Northrop pays out big on whistleblower settlement

Northrop profit falls 20 percent on pension, ship costs

 

Link:  http://www.dailyherald.com/story/?id=308892

 

Bloomberg News

Published: 7/23/2009 9:48 AM

Northrop Grumman Corp., the world’s largest warship builder, said second-quarter profit fell 20 percent as the company recorded higher costs on ship construction and pensions.

Northrup has operations in Rolling Meadows.

Net income fell to $394 million, or $1.21 a share, from $495 million, or $1.44, a year earlier, the Los Angeles-based company said in a statement today. Sales rose 3.8 percent to $8.96 billion.

Rising pension expenses, precipitated by declining returns on fund assets such as stocks, erased the benefit of increased revenue from defense electronics. Delays and higher costs on ships at the company’s yards in Mississippi and Louisiana also have been a “sore point” with investors, said Joseph Nadol, a New York-based analyst with JPMorgan Chase & Co.

“Northrop has struggled with its Gulf Coast shipyards since Hurricane Katrina hit nearly four years ago, and several efforts to improve profitability since then have failed to gain traction,” Nadol wrote in a report yesterday. He cut his rating on the shares to “neutral” from “overweight.” “We believe the outlook for shipbuilding has deteriorated further in recent months and have concerns about further charges.”

The average estimate of 16 analysts surveyed by Bloomberg was for earnings, excluding some items, of $1.29 a share. Analysts projected sales of $8.69 billion. Excluding a 21-cent- a-share charge for cost growth on ship programs in the quarter, profit would have been $1.42.

Legal Settlement

Results for the quarter included a gain of $64 million, or 13 cents a share, from a legal settlement Northrop announced in April. Northrop agreed to the largest whistleblower settlement against a defense contractor, for $325 million, to resolve claims on satellite parts the government deemed defective. The parts were made by TRW Inc. before Northrop acquired the company in 2002.

That settlement was offset by resolution for an equal value of Northrop’s suit against the government to recover costs on a canceled cruise-missile program. Because the cases canceled each other out, Northrop recorded a gain by reversing the reserve it had set up for the whistleblower case. On April 22, Northrop estimated the pretax gain would be $60 million to $70 million.

Northrop rose 2 cents to $47.13 in New York Stock Exchange composite trading yesterday. The shares have dropped 29 percent in the past year.

Northrop is the Pentagon’s third-largest supplier after Lockheed Martin Corp., and Boeing Co. Lockheed this week said second-quarter profit fell 17 percent to $734 million because of rising pension costs. Boeing yesterday said profit gained 17 percent to $998 million as it shipped more Apache helicopters and fighter jets.

Unions ask: Who has the guts to stand up to Boeing, big business?

Andrea James, has a post on the online Seattle Post Intelligencer (July 20, 2009) worth reading, including reader comments..

Unions ask: Who has guts to stand up to Boeing, big business?

“Washington state’s unions are teaming to support politicians who will fight for worker rights and stand up to big business.”

 

Follow link for entire post: 

http://blog.seattlepi.com/aerospace/archives/174025.asp

Former Boeing Engineer Found Guilty of Spying for the PRC (China)

Visit Andrea James’ blog at the new online Seattle Post Intelligencer and read her comments on the trial of a PRC spy who infiltrated Boeing.  Even more enlightening, read the reader comments that follow the article.

http://blog.seattlepi.com/aerospace/archives/173894.asp

Review of Hidden Treuhand: How Corporations and Individuals Hide Assets and Money

Upon reading Shelley A. Stark’s, Hidden Treuhand:  How Corporations and Individuals Hide Assets and Money, my first response was of shock and disbelief.  Then the anger and outrage emerged.  It is clear Shelly Stark is a courageous Whistleblower.  She has dared to expose an organized and secret system of hiding money and assets that has been going on for a long period of history but, that few average people know exists. 

What Ms. Stark is writing about has been a very closely guarded secret prior to now.  Due to becoming aware of the Hidden Treuhand, because of being victimized by its use on her by some business partners, Ms. Stark started what turned out to be five years of hard investigation and research to find out what had happened to her business partnership.  It was not an easily solved mystery.  Fortuitously, Ms. Stark has the economic education, training, intellect, and courage to have tackled this previously secret strategy,  which large corporations and wealthy individuals have known about and had access to utilize in the shadows of our economic world  for a long time.  Her work required copious amounts of research into the history of the practice of Treuhands, hidden or not, and translating masses of German/Austrian law records to get an historical perspective and meaningful understanding of its contemporary impact on our financial  lives. 

In her book, Stark explains that this type of financial and legal strategy is not legal in the U.S., but is legal in certain countries in Europe (Austria, Lichtenstein, Switzerland) and is spreading to other regions (Dubai) making it possible for a lot of manipulation and corrupt dealings to take place, with the public having no inkling it is happening to their money and assets.  She explains how it is possible for a corporation or certain officers of a corporation to hide money, assets, and even people and other money payoffs to people using these Hidden Treuhands, potentially keeping the Hidden Treuhand and everything put into it, secret even from their own board of directors. 

 It appears that using a Hidden Treuhand, Corporations and the wealthy can now thwart any current U.S. government oversight activity, including laws or federal policies.  (Think about former Vice President, Dick Cheney and his conflict of interest in and financial benefits from Halliburton.  How was he able to evade accountability to even current federal laws regarding conflict of interest, quid pro quo, and revolving door prohibitions?    Halliburton coincidentally has moved its headquarters recently to Dubai.  Perhaps, now we know why.)

Recently an article in the Washington Post presented the concept of a new proposed Financial Protection Agency.  If the U.S. Government is going to tackle protecting Americans’ financial matters, they will have to include the problem of Hidden Treuhand, for what are becoming increasingly obvious reasons.  The corrupt and unethical business practices are not just an isolated American problem, but expand across the globe.

Due to the complicated financial dealings leading to our recent financial meltdown of the “Too Big to Fails” our pensions and 401 K’s are already at risk.  Think about Madoff and the huge sums he stole from the retirement accounts of Americans either directly or indirectly.  If Madoff used a Hidden Treuhand, there is little hope all those millions of dollars will ever be openly discovered and identified, let alone recovered.   

I don’t know about you, but the possibility of my retirement funds being siphoned off and shuffled around in secret hidden corporate accounts that no one can see or audit and that I will never see again is enough to get me writing letters and demanding change.  For anyone concerned about the safety and security of American consumers and their financial affairs, this book is a must read!   In fact, this book should immediately be required reading for all U.S. Federal Oversight authorities too.

SPAWAR Corruption: Quid Pro Quo

From the Washington Post

 

Link to original:  http://voices.washingtonpost.com/government-inc/2009/07/outright_corruption_alleged_by.html?wprss=government-inc

 

 

 

Outright Corruption Alleged by Justice Department

“In the autumn of 2005, a mutual friend introduced Pamela Banks to a burly ex-Marine named Gary Alexander, at the time a high-ranking official at the secretive SPAWAR military research facility in San Diego.

“Alexander had a simple proposition. He could get Banks hired as a subcontractor on government projects through his position at SPAWAR, and get her all the work she would want.

“In return, Alexander asked for one thing: a 30 percent cut of the revenue generated from the contracts.

“Banks agreed, according to federal court records. She set up a small company in her San Diego home dubbed Advanced Technical Solutions and over the next two years reeled in $325,000 in subcontracts for SPAWAR work.”

That’s the top of a story this week in the San Diego Union-Tribune. It’s based on a recently unsealed Justice Department indictment of people who worked as senior officials in the Navy program and their alleged confederates in the contracting world.

The indictment describes a sordid kickback scheme — a subversion of the public trust. Here’s more from the story in the Union-Tribune.

“Investigators placed wiretaps on the phones of the Alexanders and others in the ring centered at SPAWAR and observed meetings where cash was handed over to Alexander, Assistant U.S. Attorney Robert Ciaffa said in court yesterday.

“Alexander, 49, was the head of SPAWAR’s Air Surveillance and Reconnaissance branch, a position prosecutors said he used to steer work to contractors and subcontractors in exchange for cash and gifts.

“Also indicted were Louis Williams, 43, and his wife, Elizabeth Ramos, 42, who own a National City-based firm called Technical Logistics Corp. That company garnered about $4.8 million in government contracts between 1999 and 2008.

“Sinthia Nares, 43, also was indicted in the scheme and prosecutors say, is allegedly Alexander’s mistress, for whom he secured lucrative jobs at various contracting firms.

“A sixth defendant, Jackie Godwin, was a manager at Kratos Defense & Security Solutions, a San Diego defense company that was a primary contractor with SPAWAR. He is alleged to have directed subcontracting work to the companies Banks, Ramos and Williams ran at Alexander’s direction. Godwin is in custody in Georgia and is on his way to San Diego to face charges.

“Though it spanned years, investigators were alerted to the alleged scheme in late 2007 with an anonymous tip to a federal fraud hotline.”

By Robert O'Harrow |  July 10, 2009; 12:12 PM ET fraud

Boeing 787 May Not Fly Until Next Year

Link:  http://seattletimes.nwsource.com/cgi-bin/PrintStory.pl?document_id=2009513152&zsection_id=2003750727&slug=boeing22&date=20090722

Boeing 787 may not fly this year

By Dominic Gates

Seattle Times aerospace reporter

The structural flaw that delayed the first flight of the 787 Dreamliner is more complex than originally described by the company, and the plane’s inaugural takeoff is likely at least four to six months away, say two engineers with knowledge of Boeing’s problem.

Follow link above for full story at the Seattle Times.

CIA Found Guilty of Fraud

CIA Committed Fraud, Judge Writes in Ruling
5 Involved in Suit Could Face Sanctions
 
Former CIA director George J. Tenet might face sanctions. (Bebeto Matthews – AP)
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Who’s Blogging» Links to this article
By Del Quentin Wilber
Washington Post Staff Writer
Tuesday, July 21, 2009
A federal judge has ruled that government officials committed fraud while defending a lawsuit brought by a former DEA agent who accused a CIA operative of illegally bugging his home.
In rulings unsealed Monday, U.S. District Chief Judge Royce C. Lamberth wrote that he was considering sanctions against five current and former agency lawyers and officials, including former director George J. Tenet, for withholding key information about the operative’s covert status.
The rulings, issued in recent months, highlighted what the judge called fraudulent work by CIA lawyers in defending a suit that Lamberth said had a lengthy and “twisted history.” Brought in 1994 by DEA agent Richard A. Horn, the suit alleged that the CIA illegally bugged his residence in Rangoon, Burma, while he was serving in the country.
Horn said that portions of a telephone conversation with a subordinate were used by the head of the U.S. mission, Franklin Huddle, to oust him from his post.
Horn, 63, returned to the United States and retired from the DEA in 2000, according to his attorney. His suit was sealed at the government’s request.
The CIA operative and Huddle, represented by the Justice Department, fought the suit and asked Lamberth to throw it out, invoking the state’s secrets privilege. The government argued that the case involved information, including the operative’s identity, that was too sensitive to be revealed in court.
Lamberth agreed and dismissed the suit in 2004. Three years later, the U.S. Court of Appeals for the D.C. Circuit overturned Lamberth, ruling that Horn could try to prove his case against Huddle by using unclassified information. The court upheld Lamberth’s decision to remove the CIA operative from the suit.
Early last year, the Justice Department informed Lamberth that the CIA operative’s cover had actually been lifted in 2002 but nobody told the judge or the appeals court about the change. A CIA lawyer learned about it in 2005 but did not alert the Justice Department, Lamberth or the appeals court, Lamberth wrote.
Lamberth identified that lawyer as Jeffrey W. Yeates. In his rulings, Lamberth chastised the former CIA operative, identified as Arthur Brown, for not informing the courts about his change in status and reinstated Brown as a defendant. Brown claimed in court papers that he told top CIA lawyers about his cover being lifted as early as 2002.
Lamberth called the decision to withhold the information a “fraud on the court.”
“The CIA was well aware that the assertion of the state secrets privilege as to Brown was a key strategy in getting the case dismissed,” Lamberth added.
In an order issued Monday, Lamberth ordered Yeates, Brown, Tenet and three current or former CIA lawyers — John Rizzo, Robert J. Eatinger and A. John Radsan — to file court documents explaining why he should not sanction them for the government’s conduct. Attorneys for the officials and lawyers declined to comment or could not be reached. CIA spokesman George Little said the agency “takes seriously its obligations to U.S. courts.”
Horn’s attorney, Brian C. Leighton, said Lamberth’s rulings showed that the CIA was trying to “cover up wrongdoing.”

SEC Charges Halliburton

Home > News & Statements > Press Releases   SEC Charges Halliburton and Two Former Officers for Failure to Disclose a 1998 Change in Accounting Practice FOR IMMEDIATE RELEASE 2004-104 Halliburton’s Settlement with the SEC Includes a $7.5 Million Penalty Reflecting Lapses in Conduct During the Course of the Investigation   Washington, D.C., Aug. 3, 2004 — The Securities and Exchange Commission announced today enforcement proceedings against Halliburton Co., its former chief financial officer, Gary V. Morris, and its former controller, Robert C. Muchmore, Jr. The Commission’s actions are in response to Halliburton’s failure to disclose a 1998 change to its accounting practice. As a result of that undisclosed change, Halliburton’s public statements regarding its income in 1998 and 1999 were materially misleading. Halliburton and Muchmore have agreed to settle the enforcement actions by consenting to a Commission order to cease and desist from committing or causing future securities law violations. Additionally, Halliburton and Muchmore have agreed to pay penalties of $7.5 million and $50,000 respectively, in a related civil action. Halliburton’s penalty for the disclosure failure reflects lapses in the company’s conduct during the course of the Commission investigation, which commenced in mid-2002. Harold F. Degenhardt, Administrator of the Commission’s Fort Worth office, commented, “The SEC’s action today emphasizes the importance of complete transparency in a company’s financial disclosures. Important information bearing on a company’s results should be clearly and timely disclosed, even if those results are calculated in accordance with Generally Accepted Accounting Principles (GAAP).” “The penalty against Halliburton serves as yet another reminder that the Commission will not tolerate lapses by companies that serve to delay or hinder the Commission’s investigative processes,” said Spencer C. Barasch, enforcement head in the Commission’s Fort Worth office. The Commission approved these enforcement actions following a thorough investigation that included the review of approximately 340,000 documents and sworn testimony from 23 individuals. The company’s former Chief Executive Officer, Vice President Richard B. Cheney, provided sworn testimony and cooperated willingly and fully in the investigation conducted by the Commission’s career staff. Today’s enforcement actions include all of the charges that the Commission deemed appropriate in light of the investigative record developed by its staff. These actions conclude the Commission’s investigation of Halliburton’s 1998 change to its accounting practice. Halliburton provides a wide range of industrial construction services. In providing those services, Halliburton, at times, incurs cost overruns; the overruns may be recovered from Halliburton’s customer depending on the terms of the construction contract and the nature of the overruns. Historically, Halliburton recognized income arising from cost overrun claims only in the financial quarter in which the claim was finally resolved with the customer. From 1993 to 1997, Halliburton had set forth this practice in its periodic filings with the Commission. In the second quarter of 1998, Halliburton changed its historical accounting practice and began recognizing revenues by offsetting losses on certain projects with revenues based on estimated probable recoveries on claims that had not been resolved with customers. Under the new practice, Halliburton recognized revenues on certain claims that the company believed were probable of collection rather than, pursuant to the prior practice, claims that had been finally resolved with its customers. Although both of Halliburton’s claims recognition practices, the historical one and the revised one, are appropriate under Generally Accepted Accounting Principles, there was a significant difference in their respective effects on Halliburton’s financial presentation: the new practice reduced losses on several large construction projects. As a result, Halliburton’s reported income was higher under the revised practice than it would have been under the prior practice. Over six reporting periods, spanning approximately 18 months covering 1998 and 1999, Halliburton failed to disclose its change of accounting practice. In the absence of any disclosure, the investing public was deprived of a full opportunity to assess Halliburton’s reported income — more particularly, the precise nature of that income, and its comparability to Halliburton’s income in prior periods. It was not until March 2000 that Halliburton, in its 1999 Form 10-K, disclosed its change in accounting practice. The following chart demonstrates the impact the undisclosed accounting change had on the company’s pre-tax income in 1998 and 1999: IMPACT ON HALLIBURTON’S PRE-TAX INCOME (in millions) Year Filing Reported Pre-Tax Income Reported Pre-Tax Income — Without Component of Unapproved Claim Revenue $ Difference % Difference 1998   Form 10-Q [Q2] $228.70 $183.30 $45.40 24.8%   Form 10-Q [Q3] ($609.50) ($646.20) $36.70 5.7%   Form 10-K $278.80 $190.90 $87.90 46.1% 1999   Form 10-Q [Q1] $149.00 $129.80 $19.20 14.8%   Form 10-Q [Q2] $146.00 $135.80 $10.20 7.5%   Form 10-Q [Q3] $103.00 $92.30 $10.70 11.6% These income figures appeared in Halliburton’s filings with the Commission. They were also presented in the company’s quarterly earnings releases and analyst teleconferences. The Commission alleges that Morris and Muchmore were responsible for the company’s failure to disclose the accounting change, over six quarters, in Halliburton’s Commission filings. Additionally, Morris and Muchmore played key roles in the preparation and review of quarterly earnings releases and analyst teleconference scripts that included the affected income figures. They were, therefore, also responsible for the absence in the releases and scripts of any clarifying reference to the accounting change or its impact. Halliburton and Muchmore neither admit nor deny the Commission’s findings against them. The enforcement action against Morris is unsettled, and has been filed in U.S. District Court in Houston, Texas. Contact: Stephen M. Cutler, Director SEC Division of Enforcement 202-942-4540   See Also:  Administrative Proceeding Release No. 33-8452; Litigation Release 18817 Last modified: 8/3/2004

Support for fixing Bush Undermined GS System

Union Leaders Defend GS System, Up to a Point

By Joe Davidson
Tuesday, July 21, 2009

Presidents of the two largest federal employee unions launched a defense yesterday of the General Schedule pay system that the Bush administration attempted to eliminate and the Obama administration, at a minimum, wants to reenergize.
Yet their defense was not without caveats. Both spoke to the need to modernize the familiar 60-year-old GS system that covers most of the 2 million federal workers.
National Treasury Employees Union President Colleen M. Kelley and American Federation of Government Employees President John Gage told the opening session of an “Excellence in Government” conference that while the GS system can be improved, it is far better than the Pentagon’s National Security Personnel System. The Pentagon system was the model for the kind of pay-for-performance operation the Bush administration wanted to spread throughout the government.
“The GS system, it is a system that is not perfect,” Kelley told the meeting, which was sponsored by the Government Executive Media Group. Then she added: “It is a system that is fair. It is understandable. . . . It is transparent,” all qualities the NSPS stands accused of lacking.
Critics of the NSPS are not limited to union leaders. A committee of the Defense Business Board, a group of private sector executives advising the Defense secretary, issued an interim report last week that called for a “reconstruction of the NSPS.” The report called it “complex,” “confusing,” “lacks transparency” and has “limited promotion opportunities.”
Gage told the government workers at the conference in the Ronald Reagan Building that the General Schedule “is basically a good system,” but that a new performance management program could be incorporated into an updated pay classification arrangement.
A new performance management system is key to the reform of the compensation and evaluation plan for federal employees that the Obama administration wants to develop. Pay-for-performance programs emphasize job execution, while the GS system has gained a reputation for rewarding workers for longevity.
In fact, the GS also can reward performance, but that mechanism has been stunted, like crops that get too little rain. Both union leaders later cited ways to recognize superior employees in the GS system, through a variety of means they consider more fair and open than the NSPS model.
“The GS system provides plenty of ways to reward superior performance,” Kelley said. “Under the GS, there is a framework for establishing performance levels, identifying those who meet those levels, and rewarding them. Rewards can come in the form of Quality Step Increases, under which employees with overall outstanding ratings receive a step increase in their grade without completing the waiting period.”
Gage cited the bonus and time-off awards available as incentives to GS employees.
“You can be very creative in the GS system,” Gage said.
John Berry, director of the Office of Personnel Management, addressed the conference’s closing session, but stayed away from advancing specific policy prescriptions. He would not comment on the report to the Defense Board because it is not a final document.
But he did say that the Obama administration will “develop a performance appraisal system that gives substantial rewards to our very best workers, recognizes the good work of the vast majority of our employees, and disciplines and removes the few bad apples who have been given the chance to improve but have either failed or refused to do so.”
That would be part of the “comprehensive reform, from recruitment and hiring to pay and training” Berry said the federal workplace needs.
“We have, by and large, the best workers in the world, but we do not have the systems or policies we need to support them.”
Much of Berry’s speech, titled “A New Day for the Civil Service,” was devoted to praising federal civil servants. After ticking off a list of their accomplishments, Berry said perceptions of federal employees “changed for the worse as it became fashionable for politicians of both parties to run against Washington and the boogey man of ‘the bureaucracy.’ “
It was a bit ironic that Berry mentioned those politicians in a building named for Reagan, who did more to dump on government than anyone, famously saying “government is the problem” in his first inaugural address.
Berry, describing himself as the “chief people-person for the federal government” strongly defended the federal workforce, saying “It’s time the denigration ends.”
“I argue today that the premise of these attacks was not only misguided — it was completely wrong,” he added. “The American people were sold a bill of goods. Federal workers are not second class or inferior to workers in the private sector, and we never were.”
Curiously, some of his applause lines like that one were met with silence.
Maybe some federal workers believe the bull that’s been spread about them.
Read John Berry’s speech here.
Contact Joe Davidson at federaldiary@washpost.com.

Cemetery Whistleblower Speaks

Cemetery whistle-blower: ‘I ain’t a hero’:  http://www.msnbc.msn.com/id/32043382/ns/us_news-crime_and_courts/?gt1=43001
 

‘I had my mouth closed too long,’ he says of shady goings-on at Ill. site