The Washington Post report is based on evidence of POGO- Project On Government Oversight a non-profit organisation set up to expose corruption.

full report is here:

 http://www.pogo.org/p/defense/do-060701-f22a.html

Ret. Admiral to Resign From Board
Senators Questioned Blair's Dual Role in F-22 Studies

By R. Jeffrey Smith
Washington Post Staff Writer
Thursday, July 27, 2006; Page D02

The head of a Pentagon-funded research organization that analyzes large weapons systems promised yesterday to resign from the board of a major defense contractor after senators raised questions about a potential conflict of interest.

Retired Adm. Dennis C. Blair, president of the Institute for Defense Analyses, said in letters to Sen. John W. Warner (R-Va.) and Sen. John McCain (R.-Ariz.) that he told EDO Corp. he would resign from its board. EDO is a subcontractor for the Air Force's multibillion-dollar F-22 Raptor program, which the institute has evaluated for the Pentagon.


One of the studies, completed in February, supported the Air Force's desire to shift from annual purchases of the F-22 to a three-year contract that begins in 2008 and will cost more than $10 billion. The report's conclusions have been challenged by the Government Accountability Office.

Another study, completed last year, was meant to provide an independent estimate of F-22 costs. Since the program's inception in the mid-1980s, it has had at least 10 cost overruns, according to the Congressional Research Service, and now figures to total at least $65 billion for 183 planes, instead of the 750 planes initially contemplated.

In a telephone interview Monday, Blair said he was deeply involved in reviewing the multiyear contract study. He also said the institute had no policy regulating conflicts of interest, and that he decided such issues case by case. He said the study's conclusion that the saving from a multiyear contract would be less than what the Air Force had claimed was evidence of the institute's independence and credibility.

Those remarks prompted Warner and several other lawmakers to express concern at a hearing Tuesday that the institute's study may have been tainted by the appearance of a conflict of interest stemming from Blair's ties to the F-22 subcontractor, including his option to acquire a large amount of EDO stock.

In his letters yesterday, Blair gave a different account of his involvement in the F-22 work. He said he did not play "an active role" in reviewing the multiyear procurement study, although he "received routine reports of its progress." Blair said that with regard to the other study, of F-22 costs, "I attended and participated in the give and take" of meetings that reviewed its conclusions but was not involved in writing it.

Blair also wrote that, contrary to his statement Monday, the institute "has a clearly articulated set of policies" approved by the Defense Department regarding conflicts of interest, which apply to the institute's corporate officers. He did not say what those policies required. "I do not want there to be any doubts in the minds of our sponsors or members of Congress concerning our commitment to providing high-quality, impartial analyses," he wrote.

Blair said he would resign from the EDO board "as soon as possible."

 http://www.washingtonpost.com/wp-dyn/content/article/2006/07/26/AR2006072601708.html

EDO net profit climbs 3%, agrees two acquisitions (6:18 AM ET) LONDON (MarketWatch)

EDO Corporation said second-quarter net income rose 3% to $6.3 million, or 30 cents a share, while revenue fell 2.4% to $152.4 million.

Analysts polled by Thomson First Call were expecting earnings of 36 cents a share and revenue of $163 million.

The company said overall revenue fell because of a drop in revenue from electronic-force-protection equipment, for which it had a large order in the second quarter of 2005.

Separately EDO said it has agreed to buy privately-held Impact Science & Technology, which provides systems and analysis for the intelligence community, for a total of $124 million. It has also agree to buy privately-held CAS Inc., which provides engineering services and weapons-systems analysis to the Department of Defense, for $175.6 million. Citing the acquisitions, EDO upped its revenue guidance for the year to a range of $735 million to $750 million.

Edo director resigns position

Appearance of conflict leads Blair, who also heads D.C. think tank, to quit over $7B defense deal
BY JAMES BERNSTEIN
Newsday Staff Writer

August 3, 2006

A director of Edo Corp., the Manhattan-based defense electronics manufacturer with a large presence on Long Island, has resigned his post after a Washington, D.C., think tank raised allegations of a conflict of interest involving a $7-billion military airplane contract.

Dennis Blair, 59, an Edo director since October 2002, told the company in a letter late Tuesday that he has resigned after the allegations raised by a public interest group, Project on Government Oversight. Blair denied any wrongdoing.

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The group said that it uncovered Securities and Exchange Commission documents indicating that Blair, a retired Navy admiral and former commander of U.S. Pacific fleet, held several thousand shares and options in Edo, one of hundreds of contractors working on the Air Force's F-22A fighter plane program.

The group said Blair is president of a defense industry research institute - the Institute for Defense Analyses - that endorsed approval of a $7-billion contract to buy 60 F-22A airplanes.

The group said if the contract is finally approved, Blair stands to gain financially as an Edo shareholder.

Jennifer Gore, a spokeswoman for the group, emphasized that it was not saying Blair had broken the law.

"The problem is there is an appearance of a conflict of interest," Gore said. "There is a question of whether he could remain unbiased while holding so many shares and options" of Edo.

Gore said the broader issue is that neither Congress nor the federal government provides sufficient oversight when it comes to organizations such as the Institute for Defense Analyses, which is one of 36 so-called Federally Funded Research Development Centers.

"Sometimes they act like a contractor, but they also have the credibility of being an arm of the government," Gore said. "It creates a murky, blurred line as to what they really are."

No one answered the phone yesterday at the Institute for Defense Analyses in suburban Washington.

The conflict-of-interest allegations will be reviewed by the Pentagon's inspector general, according to a Defense Department spokesman.

The review was requested by the chairman of the Senate Armed Services Committee, John Warner (R-Va.), along with Sen. John McCain (R-Ariz.) and Sen. Carl Levin (D-Mich.).

The House and the Senate approved a three-year contract for F-22As, but the inspector general's review may prompt them to reconsider the contract before final versions of the defense bill are negotiated and signed. Edo developed a system that launches missiles from the F-22A.

Blair said in a July 26 letter to Warner that he had no "direct involvement" in preparing the report on the F-22A by the Institute for Defense Analyses.

"It was an important research project and I received routine reports of its progress but did not play any active role in its conduct or review," Blair wrote. He said that he only saw the report when it was sent to the Pentagon for final approval.

In a letter to Edo, Blair said he was stepping down from the board because of his desire "to avoid any appearance of or potential for a conflict of interest" between his duties as an Edo director and as president of the Institute for Defense Analyses.

Edo, which has about 2,700 employees, including about 400 in North Amityville and another 200 in Bohemia, has been struggling lately. Late last month, the company reported sales in the second quarter dropped 2.4 percent, to $152.4 million, because of difficulties related to production of what's known as Warlocks - electronic devices designed to defeat roadside bombs in Iraq. Revenue from the company's Warlock program declined significantly in the second quarter, compared with the same period last year.

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EDO Corp (New York Stock Exchange)
[4:02 PM ET]
22.96 USD 0.24 (1.06%)

Risk Alert for EDO
sponsored by Reuters

SECTOR: Capital Goods | INDUSTRY: Aerospace & Defense
Risk Alert Level for EDO
Medium
EDO failed 4 of the 6 Risk Tests
Level is based on number of
Risk Test failures:
1-2 = LOW
3-4 = MEDIUM
5-6 = HIGH

Risk Tests Results
Estimate Revision FAIL
Analyst Recommendation PASS
Institutional Selling PASS
Shorted Shares FAIL
Price Deterioration FAIL
Price Momentum FAIL

Find out more about EDO
Earnings Estimates
Ratios
Financial Highlights

Risk Test Details
Estimate Revision Test
Compares this week's earnings estimates for current year and next year to last week's estimates. Test fails if any downward revision is observed.
Results for EDO: FAIL
# of Analysts # of Downward Revisions
Current Year 15.00 11.00
Next Year 14.00 5.00
Total Downward Revisions 16.00
Estimates have been revised down within the past week. This test shows the number of analysts with decreased confidence in the company's future earnings.
What should I do now?
Analyst Recommendation Test
Compares this week's consensus recommendation to that of four weeks ago. Test fails if the consensus recommendation dropped.
Results for EDO: PASS
Consensus Recommendations
1 (best) - 5 (worst)
Current 2.93
4 Weeks Ago 2.93
Recommendation Increase 0.00
The consensus analysts recommendation for this company has either improved or remained constant in the past four weeks.
What should I do now?
Institutional Selling Test
Compares last quarter's institutional investor shares purchased and sold. Test fails if institutions sold more shares than they bought.
Results for EDO: PASS
Number of Shares
Shares Purchased Prev Qtr 3.5 mil
Shares Sold Prev Qtr 3.1 mil
Net Purchased 0.4 mil
Shares held by institutional investors have either increased or remained constant.
What should I do now?
Shorted Shares Test
Compares the current short interest ratio to that of last month, looking for an increase in the number of days it would take to cover all shorted shares if trading at average daily volume. Test fails if the current short interest ratio is at least 3 days, and has increased since last month.
Results for EDO: FAIL
Short Interest Ratio (Days to cover)
Days to Cover - Current 9.9
Days to Cover - Previous Month 9.7
Net Decrease 0.2
Speculators may be expecting the price of this stock to drop in the future.
What should I do now?
Price Deterioration Test
Compares the change in a company's 4-week stock price change to the industry average, looking for instances where a company's price performance significantly underperforms the industry price performance. Test fails if the company is underperforming relative to its industry by more than 35%.
Results for EDO: FAIL
4-week Price Change
4-week Price Change - Company (10.0) %
4-week Price Change - Industry avg. 1.6 %
Net Increase (11.6) %
The price of this stock is substantially underperforming relative to its industry.
What should I do now?
Price Momentum Test
Analyzes the trend of the company's relative momentum across 4 and 13 weeks looking for significant loss in price performance momentum. Test fails of 4-Week Relative Price Performance trails Adjusted 13-Week Price Performance.
Results for EDO: FAIL
Relative Price Performance
4-Week Relative Price Performance (11.6) %
Adjusted 13-Week Relative Price Performance (0.2) %
Net Increase (11.4) %
This company's price performance momentum is in decline. The stock's 4 week price performance relative to its industry is less than its Adjusted* 13 week price performance relative to its industry.
What should I do now?

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