Pratt & Whitney

What if China Not Just Hacked — But Sabotaged — the F-35?

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Over the last week, two perennial stories have again dominated the news. China continues to be able to hack us — including top DC power players — at will. And the F-35 has suffered another setback, this time a crack in an engine turbine blade (something which reportedly happened once before, in 2007).

The coincidence of these two events has got me thinking (and mind you, I’m just wondering out loud here): what if China did more than just steal data on the F-35 when it hacked various contractors, and instead sabotaged the program, inserting engineering flaws into the plane in the same way we inserted flaws in Iran’s centrifuge development via StuxNet?

We know China has hacked the F-35 program persistently. In 2008, an IG report revealed that BAE and some of the other then 1,200 (now 1,300) contractors involved weren’t meeting security requirements; last year an anonymous BAE guy admitted that the Chinese had been camped on their networks stealing data for 18 months. In April 2009, WSJ provided a more detailed report on breaches going back to 2007.

The Joint Strike Fighter, also known as the F-35 Lightning II, is the costliest and most technically challenging weapons program the Pentagon has ever attempted. The plane, led by Lockheed Martin Corp., relies on 7.5 million lines of computer code, which the Government Accountability Office said is more than triple the amount used in the current top Air Force fighter.

Six current and former officials familiar with the matter confirmed that the fighter program had been repeatedly broken into.

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Last Week in Deferred and Non-Prosecution Agreements: Arming China and Stealing Trillions from Municipalities

I’m so old I remember the time, four years ago, when Democrats hated Deferred Prosecution Agreements.

Back in the days when Chris Christie, former US Attorney, was challenging Jon Corzine, once and future bankster, to be governor of New Jersey, Democrats made hay of the significant numbers of DPAs Christie signed, mostly with a series of medical device companies busted for kickbacks. After it was revealed Christie had picked his former boss, John Ashcroft, to make $52 million monitoring one of those medical device companies, it became a convenient way to show the corporatist corruption of Christie.

There was even a bit of discussion, in early 2009, about whether DPAs made banks more likely to engage in fraud because they assumed they’d get a DPA rather than a prosecution. Those discussions largely centered on the two DPAs AIG got in the mid-00s for fraudulently hiding its risk, which nevertheless didn’t prevent AIG from taking on so much risk it blew up the entire financial system. One of the monitors of those DPAs–who arguably should have but didn’t see AIG’s ongoing fraud–was a guy by the name of James Cole. He’s now the Deputy Attorney General.

And as recently as 2010, NJ Congressman Bill Pascrell had this to say, in response to the publication of a GAO report showing some improvement but greater need for oversight over DPAs.

One cannot ignore the spike of 38 deferred prosecution agreements in 2007, up from a mere four agreements in 2003. That proves that what was supposed to be an option to be used in rare circumstances had become the norm at the Department of Justice.

[snip]

It is imperative that the Congress reign in the unmitigated power that federal prosecutors hold to serve as judge, jury and sentencer in the deferred prosecution process.

And yet I have heard very little about the two DPAs signed last week–perhaps because big corporate impunity has become such a common occurrence in the post-crash era.

First, there’s the deal Pratt & Whitney and two subsidiaries signed for evading export restrictions to help China build an attack helicopter. Effectively Pratt & Whitney laundered their production of some development helicopters–plus the military grade engine control module software to go with them–through a Canadian subsidiary. And when they finally admitted they had deliberately avoided US export restrictions on military equipment, they lied to DOJ about doing so. While they have to pay a $75 million fine, some of the charges are being deferred. And no individual has been charged with helping China get a helicopter designed to attack tanks.

So DOJ’s punishment for a defense contractor to put Chinese civil contracts ahead of US national security is a big fine, deferred prosecution, but no jail time.

Even more troubling is the Non-Prosecution Agreement signed with Barclays over its manipulation of the LIBOR rate. Effectively, during the heady bubble days, Barclays colluded to lie about the interbank lending rate to maximize its own trades; as finance was crashing and Barclays itself had to pay higher rates for credit, it lied about that to imply the bank was healthier than it was. And while between DOJ, Commodity Futures Trading Commission, and Britain’s Financial Services Authority, Barclays will have to pay around $475 million in fines, and while CFTC imposed the kind of mandated fixes that DOJ normally would under a DPA, Barclays is basically scot-free for colluding to lie about a rate that affects people throughout the financial system.

Matt Taibbi explains why this is so important: because when the banks said the LIBOR rate was lower than it really was, a lot of investors got a smaller return on their LIBOR-tracked investments than they otherwise would have.

A sizable chunk of the world’s adjustable-rate investment vehicles are pegged to Libor, and here we have evidence that banks were tweaking the rate downward to massage their own derivatives positions. The consequences for this boggle the mind. For instance, almost every city and town in America has investment holdings tied to Libor. If banks were artificially lowering the rates to beef up their trading profiles, that means communities all over the world were cheated out of ungodly amounts of money.

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Emptywheel Twitterverse
emptywheel RT @timkaine: Read my @nytimes op-ed laying out why President Obama must get Congress’s authorization for the fight against ISIL http://t.c…
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emptywheel @p2wy You see how we could have a fun w/this? Don't think @repjustinamash would ever intro new tax but maybe some Dem would? @runtodaylight
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emptywheel @KevinBuist Aren't you assuming the video games we played when we were 12 were actually called that?
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emptywheel @samhusseini Imagine how quickly any NIE would leak this time! That said increasing #s know finally admit all our hammers not worth a damn
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emptywheel @michaelwhitney Was gonna ask how come your football team wasn't best in league w/that then remembered not to jinx Pats @jilliancyork
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emptywheel RT @carolrosenberg: There’s rigid military censorship now. US troops comb through free-press imagery, delete some that were routinely allow…
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emptywheel @chinahand Well, sure. But don't you think they'd miss Edinburgh as a kind of mecca of capitalism?
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emptywheel RT @BiometricsNerd: 93% of FBI NextGen Identification searches are automated, remaining require human-in-the-loop. Amy Hess FBI S&T Branch …
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JimWhiteGNV Having fantasies about that kayak the #Rays just gave Jeter being full of fire ants the first time he hops in...
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emptywheel @billmon1 Cruz just got to the Senate too late: remember when they were hunting AQ defense attys? @DanielLarison @Ali_Gharib
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emptywheel So after we impose 100% tax on Liz Cheney's inheritance and .1% net worth taxes on politico use of "homeland" THEN we can tax DOD contrators
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emptywheel Actually I think these are better taxes to pay for Get-Your-War-On: 1) Liz Cheney's inheritance. All of it 2) Pols using word "homeland"
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