>> about the fact -- alleging that the government was imposing cost cuts on linguists? >> certainly not to the media. i do believe that individuals that were employed by gls talked to military personnel to try to explain the situation that gls was faced with. we were in a position where we had to go from a proposal of a

billion dollars as the doctor testified to 765 -- i believe that was the correct number, and, frankly, the only place to cut that level of cost was in linguist compensation. there was prior testimony of a media campaign. that was not the case at all. >> so nobody in your company talked to the media about the possibility that linguists' salaries were going to be cut? >> the possibility of linguist salaries going to be cut, yes. the fact that it was due to pressure from inscom. as was offered this morning, we were faced with a newly competitive environment.

those costs were because when we first took over the contracts from l-3, we took -- we adopted the compensation levels that linguists were being paid. we did not want the linguists to leave the contract. we did not want it to affect the contract or the war fighter. when we got to negotiations in 2007, we were provided the target numbers by inscom and the only way to get these numbers was by linguist compensation reductions. >> did you participate in the decision to issue the formal communications on gls letterhead to the military in the theater? >> yes, ma'am. >> okay. can we have copies? >> absolutely. >> would you deliver copies of any document that relates to gls' statement that it was pressure from inscom. >> i think you'll find that those letters don't talk about pressure from inscom, but, yes, ma'am, we'll be happy to provide them. >> let me see those. >> may i offer, there were widespread communications.

we were communicating with all tens of thousands of linguists at the time. we communicated with the kuehn indicator and inscom and the military on the ground so they were aware of what we were doing. it was full and open disclosure at the time. >> you never thought about taking the money out of the potential $550 million of overhead to your subcontractors? >> i don't know that would have been allowable, ma'am. >> okay. my sense of this contract, by the way, is that, in essence, gls is basically leasing the linguists from these subcontractors. you're doing all of the work in identifying them, training them, management. you said support but essentially that you're doing all of that work. >> yes, ma'am. >> and these contractors are essentially paying them. and the essence it seems to me, if you really cut through all of this, is that you needed a lot of linguists. they had the linguists and you needed to lease them to be able

to perform under your contract. are they gls employees or are they subcontractor employees? >> other than the 700-plus linguists that are working for l-3 or our other subcontractors, they would be gls employees. approximately 60% of the linguists that we provide are provided for our subcontractors and they are employees of those subcontractors. >> i thought you just said that they were employees of gls but for l-3's linguists. did i miss something? >> i'm sure i misspoke, ma'am. 60% of the linguists we provide are provided through the subcontractors and they are employees of those subcontractors. the other 40 are gls employees. >> okay. my time's up. oh, no, it's not. i have 20 seconds. i want to ask l-3 and northrup, how many direct employees of your company perform functions under the gls contract? how many employees do you have for l-3?

not the linguists but the -- >> the administrative functions. >> i don't know the current count right now. >> well, give me a ballpark. >> i'd rather not. i really don't know the actual count. i can find out. >> it must be -- what are we talking about, 10? are we talking about 100? >> it's much more complicated than that. plus, our finance department is still dealing with the closeouts of the years for the other contracts. there's two contracts in play for l-3. that's why the numbers is not something that i have on the top of my head. it's a separate division from where i'm located at. i know we've contracted substantially. i just don't know what the number is. >> i'm not talking about the linguists. >> as in the opposite of expanded. >> okay. all right. and how about you, mr. schmitt? >> we have approximately four to six personnel in addition to the linguists so our total support staff ranges between four and six on a monthly basis depending

on the amount of work. >> so the amount of money you've been paid so far, i think, is $2.8 million up through july '09. so that would be $2.8 million for four to six people then; is that right? is that accurate math? >> ma'am, i guess, i'm a little confused where you would be getting the exact -- >> well, it's the amount of money that is the overhead -- it's not on that chart but dcaa showed us. of how much you've been paid for these functions under the gls function so it's $2.8 million. i'm just asking how many people you employ for that amount of money and you just said that was four to six people. >> yes the direct range of contract range four to six personnel. in addition, we have our indirect personnel which i described as our human resources

legal and other support staffs that are not -- >> and you're going to apply that -- give us that statement -- figure for the record? >> commissioner zakheim? >> you have a distinguished career as a lawyer and you mentioned another division. do you have any operational experience in this area? what we're talking about now? have you been to iraq? >> no i haven't. >> you have not been. have you been in a line of responsibility like these two other gentleman? >> i have not had general manager or profit and loss responsibility. >> okay. so you haven't been in a line of responsibility. i'm a little puzzled why are you here? >> i'm here because i get very involved at the business level in major matters and i was very -- >> but you don't make business decisions, do you? >> the way our organization works, i report directly to our chief of -- >> i understand that.

>> and i am involved in the business -- >> general counsels are but you don't make them, do you? >> no, sir >> question for you -- >> mr. zakheim, who do you report to is in front>> i report to the chief of the staff of the l-3 services group as well as the president -- >> and by name that is? >> retired major general jerry putnam is our chief of chaff and our president and steve post, who is the general counsel of l-3 communications corporation. >> okay. mr. houck, i want to read something to you and i just want a categorical statement one way or the other. this is page 6 of the testimony of dr. isgrigg. during the time frame of the contracting officer equate side visit gls management embarked on a campaign whereby linguist salary cuts were played on inscom having reduced the value of the gls contract. this was absolutely not true. it appears that gls used this

tactic to reduce linguist salaries, et cetera. is that statement true or untrue what i just read to you. it's a categorical statement that gls said something that wasn't true. categorize this statement for me. do you believe it's true or not true. >> i apologize, sir. could you read the read the statement again. >> during the time frame of the kuwait side visit, gls management embarked on a media complain, referring to what you talked about, whereby linguist salary cuts, end quote, were blamed on inscom's having reduced the value of the gls contract. this was absolutely not true. characterize the statement for me, please. i believe that the statement that gls undertook a media complain blaming the effort on inscom is not true. >> this is not a true statement. >> i believe yes.

>> you have a statement on page 1 you have 2800 linguists who were born in the middle east or north africa, north african region, it's the actual quote, and presumably you test these folks for arabic, is that correct? >> yes, sir will >> north african arabic is different than iraqi arabic. >> we subcontract to a firm that is alta that is an -- >> spell that for me. i believe it's a-l-t-a. we use those tests every day. >> okay. does the government have any oversight in your sense of these tests or you simply give the results to the government. do they see the test -- the examinations themselves? >> not to my knowledge, although, at anticipate time they would request we would certainly send in the results. we have all of our tests

documented. they are open to audit. >> one last question, mr. schmitt. i think it was you who said you work with dcaa, you work with dcma, you work with the army. do you get the sense -- in fact, i'd like to ask all three of you. do you get a sense that government speaks with three voices. >> i guess from our limited view of the contract i would have to say yes. >> thank you. mr. miller? >> relative to this contract i don't see anything but a single voice. >> with the exception of dcma. we have received very little input, oversight to my knowledge from dcma. they contacted us for the first time just last week. >> really? thank you. that's fascinating. thank you all. i'll yield my last 30 seconds. >> that's good. commissioner tiefer? >> mr. houck? >> yes, sir.

>> on the issue of you having had no choice left to you by inscom but to cut linguist salaries, would you undertake to give our staff -- would you have some high level people who know the stuff in your place give our staff a briefing with actual records and actual figures as opposed to the alternative of simply reducing the ridiculously set-up subcontracting structure which your contracting officer could have done for you on a partial termination for convenience? >> we would welcome the opportunity to brief your staff. there's a significant amount of detail. >> we'll set it up. you provided us with a grid and i believe it. as to which subcontractors did which functions. and that i'm just -- i believe it but i just want to make sure. l-3 did not do language testing. l-3 did not do functional training linguist services

operating in a war zone and l-3 did not do in-country management and leadership and information. >> that is correct, sir. we -- gls performs those functions currently. >> l-3 is not so modest about the services they provide. was it the case -- now, you know the forbes article that i've been mentioning. >> only from your testimony. >> you're kidding me. you're kidding me. when forbes writes an article about your parent company -- >> i'm not aware of it. >> you don't bother to read it? that's an insult to the media. you're not being read over there. you've got to work harder. so you don't know whether it's true as forbes said mccowen, the venture capitalist who came in this thing is chamber of the board and owns a quarter of dyncorp. >> yes, i do and that is the

case. >> okay. and this linguist contract helped to boost dyncorp's revenue by 45%. >> i believe that's true, yes, sir. >> okay. well, you don't have to agree with this characterization but i'm going to say this contract and the taxpayer became a cash cow -- sort of a great big juicy steak the two companies were cutting thick slabs out of this cash cow. poor taxpayer. let's get to -- let's get to l-3. and i'm far from defending my profession, i totally agree with mr. zakheim that lawyers are a poor substitute as witnesses, myself included, a poor substitute to the hands-on people making the management. yesterday dyncorp sent us is real executive, not counsel. but we'll see what we can do.

you mentioned two protests that were good and successful in your opening statement. mr. miller, does the figure 17 protests accord with the number of protests you filed over the four years it took for this contract to be awarded? >> 17? >> 17. >> no, it does not. >> give me your number. >> three. four if you include an agency action during the course of the gao protests relative to the -- >> i'm not talking about the reconsideration, no. >> there are other protests that took place that l-3 was not a part of relative to the linguist contract going back to 2004. that is perhaps where your number comes from. >> yes. but the 2004 contract -- >> well, we were not part of the protest, sir. >> okay. >> in fact, in 2004, we didn't have the contract, sir. >> okay. so it was just one or two

protests. it was part of the consideration that made them make you a subcontractor was the resolution of the protest, wasn't it? >> i am absolutely positive of that, sir. >> okay, just one or two, not more than that, huh? >> three, just three. two successful and one unresolved because it was dismissed. >> they're easily framed. >> unresolvable but withdrawn. >> withdrawn. >> because of the negotiated subcontracting agreement? >> that is correct. >> you bought titan? >> that is correct. >> and so -- and it was titan that had a linguist who came under investigation at abu ghraib because of the scandal there? >> that took place, yes, sir. >> okay. what about -- so we just heard you agree with what mr. houck said. you don't do those categories. i could read them back to you.

you don't do language testing or functional training and you don't do in-country management? >> that is correct, sir. >> i would characterize you as a do-little subcontractor for the amount of money you get. thank you. >> thank you, commissioner tiefer. i might note that -- again, i'll make the note that all of you get an opportunity to lay a capstone on anything you might choose. mr. commissioner -- >> mr. thibault, i can wait for a minute if he wants to respond. i can wait. >> would you like to respond to that now or later. >> no, sir, there's no need to. >> are you going to respond at all? >> i guess not, what, to the allegation he just made. >> i don't think it's productive for me to respond to that allegation. i've already made my statement. it's on the record as well as the written testimony. >> well, surely if a commissioner asks you a question you ought to answer it. >> sir, it wasn't a question.

>> put a question mark after it, charlie. you did in your statement describe the functions. i described the ones you don't know. what do you think my characterization that you are a do-little contract? >> i respectfully disagree, sir. commissioner henke? >> following on that fruitful dialog, i'd like to understand some of the numbers that have been tossed around. we have a chart here that says, l-3 you employ exclusive u.s. hires, right? >> that is my understanding, yes, sir. >> okay. so you employ u.s. hires and you have 733 linguists according to this chart dated whenever and northup, your business practice is you employ local nationals, right? >> yes, sir.

>> and so you have about 2,000 local nationals, iraqis -- >> 1500, sir. >> 1500? >> yes, sir. >> obviously, the u.s. hires are more expensive than local nationals; is that correct? >> yes, sir. >> that's the general -- >> uh-huh. >> just generally, what is the business reason for dividing it up between i'll do local nationals and i'll do u.s. hires? mr. miller? >> that's what we negotiated and agreed to with gls. >> why? >> that's one of the things that was offered in the negotiations. perhaps gls can specify why it wasn't -- at the time we didn't restrict it to u.s. hired but that was the anticipation it would be u.s. hire. >> is the arrangement with the prime to have 22.5% of the

work -- is it 22.5% of the linguists of the employees? >> it's 22.5% of the value of the contract basically. >> it's more related to the dollars? >> yes, sir. >> so if -- your subcontract relationship for a lot more people is 5% of the total contract value. >> actually, sir, to date we're running about 2% of the contract value to date. >> 2% of the contract value? >> yes. >> okay. mr. miller, the attachment from miss stephenson's testimony, three large businesses -- it's page 7. i'm sure you have it. i suppose, your company go there. >> that's right. it's the one attached to the billion dollars attached to it. >> billion 45. and that's a cost plus award fee

contract. >> that is correct, sir. >> okay. can you tell me roughly and in detail for the record, of that billion 45, going to 733 linguists plus your administrative staff, which is on the order of -- you said 100 or so? can you tell me how much of that billion 45 winds up in a paycheck? >> if you -- we have a ceiling on our indirect costs that we bill to gls. and if we exceed those, we don't bill them. our ceiling is 9.5%. so i need a calculator to figure that out. i'm a lawyer. >> your total indirects is 9.5. >> uh-huh. and what is your fee? >> it is our equal share or our proportionate share of our award fee that gls receives.

so we don't have a separate award fee so to speak. we participate with gls and i don't believe they put fee on our fee. i don't believe that happens. >> but what is the fee amount? >> there is 1.5% of the estimate -- and please correct me if i get this wrong. but as i recall 1.5% of the cost proposal at the start of a contract period is in the nature of a fixed fee and then, i believe, there's a possibility for an award of up to another 6%. >> that's correct. >> for a total of 7.5 if you have a 100% fee. >> so your maximum award fee on top of your 9.5% indirect is -- could be up to 7.5%? >> i wouldn't say it's on top of the 9.5%. i mean, it's on top of the total -- >> salary based.

>> yeah on the total costs, yeah. >> but it's 9.5% -- 7.5. >> 7.5. so then you pass to mr. houck -- what's your indirect rate? >> sir, i'm not -- i don't know my exact indirect rate. >> you can ask your cfo behind you. sir, about 15.6% in indirects plus the 7.5% potential base plus award fee. >> okay. so if i'm -- >> i'm sorry, if i may also correct, mr. miller. we do place their fee on my fee. it is fee on fee, yes, sir. >> it's all wrapped in. if i tried to explain this to someone who's not an expert on contracting, i'm not an expert on contracting, i would think of it as this.

your payroll is $100 and you employ u.s. hires exclusively in the 733. the payroll was $700, you'd add to that, mr. miller, 9.5% up to 7.5% as an award fee, hand that number to mr. houck who takes the new number, adds his indirect of 15.6% and adds possibly a 7.5% fee which includes the fee on the fee, right. >> the concept is correct. the indirect including fee is 15.6. >> say that again. >> the total indirect including fee is 15.6%. >> including the fee? >> yes, sir. but you have the concept correct, yes, sir. >> okay. i'm out of time. thanks. >> thank you, commissioner henke. commissioner ervin?

>> thank you. i was going to begin my round of questioning with you, mr. houck to give you an opportunity to respond to the question i was engaging in on the earlier panel whether gls would have contracted with l-3 but for the bid protest. i will give you an opportunity to do that. but before doing that, i was really riveted by your testimony, mr. miller, because to me, you really made an eloquent case for why gls had no choice, really, essentially, but to subcontract with l-3 in an eloquent case for why, it seems to me l-3 should have been awarded this contract in the first place. and i understand why gls confirmed the bid protests. you said gls had to set up a $600 million business here from scratch. you, l-3, were the incumbent here in iraq. you had this extensive experience already in the balkans and afghanistan. you had $180 million lower price to offer. that really raises the question of why you got the contract in the first place. that's not the question for the

panel. it's an inscom. anyway, it's very interesting and it sets the stage for this. now we are where we are at this point. so the question now is for l-3 and for northrup grumman what additional value do you provide? and we talked a little bit about this in the rounds of questions we've had. but i want to delve into it more. again, to go back to the chart which we keep talking about on page 6 of your testimony, mr. houck. you know, as i begun to point out already and others have, looking now at l-3, you provide corporate training, personnel security administration, human resources administration, casualty assistance, financial administration and that's defined, direct deposit. all of those functions that i've just read are also functions that gls provides. the only function that you provide that is unique on this chart that gls doesn't is advisory in management support to gls. what does that mean in l-3's case? >> i'm not sure what gls was

thinking of in choosing those words so it is speculation on my part, but i suspect what it reflects is the experience that we brought to the program, to the tims program from the prior contract. the expertise that our people have. the support that we give them as we move forward and as they face various challenges in performance of the contract. that's my guess, sir. >> okay, of course, i'm going to ask mr. houck that question. but before i do that, presumably, i just want your answer to this, mr. miller. at least in theory, gls could provide the corporate training and all these other functions that you provide, right? in theory. so the only thing is this advisory management support. mr. houck is mr. miller's understanding of what you, gls, means by the advisory and management support that l-3 provides your understanding as well. >> yes, sir, it is. we turn to l-3 as well as

northrup grumman on a regular basis to seek joint solutions to problems, to get lessons learned from the team who performed this contract for many years. they're very valuable to us as a team. >> mr. schmitt, i want you to get into this. again, just reading down the list of what northrup grumman does, these are functions with the exception of advisory management support that gls provides. so what unique advisory management support does northrup grumman provide that gls can't get on its own? >> sir, we have to my knowledge provided some support to gls on certain topics. i could get back with you on the record on specifically what those were but they did fall in the area of some of the processing of time card improvements as well as some of the activity that was going on with some of the linguists activity and some of the personnel issues that they were having with the linguists, but i

would like to probably get back with you from my team for the record on the detail. >> all right. i'd like for you to do that on the record and you likewise, mr. miller and it seems for the commission to evaluate whether this institutional wording is worth it financially and whatever background you can give us, mr. schmitt, is worth it to the taxpayer. and just a couple of other quick questions. mr. houck, what does mcneal technologies add to this joint venture to the gls joint venture. what do they do? >> mcneal provides oversight via the board of managers, actually the group that the report to. mcneal -- in addition to the board -- i'm sorry, the board has appointed an executive committee comprised of the ceo of dyncorp and the ceo of mcneal. i meet with that group weekly. communicate with them daily for the purposes of contract oversight. additionally, mcneal has a

contract to provide management and recruiting support to gls. that is a contract that does not carry fee. >> if i might just have one more minute to just ask, you know, the question to begin with. i would for the record, mr. houck, would like to you to answer the question, whether but for the bid protest that l-3 went through three times, the subcontract l-3 would have been awarded? >> well, i believe our team is stronger with l-3's presence. i believe that we would not have made the decision to bring l-3 on the team if not for the secession of the protest activities. >> thank you. >> well, based on what you just said just now, how much marginal value really is there to these advisory services if you would have been just as comfortable without l-3? >> i can't give you a quantitative figure. i can only tell you that there is significant value to the team based on l-3's past experience

and expertise. >> there wasn't value enough to make you go with l-3 in the first place? >> that is correct. >> thank you. >> northrup grumman, corporate revenue, not -- this is an accounting question. everyone just issued their '08 financial statements. can you give me a ballpark on total sales on northrup grumman? i'm looking at you -- it was a trick question. i'm going to ask l-3 in a second so i had you pause. i wasn't really expecting you to answer for northrup grumman. i apologize. mr. shasubmit? schmitt. >> approximately $35 billion, sir. >> $35 billion and this is the second half of the trick question but i'm looking at you now. about how much of that is u.s. government of all variety and forms? like 70%, 80%? 90%? ballpark? >> i would say about 90%, sir.

>> all right. i can work with that. l-3, corporate sales. >> somewhere between 14 and $15 billion annually. >> i'll round it up $15 billion. that's a better number. give you give me that percentage? >> i think it's a higher percentage of northup but i don't know it off the top of my head. i think it's in the 80 to 90 range, probably, but that may be high. >> okay. so i'll use 80%. i'll use the lowest figure. okay. i'm going to come back to that. mr. houck, you have about 40% of the heads that are linguists? >> correct. >> and about 60% are spread through to subcontractors. you have a payroll system and you process checks and you do the like. am i accurately reflecting this that a company that has those systems in place, that either print checks or result in the money or whatever you have to hand out, whether it's 3,000 people or 9,000 people it's a process that you have to follow and that you could do that function? >> yes, sir. >> 'cause if you couldn't, i'd

worry about the 3,000? >> correct. >> and i would absolutely expect that. so you can do it. i'll build upon mr. ervin's and my question is for mr. schmitt and mr. miller, and again, i apologize, mr. miller, for camouflaging you. but my question really comes down to -- we got a $35 billion company plus 90%. we've got a $15 billion company 80%. an top ten established government supplier contractor. it's a big deal. now, miss stephenson laid out this $556 million of premium which we paid 100 and we got 456 and if i'm right we got 450 but i'll dueling pins with her later. my question is pretty straightforward as a contractor and maybe as a taxpayer, you know, why wouldn't you recommend as a contentious northrup grumman and later l-3, that if

inscom, dcaa, gls got together and confirmed all this, why wouldn't you recommend and aside due to these substantial savings that would accrue get out of the business as far as this very small to your corporate health, very profitable. i'm not arguing that point. it should be. why wouldn't you just step aside as a defense contractor that's trying to support where inscom got up and said we are really looking at alternatives? that seems like the obvious thrust of where we're coming from. and i'll start with you, mr. schmitt. why wouldn't northrup grumman step aside, if asked? >> what i think, sir, what i described in my opening statement. we have a subcontract with gls. >> right. we know. the question really is though, as a contentious $35 billion primary government contractor, why couldn't you sit there and say, wow, you know, bringing this into light, bringing this

into focus -- i don't believe in this -- you know, they can do it. that's really -- i come from a viewpoint that we're talking about -- whether we're talking about permitting of indirect kos or unnecessary costs, we have this real opportunity $465 million we're staring down, why shouldn't you? >> well, sir all i can say we do have a legal obligation to gls -- >> under the current contract. because you signed a contract you're going to deliver the contract unless the contract is changed or unless rules have changed. >> and if it is deemed, sir, they do not need our services anymore. >> it will be affected contractually. >> yes, sir. >> and that a good answer. that's a fair answer. mr. miller? >> i have two points to the answer, sir. the first deals with fundamentals of contracts. >> that's basically the same answer of mr. schmitt. >> it's a little bit involved and that's for professor tiefer.

but go ahead. consideration meaning? >> value. >> experience. >> no in the transition period, we literally turned over our company in a matter of speaking, key employees and numerous key employees spread out across the country to gls facilities to oversee participate, support the transition and we participated in that approach until early this year when they changed that approach. >> you brought value to the transition and as a contractor, quite frankly, call it like it is, regardless whether you're a subcontractor that lost the award, you were paid to -- >> we entered into a contract which -- >> you were paid to do this transition? >> sir, we were indeed. and the deal that we entered into, the agreement that we entered into them with gls was that we would be in this position as a subcontractor for five years.

in other words, we performed a large part -- >> okay. i hear that. we'll take the second point. but that deal is costing you and me, the taxpayer, a whole lot of money. sir, what's your second point -- >> sir, if i could just respond to that real quickly. i think there's considerable value that anything that the government and the taxpayer is paying, they are receiving value for. there is a serious value in having a second source. there is a serious value in having the ability to call upon l-3 and, in fact, l-3 being there and able to help in the performance of this contract. >> okay. again, your customer, your previous customer, now your customer is mr. houck. but your previous customer said that he agreed fully and that's why this organization that was up in afghanistan that you reference, rem or whatever you called, he used them for competition. so my time is way up.

but you'll get a wrap-up session. but to me that's the part that rivets me is why wouldn't $50 billion companies total do this when there's a need -- and to transition is going in iraq all over. and organizations are -- you know, kbr was in here. kbr is stepping aside from a lot of work, you know, and that's painful. so we're in the point now where we can pursue and we'll let you go first because rather than go around in expend si of trying to get out of here and our commitment at 1:00 everyone in the audience yes at 1:00 we're going to go around and change the process a little bit. commissioner zakheim? >> well, thank you. i want to pursue this a little more because if i understood you correctly you were being paid to transition which is normally the case so the fact that you did what you were paid for doesn't strike me as a big

deal. tell me why it was such a big deal to do what you were paid for. >> he with went beyond doing what we paid for which is to say we went beyond simply working the transition of a set of linguists from l-3 to gls, which is what normal transition is. by becoming a part of the gls team, we became a part of their management. we graphed on to them our experience, our lessons learned, you know, our abilities and then we didn't stop at that. we literally handed over proprietary intellectual property because that was the best thing for the contractor. you're looking for an altruistic sort of action on the part of the american corporation. there it is right there because we had a greater concern about the performance of this contract and we wanted it to go very well. well, okay since you talked about altruism -- it wasn't me it was you. on page 6 of the inscom testimony, it talks about 5 million in spending that was

overspent because of private housing for vendor management and administrative personnel, private three bedroom partnerships for private employees an isolated instance of a contractor with deployed dependents at government expense, automobile densities of a 1 to 1 ratio for management personnel, lost productivity due to less than expendient transition into iraq. is that where your experience got us? is that what you were adding value to? you didn't turn around to this company which was wet behind the ears unlike you guys and say you can't be doing this? i mean, what exactly did you transfer? >> sir, the details are set out in my written testimony if you want me to go through them. i will say that this is a huge contract. it's extraordinarily complicated. and it's in the most difficult environment that is possible to imagine. so under those circumstances, there will be problems that you run into. that is the nature of performing a contract, especially, one like this.

>> well, i guess, all i'm saying is -- i heard from mr. houck that he would have been perfectly happy not to have you guys on the team. he's got you but, you know, he could have lived without you. i see here there's all kinds of stuff that went on and dcaa has more that it's talking about now, you know, billings -- interim billings that are a problem for dcaa so they're not even paying you guys out right now. and you keep talking to me about this added value. and i just have a lot of trouble -- maybe i'm blind. but i have a lot of trouble seeing it, and your testimony is written in such a way that it doesn't tell me very much more either. so perhaps you can give us for the record -- and i would like an itemized list of what it is you have been adding not just during the transition by the way but the transition is sort of over. if you can give me a half a dozen things, i would appreciate it. >> commissioner ervin and then we'll sail around -- >> i'll be brief and this

question may have been answered in an earlier round and i apologize and i was distracted when a colloquy began on this issue. i want to understand again what the rationale is for l-3's contracting with u.s. nationals for the linguistic nationals and i understand u.s. personnel are more expensive and i also understand foreign nationals there's more of them obviously and i think they would be better prepared because they live on the ground there and, therefore, are in daily -- they understand the daily nuances of the language. but i just want to understand the rationale for u.s. and foreign nationals. >> sir, i could take that question. when we were negotiating with the different subcontractors we wanted -- granted, it's a complicated structure but in an effort to try to reduce some of that complexity, we wanted to give to the different subcontractors different populations of linguists and we

gave them only local nationalses. with our small businesses we gave them u.s. hires exclusively because of the difficulties overseeing the h.r. aspects which is what these companies do of the local nationals. likewise, with l-3, it was to keep the complexities out of the oversight processes from a gls to an l-3 -- >> may i ask, did have it anything to do with the fact that it hit a 22% bogey for a contract value. >> absolutely absolutely. >> and the way to do that was to hire more expensive u.s. hires. >> precisely. >> thank you. >> yes, sir. >> if there's more to it. >> you hit on it earlier. the local nationals are paid a significantly less than our u.s. hires and, therefore, to get to that level of work-share you need to give them -- >> you had to get to 22.5? >> yes, sir. >> are you good? >> i am. >> mr. miller, you previously said, when you were talking about the fees, said i don't think gls puts a fee on our fee.

>> i was mistaken. >> that's not something you would put a fee on a fee? >> no i've seen that happening in government contracting. i've been in government contracting for 30 years. so that's not a surprise. that wasn't my understanding of the structure. when we went through our negotiations to create the subcontract, i did not understand the structure of their relationship with the government in that regard. >> i think that's something that the commission needs to look at is the utility or advantage or allowibility of a fee on a fee. i want to talk to mr. houck. it's illegal now? >> the law is pretty clear about fee on fee from here on out. >> well, excellent. >> mr. houck, dcaa talked about subcontractors that gls was billing the government for subcontractors who were double-billing -- billing beyond

what was allowed under the contract and that you just passed that on apparently to the government. now your billing system is deemed inadequate and you're not getting paid. your bills are is really worse than a withhold. it's not just a percentage of what's being of your money that's being withheld. you aren't being able to be billed. how did youuq pass on a double-billing of your subcontractors to the government? isn't that your job to oversee that? >> yes, ma'am, it is. if i could provide some background. halfway through our period of performance thus far, as you know we undertook some cost cutting efforts. one of those efforts was to go back to our subcontractors and negotiate that indirect ceiling rates down to about 50%. the disconnect occurred and it is oureeñ responsibility to che these things is between our contracting shop who negotiated those new subcontract agreements and the financial shop that

actually reviews the invoices. one hand wasn't talking to the other. the invoice evaluators weren't negotiated that the contracts had negotiated. in working with dcaa we have, i believe, put corrective action in place. in fact, just last night that billing was put back into place. >> thank you. >> thank you. we're going to skip over -- well, actually grant is here. commissioner green, i apologize. >> two or three very quick questions, yes or no answers. mr. schmitt, you said you had about four to six people that worked the gls headquarters or whatever. am i correct? >> yes. >> mr. miller, you didn't know. mr. houck do you know how many l-3 has supporting you. >> no, sir i think what mr. miller was referring to is the fact that those employees are part of a management pool.

we don't have insight into the numbers on the employees. >> could one of you get us that number? number two, could one of you and probably l-3 is the best one to do that, mr. miller. could you characterize and compare, contrast the time of transition between iraq and afghanistan, the difference in the length of time it took to transition those contracts since you are involved in both of them. >> yes, sir. i do not recall exactly how long the transition was in afghanistan. i do know -- >> three weeks --. >> it was shorter than iraq for sure because it was a much smaller contract at that time. it's still a much smaller contract, i believe. and we worked very closely to transition over the employees. >> well, you just kind of hung around in iraq for a much longer period of time? you got paid a lot of money?

>> sir, well, my written testimony and -- >> okay. one last point and i don't want to beat a dead horse, mr. houck. but you just made a comment about the difficulty of a small company, a subcontractor managing the h.r. stuff. i think was your term. i just want to make sure that we don't have additional subcontractors or if we do, they're identified. because i -- you know, having worked with a lot of small businesses, payroll is complicated. for example, many of these other administrative h.r. functions are complicated, and many small businesses and maybe yours are all exceptions -- many small businesses do not have the technical expertise to do those mechanical things. >> if one of our small

businesses or any of our companies, subcontractors, are using a third tier to process payroll or anything else, i'm not aware. >> but i'll get that for us. >> yes. >> commissioner henke, we will leapfrog. >> when l-3 had the previous contract from '99 to '04 and then extended into '08, were you a subcontractor? was northrup grumman a subcontractor? >> yes, sir, we were. >> okay. mr. miller, when l-3 had the predecessor contract, did you have in that contract a small business subcontracting. >> yes, sir. >> do you remember what they were, 35%, 31%? >> i don't recall what had been set up at the start of the contract. if i remember correctly from the proposal period for the tims program, at that time we were probably running close to 44% small business. that's what comes to mind.

>> okay. 44% smalls. did you have -- i'm told right now there are 9400 linguists roughly. was that about what you had at the end of the contract, '07, '08. >> we were over 8,000. >> okay. and did you employ both local and nationals and u.s. hires? you must have had to, i assume. >> yes, sir, we had both. >> you did. when you had the earlier contractor contract, did you have large subcontract arrangements with large businesses? for defined percentages of the total contract value? >> sir, i don't think so because of the way this contract evolved over time. in other words, lots of times, the large percentages with different -- or the percentages that are fixed and set up are a result of teaming agreements leading into competitive solicitation. as you'll recall, this began life way back when as a 12-linguist contract so there wasn't a great deal of things

for btg back in 1999 to agreed to. so it went forward. we, l-3, and titan before it, managed the contract differently than gls does. we did not have sole centralized recruiting. we used recruiting through our subcontractors. all of our subcontractors. >> right, but importantly you didn't find yourself in a business relationship where you had given to large businesses a large amount of the work? >> no, sir. >> those were all l-3 employees then? >> we had relationships with large businesses. in fact, a number of our -- many of our small businesses over the years grew into large businesses. now, if you're talking about a top six, no. >> okay. thank you. john isgrigg, i think you're dr. john. can you take a seat. commissioner tiefer, and you're already under oath, commissioner

tiefer had a question that he wanted to focus, i think, to you and then bounce through however you want to do it. >> doctor, it's great. you saw me having some trouble. technically there were only three protests made by l-3 of the gls contract. yet, one way to explain what we're seeing is that enormous pressure was brought on gls to cut a very sweet deal for l-3. were there more -- not more technically than three but were there more protests involved? i had the number of 17 buzzing around in my head. >> yes, sir. the contract at l-3 had as a linguist provider was broken into four separate contract efforts. due to a seka protest which is protest number one a bundling protest that was upheld. each of the other three small business protests suffered at

least -- i believe it was four protests each before the full performance was finally accomplished on those. and so while we were fighting one protest, we had multiple protests at the same time. >> i can see you would be busy. that 1.5 staff must have been putting the hours in. as far as the pressure brought in on gls, was l-3 on the team of these small contractor protests? you know, in a general way it's often the case. you use -- a pawn is not a fair statement. but there's a big character that's in the weeds and there's a little character that makes the protest? >> i can't speak to the exact nature of their relationship, but as the incumbent, l-3 was a business partner with many --

>> did they benefit from the endless stalling by these 17 protests. doesn't the incumbent say in position and isn't the money from the contractor roll in and we're talking about a period from 2004 to 2008? >> yes, sir. >> thank you, dr. isgrigg. mr. miller, is there something that you would like to say that say he got it wrong? >> well, sir, the only thing that i would like to observe is those were not our protests. we may have been the third-party beneficiary, if you will. my understanding was most of them were protests of a small business-size status for the different pieces that have been broken out. i'd like to have your luck, let's put it that way. can i ask further --

commissioner zakheim discussed with you general counsel and you were in iraq, the private equity capitalist who's the chairman of the board back in dyncorp, does he personally go to iraq to supervise. does he bring his private equity expertise to the field on these contracts? >> are you asking me, sir? >> i can answer that. actually, i cannot, sir, because i'm not sure if they've traveled to iraq or not. >> can you give me answer executive with these contracts. which says he's thought working particularly a lot on these contracts. >> no, sir.

>> well, i just don't see what l-3 was getting except huge pressure was brought on gls. gls had to yield. and as a result, the pay of the translators was cut and our troops -- >> was shea attica -- they mentioned in a couple of testimonies were they a subcontractor, mr. miller, to l-3 in a prior contract? >> i don't recall the name. that doesn't mean they weren't at some point. i just don't recall it. >> they weren't -- to my knowledge they were not? >> no, i do not. >> for some reason $600 million sticks in my mind approximately with them as the third or as zasecond largest behind l-3 subcontractors. >> yes, sir, they are

subcontracted 15% of the share. >> they weren't on the l-3 and my question comes in very, very large subcontractor, were they -- what -- you know, we heard organizations that have been in the linguistics field in order to raise exceptions and concerns about your contract, but no question, they've supported the field and their knowledgeable. had shea attica had any experience to them when you reviewed them -- you know, they're an alaska native company based somewhere in alaska. did they bring arabic and kurdish as part of their proposal. >> yes, sir, they do have a portfolio of linguist support contracts. >> that met -- in other words, for the record, i'd ask for that. >> yes, sir. >> but is there anything in terms of -- you know, when i

look at it, am i going to see they're providing 2,000 interpreters or linguists now and they're high watermark for kurdish and arabic was 12 people or something like that? is that -- >> i don't have the specifics of the size of the contracts. >> so for the record -- >> for the record, i'll provide that. >> the chairman is about done. >> they've done contracts primarily for southcom, haven't they? >> again -- >> the contracts are in spanish and portuguese, right? >> i do not know the answer of that. >> they haven't been doing contracts in southwest asia, have they? >> i don't know the answer. >> then we're going to find it out then. all right. per our agreement, if you have any -- you know, hopefully we've done a pretty good job in letting you comment but if you have any final comments -- you know, anything you want to share and let's work our way out. mr. houck? >> only briefly. earlier this morning inscom discussed their lack of

resources, and i fully support the need for providing the adequate staff to these oversight agencies. we view our relationship with inscom as a partnership. we know that they are struggling with their portfolio of contracts and were they to have additional resources, i think that would help this whole situation immensely. other than that, i thank you for your time, sir. >> thank you. mr. miller? >> i will be happy to respond to -- what we call taskers that i received from the commission today and look forward to getting those answers to you quickly. i'd appreciate the time you're taking and look into us. i appreciate it very much. l-3 is proud of what it has done to support our troops, not only on this contract but a lot of other work. we, without any reservation, do believe we have added great value and have done good things here. and all i have to say, sir.

thank you very much. >> mr. schmitt? >> yes, sir. a couple points of clarification. northrup grumman's annual sales are $33.9 billion, just for the record and also concerning the question on our involvement with l-3, from a previous contract, that was in the calendar years 2006 and 2007. >> good. good clarification. >> and also i will take the action to get for the record the exact actsitieiv that we have done and the advisory support so that we can be clear on that. and then again thank you for the opportunity to testify here and to clarify our position as a subcontractor to gls. i think hopefully we have done a clear job of focusing on our limited scope of work for this contract. >> well, i want to thank all three of you. i think we thanked our prior group. we have a very competent staff and they consist of several great, talented -- what we refer

to as young jedi lawyers and they will work with you very directly in terms of, hey, this is what i heard as a tasker and whatever you call it, a follow-up, and we'll get a meeting of the minds and they'll bring it forward. i want to thank you all. thank the commission. thank you. we're done. oh, they tell me to say we're adjourned. we're adjourned. we're out of here. .. >> you are watching public

affairs programming on c-span2. at next, muhammad yunus talked about efforts to fight poverty with the help of small interest loans known as microfinancing. later, remarks from former house speaker newt gingrich on the budget process. live coverage begins at 9:00 eastern. >> bill clinton kicks off the 2009 blocker's convention, coverage starts tonight at 8:00 eastern on c-span. tomorrow, health care reform with howard dean, pennsylvania politics with senator arlen specter, making change happen and reshaping the supreme court. >> nobel peace prize winner muhammad yunus spoke at the national press club yesterday shortly before a white house ceremony where he was awarded the presidential medal of freedom. he talked about efforts to fight poverty and include microfinance programs in the u. s.

this is about our. >> we will go ahead and get started. i want to welcome each of you to the national press club for this morning's conference. i am the chair of the press club's newsmaker's committee, the washington correspondent for work-force management at business magazine, published by crain communications. we are pleased to welcome professor muhammad yunus. he is known as the father of microfinance. he won the 2006 nobel peace prize for his effort to alleviate global poverty through small, low interest collateral free loans directed primarily at women through the bank, which he founded in bangladesh in 1983, the grameen bank. to day prof. yunus is intended to cut another prestigious

prize, he will receive the presidential medal of freedom this afternoon at the white house. first, he is going to talk to us about the growth of grameen's u.s. organization, grameen america which was established in 2008. the battle against poverty is not limited to the developing world, and grameen america has $1.1 million in microloans in the united states to more than 450 -- 850 bar workers at orrow centers throughout the country. >> thank you very much, good morning. a very special day for me today. it is a big ceremony in the

afternoon, we are getting ready for that. is special because my daughter is here, monica, and her husband. this is their first official meeting as a married couple. they just got married on june 14th. this is very special for me. in a way, i am a very lucky person to be on the list for presidential medal of freedom. out of 16, this is by one slot, needs a lot of luck to make it happen. i am very happy and honored that the president has given me that's what. it is very special because probably the most admired person globally, he has inspired the whole world. to be on his list, i share the

admiration that he has created for himself, so that probably some of his inspiration will mature. by being on his list. this is important because all of the issues that happen in the past, about poverty, how it can overcome, it is over, finished, sometimes people think this is not achievable. i feel very strong about it, it is achievable. talk about putting poverty in the museum, saying this is over, we move on with our life, the real view of human life because poverty does not represent real human life. it is of human life, almost like animal life. there is no reason in this day and age we should be carrying on

this past legacy of this poverty. so this is one issue that i get being on the list that makes it known to many people who probably knew in depth before, they would like to know. and i talk about issues along the way, poverty is not created by poor people, poverty is created by the system that we built around us. so how to change the system? the timing is very right for this work for me because the whole world is going through the financial crisis. inside, everybody feels the system is not right, but they don't know what would be the right one. i kind of give my views of what could be the right one. this is one occasion we should be paying a lot of attention to

how to read design and improve the system so that we don't follow the same old way of making a life proceed, we create a different structure so that we don't fall in the same ditch over and over and make it worse every time. so this is a call that i gave, the deepest of the crisis but this is the greatest of opportunity. opportunity is emphasize, this is forgotten most of the time because it is so busy trying to fix things. it is not fixing to get back to the same old thing, as to be designing the system so that we go to the new beginning rather than going back to the same normalcy we get used to. we shouldn't be going back to normalcy again, the same normalcy again. bewe need a new normalcy.

we need to make available to every human being on this planet. i keep talking about a human right, it is so fundamental, plays a fundamental role in human life. it is left to the business people to decide who should get and who shouldn't get, this is in the we must adjust as a human right. that instead of having an exclusive financial institution for specific people, we should have inclusive financial system so that nobody is excluded from that system. this is a version we bring out and demonstrate coming back, like we do in bangladesh, and it

is replicated all over the world. to day, not a single country would be available where you don't have mikcrocredit program running. it is not a charity. it can be run in a way that people benefit. it is not charity money that you depend on. this is one issue to fixing the financial system. in the business world, business world is devoted to making money because that is the only kind of business in the world. the business of making money, profit maximization, the single mission of business. that is too narrow interpretation of a human being. human beings are selfish, basic elements of the human being but at the same time all human beings, every single human being

is also selfless. is built into the human being. that part has been completely ignored by the -- that is where we went wrong. we build a world where we were all running to make money because that is what we should do. that is a narrow way of building our world because we have ignored a basic part of the human being, being selfless, being able to touch other people's lives by individual actions. i am using this selfless part of the human being to build a new kind of business using that part of the human being that i call social business, business to change the world, business impact a human being's life. we have no intention of getting any money for myself. it is all for others, nothing from the. to contribute to the existing business where everything is for me, nothing for others, policy that we pursue. we can create those businesses along the way and make the world

better place for all of us. microfinance can be one of them, health care can be another and also environment can be another social business and many things, housing, communication could be done in a social business way. this is important because health care is a big issue. we are trying to address health care in a social business way, we are creating social businesses. so that nobody has to be denied this service but at the same time, hospital rounds on income, not for making money for the owners of the hospital because the owners decided nothing should come to them, it should be available to the people because the aim of the hospital is to make sure nobody suffers from our problems. this is a case of a social business. we are building anymore problems

in bangladesh and other universities in companies here, universities like every, the university of pennsylvania, johns hopkins, harvard university, the mayo clinic, trying to build pieces together, on the basis of social business. we are creating small held management centers, we are focused on keeping healthy people healthy. that is the main focus, so that awareness becomes an important element of this health business, and how to make healthy people healthy and detect an early stage any deviation from that. early detection and early treatment. since we cannot keep the doctors in the villages because doctors everywhere want to live in the metropolitan city which i don't fault them for, we have to find

a way, how to bring the health service, technology is available for us. if we can do that because of the availability of the internet and the availability of a huge platform of mobile phones, everywhere in the world today, a common thing. everybody has these in their pocket or whatever way, they have mobile phones. immobile phone is also an internet pay phone. what we are trying to do is build diagnostics, tools, so that at the village level, the tools are used, diagnostic tools are used, make it very simple and village girls are trained to use diagnostic tools and plug it into the mobile phone, transmit the images and data from the

household to the doctor to the patient wherever he lives. and communicate through mobile phones and get prescriptions. this is something we are in the process of building. this is another area that we want to build up. along the way in that application, the application began in new york city. today in new york city, in queens and expanded to manhattan, we cross the 1,000 mark, we have 1,000 borrowers in the program. we follow the same principles, women getting together, taking individual loans, being responsible individual the, take the loans for other purposes and

create their unemployment. this is an amazing thing that happens. we will open a branch in a lot and i hope to see the same kind of thing repeated. these the kind of things that tries to focus, with the intention that we can overcome these programs. employment can be overcome. as unemployment continues to increase, we can create alternative forms of employment like self employment and also creating through social businesses, the opportunity to

grow for creating social business to create employment for people. that aspect has never been -- i am trying to bring that to their attention. i will stop here. to see few more words, we have nearly eight million borrowers in bangladesh, 97% of them are women. we lend out $100 million a month and all this comes, collected for each branch coming back, the local money taken as a deposit on, and lend to local poor women and the branch makes a profit. coming back, a profitmaking company owned by the borrowers, the dividend goes back to the borrowers as a shareholder, so is a complete circle. the money given out, paid back with interest, the bank makes a profit, profit back to the borrowers. that idea can be replicated

anywhere in the world and this is being done in many countries, very happy now, we are launching in a big way in china, in mongolia and sichuan. in the interest of the chinese government they have invited us to start the program and we are happy to start the program this year. thank you very much. [applause] >> we will take questions. identify yourself and your organization when you ask a question. we would like to know who has joined us. who has the first question? >> i am from new york. what is your reaction to receiving a lot of the u.s. government? >> very lucky. very exciting moment for me. because this is completion for

the ideas that have been promoting, trying to let people pay attention to it. this brings a lot of attention to those ideas so i am very happy about it. it is important for me personally, for being recognized by such an important person in the world, most admired person right now in the world, the person who has inspired a whole generation of young people all over the world. it is an inspiration, capacity to draw people's attention, to be on his list, saying that some of this will drop on to my ideas, creating attention and inspiring young people. that is very exciting.

also very exciting for bangladesh, being recognized out of many countries in the world, someone from bangladesh to be recognized. this gives lots of happiness to the people of bangladesh, we feel very confident in the future, we can contribute to the world, we can make a goal in our life to make changes, to distinguish -- make a distinguished nation in the community of nations. >> what is your -- all biologys call over the world, what is your message? >> the message is yes, what we do with bangladesh is not just a local thing. it is -- global implication including implications in the united states, which gives

bangladeshis a lot of confidence in their life that yes, we can do things in the global stage, not just a poor nation as we are used to knowing that we are a pour nation and kind of feel neglected and ignored, we are not ignatius--ignored, we are significant nation. we have the ability not only to make an impact in our life but impact globally. this is recognition of that kind of thing. i am not being recognized for things anybody else does. in a way, very contradictory kind of situation. i stand in it, in contrast with everything that is done in the usa. business solves everything in the u.s.a. if you make money that is good for the nation and that is it. i am saying that is not it. making money is not the goal we

ought to pursue. we are not money-making machines. we are human beings, we have to solve problems and we can create another kind of business, social business is a big contradiction to the moneymaking business, where moneymaking business, everything from me, nothing for others, in social business, everything for others, nothing for me. it is a big kind of contradiction in the general thinking process in the usa. at the same time i am being recognized by the president of the united states. that gives big recognition to being different, at the same time being paid attention to. i am one who has always been saying the welfare system is the wrong system. there is welfare, it should be temporary. welfare cannot be a permanent solution to people's life. it took -- the name of welfare should be to help people get out of welfare.

i am saying that, being recognized by the president of the united states, saying things completely different. it is not something that goes along with the united states. times saying exactly the opposite. i am saying the health care system could be done in a social business way. that is not the health care system probably u.s. people have in mind. a different kind of system. the financial system, the usa is the world capital of the banking world. you are making money, so you keep on making money, in the process, the supergreed takes over and the crisis happens. i am saying no, we can build a new kind of financial system, financial system that can work just like we do, giving people who will never be able to open a bank account, forget about taking a loan, just put their money in the bank, no bank would

accept that. we are doing that. this is something that we do everything, at the same time, it draws attention because people see sense in what i do and what i say. thank you. >> in the current severe recession, many of the biggest banks, have their own survival question, hitting the likes of citibank. how has grameen bank affected by the recession or are you recessionproof? >> it didn't hit us at all for several reasons. for several reasons, i will give you the reasons icy. coming back, the banking we do in bangladesh is close to the real economy. when you get a loan of $200,

there are some chickens, the money at the cow, tied to the real economy. it is not paper based economy. you create a fantasy world and that is where you get a crisis. we belong to the fantasy world, we belong underground, the bank is grounded, very solidly underground. this is one reason. second reason is we are not exposed, you can transmit the crisis you created. wherever the branch operates, the money to come from the

branch. on the village level we are very local. it didn't work for us. that way we have concerned ourselves. we have payments, no borrowers ever said sorry, we can't pay you back. they are crisisproof of. this is how it works. >> back in the back? i will get to you in a moment.

>> dr. yunus, congratulations. the you foresee any thing in war-torn countries like afghanistan after the election? >> lots of programs in afghanistan. the organization, nationwide, micro finance has it all in all countries. we have done microfinance in other war-torn countries, those of low, when the guns were firing when the peace treaty was signed. there was no bank.

we started program completely. no government, no rules, no financial system, no banks and it worked, it worked beautifully. it is possible. the reason i say it is possible, it can be done, because life goes on, war goes on, life goes on. you need to support that life, whatever life there is so you can build the economy. the total national system, you build your local economy for yourself, do things among each other. that is important to build up that program. >> thank you. 51% of women in the program, can you explain why you have targeted women with that iq factor in your success? >> it is a key factor. we started out focusing on women in a 50/50 basis, men and women should be equal number, that

came as a reaction to the existing financial institutions of the time in bangladesh. i was very critical of that. i was saying to the anti woman organizations, banks, not even 1% of all borrowers happened to the women. i was making a big noise about it. trying to defend themselves, put the blame on the women, they don't come to as an artist showing how screwed up they are. they're always focusing on men. if a woman comes they want her husband to come with her. the don't require the white to come with the husband and husband is applying. when i begin after all this controversy at wanted to make sure i don't make the same mistake. it was a tough job because women didn't want to come in. they said we don't know anything about money. it was frustrating.

some of my colleagues suggested maybe we should move on with men. i said no. when the woman says i cannot handle money, i don't know about money, give it to my husband, this is not her voice, it is the voice of history, the history that created her. we have to peel off the fear that has been generated, the sense of incompetence, the inability to do things for herself. once you peel that off the real person will come out and that is the person we are waiting for. and we waited pretty long, we waited we 6 years to make that happen to 50/50, then we saw money bring benefit to the family. amazing difference between the same amount of money going to the family through women and men. impact to the family is way bigger when it goes through the women. we said why are we going to the men if the impact in the family is such a big difference?

so we switched our policy and said let's focus on women. that is how we did that. lots of things happened in grameen bank because of the decision we made early on. when people learn from grameen in other countries, they immediately concentrate on women. microfinance became synonymous with small loans to the poorest women that all women talk about other options because of the impact. >> in the back row? >> i am interested in knowing what inspires you or who inspires you personally to do what you do? >> the basic inspiration comes just like any other program. but the impact you make on people's life, when i am depressed or criticize, i am attacked and so on, and wonder whether i am doing the right thing, and i go and visit the

village, talk to the women, sit down with them, totally recharged. you are on the right track, no matter what the world says, ignore them. once miles of a young woman or young daughter in the family, what they have done, what is important, all it plays in their life, it gets recharge, they you can do it. that is the most inspiration you can get. the inspiration comes when i go around, many years have gone by, the young generation coming up in those families, 33 years now, down the road. you see young girls who grew up with their family, there -- their mother's work, going to school, college, university, some of them have already completed them. some are doctors. side by side, the mother who's

totally illiterate and the son who is an engineer, just like another village kid, you talk to him, i am an engineer, just graduated. suddenly remember poverty is not created by the person. her mother could have been an engineer too. but she never had the opportunity to go to school. so her work created an opportunity for her son or daughter to go to school and become a doctor or an engineer. it is not inherent deficiencies in the person. it is an involved -- the environment we create, the system we created, the difference we made among ourselves. that is the system i am trying to change, and highlight that we need to change, which creates different kind of people because the system doesn't work for some people, it remains neglected. can we blame them for being

illiterate, for being stupid, for not being able to handle their own life and so on. is not their fault. all the ingredients are inside. we never let them open up the gift and make the difference in her life, in the life of the world. >> i cover all of your events. i want to know, do you have a message to the government, the welfare of the people and another question, is the government, a special word? where is that? because you are -- eight million poor people in bangladesh out of 1 hundred forty five million

people. if the present government has any special inquiry to the time sheet in the facility. >> any assignment the government would like to give would be an honor, i would be delighted, whatever i can do. coupons save the same thing, doing the same thing. i have a bigger platform to work through. faugh i will do that as long as i can do that. i always say it should be done. poverty in bangladesh is not 90%. the latest would be 40%, 50% of the population. it is declining steadily. we are hoping to achieve the minimum -- millennium development goal by 2015, decreasing poverty by half.

we are on that track also. bangladesh has been a very well recorded country for achievement in poverty reduction but we can do much better. lots of things have to change. one financial crisis pull this back because many of the things we do in bangladesh would be affected by the global crisis. but we hope it is up by 2015 and we continue to achieve that. when you see eight million people of 1 fifty million people, there is a little correction, eight million borrowers, meaning eight million families, so you take eight million families, and the family, talking about forty million people out of 1 hundred fifty million people. when you have 40% of the population under poverty, you are not far away. the government is only one actor

in microcredit. there are many other players in microcredit. together, i think we come to 80% of the poor families covered, our goal is to make sure we get to 100% as soon as possible, three four years, we should reach out to every poor person or every poor family because the family, basically women in the family, each woman presents a family. one problem we have in bangladesh because there are so many organizations, lots of overlaps, in the same family, several organizations, if you add the borrowers, it will not represent all the families. if you take 25% of them, still will have 80% of the borrowers.

80% of the poor people in the system of microcredit, this is the most intensively done microcredit in the world. we should be proud that we have done something and it works despite the disasters, the floods. that is the most important thing. there are lots of groups, lots of things we can do better as we go along. that is what we should be concentrating on, more efficiency and building of the second-generation. that is another idea. and the one, probably, you didn't get this peace, health care. how to bring health care to the families, these families are not reached by health care, and health care is important because most of the time you make money use this money to -- traditional healers for overcoming whatever problem you have. you are wasting your money and at the same time bringing

suffering because what about traditional healers and exchange of money, this is not secure. this is getting your business worse than it was before. why can't we bring healthcare and the state of the art health care? that is what we're paying attention to today so that we can do that.

families and villages and their own personal life never seen outside the village, works in a very different country, they have a health care system providing very important service for their people and we should take pride that we can do that. we are creating those, we hope that will bring a lot of change in our health-care system and we want to use them at the village level for health benefits. >> i have a question. as the world recovers from the financial crisis, there's talk of reforming the world wide financial system. if countries can get together and do that, bankers from wall

street and the city and london are highly influential. it seems to me that if i were one of them, grameen would sound like a socialistic organization especially when you say we are not about making money, probably people on wall street in the financial sectors would blanch at that. how do you overcome that attitude? because grameen, i assume, has nowhere near the leverage of goldman sachs or citigroup in reforming the world financial system. how do you fight that attitude? >> with this metal. they didn't get the metal. we will have a bigger voice, definitely. it cannot be ignored. so that voice is not something -- these are crazy ideas.

you can't just forget that. so that should be a strong voice. let them do what they like to do, that wall street is doing their job, whatever they are thinking. i am saying those who are not wall street, like us, we should be doing our thing too. we should be waiting for them to change and change us. we should be working for us. it is a good idea, whether citibank does it or wall street, who cares? we don't care. as long as this works, you can see the crisis, all those big pillars collapse, and this system doesn't collapse. if they don't want to learn from it, that is their problem. but they have built an institution which is the

slightest deviation, it starts collapsing. there is the basic weakness in the system. this is a system that works globally. remember we don't have any collateral. all the lawyers, the state collapses. we don't have the lawyers or the collateral. the interesting part, right in new york city, big banks collapsing. we have no problem, no impact on them. this is what they have to learn for their own safety, not doing favors for anybody. this is the right one i am talking about. it has to be the right thing, that we can do, we can build a system, change their life and a just unemployment. which nobody can solve. all the we have learned in our textbooks all these years,

government has to give them a check every month, unemployment benefits, call it anything, simply giving taxpayers' money to take care of yourself. why? why can't we do the other things? we can do self-employed and? we can build a credit system. not every unemployed person is immediately going to it but some people were. in the process, they inspire other people, i can handle myself. i am an experienced person, i am a skilled person. while my taking government money? nobody feels that is a dignified way to take care of yourself. if i have an option, i can build my own business. i don't have to work for a big company like i used to do. i know how to do things. social business, we create social business to create unemployment, very simple idea.

if i could invest, it employs four people, the reason i created this business, not to make money for myself, this is a social business, i created this business to employ four people and it works, it pays for itself, it is not a burden on me, they will pay me back for the investment, at the same time we keep on running. what i have done, i found a solution for unemployment, if i create a business for four people as a social business and you create -- we will have a lot of force out of many people. somebody says i can do for me, why four? i have a beautiful idea, i can build your business. if i'm not making money at don't have to worry about it because i have my own business. all i want to do is employed 40 people, these 40 people are employed. they get a decent job, decent salary, because they designed a business in a very good way.

anybody could do that. that would be a solution to providing unemployment in your neighborhood, your city, your county, wherever you are. this is the idea of social business, a simple idea, nothing complicated. anyone willing to do that can do that. these things have to be brought in, not just wall street will decide. it is unleashing capacity, you said this is a socialistic idea, but that is about getting parts of the state. state controls the economy. we are talking about option for individuals. i do, you do, she does, that is how we do it. that is very much in the spirit of the capitalism free-market, plenty of options. to day you have no option. you have only one business, if you want that, that is socialistic, you have another

option. free-market is about creating options for people. you have two businesses, one for making money, one for changing the world. you choose which one you want to do. if i have to work for the company, if i know in my text book, there are two sides of business, i will be deciding which kind of business i should be working for? should i work for social business or for profit-making business? it is my decision. if i get the same salary both ways, why don't i work for the social business? i will do something for the people read it and just making money for the shareholders. all you do, get a good job to make big profits for the shareholders. that is no option.

>> how do you overcome the cycle that the environment, people who are in london, getting unemployment benefits in america, those unemployment benefits, are large enough that they don't have the incentive to go out and work? would you cut back on those? >> is a big challenge for us. i was invited to receive an honorary degree in glasgow. they had a big celebration, special convocation, students, faculty and so on and during the discussion, we came in and faber telling me, the city has several thousand families who are third generation unemployed. in three generations they never

saw employment. i said how do they live? they live because of their gulf. they get their check and take care of themselves. then you try to tell young people to find jobs? do something? they said we took a project to do that. help these young people find jobs, and we found decent jobs for them, they work for two weeks, 20 -- we 6 weeksix weeks enjoy sitting around. you have created another kind of human being who are not interested in work. you have done permanent damage, that is what you have done. you should be creating options for people.

let people take options. whether you want to take a loan and go for yourself. some people take the loan option, 5%, 10%, it will create a new kind of incentive, loaned people are succeeding, those people say why am i sitting here? why can't we do something like this? i can do better than him or better than her. it should be an incentive. they ask, would you come in for these people? i said if you invite us, we will do that, we will take that challenge. it is not easy. i was mentioning the women. when first we went to the women, they said not me, i don't know how to make money. i am afraid of money. give it to my husband. we didn't give up. we continued and we succeeded. 97% of our work force are women

today. they will do the same thing. they will take the money and say sorry, i can't pay you back. gradually some of them will start doing that. if one succeeds, two succeed, you start a chain reaction. you have to go through the process. the third generation is not easy. you have no example of anything other than sitting around to get drunk or whatever you do with your money. this is the challenge, it is not a signal -- you have to start the process. we have opposition, this is not what we want, that is okay. i am not saying everyone has to tag along. we know that. human life thrives on challenges. unless you challenge human life, human life becomes vegetable life. yen people find that out. i can do things for myself and others, that is what makes us

human being, human life, most interesting. you have to bring it up. getting a single kind of solution, you are unemployed, here is the door. that is not a solution. i kept saying welfare, the door should be a temporary solution, not a permanent solution. the kind of preamble of any welfare law should be this welfare is past to help people get out of welfare as fast as possible. that is the whole purpose. not keeping you on welfare. on the other hand, welfare laws that passed away, you can't get out of. if you are on welfare, if you earn a dollar, you have to deport you to the welfare authority. welfare authority will deduct that dollar from your check. what a shame.

if i have a design, i would do with the other way. you earn a dollar, we will match you with another dollar. encourage you to do that so the next time you turn $2. and gradually you get out. that is forgotten. that is why we have so many problems. drinking, drugs, whatever, crimes, because you have no responsibility whatsoever. you're taking away the sense of responsibility from human beings. that is the end of human beings. if i don't feel responsible for myself. thank you. >> i am a citizen, we are proud of you as the father of microcredit and very proud that you brought it to bangladesh, you change the country, 40% of whatever, i listened to you and

how many years it takes in bangladesh's specialty, told a nationwide, i think you have a better idea than anybody else and also, any political party offers you to become head of state, do you accept it? >> got another job here. >> he declined that. >> one is, i just mentioned we are on the right track to achieve the millennium development goal. goal number one, reduce poverty by half by 2015. we are there. we are solidly on that track. i keep asking, in bangladesh, now that we have very happy, proud nation that we achieve this goal, many nations do not do that. we are designated the poorest

country in the world, 1 hundred fifty million people, a lot of poor people. a very poor economy, lots of poor people, if you can reduce the number by half by 2015, this is very strong message for the world that yes, we can do that. we have the capacity. the question that i asked, isn't it a good time for us to set a date after 2015? on what date will we have 0 poverty? if we can do it, reduce it by half, by the same logic you can reduce it to zero. but how long will that be? will be another 10 years, 15 years, 20 years? let's set the date and work for it from now on so we can achieve that goal. i suggest, before anybody comes up with a date, why don't we

make it 2,030 as the date when nobody in bangladesh will be a poor person? this is a big message for the world. the richest country in the world, the u.s.a. has for people. we are starting from the poorest country of the world but today in 2013 we have no poor people. this will be a thing we can stand very tall, that we have done that. that indignity we don't want to have in our people is achievable. it is not a pipe dream or something. people used to think, in 2000, setting that goal, all those development goals to reduce poverty by half, that will never happen, just like any other goal which never happens and you move onto another bowl. if you take it seriously it will happen. and it will happen for many countries including bangladesh. so this is it. that you have to keep reminding

your policies and things so that we achieve that. you just put the goal and merrily do the same thing over again like you have been doing, it will happen but much later. the question is, how fast we can do it. as soon as possible, physically possible. it is a question of putting the date in effect. but it is achievable. >> the government to act? >> this is what we have been talking about, what i just said, what i have been promoting, we have to change the structure of the economy, because the system is responsible for negating policy, it is not the foreperson, the literate person that is sad that he or she is illiterate, we condemn her to literacy. those of us who run the country, because we created that environment for her, never reached out to her. she is sick, about marriage, her son is now marriage, it is not

her fault. we created that. we can change that. we have beautiful programs are, government-funded and so on. the system doesn't work. it works very poorly. at the same time offer the and disease are linked together. if you can improve quality of life by not being poor, children will not be sick. they will be having decent -- dysentery -- help children grow up not down urged, and they will have a better life for themselves. there are many diseases in other countries. doesn't need big doctors or big

things, very simple actions like rum in your stomach. you don't need doctors to fix the stomach. it spreads easily all over the country. how to fix that? how to fix has very common diseases like skin disease. for example we have a problem in bangladesh, 15% of bangladeshi people carriers of callous and mia. very short life, they don't survive because of the blood problem, blood and transfusion and so on. we are one of the most densely -- we don't even tell our young boys and girls about getting married. the partner that you are marrying, if both husband and wife are carriers, most likely

the child will be thalessemia a patient. we don't test their blood before we get married. the expanded the next generation, more carriers than before because we passed on to our children, they become sick, produce carriers. this is a simple thing, simple blood test before you get married. you don't need doctors for that. those of the attempts, initiatives that somebody needs to take. >> in a talk-show, you mentioned china. gold, 2003, you mention 15, 2,030, to make zero poverty, anyone from the date, nice talk show, to chinese government or china have a