More Problems with Contractor Computer Security

This is the same problem Boeing and a number of other defense contractors had going on as well as some other issues I have read about regarding their “security” of their computer files and other materials. It seems to me that some of the defense contractors just don’t value putting the resources into adequate computer security. -GFS

***************************************************

Report: Obama helicopter security breached Pa. company says blueprints for Marine One found at Iran IP address NBC News and msnbc.com February 28, 2009 A company that monitors peer-to-peer file-sharing networks has discovered a potentially serious security breach involving President Barack Obama’s helicopter, NBC affiliate WPXI in Pittsburgh reported Saturday. Employees of Tiversa, a Cranberry Township, Pa.-based security company that specializes in peer-to-peer technology, reportedly found engineering and communications information about Marine One at an IP address in Tehran, Iran. Bob Boback, CEO of Tiversa, told WPXI-TV: “We found a file containing entire blueprints and avionics package for Marine One, which is the president’s helicopter.” The company was able to trace the file back to its original source. “What appears to be a defense contractor in Bethesda, Md., had a file-sharing program on one of their systems that also contained highly sensitive blueprints for Marine One,” Boback said. Tiversa also found sensitive financial information about the cost of the helicopter on that same computer, WPXI-TV reported. Someone from the company most likely downloaded a file-sharing program, typically used to exchange music, not realizing the potential problems, Boback said. “When downloading one of these file-sharing programs, you are effectively allowing others around the world to access your hard drive,” Boback said. Retired Gen. Wesley Clark, an adviser to Tiversa, said the company discovered exactly which computer the information came from. “I’m sure that person is embarrassed and may even lose their job, but we know where it came from and we know where it went.” Boback said the government was notified immediately. Iran is not the only country that appears to be accessing this type of information through file-sharing programs, Boback told the station. “We’ve noticed it out of Pakistan, Yemen, Qatar and China. They are actively searching for information that is disclosed in this fashion because it is a great source of intelligence,” Boback said. Clark told WPXI that he doesn’t know how sensitive this information is, but he said other military information has been found on the Internet in the past and should be monitored more closely. Rep. Jason Altmire, D-Pa., said he would ask Congress to investigate how to prevent this from happening again.

More Corporate Attempts to Influence Government Oversight

There sure are a lot of ugly things happening out there, in spite of promises to clean up the government and government contracting, shut down the revolving door etc. etc.  Those of you who’ve been reading my blog for some time know that I’ve featured posts regarding industry/government corruption, and shenanigans occurring in federal Defense Department offices, including oversight agencies.

 

A person who insists on remaining an anonymous Boeing whistleblower communicated this to me.  Considering what all has been going on and the abusive actions taken by Boeing against their own employees in the past, (See http://www.thelastinspector.com), I can fully understand why.  I admire and appreciate this person being willing to speak up.  I hope more of the people at Boeing will continue to speak up.  I know there are good people working there, as well as some others we’ve heard of who have not brought honor to the company.  If what they are reporting is accurate, what they are describing are wholly inappropriate efforts by a contractor to influence an oversight agency at its highest levels.  It is exactly the type of thing that our new administration must put a stop to now.  –GFS

 

************************************************************************

 

 

Here is the letter:

 

Dear G. Florence Scott:

 

I am writing to you as an anonymous whistleblower.  I feel that I have to write anonymously because I fear retaliation from Boeing management and the Department of Defense.  I have worked for many years for Boeing and I have worked on many defense programs.  I have always tried to do what is right.  But now I find myself at moral odds with my company.  I work on a defense program called Wedgetail.  The Wedgetail program has had many design and engineering problems as long as I have been on it.  The problems are very serious and threaten cancellation of the contract with the Australian government.  The company management is under a lot of pressure for the program to succeed.  Because of these program problems my management is taking unusual risks with the security of the program.  I have just heard that a Boeing corporate security officer Tim McQuiggen flew back to the east coast to pressure the Department of Defense into letting Boeing conduct classified testing of the Wedgetail at remote locations that are not authorized for classified testing.  This type of corporate behavior does not seem right!

 

Anonymous Boeing Whistleblower

 

US Government Fails to Withhold Contracts from Criminal Contractors

Yes, after the stellar examples of broken oversight in the federal contracting world like the infamous Boeing Deferred Prosecution Agreement, which would allow a corrupted contractor to evade being held accountable and losing contracts or being disbarred, I can well believe what Mr. Brodsky reports here.  –GFS

 

 

Government continues to provide unethical contractors with work, GAO says

 

By Robert Brodsky rbrodsky@govexec.com February 26, 2009

 

More than two dozen contracts were issued in fiscal 2006 and 2007 to businesses or individuals who at the time were under federal suspension or debarment, according to a new report from the Government Accountability Office.

“This is probably just the tip of the iceberg,” said Gregory Kurtz, GAO’s managing director of forensic audits and special projects before the House Oversight and Government Reform Committee on Thursday. “I believe that further investigation will find dozens or hundreds of other cases. These are the kinds of cases that cause taxpayers to lose faith in their government.”

When the government decides to suspend or debar a contractor, they are placed in the Excluded Parties List System, a database maintained by the General Services Administration. Contracting officers are required to check the list before issuing a new award.

But according to GAO, contracting officers repeatedly failed to check EPLS or, in the Army’s case, willfully ignored the suspension and debarment notice.

The president of defense contractor Optronics, a German military training company, was convicted in 2004 of attempting to illegally sell to North Korea aluminum tubes, which can be used to develop a nuclear bomb. In July 2005, more than a year after the conviction, the Army said there was a “compelling interest to discontinue any business with this morally bankrupt individual,” and debarred the company from receiving further contracts.

But Army procurement officers disregarded the debarment notice and continued to pay the company an additional $4 million in fiscal 2006 through contract extensions and task orders from an existing training contract, the report said.

Despite grilling from lawmakers, Brig. Gen. Edward Harrington, the Army’s deputy assistant secretary for procurement, would not acknowledge that extending Optronics’ contract was a mistake, noting that the company’s performance was rated as “excellent.”

The general argued that the training Optronics was providing was a matter of national security, that it would have taken as long as six months to bring on a new contractor and the Army would have been obliged to pay the debarred firm in full if it canceled the contract.

“What is the point of having suspension and debarment regulations, if our own agencies disregard them?” asked committee Chairman Edolphus Towns, D-N.Y.

In other instances, GAO attributed errors to ineffective management of the EPLS database or to control weaknesses at both excluding and procuring agencies.

For example, in April 2006 the Navy suspended a company after one of the contractor’s employees was caught sabotaging repairs on an aircraft carrier by using unsuitable parts to replace fasteners on steam pipes. If the pipes had ruptured as a result of faulty fasteners, hundreds could have died, the watchdog said.

But less than a month after the suspension the Navy awarded the same company three new contracts, worth more than $100,000, because a department contracting officer failed to check EPLS to verify the company’s eligibility.

The problems were not limited to military agencies. In September 2006, GSA suspended a construction company after its president opened fraudulent GSA surplus property auction accounts using phony Social Security numbers.

Shortly thereafter, the Interior Department tried to check the contractor’s eligibility in EPLS before making several awards to the company, but GSA had not yet noted the suspension in the system.

During its investigation, GAO successfully bought body armor worth more than $3,000 with a government purchase card through a GSA supply schedule from a company that had been debarred by the Air Force in 2007 for falsifying tests related to the safety of its products.

Jim Williams, commissioner of GSA’s Federal Acquisition Service, acknowledged the mistakes, but noted they represented a few “isolated incidents” of human error, rather than a systematic breakdown. Nonetheless, GSA, as well as the Army and Navy, has sent out alert notices to agency contracting officers to remind them to check the EPLS.

“EPLS is not broken,” said David Drabkin, GSA’s acting chief acquisition officer.

But some lawmakers noted the database suffers from fundamental flaws, such as missing corporate identification numbers, an inadequate search function, obsolete contact information and an incompatibility with other government procurement databases.

“The egregious examples of contracting failures found by GAO not only led to waste but endangered lives,” said Darrell Issa, R-Calif., the committee’s ranking member. “Recommendations for fixing mistakes, including better training and technology, need to be implemented.”

How Europe offers US Corps a way to hide assets, identity and income

 

New Book Out Soon by Shelly Stark!  Must Read!

 

In addition, a writer, Shelly Stark, who wrote the article about this problem for Truthout, is shortly going to be publishing an intensive book on the subject of Hidden Treuhand and European Banking Secrecy.  She left a comment on my Word Press Blog.

 

She said,  “Hi! It’s me Shelley Stark. Thank all of you for commenting. Shirley, I hope you will read my book. I’m almost finished. You be sure to comment, I’m looking forward to hearing from you. You’re OK. Your just frustrated and it is not easy to separate all the issues facing all of us today. I love America, but that doesn’t mean I have to love what is being done to my country and its people. In fact, in light of my education and knowledge, it would be immoral to hold back this information. For that reason, I spent the last few years translating German law in order to explain a phenomenon that impacts our understanding of the war in Iraq, Halliburton, and even the current financial crisis. The book will include some of the documents I turned over to the IRS. I assure you, this is not a game. The foreword was written by the most religious man I have ever known if that makes you feel better- Ernst Florian Winter- Google him. Read his foreword when the book comes out. I did much of the work living high in the Austrian Alps in his 350 year old Tyrollean style home complete with wood burning stove for heat and cooking. No meal is eaten without prayers and on Sunday the local peasants hold Mass high in the meadow alps. It’s an event i wouldn’t miss though i admit I look forward to the barbeque and giant mugs of beer afterwards. The story is straight forward. Everything I claim is footnoted in the original German language. I don’t expect you to understand the German references but they are there nonetheless. I foretold that billions would go missing – this book explains how it is done – the Hidden Treuhand and European banking secrecy – that is why you can’t find it in any law in the English language. This is the dark side of globalization. God bless us all – we are going to need it.”

 

 

 

 

 

 

Shelly Stark’s original article for Truthout

 

Halliburton’s Hidden Treuhand

Monday 11 August 2008

by: Shelley Stark, t r u t h o u t | Report

Vanity Fair reported shipments of over $12 billion in cash to Iraq. $9 billion of the cash is gone and unaccounted for. (Photo: The Village Voice)

Halliburton takes advantage of a European loophole that lets corporations hide beneficiaries and assets.

    Little is known of a customary European legal practice that offers corporations and individuals an opportunity to profit from assets while maintaining complete anonymity of the beneficiary’s identity. This practice is referred to as “Hidden Treuhand” in the English language. The practice of Hidden Treuhand submits to legal local customs in Austria, Germany, Liechtenstein, Luxemburg and Switzerland, but due to globalization, has moved beyond European borders via corporations and individuals, who put it to personal use.

    The practice of Hidden Treuhand is relevant and unregulated. More and more, the relevant practice of Treuhand is used in hiding an asset owner’s identity from the outside world. Assets, whether they are corporate shares or fixed assets, can be owned in secret. The personal income derived from these assets can also be kept secret from tax authorities. An example of how Hidden Treuhand facilitates tax evasion is part of the latest scandal where thousands of Germans evaded tax through the services of the LGT Treuhand Bank in Liechtenstein, using a combination of Treuhand and foundations to hide true owner identity of bank accounts.

    Hidden Treuhands in Europe impact the lives of American citizens. Hidden Treuhands enable even American corporations to hide the identity of beneficiaries, assets and income. Halliburton has a Hidden Treuhand embedded in its Austrian subsidiary. It prevents transparency regarding corporate activities.

    The lack of transparency creates special advantages for some, and consequences for others such as governments, competitors, stockholders and citizens. For example, a beneficiary can evade personal income tax, because the income derived from a hidden asset is not linked to the beneficiary. There is another advantage to Hidden Treuhands that borrows from the concept of a “trust.” The “trust” concept allows for dividends to be removed. Money transferred to a subsidiary may be considered a dividend. By using a network of subsidiaries, favorable tax laws and banking secrecy, CEOs and insiders can profit without transparency. The Hidden Treuhand is an important aspect of what makes globalization so attractive to American and European corporations.

    Given these attributes, it is alarming when a Hidden Treuhand is discovered in a subsidiary that is fully owned by Halliburton USA. Halliburton’s Hidden Treuhand is evident in the firm’s corporate records. Halliburton International GmbH was created in Austria in June of 1992, although another subsidiary, at the same address, was in existence in Austria since 1958. The new subsidiary, Halliburton International GmbH, has no apparent reasons for existing other than to house a Hidden Treuhand in its corporate structure, receive dividends from other subsidiaries and acquire other subsidiaries. This firm has no employees. It creates no income. Another company, Halliburton Company Austria GmbH, at the same address, could have equally performed whatever function this subsidiary has, but it has no Hidden Treuhand. The obvious conclusion is Halliburton USA needed a subsidiary with a Hidden Treuhand.

    The Hidden Treuhand easily accomplishes tax evasion because dividends transferred to a subsidiary with a Hidden Treuhand can be anonymously distributed or used to purchase other holdings. For example, Halliburton International GmbH has acquired acquisitions in Russia and Kazakhstan that later disappear from the corporate records.

    Halliburton attracts a certain limelight in connection with any Treuhand activities because of its link to a highly controversial war and Vice President Dick Cheney’s earlier association with Halliburton. We would have expected all ties to his former employer to be have been severed when he took office to avoid a conflict of interest. The impenetrability of the Hidden Treuhand makes it impossible to know who else is involved beyond the CEOs listed on Halliburton International GmbH historic corporate data.

    Dick Cheney claims to no longer own stock in Halliburton, but he was its chairman and CEO for five years, and either hired or promoted many of the executives now running Halliburton, or formerly involved with the subsidiary with the Hidden Treuhand in Austria. It is highly unlikely the chief executive officer, Dick Cheney, would be unaware of the Austrian subsidiary’s existence, originally headed by the executive vice president and chief legal officer, Lester L. Coleman, of Halliburton International USA. But it is an absolute certainty Lester L. Coleman and all the other CEOs listed on Halliburton International GmbH corporate historic records do know of the subsidiaries existence and its Hidden Treuhand. It was the intention of these CEOs to set up a secret subsidiary in 1992 with a Hidden Treuhand embedded.

    Perhaps more importantly, Halliburton’s CEOs, listed in the corporate historic records of Halliburton International GmbH in Austria, should know Hidden Treuhands could be used to undermine American security by providing a means for financing terrorists. Currently, one of the strongest arguments the US and the OECD are using against banks, lawyers and Treuhand activities in Europe to combat tax evasion and money laundering is how these activities can be used to fund terrorism. The Iraq War is one portion of the overall strategy of the ‘War on Terror’ that also includes preventing any funding for terrorism. It takes little imagination to see the huge potential Treuhands facilitate: creating a means for terrorists and criminal organizations to conceal their true identities and motives and yet work openly in the capitalist system.

    Halliburton’s CEOs must be aware of the potential misuse of Hidden Treuhands, as they have not been particularly open about their own use of Hidden Treuhands to date. Halliburton simultaneously contracts to fight a “war on terror,” while utilizing the same nontransparent mechanisms concerned authorities seek to prevent access to by terrorists. Faced with a conflict of interest, Halliburton CEOs demonstrate with their silence a willingness to protect their own interests, and doing so while we are at war with an enemy that works in the shadows.

    The noncompetitive contract awarded Halliburton was orchestrated by Vice President Dick Cheney and backed by the Bush administration. This contract has afforded an estimated US$1.4 trillion to US$3 trillion of US taxpayer money to flow through the coffers of Halliburton, virtually unmonitored and fraught with accounting irregularities. The receiver of much of this US taxpayer money is Halliburton USA, its affiliates and subsidiaries. One of the subsidiaries, the Austrian subsidiary, is capable of dispersing any money sent to it to unknown persons, without a hint of transparency.

    The Hidden Treuhand is more than just a means of profiting without transparency; it is a national security threat, whether wielded by al-Qaeda or Halliburton. If Americans were brought into a war based on a profit motive while we were supposed to be focused on alleviating the threat of terrorism, it could amount to treason. This risk should be given some credence and investigated. For this reason, Halliburton’s corporate records were given to the US Internal Revenue Service. Maybe they will find something illegal, tax evasion for example, or maybe they will come back and say they found nothing illegal: The Hidden Treuhand is just a little bit naughty.

    There is no transparency to a Hidden Treuhand, and, therefore, no means to identify the real benefactors. But the most important factor concerning a Treuhand contract is this: If a Treuhand contract is embedded in the corporate structure, then its sole purpose is to prevent the public from knowing the identity of the real stockholders. Who is calling the shots and who is benefiting is kept secret.

    The “True Hands,” the true benefactors’ identity, is hidden from public knowledge; they remain anonymous and nameless in transactions, and that is the sole incentive for creating a Hidden Treuhand.

    ——–

    Shelley Stark is the author of a forthcoming book, “The Hidden Treuhand: How Europe Offers US Corporations and Individuals an Opportunity to Hide Assets, Identity, and Income.”

 

 

Jim Jones, Nat. Security Advisor Questions & a new book by Shelly Stark

Questions about Jim Jones, National Security Advisor

 

Someone wrote me a question today about a person featured in some material I posted some time ago.  I post the question and a quick answer here, as well as more information about author, Shelly Stark and her research on European secrecy in banking and the device used by a lot of multinational companies (including many of our large defense contractors) to keep their financial machinations secret.  

-GFS

 

                       

Question:  Just a thought, but I wonder what the danger of General Jim Jones being so close to the President is to those of us seeking reform at Boeing. Why was he allowed in? It’s like having a fox in the henhouse.

 

 

Answer:  Yes, it is.  That is why I posted what I did on the blogs about him immediately upon hearing he was selected.  He was only on the Boeing Board of Directors for a year before accepting the Obama Admin. post. One might think it possible, he was inside and did not like what he saw.  If that is the case, I can understand he wanted out of there.  It does though, present the look of a fox sent in to seize control of guarding the hen house, if he is just moving through the revolving door to service the Boeing Company as so many before him have.  It is hard to tell what is really going on.  While on the Boeing Board of Directors, General Jim Jones  was in charge of something financial as his role on the board. In June 21, 2007 through Dec. 15, 2008 he served as a director on the Boeing Company’s Board of Directors, serving on the company’s audit and finance committees.  (http://en.wikipedia.org/wiki/James_L._Jones)

 

 

 I wonder what he really knows. It seems like he would have to know a lot of TBC’s inside financial business, including some things they’ve done that are not proper, unless the upper managers of the company keep the Board ignorant of what is really going on, which seems unlikely.  He may well know about the Hidden Treuhand, the secret European banking way companies can hide funds and stockholders and just about anything else from the U.S. government for various reasons including taxes or fraud or you name it. 

 

 

New Book Out Soon by Shelly Stark!  Must Read!

 

In addition, a writer, Shelly Stark, who wrote the article about this problem for Truthout, is shortly going to be publishing an intensive book on the subject of Hidden Treuhand and European Banking Secrecy.  She left a comment on my Word Press Blog.

 

She said,  “Hi! It’s me Shelley Stark. Thank all of you for commenting. Shirley, I hope you will read my book. I’m almost finished. You be sure to comment, I’m looking forward to hearing from you. You’re OK. Your just frustrated and it is not easy to separate all the issues facing all of us today. I love America, but that doesn’t mean I have to love what is being done to my country and its people. In fact, in light of my education and knowledge, it would be immoral to hold back this information. For that reason, I spent the last few years translating German law in order to explain a phenomenon that impacts our understanding of the war in Iraq, Halliburton, and even the current financial crisis. The book will include some of the documents I turned over to the IRS. I assure you, this is not a game. The foreword was written by the most religious man I have ever known if that makes you feel better- Ernst Florian Winter- Google him. Read his foreword when the book comes out. I did much of the work living high in the Austrian Alps in his 350 year old Tyrollean style home complete with wood burning stove for heat and cooking. No meal is eaten without prayers and on Sunday the local peasants hold Mass high in the meadow alps. It’s an event i wouldn’t miss though i admit I look forward to the barbeque and giant mugs of beer afterwards. The story is straight forward. Everything I claim is footnoted in the original German language. I don’t expect you to understand the German references but they are there nonetheless. I foretold that billions would go missing – this book explains how it is done – the Hidden Treuhand and European banking secrecy – that is why you can’t find it in any law in the English language. This is the dark side of globalization. God bless us all – we are going to need it.”

 

Could Airbus Build the Air Force One Replacement?

Airbus could build next Air Force One; 747 due to be replaced

 

Link to Original:  http://seattletimes.nwsource.com/cgi-bin/PrintStory.pl?document_id=2008641936&zsection_id=2003750727&slug=airforceone18&date=20090118

 

By Peter Pae

Los Angeles Times

For nearly two decades, Boeing’s 747 jumbo jet has served as the president’s flying White House, projecting America’s might wherever it landed.

But in the next decade, “United States of America” could end up being emblazoned on an even bigger plane that has been a symbol of European unity and pride.

The 747 Air Force One is scheduled to be replaced, and the new plane is likely to be stuffed with top-secret gee-whiz gadgetry, including countermeasures to thwart missile attacks, and aerial-refueling capabilities so it can fly for days without landing.

That’s on top of comforts likely to make even the world’s richest jet setters envious, including a medical facility and lavish staterooms with showers.

What it will not have is a presidential escape pod, analysts said, a feature that became an urban legend, thanks to a 1997 action film that starred Harrison Ford.

Follow the link to the original above to read the full story. 

Boeing 2009….

Boeing in.…

 

Is that plane Boeing’s 787 or the 7-Late_7 Dreamliner?

From Blogging Stocks, Joseph Lazzaro http://www.bloggingstocks.com/2009/02/16/is-that-plane-boeings-787-or-the-7-late-7-dreamliner/

 

Boeing says 787 production, deliveries on schedule from Business Week, link:  http://www.businessweek.com/ap/financialnews/D9690D581.htm

 

UPDATE 2 – Boeing 787 on track for Q1 2010 delivery-executive-link: http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSN1026757820090210

 

 

Statement of DCAA auditor regarding Boeing:

http://hsgac.senate.gov/public/_files/091008Hackler.pdf

 

Boeing Electrical Issues: FAA Relaxes Safety Rules for Boeing

FAA to loosen fuel-tank safety rules, benefiting Boeing’s 787

Link to Original:  http://seattletimes.nwsource.com/cgi-bin/PrintStory.pl?document_id=2008719843&zsection_id=2003750727&slug=lightning08&date=20090208

 

By Dominic Gates

Seattle Times aerospace reporter

The Federal Aviation Administration (FAA) has quietly decided to loosen stringent fuel-tank safety regulations written after the 1996 fuel-tank explosion that destroyed flight TWA 800 off the coast of New York state.

The FAA proposes to relax the safeguards for preventing sparks inside the fuel tank during a lightning strike, standards the agency now calls “impractical” and Boeing says its soon-to-fly 787 Dreamliner cannot meet.

Instead of requiring three independent protection measures for any feature that could cause sparking, the revised policy would allow some parts to have just one safeguard.

Boeing has worked closely with the FAA to make the change in time for the 787 Dreamliner, whose airframe built of composite plastic makes lightning protection a special challenge.

But the move has stirred intense opposition inside the local FAA office from the technical specialists — most of them former Boeing engineers — responsible for certifying new airplane designs.

The national union representing about 190 Seattle-based FAA engineers this past Tuesday submitted a formal critique to the agency, calling the new policy “an unjustified step backward in safety.”

In a lightning storm, the critique said, the less stringent rules could leave a commercial airliner “one failure away from catastrophe.”

 

Please follow link above to read entire original story. 

New Administration Appears to Defend Old Administration’s Secrets

Obama administration defending Bush secrets

Justice Department seeks to hold back lawsuits as FOIA rules rewritten

Link to original:  http://www.msnbc.msn.com/id/29225492/page/2/

 

updated 1:21 p.m. PT, Mon., Feb. 16, 2009

WASHINGTON – Despite President Barack Obama’s vow to open government more than ever, the Justice Department is defending Bush administration decisions to keep secret many documents about domestic wiretapping, data collection on travelers and U.S. citizens, and interrogation of suspected terrorists.

In half a dozen lawsuits, Justice lawyers have opposed formal motions or spurned out-of-court offers to delay court action until the new administration rewrites Freedom of Information Act guidelines and decides whether the new rules might allow the public to see more. 

 

Follow link above to see the rest of the story.

DCAA Auditor’s Testimony to Congress involving Boeing

 

 Statement of Paul Hackler

Supervisory Auditor

Defense Contract Audit Agency

September 10, 2008

Mr. Chairman, Ranking Member Collins, and members of the Committee:

Thank you for the opportunity to speak to you today about DCAA’s ELC Buy III proposal audit. I am currently a GS-13 Supervisory Auditor in the Defense Contract Audit Agency’s Western Region – Huntington Beach Resident Office responsible for Department of Defense contractor audits. I am a certified public accountant with 25 years of contract audit experience. The 2005 and 2006 ELC proposal audits I supervised were based on a 15-year lot costing scenario designed to allow Boeing to recover approximately $270 million in losses Boeing incurred as a result of its poor business decision to gear up for a robust commercial cell phone satellite market that failed to materialize. In using a 15-year lot costing approach, Boeing was able to average those losses over 15 years, thereby reflecting higher costs for future missions. In restructuring the program to avoid further losses, the government agreed to reimburse Boeing prospectively for launch capability efforts and Boeing was forced to abandon lot costing for that portion of the program. Boeing seized this opportunity to recover past losses by

1

developing proposals that violated numerous procurement regulations. In its proposals, Boeing claimed that the cost per launch would decrease in the future and the government needed to compensate Boeing for higher up-front costs. In actuality, the devastatingly high up-front costs were a direct result of Boeing’s unprofitable decision to gear up for a prolific commercial market that failed to materialize. My office was directed by DCAA upper management to basically play along with this outrageous government bailout!

 

Link to rest of testimony: http://hsgac.senate.gov/public/_files/091008Hackler.pdf