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02 Nov 18. Department of Justice forces $30m from Northrop for fraudulent costs. Northrop Grumman will have to pay the U.S. government $30m as a settlement for falsely billing hours to the Air Force between 2010 and 2013, the Department of Justice announced Friday. But in an internal memo to employees obtained by Defense News, Northrop Chairman and CEO Wes Bush expressed his belief that the company followed its own internal procedures and appropriately handled the issue. Northrop will make a payment of $25.8m to the federal government. Additionally, the company will forfeit an additional $4.2m to the Criminal Division of the U.S. Attorney’s Office for the Southern District of California, bringing the total of Friday’s settlement to $30m. (Northrop had previously been hit for $1.65m for the same issue.) The issue stems from two Northrop contracts, the Battlefield Airborne Communications Node, an airborne communications relay, and the Dynamic Re-tasking Capability. Per the Justice Department, between July 1, 2010, and Dec. 31, 2013, Northrop employees stationed in the Middle East billed hours they did not work to the government.
“Federal contracts are not a license to steal from the U.S. Treasury,” U.S Attorney Adam Braverman said in a statement. “DOJ is firmly committed to vigilantly weeding out abuse and will swiftly pursue all available remedies when egregious fraud occurs.”
Added John Brown, special agent in charge of the FBI’s San Diego Field Office: “Uncovering this immense fraud against the government and returning the funds to the American taxpayer is vitally important to ensuring our military receives the honest services they are due.”
In a statement, Northrop Grumman spokesman Tim Paynter said the company identified the issue and reported it to the government in 2013.
After the DOJ announcement, Bush sent an internal memo to staff, saying: “There should be no doubt, the misconduct of these former employees does not reflect who we are as a company, nor the values we embrace.”
“We took disciplinary action against those who we found acted improperly and violated company policy, and we took corrective action to strengthen our time-charging processes even further. We cooperated with the government as it investigated the issues over the following years,” Bush wrote in his memo.
“I am proud of the responsible way the company acted ― investigating, reporting and fixing issues as they arose. As always when we experience a disappointing situation such as this, we are using this opportunity to learn and further improve,” Bush continued. “This provides a strong reminder of the importance of adhering to our values in everything we do. It also serves as a reminder to us all that we each have a responsibility to speak up if we have any concerns.” (Source: Defense News)
01 Nov 18. Bolton: National debt ‘threat to the society,’ forcing DoD spending to ‘flatten out.’ White House national security adviser John Bolton called the national debt “a threat to the society” and said Pentagon spending will “flatten out” in the near term. Bolton, speaking at the Alexander Hamilton Institute on Wednesday, said he expects significant cuts to discretionary spending, but not entitlements such as Medicare and Social Security. The comments came as the country’s deficit rose to $779bn, its highest level in six years, fueled by revenue-sapping tax cuts.
“It is a fact that when your national debt gets to the level that ours is, that it constitutes an existential threat to the society,” Bolton said. “And that kind of threat ultimately has a national security consequence for it.”
While Congress will have the final say, Bolton also affirmed the White House Office of Management and Budget is planning 5 percent cuts across all government agencies for its fiscal 2020 budget proposal expected in February. That plan, which Trump disclosed at a Cabinet meeting on Oct. 17, has prompted “howls of outrage … from various parts of the government,” Bolton said.
Federal spending is divided into discretionary spending (which funds federal agencies), mandatory spending (which funds entitlement programs) and net interest (which is interest payments on debt held by the public).
Mandatory spending makes up more than 60 percent of total federal spending, and is expected to continue to rise, in part due to America’s aging population.
“The entitlements come in few years and that problem will have to be addressed, but right now you can have significant impact on both the deficit and national debt by cutting government spending on discretionary programs,” Bolton said.
Though national defense spending bounded to $700bn in fiscal 2018 and $716 bn in fiscal 2019 under the Trump administration, Pentagon officials confirmed they have been ordered in recent days to prepare a $700bn budget for fiscal 2020.
To presebt the White House with alternatives, the Pentagon plans to continue preparing a $733bn budget, in line with previous plans for fiscal 2020. Though midterm election results will determine what leverage he has, House Armed Services Committee Chairman Mac Thornberry, R-Texas, sent a terse statement last week expressing reluctance to reverse hard-won budget gains.
“We are not going backwards,” Thornberry said.
Bolton sought to downplay the impact of the proposed cut to the Defense Department, highlighting the internal savings available through “procurement reform and finding ways to reduce costs across a wide variety of areas.
“So while the budget may not be in an upward curve, the effect of spending the money will increase,” he said.
According to the U.S. Treasury, the deficit rose by $113bn over the previous year as government spending outpaced revenues. Receipts were generally flat in FY18, while spending increased 3.2 percent as Congress gave more funds for military and domestic programs.
Revenues generally tumbled after December when Trump signed into law $1.5trn of tax cuts over the next decade. The tax cuts have caused economic growth to accelerate this year, with Federal Reserve officials anticipating gains of 3.1 percent. But the Trump administration initially promised that the tax cuts would pay for themselves through stronger growth — and there is no sign so far of that happening. (Source: Defense News)
31 Oct 18. US charges 10 Chinese spies with hacking aerospace firms to steal engineering secrets. Ten Chinese spies have been charged in the US with hacking in to aviation firms in the UK, US, France, and Australia to steal trade secrets. The US Justice Department unsealed an indictment accusing intelligence officers of taking sensitive data “to build the same or similar engine without incurring substantial research and development expenses”.
It was the third round of charges brought by the US since late September against alleged Chinese spies targeting commercial secrets from aviation and aerospace companies that are often also American defence contractors. The move came amid a shift in the US to a more assertive policy towards China on top of the escalating trade spat. American leaders have repeatedly accused Beijing of overstepping its bounds, orchestrating a sophisticated economic and military campaign to bolster its influence, and getting ahead by cheating and stealing intellectual property from the West.
“This is just the beginning,” said John Demers, the assistant attorney general for national security. “Together with our federal partners, we will redouble our efforts to safeguard America’s ingenuity and investment.”
The officers – part of a regional unit of China’s Ministry of State Security, the agency responsible for domestic and foreign intelligence – stole turbofan engine plans and other confidential information from 13 companies, including two UK aerospace firms, which were not named in the indictment. Only one company’s name was revealed in court documents – Capstone Turbine, a gas turbine manufacturer in Los Angeles.
From 2010 to at least May 2015, they hacked into corporate computer networks through “phishing” attacks, when emails that seem to come from a trusted sender are used to get inside systems and glean confidential data. The hackers also turned company websites into malicious sites that infiltrated the computers of anyone who visited the pages.
At the time, a Chinese state-owned aerospace company was developing a comparable engine for use in commercial aircraft manufactured in China, such as the C919 and ARJ21. Both of these Chinese-made jets use foreign engines, and the country has long struggled to design a competitive version of its own.
The Justice Department on Tuesday confirmed to The Telegraph that none of the ten defendants had been arrested.
The individuals named in the indictment are likely in China, and if so, it’s unlikely Beijing will ever hand them over – there is no extradition treaty between the two nations and Chinese officials have long denied cyber espionage. For years, Washington has indicted alleged Chinese spies in absentia.
In a first, the US extradited a Chinese national from Belgium earlier this month for trying to steal trade secrets from major US military jet engine suppliers, including GE Aviation.
In September 2015, Barack Obama, then the US president, and Xi Jinping, China’s president, signed a pledge not to hack each other for economic espionage.
Washington’s recent accusations indicate that China is in violation of that accord.
“State-sponsored hacking is a direct threat to our national security,” said Adam Braverman, a US government lawyer. “This action is yet another example of criminal efforts by the MSS to facilitate the theft of private data for China’s commercial gain.
China on Wednesday gave a robust denial, with the foreign ministry insisting: “The allegations are without any factual basis and are completely fabricated.” (Source: Google/Daily Telegraph)
30 Oct 18. Defence firms see only hundreds of new U.S. jobs from Saudi mega deal. Every time President Donald Trump mentions the $110bn (86bn pounds) arms deal he negotiated with Saudi Arabia last year, he quickly follows up, saying “It’s 500,000 jobs.”
But if he means new U.S. defence jobs, an internal document seen by Reuters from Lockheed Martin (LMT.N) forecasts fewer than 1,000 positions would be created by the defence contractor, which could potentially deliver around $28bn of goods in the deal. Lockheed instead predicts the deal could create nearly 10,000 new jobs in Saudi Arabia, while keeping up to 18,000 existing U.S. workers busy if the whole package comes together – an outcome experts say is unlikely. A person familiar with Raytheon’s planning said if the Saudi order were executed it could help to sustain about 10,000 U.S. jobs, but the number of new jobs created would be a small percentage of that figure.
Lockheed Martin Corp(LMT.N) declined to comment on the Saudi package. Raytheon Co’s (RTN.N) Chief Financial Officer Toby O’Brien said last week that hiring overall is growing, but he did not pin it to any particular programme. The White House did not immediately respond to a request for comment.
Jobs are important to Trump. He campaigned on his ability to create American jobs, especially high-paying manufacturing ones. Meanwhile he has limited his criticism of Saudi leadership over the killing of a prominent critic because he did not want to endanger the massive arms deal.
Trump’s 500,000 figure has been greeted with widespread scepticism given the five biggest U.S. defence contractors, who make nearly every item on the Saudi list, now employ 383,000 people.
Documents seen by Reuters and interviews with defence industry sources familiar with the arms package suggest that between 20,000 and 40,000 current U.S. defence industry workers could be involved in Saudi-bound production if the whole $110bn package goes through.
Existing workers typically are experienced, skilled, who can be redeployed more easily than new hires who would require significant upfront investment in their training.
One significant caveat to any predictions on job creation is whether all of the missile defences and radars, ships, tanks, software, bombs and other equipment listed in the full Saudi package get delivered.
SAUDI ARABIA JOBS
Interviews with people familiar with other major defence contractors’ plans and estimates reflect similar dynamic as Lockheed’s and Raytheon’s plans – relatively minor additions to their U.S. workforce and more significant build-up in Saudi Arabia.
Since Trump’s trip to the Kingdom last year, little economic activity has taken place beyond Lockheed’s work on four frigates the Saudis have ordered.
The order will yield nearly 10,000 jobs in the Saudi ports for maintenance workers, but only 500 new U.S. jobs will be created, according to documents seen by Reuters.
Executives at the several of top U.S. defence companies say Riyadh had wanted much of the military equipment as a way to both develop new domestic industry and to create new jobs and local expertise as a part of Crown Prince Mohammed bin Salman’s Vision 2030 initiative to wean the country off oil dependency.
Saudi Arabia has set a goal of creating 40,000 defence industry jobs by 2030. The arms package Trump announced in May 2017 came under renewed scrutiny after the Oct. 2 killing of Washington Post columnist Jamal Khashoggi in the Saudi consulate in Istanbul. The killing provoked international outrage and both the administration and defence contractors have been working to prevent a backlash that could imperil what Trump has called a “tremendous order” and 500,000 jobs.
Industry executives have argued that without the Saudi package coming through they would have fewer orders to fill, but robust U.S. defence budgets, which account for the majority of their sales, coupled with a record backlog of orders suggest little risk that workers would face layoffs if the Saudi sales package failed to materialise.
Certainly for each defence manufacturing job, other adjacent jobs are supported indirectly by higher demand for defence products.
But Heidi Garrett-Peltier, a research fellow at the Political Economy Research Institute, estimated that for this type of industry the highest multiplier would be just below 3.2. Given that, 20,000 to 40,000 sustained or new jobs could generate between about 64,000 to 128,000 jobs in related industries, Reuters calculations show, bringing the total of sustained and new jobs to between 84,000 and 168,000.
In short, 500,000 jobs Trump keeps bringing up is at least three to five times higher than what one could expect from the Saudi deal, given the estimates from the companies themselves, plus the most generous use of the indirect multiplier. By its own math, the U.S. State Department said in May 2017 that the Saudi deal could support “tens of thousands of new jobs in the United States.” (Source: Reuters)
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