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21 Feb 20. US Army’s $7bn wish list would boost multidomain units and wartime funding. The U.S. Army’s fiscal 2021 wish list — also known as an unfunded requirements list — sent to Congress amounts to nearly $5bn more than the service placed on its list last fiscal year, and it would give its multidomain units in Europe and the Indo-Pacific region a boost while providing more padding for its wartime funding account.
The unfunded requirements list is something the military services send to Congress each year shortly following the release of the defense budget request to inform lawmakers on where money would be spent if there was more of it. The lists are usually provided at the request of congressional defense committees.
While the Army’s wish list was modest last year — with only $2.3 bn in unfunded requirements — the service’s list this year is higher, likely to account for the fact that the $178bn requested for FY21 is $2.2 bn less than the FY20 enacted budget, plus the last several years have sen higher budget top lines.
“This reduction comes in a pivotal budget year for the Army as we begin to fully leverage the early successes of our modernization efforts,” Army Chief of Staff Gen. James McConville wrote in an undated letter to congressional leaders and defense committees, obtained by Defense News.
The Army has referred to this moment in time as an “inflection point” where it needs to begin to divest its current capability to fund ambitious modernization efforts and align with the National Defense Strategy and its new guiding operational doctrine — Multi-Domain Operations.
“The Army’s FY21 budget request is anchored to the priorities set forth in the [National Defense Strategy], however this request represents a downturn in real purchasing power (-1%) from FY20,” McConville wrote. “While we have managed to sustain readiness gains the Army has achieved in FY18-20 and further invest in our six modernization priorities, our progress is at risk in future years if we don’t have real growth of 3-5% in our budgets going forward.”
The Army’s base budget remained relatively flat, but in FY21 the service’s overseas contingency operations, or OCO, top line was whittled down by $6 bn compared to the FY20 enacted levels.
The lower FY21 request for OCO, according to McConville, was “primarily attributed to force reduction assumptions that have been challenged by recent events.”
The general also said the Army’s current estimate for its OCO shortfall totals $3.9bn. “The Army’s OCO funding requirement based on current [U.S. Central Command] troop levels and ongoing contingency operations could require up to $3.9 (bn] should troop reduction assumptions not be realized,” McConville said.
Of that, $3.7bn would “primarily” support “Operation Freedom Sentinel (Afghanistan) and Operation Inherent Resolve (Iraq) and the Army Counter-Terrorism Operations around the globe — theater operations such as mobilization, transportation, force protection, base operations, combat and advisory operations, intel and electronic warfare ground collection, aerial ISR, and equipment reset,” according to the wish list.
“Changing and unpredictable conditions on the ground, in the Southwest Asia Area of Operations, create an uncertain fiscal environment making it difficult to forecast budgetary requirements well in advance of the year of execution,” the document warned.
Additionally, unfunded base requirements total $3.3 bn.
At the top of the Army’s list for unfunded requirements in the base budget is $151.4m for enhancements for the Multi-Domain Task Force (MDTF) units in the European and Indo-Pacific theaters.
According to the list, the extra funding would sustain, restore and modernize building renovations and provide adequate housing for personnel and headquarters for MDTF elements and the second and third MTDF units.
The first MDTF unit has been active in the Pacific for several years, and the Army is standing one up in Europe this year. The service also plans to send another unit to the Pacific in FY21.
Other funding for the units would include command post capability including secure WiFi, advanced intelligence systems, space site survey kits and electronic warfare tools.
The Army has also listed a few specific modernization efforts it would like to bolster if provided more funding: The service would like $33m to fund two ongoing efforts to conduct initial prototyping for the Synthetic Training Environment and develop technology to replace the legacy Instrumentable-Multiple Integrated Laser Engagement System.
The Army is also trying to find alternatives to the system developed in the 1970s and 1980s for live force-on-force and force-on-target training at Army training locations around the world. And included in the wish list is a prototype effort for the Soldier Virtual Trainer that would replace the legacy Engagement Skills Trainer and Call For Fire Trainer.
An additional 60 upgraded Stryker double V-hull combat vehicles also made the wish list — which would cost an additional $375m.
The vehicles would support fielding Strykers to the 2nd Infantry Division in FY22 and the 25th Infantry Division in FY24.
The unfunded requirements list also “offsets the early fielding of the 75th Ranger Regiment and helps restore the Stryker procurement strategy to 1x [Stryker brigade combat team] over 2 years versus 1x SBCT over three years,” the document detailed. The additional funding would also enable the procurement of half a Stryker brigade combat team per year.
“The current funding plan results in a shortfall in fixed costs for storage and maintenance of vehicles prior to fielding and does not account for the realized cost avoidance plan,” the document explained, adding that the original plan estimated that leveraged parts taken from “seed vehicles” would result in a cost avoidance of $750,000 per vehicle, but the actual realized cost avoidance averages $328 per vehicle.
The Army would also like eight new AH-64 Apache attack helicopters “to address attack aircraft shortages.” A total of $283m would buy an attack company of AH-64Es in FY21.
More funding — roughly $28m — would also be required to support the Army’s designation as the executive agent for Joint Counter-small Unmanned Aerial Surveillance, and the additional money would help support the establishment of an operational headquarters, buying systems and developing enduring solutions.
Separately, U.S. Central Command issued a wish list to Congress that asks for an additional $68 m to fund the Army’s Indirect Fire Protection Capability to counter UAS threats. The Army has yet to issue a revised strategy for its IFPC development, but it’s expected soon.
The rest of the list mostly targets boosts for personnel and infrastructure requirements. The Army would want an additional $538m for personnel needs and another $1.4bn for infrastructure modernization and enhancement. (Source: Defense News)
21 Feb 20. Here is the first thing the Air Force would fund if it had more money in FY21. Further investments in advanced technologies like the autonomous combat drone known as Skyborg topped the Air Force’s unfunded wish list for fiscal year 2021, beating out the need to buy more F-35s.
Every year, the services submit unfunded priorities lists, or UPLs, to Congress that lay out how they would spend a budget with a larger topline. These recommendations are usually used by lawmakers as a baseline for their own changes to the budget, with congressional committees often moving funding to accommodate larger buys of planes, ships and vehicles as spelled out in the lists.
This year, the Air Force lists an $115m investment in advanced technology as its biggest need, following a trend over the past several years in which the service used its UPL to seek out additional funds for classified programs or cutting-edge development programs.
Of that sum, $25m would go to Skyborg, one of the service’s highest visibility technology programs. The Air Force envisions Skyborg as an AI-equipped “loyal wingman” that could fly alongside fighter pilots autonomously, sending back important data to pilots and improving its skills the more it operates.
However, the program does not currently have enough funding to start testing a prototype aircraft. With an additional $25m, the Air Force would be able to integrate an unspecified number of vehicles with artificial intelligence, according to the UPL. That funding also would allow the Skyborg to be rapidly transitioned to U.S. Indo-Pacific Command and to a program of record.
Will Roper, the Air Force’s acquisition executive, told reporters on Friday that the service is still bullish on Skyborg. However, it opted to delay funding a prototype in FY21 because of funding throughout the budget for further testing on the XQ-58A Valkyrie drone, which will likely serve as the Skyborg prototype.
“There’s huge enthusiasm for Skyborg,” he said. “I fully expect that we’ll see an attritable drone program called Skyborg in our FY22 budget. It’s high on the list and if it makes the FY22 budget then we know we have the funds … to be able to keep it alive, keep it moving, and work on the artificial intelligence.”
The $115m investment in advanced technology also would include $35 m for an AI-equipped version of the small diameter bomb. According to the UPL, the goal would be to create a prototype SDB variant “that autonomously optimizes coordinated attacks” on radar-emitting or GPS targets, following rules of engagement that are predetermined by the user.
The biggest chunk of the desired advanced technology investment — about $55m — would go to the vaguely-named Emerging Technology Concept Operational Prototype. Most details on the program are classified, but the UPL states that the funding would be used to advance the maturity of the technology, do design work necessary for a prototype and secure a space launch.
The most expensive item on the wishlist — clocking in at about $1.3bn — is an unfunded requirements for additional F-35 joint strike fighters and associated expenses. The list states that around $1.2bn of that would procure an additional 12 F-35A conventional takeoff and landing models at a price of about $80m a piece, while the rest would go toward advance procurement of 12 aircraft in FY22 as well as the ability to buy certain parts in economic order quantities.
The Air Force listed funding for “advanced weapon systems” as its number two priority. Specifically, the service would like to spend an additional $228m on GPS M-Code receivers, which enables secure positioning, navigation and timing for military users of GPS. That funding would also go toward classified offensive cyber operations.
Funding for infrastructure also made up a major portion of the list. The service has an $190m unfunded requirement for certain tech needed to modernize its test and training ranges, such as systems that emulate near-peer threats, which are necessary to train pilots of fifth-generation aircraft like the F-35.
The Air Force included $736m needed for facility sustainment and modernization, as well as $589m for military construction projects such as a stealth coating repair facility for the B-21 Raider at Ellsworth Air Force Base, S.D. and a software integration center for the Ground Based Strategic Deterrent program at Hill Air Force Base, Utah. (Source: Defense News)
21 Feb 20. Here’s $5.4bn of stuff the US Navy says it wants but didn’t fit in its FY21 budget request. You can’t always get what you want.
Every year the services put together a list of items it really want but couldn’t fit into its budget request. For fiscal 2021, the Navy said it was stiffed to the tune of $5.42bn, with an additional $582m missing from the perennially shorted military construction account.
So here’s an (almost) comprehensive list of what the Navy said it wanted but didn’t fit into its FY21 ask:
- One Block V Virginia-class submarine: $2.77bn
- Five carrier-variant F-35 aircraft: $525.5m
- Two E-2D Advanced Hawkeye aircraft: $357m
- Two CMV-22B Osprey helicopters and spares: $211.4m
- A small logistics ship proof of concept: $12m
- Three next-generation jammers: $115.4m
- 20 Naval Strike Missiles: $41.4m
- Two littoral combat ship surface mission modules: $42.8m
- 100 additional AIM-9X missiles: $42.8m
- A technology refresh for the Ford-class dual-band radar: $113m
- An unspecified number of sonobuoys
- An additional high-energy laser with optical sensor (HELIOS): $88.3m
- Three CANES Windows 10 modernizations: $11.9m
- Emergency repairs to sealift ships discovered this year by U.S. Transportation Command: $57m
- Advanced communications gear for Military Sealift Command ships: $11.9m
- F/A-18 E/F fighter jet spares: $21.9m
- Flying hours to make up for shortfalls caused by unavailable T-45 Goshawk trainers: $132.8m
- Cooperative engagement capability testing: $22m
- Depot-level repairs to support the 80 percent aircraft mission-capable rate goal: $236.8m
- Upgrades to hospital ship Mercy’s treatment facilities: $11.6m
- A counter-unmanned aerial system program: $63.5m
Rep. Joe Courtney, D-Conn., said in a statement he is pleased to see the second Virginia-class submarine on the list, which was cut in last-minute budget wrangling.
“It should be no surprise that restoring the second 2021 Virginia-class submarine ranks as the highest unfunded need for the Navy,” said Courtney, who chairs the House Armed Services Committee’s sea power subcommittee. “Congress has consistently heard from Navy leaders, combatant commanders, and experts about the growing demand for submarine capabilities as countries like China and Russia step up their undersea activity.
“Congress has demonstrated its strong and bipartisan commitment to this second 2021 submarine, having already provided more than $1.1bn in advanced funding to support it. I welcome and appreciate the Navy’s clear request to Congress to support restoration of this submarine as we begin deliberations on the 2021 defense budget next week.” (Source: Defense News)
21 Feb 20. Department of Defense Directs Review of Army Field Manual 2-22.3.
The Secretary of Defense has directed the Under Secretary of Defense for Intelligence & Security, in consultation with the Attorney General, the Director of the Federal Bureau of Investigation, and the Director of National Intelligence, to review the Army Field Manual (FM) 2-22.3, Human Intelligence Collector Operations. This review is in compliance with the National Defense Authorization Act (NDAA) Fiscal Year 2016 (FY16) which directed the review of FM 2-22.3 no sooner than three years after the enactment of the law.
The Department of Defense is committed to complying with the requirement to conduct a review of the field manual, and will work both internally and with our interagency partners to ensure it is completed thoroughly and expeditiously.
As directed by the FY16 NDAA, any potential revisions to the field manual adopted by the Secretary of Defense will be made available to the public 30 days prior to the date the revisions take effect. Additionally, the department will conduct a review of the field manual every three years thereafter. (Source: US DoD)
20 Feb 20. Esper: Nuclear Triad Must Remain Effective, Reliable, Credible. The fiscal year 2021 defense budget request places a high priority on modernizing the nation’s strategic nuclear triad, Defense Secretary Dr. Mark T. Esper emphasized during a visit to Minot Air Force Base, North Dakota.
The secretary met yesterday with leaders and airmen at the 91st Missile Wing and the 5th Bomb Wing, and he toured a B-52 bomber and a nuclear launch silo. Bombers and ground-launched missiles make up two-thirds of the nuclear triad, with submarine-launched missiles providing its third leg.
“It’s been a very good education for me,” he said. “The nuclear strategic triad is the most important part of our military. It’s key to our nation’s defense. It provides that strategic nuclear deterrent that we depend on day after day — that we’ve depended on decade after decade.”
For that reason, Esper said, modernization of the nuclear triad is of top importance to both the White House and the Pentagon.
“The president was very clear to me, to the Pentagon, to the Hill, that modernization of our strategic nuclear forces is priority No. 1,” the secretary said. “So, we made it priority No. 1 in our budget, and the numbers should show that.”
Top priorities in DOD’s budget request include nuclear modernization, missile defeat and defense, space and cyberspace.
For fiscal year 2021, DOD is asking for $28.9bn to fund modernization of the nuclear defense program, covering all three legs of the nuclear triad. Around $7bn is targeted at nuclear command, control and communications. Another $2.8bn is earmarked for the B-21 Raider long-range strike bomber. The Air Force eventually expects to purchase 100 of the aircraft, which will carry the B61-12 and B83 nuclear gravity bombs, as well as the long-range standoff cruise missile.
The request also funds procurement of the Columbia-class ballistic submarine for $4.4bn and the ground-based strategic deterrent for $1.5bn. The ground-based strategic deterrent is expected to replace about 400 Minuteman III intercontinental ballistic missiles. (Source: US DoD)
13 Feb 20. Army Kills APKWS Rockets & Mystery Missile, MIRM. The 2021 budget request also makes major reductions in the tracked M2 Bradley and the wheeled Joint Light Tactical Vehicle, as well as counter-IED The Army wants to cancel $122m in precision-guidance upgrades for helicopter-launched rockets and cut $222m in upgrades to the venerable M2 Bradley armored troop carrier. And those are just the top two items out of 20 released today, totaling $1.13bn in budget reductions. Those savings, in turn, helped the Army plus up its highest-priority weapons programs by almost $3bn, as we reported Monday.
Other big items? A $201m reduction in the Joint Light Tactical Vehicle (as we’ve previously reported) and the cancellation of the Mobile Intermediate Range Missile. The MIRM showed up as a $20m item in the 2020 budget plan as the Mobile Medium Range Missile, when the Army projected it would cost $1bn over 2020-2024. But the service offered almost no details about the project – I spent months trying in vain to figure out even the basics, such as whether it was a ballistic missile, cruise missile, or hypersonic – and now it dies as mysteriously as it lived.
Such ambiguity isn’t uncommon when it comes to the military, especially the infamously media-unsavvy Big Army. When Army officials rolled out their 2021 budget request Monday afternoon, they said they’d cancelled 41 acquisition programs outright and reduced spending on another 39. The service took until today before it released a list of the 20 most significant programs affected: the top 10 cancellations and top 10 reductions.
The largest single item is upgrades to the M2 Bradley, a BAE product. The Army wants to replace the Bradley completely, although that replacement program, OMFV, has problems of its own.
The Army’s infamous “Night Court” drills have found cuts in all corners of the service budget, so the 20 items are a bit of a grab-bag, but nonetheless two common themes emerged, aside from the Bradley.
Cutbacks to artillery, missiles, & munitions totaled at least $427m. Almost three-quarters of that came from the cancellations of the Mobile Intermediate-Range Missile ($90m) and the Advanced Precision Kill Weapons System ($122.2m), a laser-guidance kit for the 2.75- inch rockets fired by military helicopters. APKWS is built by BAE Systems, whose ground vehicle division has taken hits in this budget as well, but since the Navy ordered $2.9bn of the rockets last year, BAE’s production line should have no problems staying open – which gives the Army the option to reconsider its own buy later on.
Other precision-guided weapon cutbacks include a $35.6m reduction in upgrades for Lockheed Martin’s Army Tactical Missile System. That makes sense because the Army’s urgently developing a complete replacement for the Reagan-era ATACMS, with both Lockheed Martin and rival Raytheon already testing their competing designs for the lighter-weight and longer-ranged Precision Strike Missile (PrSM).
In a similar move, the Army completely cancelled a service-life extension for the existing Guided Multiple Launch Rocket System (GMLRS) missiles, also by Lockheed, for a $42.5 m saving. That’s because the service and Lockheed are already developing an improved GMLRS Extended Range (ER) variant.
The service also cut $92.9m from a landmine known as the Close Terrain Shaping Obstacle. Unspecified cuts to Army mortars ($22.7m) and Total Army Munitions Requirements (TAMR, $21.8m) round out this category.
The unifying theme: The Army is urgently modernizing its artillery, with an emphasis on longer-range weapons to counter Russian and Chinese missile launchers, and this year it’s clearly pruning the portfolio.
Cuts to counterinsurgency-related-programs totaled another $250 m. Over 80 percent of that is from the reduction to JLTV, a 4×4 armored truck originally intended to replace the under-armored Humvee and unganily MRAPs. As the Army refocuses on Russia and China, it is emphasizing much more heavily armored tracked combat vehicles.
Another $45.8 m came from cuts or outright cancellation of a host of counter-IED programs to defend against roadside bombs: the Vehicle Optics Sensor System (VOSS) for the Explosive Hazard Roller and the Route Clearance Interrogation System (RCIS), both of which which detect IEDs; upgrades to the High Mobility Engineer Excavator (HMEE), an armored backhoe built by JCB; and the shutdown of a management office for CREW jammers (Counter Radio-Controlled IED Electronic Warfare).
Also in the COIN-related category is the Tactical Electric Power (TEP) family of new generators for forward bases, which the Army expects to use much less in a highly mobile future war with Russia and presumably withdraws forces from Afghanistan and the Middle East, as President Trump has pledged to do.
Other cutbacks don’t fit in these two broad categories, but they’re generally existing “legacy” programs for which some kind of successor is in the works, such as the M2 Bradley, to be replaced by OMFV; the Prophet Signals Intelligence (SIGINT) vehicle, to be replaced by the Tactical Layer System (TLS); and the DCGS-A intelligence system, which will be superseded by future Army networks.
A few of the items are more puzzling. Why would the Army cut upgrades to the Joint Assault Bridge, a vehicle-mounted extendable bridge, when it is worried about a war in Eastern Europe, which is riven by rivers? It may be the JAB is just not long enough to cross most of them. Also confusing is the cancellation of upgrades to the Heavy Equipment Transporter (HET) truck, in high demand in Europe for redeploying tanks. But with its total budget cut by $2 bn and its highest-priority programs starting to move from R&D to the more expensive production phase, the Army has to make some hard choices. (Source: Breaking Defense.com)
15 Feb 20. Esper Makes Case That China a Growing Threat to Europe. In Europe, there is a focus on the threat from Russia. However, there is also a threat from China, the Pentagon’s number one concern, said Defense Secretary Dr. Mark T. Esper.
“America’s concerns about Beijing’s commercial and military expansion should be [Europe’s] concerns as well,” Esper said, during his remarks at the Munich Security Conference in Germany today.
China is currently applying economic and political pressure publicly and privately on many Indo-Pacific region and European nations, to seek new strategic relationships, he said.
The Belt and Road Initiative is one such example where it uses overseas investments to force other nations into making suboptimal security decisions, the secretary noted. This has wide-ranging implications for the U.S. and allies in areas such as data security and military interoperability.
Another example is China’s telecommunication firm Huawei, which has developed and is exporting 5G networks that threaten secure communications and jeopardize U.S. alliances. The department is working to support 5G advances in the U.S. and the secretary said he hopes European nations will follow suit.
Esper said China’s President Xi Jinping is leading his nation even faster in the wrong direction: more internal repression, more predatory economic practices, more heavy-handedness and a more aggressive military posture.
The international community needs to be aware of the challenges presented by China’s manipulation of the longstanding international rules-based order that has benefited the world for many decades, he said.
Beijing has said that by 2049, it intends to dominate Asia as the preeminent global military power, Esper said.
Over time, the Chinese have seized and militarized islands in the South China Sea, rapidly modernized its armed forces, while seeking to use emerging technology — often acquired through theft — to alter world power in its favor, he said.
Beijing is using artificial intelligence and other technologies to surveil and to repress many of its own people. Also, China is exporting those technologies to other authoritarian regimes, the secretary said.
For its part, DOD is investing in cutting edge technology to modernize its force and building stronger relationships with allies and partners. Examples, he said, are hypersonics, advanced missile defense systems and artificial intelligence. The goal of developing these weapons is to protect the sovereignty of all freedom-loving countries.
Next year marks the 20th anniversary of China’s admission into the World Trade Organization, “a decision that fundamentally altered the course of international affairs,” he said.
The thinking at the time was that China’s admission into the WTO and other multilateral institutions would result in China’s continued path to economic reform and eventually become a responsible global and political stakeholder, and possibly an eventual democracy, he mentioned.
Skeptics, however, warned that China would reap the benefits of free trade to acquire technologies to build a strong military and security state capable of expanding the reach of its authoritarian rule, he said.
“These are both credible arguments but we all know which one is winning right now,” he said.
Having said that, the U.S. doesn’t seek conflict with China, he said. “In fact, we look for areas of cooperation where our interests converge.”
For example, Esper said the U.S. delivered 18 tons of medical supplies to China and provided other assistance to help fight COVID19, the coronavirus. “The world is too interconnected for us not to work together to solve some of our toughest problems.”
The world is increasingly becoming aware of China’s motives and is responding in turn, he said.
To be a responsible partner in the international community, China must be transparent and respect the sovereignty, freedom and rights of all nations, he said. (Source: US DoD)
14 Feb 20. DOD Moves to Use Data More Effectively in Decision-Making. The Defense Department is seeking ways to use data more effectively for improved decision-making on the battlefield and in its business practices, Deputy Defense Secretary David L. Norquist said.
Norquist and DOD Chief Information Officer Dana Deasy met with data analytics industry experts in the Pentagon today to discuss the way ahead for the department.
“This is the core of what we need to do under the National Defense Strategy,” the deputy secretary said, noting that better use of data leads to increased reform and lethality. At the most basic level, data from everyone’s salary and every piece of equipment could be collected and reported in a data set to which analysis could then be applied, Norquist said. This information would be especially useful in the DOD-wide audit and reporting to lawmakers, he noted.
To accomplish this, he said, DOD has to determine internal methods of data identification, collection, organization and how it can be used most effectively for operational and business decisions.
“This is an area where there’s a great deal to be learned from industry,” Norquist said. “We don’t have to be ahead of industry. We just have to competently follow industry and take advantage of some of the things they’ve already done.”
Deasy said data accuracy is especially important to making informed decisions and allowing individuals to trust the data.
Although the way industry uses data may differ from the way the Defense Department does, he said, DOD could borrow some of industry’s methods.
Juliana Vida, industry representative and retired naval aviator, said data collection could come from sensors embedded in machines, weapons platforms and facilities to predict outages, material failure and other information, thereby saving money and making things safer.
Data analytics is so important for the department, she said, because the margin for error is shrinking, the decision cycle is shortening, and the attack surface is growing. “There are more bad guys out there looking for vulnerabilities,” she added.
Anthony Perez, industry representative, said data analytics collection and processing could be automated to operationalize the data so humans in the process can make informed and critical decisions. (Source: US DoD)
14 Feb 20. Chinese Telecommunications Conglomerate Huawei and Subsidiaries Charged in Racketeering Conspiracy and Conspiracy to Steal Trade Secrets. The U.S. Department of Justice (DOJ) has announced that a superseding indictment was returned yesterday in federal court in Brooklyn, New York, charging Huawei Technologies Co., Ltd. (Huawei), the world’s largest telecommunications equipment manufacturer, and two U.S. subsidiaries with conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act (RICO). The 16-count superseding indictment also adds a charge of conspiracy to steal trade secrets stemming from the China-based company’s alleged long-running practice of using fraud and deception to misappropriate sophisticated technology from U.S. counterparts. The indicted defendants include Huawei and four official and unofficial subsidiaries — Huawei Device Co., Ltd. (Huawei Device), Huawei Device USA Inc. (Huawei USA), Futurewei Technologies, Inc. (Futurewei) and Skycom Tech Co. Ltd. (Skycom) — as well as Huawei’s Chief Financial Officer (CFO) Wanzhou Meng (Meng). The new superseding indictment also contains the charges from the prior superseding indictment, which was unsealed in January 2019. The misappropriated intellectual property included trade secret information and copyrighted works, such as source code and user manuals for internet routers, antenna technology, and robot testing technology. Huawei, Huawei USA, and Futurewei agreed to reinvest the proceeds of this alleged racketeering activity in Huawei’s worldwide business, including in the United States.
The means and methods of the alleged misappropriation included entering into confidentiality agreements with the owners of the intellectual property and then violating the terms of the agreements by misappropriating the intellectual property for the defendants’ own commercial use, recruiting employees of other companies and directing them to misappropriate their former employers’ intellectual property, and using proxies such as professors working at research institutions to obtain and provide the technology to the defendants. As part of the scheme, Huawei allegedly launched a policy instituting a bonus program to reward employees who obtained confidential information from competitors. The policy made clear that employees who provided valuable information were to be financially rewarded. Huawei’s efforts to steal trade secrets and other sophisticated U.S. technology were successful. Through the methods of deception described above, the defendants obtained nonpublic intellectual property relating to internet router source code, cellular antenna technology, and robotics. As a consequence of its campaign to steal this technology and intellectual property, Huawei was able to drastically cut its research and development costs and associated delays, giving the company a significant and unfair competitive advantage. When confronted with evidence of wrongdoing, the defendants allegedly made repeated misstatements to U.S. officials, including FBI agents and representatives from the U.S. House Permanent Select Committee on Intelligence, regarding their efforts to misappropriate trade secrets. Similarly, the defendants engaged in obstructive conduct to minimize litigation risk and the potential for criminal investigations, including the very investigation that led to this prosecution.
The superseding indictment also includes new allegations about Huawei and its subsidiaries’ involvement in business and technology projects in countries subject to U.S., E.U. and/or U.N. sanctions, such as Iran and North Korea – as well as the company’s efforts to conceal the full scope of that involvement. The defendants’ activities, which included arranging for the shipment of Huawei goods and services to end-users in sanctioned countries, were typically conducted through local affiliates in the sanctioned countries. Reflecting the inherent sensitivity of conducting business in jurisdictions subject to sanctions, internal Huawei documents allegedly referred to such jurisdictions with code names. For example, the code “A2” referred to Iran, and “A9” referred to North Korea. Huawei employees also allegedly lied about Huawei’s relationship to Skycom, falsely asserting it was not a subsidiary of Huawei. The company further claimed that Huawei had only limited operations in Iran and that Huawei did not violate U.S. or other laws or regulations related to Iran. In fact, the indictment alleges Skycom was Huawei’s unofficial subsidiary that, among other services, assisted the Government of Iran in performing domestic surveillance, including during the demonstrations in Tehran in 2009. (Source: glstrade.com)
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