTC seeks restitution to defrauded customers, a return of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the CEA, as charged.

The CFTC Division of Enforcement staff responsible for this action are Karin N. Roth, Philip Rix, David W. MacGregor, Lenel Hickson, Jr., Stephen J. Obie, and Vincent A. McGonagle.

CFTC’s Precious Metals Fraud Advisory

In January 2012, the CFTC issued a Precious Metals Consumer Fraud Advisory to alert customers to precious metals fraud. The Advisory states that the CFTC had seen an increase in the number of companies offering customers the opportunity to buy or invest in precious metals. The CFTC’s Advisory specifically warns that companies often fail to purchase any physical metals for their customers, instead simply keeping the customer’s funds. The Advisory further cautions consumers that leveraged commodity transactions are unlawful unless executed on a regulated exchange.