Remarks By Assistant Attorney General For National Security John C. Demers On Announcement of Charges Against Russian Military Intelligence Officers

As Prepared For Delivery

Good afternoon.  Today, we announce criminal charges against a conspiracy of Russian military intelligence officers who stand accused of conducting the most disruptive and destructive series of computer attacks ever attributed to a single group.

I am joined in this announcement by FBI Deputy Director David Bowdich, U.S. Attorney for the Western District of Pennsylvania Scott W. Brady, and Special Agent in Charge of the FBI’s Pittsburgh Field Office Michael A. Christman. 

In the past three months alone, the Department has charged computer intrusions or taken legal action related to the activities of China, Iran and North Korea.  Each of these cases charged significant malicious conduct that we have called out, in part, to reinforce norms of responsible nation state behavior in cyberspace.  But as this case shows, no country has weaponized its cyber capabilities as maliciously and irresponsibly as Russia, wantonly causing unprecedented collateral damage to pursue small tactical advantages and to satisfy fits of spite. 

The defendants in this case were all members of Military Unit 74455 of the Russian Main Intelligence Directorate, an intelligence agency known as the GRU. The Department previously charged members of this same unit, also known to cybersecurity researchers as “Sandworm Team,” for their role in Russia’s efforts to interfere in the 2016 U.S. elections.  We make no election interference allegations here.  Rather, today’s charges illustrate  how Unit 74455’s election activities were but one part of the work of a persistent, sophisticated hacking group busy sabotaging perceived enemies or detractors of the Russian Federation, regardless of the consequences to innocent bystanders or their destabilizing effect.

Six current and former officers in Unit 74455 are accused of the following disruptive and destructive attacks alleged in the indictment:

In December of 2015 and 2016, the conspirators launched destructive malware attacks against the electric power grid in Ukraine.  These were the first reported destructive malware attacks against the control systems of civilian critical infrastructure. These attacks turned out the lights and turned off the heat in the middle of the Eastern European winter, as the lives of hundreds of thousands of Ukrainian men, women and children went dark and cold. 

From there, the conspirators’ destructive path, still putatively aimed at Ukraine, widened to encompass virtually the whole world.  In what is commonly referred to as the most destructive and costly cyber attack ever, the conspirators unleashed the “NotPetya” malware. Although it masqueraded as ransomware, designed to extort money, this was a false flag: the co-conspirators designed the malware to spread with devastating and indiscriminate alacrity – bringing down entire networks in seconds and searching for remote computer connections through which to attack additional innocent victims, all without hope of recovery or repair.  The entirely foreseeable result was that the worm quickly spread globally, shutting down companies and inflicting immense financial harm.  This irresponsible conduct impaired the ability of companies in critical sectors, such as transportation and health, to provide services to the public–not only in Ukraine, but as far away as Western Pennsylvania.  As alleged, for just three U.S.-related victims—three of at least hundreds of victims—monetary losses reached nearly one billion dollars.

Rather than express remorse for the damage they inflicted against victims worldwide, the conspirators callously celebrated their success.

Next, the conspirators turned their sights on the Winter Olympics, a forum where the international community, despite recurring conflict, comes together to celebrate the common pursuit of physical excellence and mental toughness.  The conspirators, feeling the embarrassment of international penalties related to Russia’s state-sponsored doping program, i.e., cheating, took it upon themselves to undermine the games.  Their cyber attack combined the emotional maturity of a petulant child with the resources of a nation state.  They conducted spearphishing campaigns against South Korea, the host of the 2018 PyeongChang Winter Olympic Games, as well as the International Olympic Committee, Olympic partners, and athletes.  Then, during the opening ceremony, they launched the “Olympic Destroyer” malware attack, which deleted data from thousands of computers supporting the Games, rendering them inoperable.  Although the conspirators took steps to pin the Olympic Destroyer attack on North Korea, this second false-flag attempt also failed.  Cybersecurity researchers ultimately attributed the attack to Sandworm Team, as we do today. 

These destructive and disruptive malware attacks, and related preparations, were not the conspirators’ only malicious conduct alleged in the indictment.  The conspirators also supported a hack-and-leak operation in the days leading up to the 2017 French elections.  And the conspirators continued their disruptive attacks as recently as October 2019, targeting government and non-government websites in the country of Georgia. 

Today’s allegations, in their entirety, provide a useful lens for evaluating Russia’s offer two weeks ago of a cyber “reset” between Russia and the United States.  Russia is certainly right that technologically sophisticated nations that aspire to lead have a special responsibility to secure the world order and contribute to widely accepted norms, peace and stability.  That’s what we’re doing here today.  But this indictment lays bare Russia’s use of its cyber capabilities to destabilize and interfere with the domestic political and economic systems of other countries, thus providing a cold reminder of why its proposal is nothing more than dishonest rhetoric and cynical and cheap propaganda.

Before I wrap up my remarks, I’d like to thank the team of prosecutors and FBI agents whose diligence and perseverance has led to these charges and the kind of evidence that would allow us to hold these defendants accountable in a court of law.

I’d also like to express the Department’s appreciation for assistance from the private sector, such as Cisco’s Talos Intelligence Group, Facebook, Google, and Twitter in investigating and disrupting the Unit 74455 cyber threat.  We also appreciate the hard work and dedication of our foreign law enforcement or intelligence partners, including in Ukraine, Georgia, South Korea, the United Kingdom and New Zealand, who have also pursued these conspirators after attacks and intrusions within their own countries or otherwise assisted in our investigation. All of these partnerships send a clear message that responsible nations and the private sector are prepared to work together to defend against and disrupt significant cyber threats.

Now, I will turn the podium over to U.S. Attorney Scott W. Brady, who will discuss the allegations in the indictment in greater detail.

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    GAO's analysis of Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS) data show that in fiscal year 2018, 287,547 Medicare fee-for-service beneficiaries had inpatient stays that included care for severe wounds. These wounds include those where the base of the wound is covered by dead tissue or non-healing surgical wounds. About 73 percent of the inpatient stays occurred in acute care hospitals (ACH), and a smaller percentage of stays occurred in post-acute care facilities. Specifically, about 16 percent of stays were at skilled nursing facilities (SNF), and about 7 percent were at long-term care hospitals (LTCH). CMS data show that Medicare spending on stays for severe wound care was $2.01 billion in fiscal year 2018, representing a decline of about 2 percent from fiscal year 2016, when spending was about $2.06 billion. Spending declined as a result of decreases in both the total number of these stays, as well as spending per stay, which both decreased by about 1 percent. The decrease in per stay spending was likely driven, in part, by a change in where beneficiaries received care. CMS data show fewer severe wound care stays in LTCHs, which tend to be paid higher payment rates. At the same time, more severe wound care stays were at two other types of facilities that tend to be paid lower payment rates: ACHs and inpatient rehabilitation facilities. GAO's analysis of CMS data also show that, while the number of LTCHs that billed Medicare for severe wound care decreased by about 7 percent from fiscal years 2016 to 2018, Medicare beneficiaries continued to have access to other severe wound care providers. For example, CMS data show that most beneficiaries resided within 10 miles of an ACH or SNF that provided severe wound care in fiscal year 2018. Figure: Percentage of Medicare Fee-for-Service Beneficiaries Residing within 10 Miles of a Health Care Facility That Provided Any Severe Wound Care, by Facility Type, Fiscal Year 2018 Note: The “other” category includes facilities such as psychiatric hospitals or units. There is limited information on how or whether the decrease in LTCH care for severe wounds may have affected the quality of severe wound care Medicare beneficiaries receive. For example, CMS collects information on the percentage of patients with new or worsened pressure ulcers at post-acute care facilities, but it does not measure the quality of care they receive. Medicare beneficiaries with serious health conditions, such as strokes, are prone to developing severe wounds due to complications that often lead to immobility and prolonged pressure on the skin. These beneficiaries may require a long-term inpatient stay at an ACH or a post-acute care facility, such as an LTCH. LTCHs treat patients who require care for longer than 25 days, on average. In 2018, LTCHs represented about $4.2 billion in Medicare expenditures. Prior to fiscal year 2016, LTCHs received a higher payment rate for treating Medicare beneficiaries than ACHs. Beginning in fiscal year 2016, a dual payment system was phased in that paid LTCHs a rate similar to ACHs for some beneficiaries and a higher rate for beneficiaries that met certain criteria. As this payment system has moved from partial to full implementation, lawmakers had questions about how it may affect beneficiaries' severe wound care. The 21st Century Cures Act included a provision for GAO to review severe wound care provided to Medicare beneficiaries. This report describes facilities where Medicare beneficiaries received severe wound care, Medicare severe wound care spending, and what is known about the dual payment system's effect on access and quality. GAO analyzed Medicare severe wound care access and spending data for fiscal years 2016 and 2018 (the most recent data available); reviewed reports; and interviewed CMS officials, researchers, and national wound care stakeholders. HHS provided technical comments on a draft of this report, which were incorporated as appropriate. For more information, contact James Cosgrove at (202) 512-7114 or cosgrovej@gao.gov.
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    The Department of Justice announced today that the Madoff Victim Fund (MVF) began its sixth distribution of approximately $488 million in funds forfeited to the U.S. Government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme, bringing the total distributed to almost $3.2 billion to nearly 37,000 victims worldwide.
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    A federal grand jury in Richmond, Virginia, returned an indictment charging a return preparer with tax evasion and failure to file individual income tax returns, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney G. Zachary Terwilliger for the Eastern District of Virginia.
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  • Defense Reform: DOD Has Made Progress, but Needs to Further Refine and Formalize Its Reform Efforts
    In U.S GAO News
    The Department of Defense (DOD) has made progress in establishing valid and reliable cost baselines for its enterprise business operations and has additional efforts ongoing. DOD's January 2020 report responding to section 921 of the John S. McCain National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 addressed most of the key requirements from that section but also had some limitations, which DOD acknowledged. For example, the baselines included only labor and information technology costs because DOD's financial data do not attribute costs to other specific activities required under section 921. However, DOD officials told GAO they have developed and are continuing to refine baselines for all of the department's enterprise business operations, such as financial and human resource management, to enable DOD to better track the resources devoted to these operations and the progress of reform. While still in progress, this effort shows promise in addressing the weaknesses in DOD's section 921 report and in meeting the need for consistent baselines for DOD's reform efforts that GAO has previously identified. GAO found that DOD's reported savings of $37 billion from its reform efforts and a Defense-Wide Review to better align resources are largely reflected in its budget materials; however, the savings were not always well documented or consistent with the department's definitions of reform. Specifically: DOD had limited information on the analysis underlying its savings estimates, including (1) economic assumptions, (2) alternative options, and (3) any costs of taking the actions to realize savings, such as opportunity costs. Therefore, GAO was unable to determine the quality of the analysis that led to DOD's savings decisions. Further, some of the cost savings initiatives were not clearly aligned with DOD's definitions of reform, and thus DOD may have overstated savings that came from its reform efforts rather than other sources of savings, like cost avoidance. For example, one initiative was based on the delay of military construction projects. According to DOD officials, this was done to fund higher priorities. But if a delayed project is still planned, the costs will likely be realized in a future year. Without processes to standardize development and documentation of savings and to consistently identify reform savings based on reform definitions, decision makers may lack reliable information on DOD's estimated reform savings. In coordinating its reform efforts, DOD has generally followed leading practices for collaboration, but there is a risk that this collaboration may not be sustained in light of any organizational changes that Congress or DOD may make. This risk is increased because the Office of the Chief Management Officer (OCMO) and other offices have not formalized and institutionalized these efforts through written policies or agreements. Without written policies or formal agreements that define how organizations should collaborate with regard to DOD's reform and efficiency efforts, current progress may be lost, and future coordination efforts may be hindered. DOD spends billions of dollars each year to maintain key business operations. Section 921 of the NDAA for FY 2019 established requirements for DOD to reform these operations and report on their efforts. DOD has also undertaken additional efforts to reform its operations in recent years. Section 921 called for GAO to assess the accuracy of DOD's reported cost baselines and savings, and section 1753 of the NDAA for FY 2020 called for GAO to report on the OCMO's efficiency initiatives. This report assesses the extent to which DOD has (1) established valid and reliable baseline cost estimates for its business operations; (2) established well-documented cost savings estimates reflecting its reforms; and (3) coordinated its reform efforts. GAO assessed documents supporting costs, savings estimates, and coordination efforts; interviewed DOD officials; observed demonstrations of DOD's reform tracking tools; and assessed DOD's efforts using selected criteria. GAO is making three recommendations—specifically, that DOD establish formal processes to standardize development and documentation of cost savings; ensure that reported savings are consistent with the department's definition of reform; and formalize policies or agreements on its reform efforts. DOD concurred with GAO's recommendations. For more information, contact Elizabeth Field at (202) 512-2775 or fielde1@gao.gov.
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  • VA Real Property: Preliminary Observations on Challenges Limiting VA’s Ability to Effectively Manage Its Assets
    In U.S GAO News
    What GAO Found GAO has identified key characteristics of an asset management framework designed to optimize funding and decision-making related to capital assets. The Department of Veterans Affairs (VA) continues to have challenges meeting at least three of these key characteristics. Staffing resources. This key characteristic calls for organizational leadership to provide the necessary resources for asset management to succeed. Previously, VA officials described problems resulting from low levels of staffing resources, including project delays and difficulties in managing projects. VA has taken some actions to improve staffing levels, such as establishing special salary rates for engineers, and VA's vacancy rate for general engineers has improved, decreasing from 17.2 percent in fiscal year 2019 to 12.6 percent in fiscal year 2020. VA officials, however, continue to describe staffing difficulties in planning and executing projects and limits on the number of projects that facilities can undertake. Communication and collaboration. This key characteristic calls for organizations to promote a culture of information-sharing across traditional agency boundaries to help ensure that agencies make effective, enterprise-wide decisions regarding their assets. VA has taken steps to improve communication among offices with asset management responsibilities, such as by issuing an asset management directive that VA officials said would help to facilitate such collaboration. However, in current work GAO has found instances of insufficient communication, such as lack of (1) collaboration early in project development between local offices and the Office of Construction and Facilities Management and (2) coordination between construction offices and the Office of Information and Technology when bringing facilities online. Measurement and evaluation. This key characteristic calls for agencies to continuously evaluate the performance of their asset management systems and implement necessary improvements to optimize the assets' value and ensure the assets reflect the organization's current goals. VA previously developed goals and measures for its program of inspections to identify maintenance and repair needs in health care settings. However, currently VA lacks goals with related measures that would evaluate its asset management processes and point the way to necessary improvements. Why GAO Did This Study VA manages a vast portfolio of real property assets, including a healthcare system that provides care at 171 VA medical centers and 1,112 outpatient sites to over 9 million veterans enrolled in the VA health care program. VA has pressing infrastructure needs, including adapting to changes in veterans' demographics and maintaining or replacing aging facilities. GAO's key characteristics of an asset management framework state that effectively managing assets requires, among other things, maintaining leadership support that provides the necessary resources; a collaborative organizational culture; and a system for evaluating and improving asset management performance. However, GAO's previous and ongoing work has found that VA continues to face challenges on these fronts. Although VA has implemented some GAO recommendations, several priority recommendations remain outstanding in areas related to asset management, such as staffing and capital planning. GAO was asked to testify about VA's management of its capital asset portfolio. This statement summarizes GAO's findings from prior reports and preliminary observations from ongoing work examining VA's capital asset management. In ongoing work, GAO reviewed VA documentation and interviewed officials from VA headquarters offices involved in asset management. GAO also interviewed personnel at a selection of eight VA medical centers and seven regional offices and from four Veterans Service Organizations about VA's asset management. For more information, contact Andrew Von Ah at (202) 512-2834 or vonaha@gao.gov.
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  • Program Evaluation: Key Terms and Concepts
    In U.S GAO News
    Both the executive branch and congressional committees need evaluative information to help them make decisions about the programs they oversee—information that tells them whether, and why, a program is working well or not. The Government Performance and Results Act of 1993 (GPRA) and GPRA Modernization Act of 2010 (GPRAMA) established a framework for performance management and accountability within the federal government. Building on that foundation, Congress has since passed, among other laws, the Foundations for Evidence-Based Policymaking Act of 2018 (Evidence Act) to strengthen the evidence-building efforts of executive branch agencies. This product updates our previous glossary (GAO-11-646SP) to highlight different types of evaluations for answering questions about program performance, as well as relevant issues to ensure study quality. This glossary can help agency officials better understand fundamental concepts related to evaluation and enhance their evidence-building capacity. For more information, contact Lawrance Evans, Jr. at 202-512-2700 or EvansL@gao.gov.
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  • Developer Agrees to Mitigate Impacts to Streams and Wetlands
    In Crime News
    A developer and his companies have agreed to effectuate $900,000 in compensatory mitigation, preserve undisturbed riparian areas, conduct erosion-control work on streams, and be subject to a prohibitory injunction to resolve alleged violations of the Clean Water Act (CWA) on property north of Houston, Texas, the Justice Department announced today.
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  • Veteran Suicide: VA Needs Accurate Data and Comprehensive Analyses to Better Understand On-Campus Suicides
    In U.S GAO News
    The Department of Veterans Affairs' (VA) process for identifying on-campus suicides does not include a step for ensuring the accuracy of the number of suicides identified. As a result, its numbers are inaccurate. VA's Veterans Health Administration (VHA) first started tracking on-campus veteran suicides in October 2017, and uses the results to inform VA leadership and Congress. GAO reviewed the data and found errors in the 55 on-campus veteran suicides VHA identified for fiscal years 2018 and 2019, including 10 overcounts (deaths that should not have been reported but were) and four undercounts (deaths that should have been reported but were not).   Examples of Errors on the Department of Veterans Affairs' (VA) List of 55 On-Campus Veteran Suicides for Fiscal Years 2018 and 2019 (as of September 2019) VA has taken some steps to address on-campus veteran suicides, such as issuing guidance and staff training. However, GAO found that the analyses informing these efforts are limited. Specifically, VHA requires root cause analyses—processes to determine what can be done to prevent recurrences of incidents—for some but not all on-campus veteran suicides. According to VHA officials, only 25 percent of on-campus suicides from October 2017 to April 2019 met the criteria for a root cause analysis. does not make use of all relevant information VA collects about these deaths, such as clinical and demographic data collected through other VA suicide prevention efforts. VHA officials said they could not link the different sources of information, but GAO found that selected medical facilities could do so. Without accurate information on the number of suicides and comprehensive analyses of the underlying causes, VA does not have a full understanding of the prevalence and nature of on-campus suicides, hindering its ability to address them. VA established suicide prevention as its highest clinical priority. In recent years, there have been reports of veterans dying by suicide on VA campuses—in locations such as inpatient settings, parking lots, and on the grounds of cemeteries. GAO was asked to review veteran deaths by suicide on VA campuses. This report examines (1) VA's process to track the number of veterans that died by suicide on VA campuses, and (2) steps VA has taken to address these types of suicides. GAO reviewed the sources of information VHA uses to identify and analyze on-campus veteran suicides, VA and VHA strategic plans and policies related to suicide prevention and reporting, and federal internal control standards. GAO also interviewed VA and VHA central office officials, and officials from three medical facilities that GAO selected because they reportedly had on-campus veteran suicides between fiscal years 2018 and 2019. GAO is making three recommendations, including that VA improve its process to accurately identify all on-campus veteran suicides and conduct more comprehensive analyses of these occurrences. VA did not concur with one of GAO's recommendations related to conducting root cause analyses. GAO continues to believe that this recommendation is valid, as discussed in the report. For more information, contact Debra A. Draper at (202) 512-7114 or draperd@gao.gov.
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    The Department of Justice announced today that Lakeway Regional Medical Center LLC (LRMC) agreed to pay $13,580,822.79, and Surgical Development Partners LLC, Surgical Development Partners of Austin Enterprises LLC, G. Edward Alexander, Frank Sossi, and John Prater collectively agreed to pay $1.8 million, to resolve allegations they violated the False Claims Act and other statutes in connection with the development of Lakeway Regional Medical Center, a hospital in Lakeway, Texas.  LRMC was formed to develop and operate the hospital.  The other settling parties assisted in the development of the hospital and the management and operations of LRMC. 
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  • Owner of Japanese Fishing Vessel Pleads Guilty to Unlawful Trafficking of Shark Fins
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  • Workplace Sexual Harassment: Experts Suggest Expanding Data Collection to Improve Understanding of Prevalence and Costs
    In U.S GAO News
    Limited nationwide data hinder a comprehensive understanding of the prevalence and costs of workplace sexual harassment. According to GAO's analysis of available federal data and literature review, the few reliable nationwide estimates of sexual harassment's prevalence vary substantially due to differences in methodology, including the question structure and time period the survey used. Moreover, the likelihood of experiencing workplace sexual harassment can vary based on an individual's demographic characteristics—such as gender, race, and age—and whether the workplace is male- or female-dominated. For example, women, younger workers, and women in male-dominated workplaces were more likely to say they experienced harassment. GAO did not find any recent cost estimates of workplace sexual harassment, but identified four broad categories of costs: health, productivity, career, and reporting and legal costs (see figure). Examples of Costs Associated with Workplace Sexual Harassment The Equal Employment Opportunity Commission (EEOC), as part of its mission to prevent and remedy unlawful employment discrimination, maintains data on sexual harassment and retaliation charges filed against employers, but cannot systematically analyze the relationship between the two for all charges filed nationwide. After filing sexual harassment charges or engaging in other protected activity, employees may experience retaliation, such as firing or demotion, and EEOC data show that retaliation charges constitute a growing portion of its workload. EEOC's planning documents highlight its intention to address retaliation and use charge data to inform its outreach to employers. However, while EEOC can review electronic copies of individual charges for details, such as whether a previously filed sexual harassment charge led to a retaliation charge, its data system cannot aggregate this information across all charges. Without the capacity to fully analyze trends in the relationship between sexual harassment and retaliation charges, EEOC may miss opportunities to refine its work with employers to prevent and address retaliation. Experts at GAO's roundtable said nationally representative surveys would help to improve available information on workplace sexual harassment. Expert recommendations focused on three main areas: (1) survey administration and resources, including advantages and disadvantages to various federal roles; (2) methods to collect data, such as using stand-alone surveys or adding questions to existing surveys; and (3) content of data to be collected, including employee and employer characteristics and specific costs. While many workers in the United States experience workplace sexual harassment—resulting in substantial costs to them and their employers—the extent of sexual harassment and the magnitude of its effects are not fully understood. GAO was asked to examine the extent to which reliable information is available on workplace sexual harassment's prevalence and costs. This report examines (1) what is known about the prevalence and costs of U.S. workplace sexual harassment, including the federal workforce, (2) the extent to which EEOC collects sexual harassment data, and (3) data collection approaches experts recommend to improve available information. To address these objectives, GAO analyzed EEOC data and survey data from other federal agencies, interviewed officials and reviewed documentation from multiple federal agencies, and interviewed experts on sexual harassment. GAO also convened a 2-day roundtable of experts, with assistance from the National Academies of Sciences, Engineering, and Medicine, and conducted a literature review. GAO recommends that EEOC assess the feasibility of systematically analyzing its data on retaliation charges and the associated protected activities, including those related to sexual harassment. EEOC did not state whether or not it concurred with GAO's recommendation. GAO continues to believe this recommendation is appropriate, as discussed in the report. For more information, contact Cindy S. Brown Barnes at (202) 512-7215 or brownbarnesc@gao.gov.
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