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Watchdog raps MoD over Qinetiq sell-off bonanza

Eyewatering Stealth raid by pinstripe execs

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The top ten led by Sir John Chisholm, who according to the NAO had pushed the deal through unopposed since the early years of DERA, scored no less than a two-hundred-fold payoff. Chisholm himself, putting down £130k, came out with a cool £25 million worth of shares. Three other executives are specifically named by the NAO: Graham Love, Hal Kruth and Brenda Jones, who made £20m, £13m and £11m respectively.

Much of Qinetiq's value-build in its three years before flotation could be said to have come from the MoD signing up to the 25-year gravy train partnering deal; a lot more came from a bunch of acquisitions in the States, which delivered nearly all the new revenue required to make Qinetiq profitable.

So actually, even 900 per cent for the smallfry seems a bit cheeky, although many won't have been able to get in on it. Twenty thousand percent payola for Chisholm and his top team seems grotesque. In NAO-speak:

We consider that the returns in this case exceeded those necessary to incentivise management.

Then, of course, there's the matter of intellectual property inherited by Qinetiq from DERA. As we noted this week, the company seems to be selling off all kinds of critical military secrets - not least the knowhow required to build stealth aircraft, and interesting spookery electronics.

The MoD says, however, that all the best secrets were kept in the small part of DERA which stayed in the government under the name Defence Science and Technology Laboratories (DSTL). In particular, Blighty's valuable secret access to American military/spook tech (and America's use of crafty UK boffinry) was supposed to be safeguarded in this way, after "concerns expressed by collaborative partners in the US Department of Defense* over the sensitivity of privatising certain elements of DERA".

The NAO report isn't exactly reassuring on this:

Intellectual property relating to international collaboration projects was in most cases transferred to DSTL ... some of the concerns held by... the US Department of Defense* were addressed ...

Presumably a little thing like Stealth wasn't thought important enough to keep secret. Similarly, at least a few neat ideas employed by the British GCHQ and American NSA listening agencies seem to have been OK'd for sale. Or maybe the MoD's efforts to separate DSTL and Qinetiq just haven't worked in the real world. In most cases the secret government labs and the privatised company ones share sites, and boffins can simply walk in and out of each other's offices, canteens etc; though the MoD swears blind that at least they don't share IT systems or buildings anymore.

All in all, another masterful bit of work by the MoD, one really has to say. They didn't just sell off all our secrets and a lot of our assets and get (us) brutally shafted on the deal. They seem to have sold an unknown number of American secrets too, and created a perpetual, leaky, revolving back door through which more critical secret tech can dribble out. ®

*One notes that the US DoD includes the National Security Agency (NSA), the US government's primary code-cracking and comms intercept outfit. The UK equivalent is GCHQ, which is under the Foreign Office along with the spies. It is sometimes said that the NSA has actually been able to learn a few tricks from British electronic spies in recent times.

Internet Security Threat Report 2014

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