Homeland Security

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					Homeland Security
The events of September 11, 2001, as well as subsequent developments, create new
challenges for the United States, its citizens, and American business. In November 2002,
the enactment of the Homeland Security Act signaled the advent of sweeping changes in
virtually every industry and other regulated activities.

The Act established a new executive department of roughly 179,000 employees from 22
agencies. The Department of Homeland Security (DHS) had an estimated budget of
$40.2 billion for FY 2005, and an estimated $41.1 billon for FY 2006 including multi-
billion dollar budgets for procurement and R&D. The Act also addresses or implicates a
number of other homeland security-related matters, such as immigration; information
analysis and infrastructure protection; privacy and information security; emergency
preparedness; and international trade.

K&L Gates’ national reach and preeminence in the areas of government affairs, public
policy, technology and other vital disciplines make the firm well-suited to assist clients in
all aspects of the implementation and evolution of the Act and related regulations. Our
interdisciplinary Homeland Security Practice group consists of lawyers throughout the
country that bring dedicated expertise to bear on these contemporary issues, including the

Government Affairs
The Act represents an unprecedented restructuring of the executive branch of the federal
government. The effect of the Act on federal law, policy and governance is only
beginning to unfold and will evolve over time. The Act also contains provisions
requiring extensive federal-state coordination for homeland security preparedness and
response. One thing is clear: the actions and decisions of federal, state and local
government officials in dealing with homeland security laws, regulations and procedures
will have a critical impact on all segments of the economy, American business, and the
general public.

K&L Gates’ government affairs practice is well-positioned to provide clients with
sophisticated assistance in federal, state and local aspects of homeland security-related
matters. Our team includes the former Attorney General of the United States, Dick
Thornburgh; former U.S. Senator Slade Gorton, former Assistant Secretary, International
Affairs for the Department of Homeland Security, the former Deputy Secretary for
Legislative Affairs to then-Governor Tom Ridge, Peter Gleason; and the former president
and chief executive officer of one of the major trade associations in the United States,
George Koch. The team provides client services in the realms of legislative and
regulatory advocacy; legislative and regulatory monitoring; federal, state and local
budget/appropriations counseling and advocacy; and similar efforts. K&L Gates’
government affairs experts are carefully observing the emerging homeland security
environment and can help decipher it.
Government Contracts and Public Sector Technology
The Act contains unprecedented provisions for the procurement of homeland security-
related goods and services as well as unprecedented opportunities for companies to
engage in homeland security-related research and development.

As a result of this legislation, federal procurements are expected to increase dramatically
for IT and other products and services designed to enhance the nation’s security. Indeed,
the DHS had close to a $5.9 billion budget for IT alone in FY 2006, focusing on
information security, reliable communications and advanced knowledge systems. The
new department has four additional procurement-related priorities: first responders,
biological defense, border security and the fusion of navigation and intelligence.

K&L Gates is poised to counsel the firm’s clients on the new DHS contracting
opportunities. Our government contracts and public sector technology professionals are
already conversant with the special procurement provisions of the Act, including its
special streamlined acquisition procedures. With its extensive background in bid and
proposal preparation, contract negotiation and performance, licensing, commercial item
contracting, and other IP issues, K&L Gates is capable of providing clients with the
assistance they need in every aspect of contracting in this sector.

The Act also creates a special R&D authority within the DHS to conduct homeland
security research, and the DHS is expected to spend $1.3 billion in FY 2006 in R&D
funding. Many of the R&D projects that will be sponsored by the DHS will involve IT,
biotechnology, and related efforts. In addition to traditional contract vehicles, other
agreements will be available that will enable contractors to maximize their potential
return on investment (in the form of retained intellectual property and commercial market
prospects) while minimizing the usual regulatory burdens that accompany traditional
R&D contracts. K&L Gates is familiar with these alternative vehicles (including “other
transactions” and similar agreements), and has participated in the drafting and negotiation
of a number of these cutting-edge transactions.

Protecting the nation against a whole new range of terrorist weapons is one of the greatest
challenges that the DHS will face. Developing vaccines and treatments to address a long
list of possible biological, chemical, and nuclear weapons, as well as better ways to detect
possible releases of these weapons, will be a major task of the new Department in the
coming years.

K&L Gates is working with companies researching new therapies for bioterrorist
weapons and research institutes interested in working on the development of other
countermeasures. K&L Gates is also helping research laboratories comply with new
restrictions and regulations governing chemicals and other materials that are currently
used in a wide range of biomedical research but that could be diverted and used to create
bioterrorist weapons.

K&L Gates represents a range of clients whose products are being used by the
intelligence community. Our lawyers include former insiders and supervisors of
intelligence agencies who maintain high-level contacts at the CIA, NSA, DIA, FBI,
congressional committees, and in the office of the Homeland Security Advisor. We also

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have relationships with many of the components of federal agencies transferred to the
DHS. Our understanding of programs that the community conducts enables us to
anticipate the community’s needs and priorities.

Anti-Money Laundering
The USA PATRIOT Act of 2001 gives broad additional authority to a number of federal
agencies to investigate and prosecute institutions and individuals suspected of money
laundering activity. Some of these entities, including mutual funds and investment
advisers, insurance and mortgage brokers and even yacht brokers and jewelers were not
previously subject to such regulation and therefore face a greater challenge to come into

Leveraging our years of experience representing clients before regulatory oversight
bodies such as the SEC, CFTC, NASD, NYSE, OCC, FDIC, OTS and the Federal
Reserve Board and our specific anti-money laundering (AML) experiences, K&L Gates’
cross-practice AML team can assist with:

   Strategic risk assessments of present business practices and information systems
   Structuring and performing internal investigations, being sensitive to employment
    law issues as well as privacy regulations for both employees and customers;
   Responding to regulatory inquiries and enforcement actions thoroughly and
    effectively while maintaining the security of sensitive competitive information;
   Establishing, reviewing and documenting compliance practices, including
    procedures, literature, programs and training; and
   Analyzing of the privacy, data protection, information security and cybercrime
    prevention considerations inherent in reviewing customer accounts and reporting
    activity to governmental supervisory bodies.

Reviewing and drafting third-party vendor relationship agreements, as an enhanced
technology infrastructure may be the best way to bring present practices into compliance
with the requirements under the PATRIOT Act and subsequent regulations imposed by
financial regulators.

Information Security and Privacy
Information security has become an essential aspect of virtually any business
relationship. The need for trustworthy data is unquestioned and business partners and
customers increasingly demand assurances of adequate information security and
responsibility for the consequences of adverse security incidents. Whether as a part of
traditional corporate transactions (mergers and acquisitions; joint ventures), online
strategic alliances, online retail services or supply chain management, the issues of
information security have become high-profile from a legal perspective. The reason is, in
fact, quite simple: most incidents of information security involve the execution of an
illegal act—theft, deception, infringement or fraud.

Information security and homeland security will be closely managed. Indeed, the
Homeland Security Act emphasizes that a vital tool for achieving improved national
security will be the analysis and evaluation of many types of information, including

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business data that is historically protected by the good information security practices.
Privacy also has the potential to collide with homeland security objectives.

K&L Gates has been involved in cybersecurity issues since they first arose over a decade
ago. Because we work to form broad coalitions of businesses, consumers, privacy groups,
and interested individuals, we are able to give our clients a powerful voice. Among the
clients that we advise in this area are Americans for Computer Privacy, the Business
Software Alliance, and Microsoft. We guided the technology industry through the
encryption struggle, which ended in victory. We have been involved in the development
of critical infrastructure protection policy, and we played a significant role in the USA
PATRIOT Act and the Homeland Security bill. We have addressed electronic
surveillance, computer crime, and international agreements to improve cybersecurity
such as the Council of Europe’s cyber-treaty.

Much of the work that K&L Gates does in the area of information security focuses on
ensuring that statutes and executive branch policies do not impose technology mandates
on industry. We have worked to keep the field clear of unnecessary regulation while
supporting the adoption of necessary statutory protections for information voluntarily
shared with the federal government to improve security.

We advise a number of clients on infrastructure security issues, with a focus on nuclear
power plant security. Our representations in this field have addressed federal nuclear
security, commercial reactor security, and the development of new technologies for
breach detection and security enhancement.

The K&L Gates privacy and information management team delivers privacy and
information security solutions to companies operating domestically and internationally
across a wide range of industries. For our team, “privacy” includes “data protection,”
and “information management” means helping to ensure the integrity, reliability and
security of our clients’ information assets.

International Trade
The United States Customs Service is among the agencies that the Act transferred to the
DHS. This “new” Customs Service will continue to serve as the primary enforcement
agency protecting the nation’s borders. The Customs Service performs many diverse
tasks to ensure homeland security, flow of trade and compliance, inspections at ports of
entry, and seizures of illegal drugs and contraband. Among its many functions, the
Customs Service is responsible forensuring that all goods entering and exiting the United
States do so in accordance with all applicable U.S. laws and regulations. For example,
Customs monitors imports to ensure that they comply with the myriad of laws involving
public health, safety, and protection of intellectual property rights. In addition, the
agency enforces export regulations for various other government agencies, such as the
U.S. Department of Commerce, Bureau of Industry and Security, Department of State,
Office of Defense Trade Controls, Bureau of Alcohol, Tobacco and Firearms, Drug
Enforcement Administration, Nuclear Regulatory Commission, and the Office of Foreign
Assets Control.

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K&L Gates professionals on both coasts routinely provide advice on a wide range of
export controls and customs issues. As a result, K&L Gates is ready to assist clients with
satisfying international trade requirements under the DHS’ new jurisdiction. The firm
represents a full range of transportation industry clients involved in domestic and foreign
commerce-airlines, railroads, shippers, shipping lines, and ports. We have played a
significant role in all recent transportation security legislation, including the port and
maritime security bill, advising our clients on potential opportunities and issues resulting
from such legislation.

Border security is an increasingly important issue and it is an issue that K&L Gates is
well equipped to address. Our homeland security team includes a former Senate Judiciary
Committee Counsel who worked extensively on border security legislation before
overseeing the Office of Immigration Litigation as a Deputy Assistant Attorney General
in the Justice Department.

The Act seeks to prevent future acts of terrorism against the United States and its citizens,
but risks remain. Businesses need to insure against terrorism and related risks to protect
their stakeholders and need to collect policy benefits in the event of a terrorism loss.
K&L Gates has the experience and expertise to counsel businesses on the insurance
issues relating to homeland security and terrorism risks. Over 75 K&L Gates lawyers are
concentrated in what has become one of the largest insurance coverage practice groups in
the nation. Our success in recovering insurance assets on behalf of clients has been
reported in the Wall Street Journal, The New York Times, Business Insurance and
various trade periodicals. In November 2001, Of Counsel Magazine devoted its lead
article to the nation’s top insurance coverage law firms. While discussing several firms
and their practices, the article observed that K&L Gates “is recognized as perhaps the
leader in insurance coverage representation.”

K&L Gates has substantial experience in handling the types of claims likely to arise from
terrorist acts, including claims under property, liability and business interruption
coverages. In particular, K&L Gates insurance coverage lawyers have represented
businesses with insurance claims arising from the September 11 attacks and have the
experience and resources to pursue these claims.

The Terrorism Risk Insurance Act of 2002 (TRIA) requires that all commercial property
and casualty insurers offer terrorism coverage, and also provides a federal backstop for
these insurers in the event of a future terrorist strike. The TRIA, as well as the guidance
and regulations promulgated by the Department of Treasury, raise a host of issues for
businesses seeking to obtain coverage for terrorism. K&L Gates is able to counsel clients
on the procurement of terrorism coverage and the scope of such coverage.

Environmental Safety and Security
The heightened national awareness of security and emergency preparedness is perhaps no
more evident than in the environmental arena. Congress has focused on the protection of
physical infrastructure and industrial assets against terrorist attacks, preparation for and
response to chemical, biological, and radiological attacks, and improvement of disaster
preparedness and response capabilities. The Environmental Protection Agency has

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created the Office of Homeland Security to act as liaison with the DHS and to coordinate
homeland security activities and policy development within EPA. And the Department
of Justice has declared that homeland security is the number one enforcement priority for
its Environment and Natural Resources Division.

Two common objectives of homeland security and environmental protection are the
protection of critical infrastructure against terrorist attacks and enhancement of our
emergency preparedness and response capabilities. Critical infrastructure includes
drinking water supply and distribution systems, chemical facilities and the hazardous
materials transportation system. A number of initiatives directed at increasing security
and improving emergency preparedness and response capabilities at these facilities have
been recently developed, and more are under development.

K&L Gates’ Environment and Natural Resources practice has the experience and
resources to assist clients with this developing body of regulatory requirements. We
presently represent a number of clients in the chemical industry, water utilities and oil
and natural gas transportation industry and are sensitive to the potential impacts of these
new requirements on our clients’ activities. We can assist clients in commenting on
proposed rules, counsel them on compliance with new regulations, and represent them
before the agencies and in court when necessary to ensure that their views are heard or
their interests are defended.

Emergency Preparedness and Response
The anthrax attacks exposed important vulnerabilities in the nation’s public health
resources, and Congress has acted quickly to provide needed assistance to state and local
governments and their first responders. K&L Gates is advising the American Society for
Therapeutic Radiology and Oncology, a group of physicians working to develop
resources and information needed by first responders who might have to deal with a
nuclear terrorism response. We also represent numerous nuclear energy clients, utilities,
and transportation companies, advising them on matters relating to increased security

Charitable Organizations
Charities are subject to an array of statutes, regulations and orders regulating their
activities and designed to disrupt the funding of terrorist organizations. The scope of the
penalties associated with these laws is broad and the severity of the penalties is
sufficiently harsh to threaten the existence of an accused charity. Virtually all charities
are affected, although those that grant or provide aid or assistance outside the U.S. are
most seriously affected.

K&L Gates’ Tax-Exempt Organizations/Nonprofit Institutions practice includes lawyers
who devote the bulk of their professional time to the representation of charities,
frequently advising regarding the unique tax, regulatory and other issues affecting
charities. Included in their practice is counseling charities regarding compliance with the
array of laws designed to combat terrorism. They assist their clients in developing grant
making policies and strategies which are efficient, practical and cost-effective, so as to
enable the charity to minimize its risk of funding terrorism without compromising the
charity’s charitable mission or diverting excessive resources to administrative costs.

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The Act dramatically affects the immigration functions of the federal government. The
Immigration and Naturalization Service (“INS”) has been abolished and replaced by the
Bureau of Border Security (primarily responsible for enforcement) and the Bureau of
Citizenship and Immigration Services (responsible for adjudication of applications and
naturalization). These two Bureaus are independent and will be minimally coordinated,
likely resulting in increased delays in the processing of visas and shortages of workers in
certain sectors of the economy. Consequently, traditional strategies in bringing foreign
workers to the United States may have to be replaced with novel strategies in order to
meet employers’ needs.

The Act also gives the DHS complete authority to administer laws and issue regulations
relating to the granting and refusal of visas. This has far-reaching implications for visa
applicants because--even though a United States Consulate may issue a visa—a DHS
official can reverse any visa approval, and Consular officers will be required to record
detailed information in a database about every applicant denied a visa. We forecast that
visa applications will be subject to increased delays as a result of the Act.

K&L Gates’ immigration lawyers address and resolve issues concerning immigration
benefits and visas for individuals and businesses. Our practitioners bring experience,
creativity and knowledge to the practice of immigration law, especially in today’s
“immigration-adverse” environment.

Corporate Compliance
Rapidly evolving corporate governance standards, practices and procedures will be
critical to enterprises that are confronted by homeland security and related developments.
Novel issues will emerge for businesses that must comply with DHS regulations while
satisfying generally applicable corporate governance standards. K&L Gates counsels
publicly-traded corporations and their boards, independent directors, board committees
and management on a wide range of corporate governance issues. Traditional client
concerns surrounding corporate governance have recently been magnified by the
Sarbanes-Oxley Act, the proposed corporate governance rules of the NYSE and
NASDAQ, and other regulatory initiatives taken in response to the recent failure of a
number of major U.S. corporations. Of particular interest here, we have provided
detailed guidance to financial institutions on the implementation of special policies,
procedures and controls to comply with the anti-money laundering provisions of the USA
Patriot Act.

We also assist our clients by performing corporate governance reviews and designing
policies and procedures to reduce risk and promote corporate governance compliance.
We draw upon our extensive securities enforcement and white-collar criminal defense
expertise to examine and investigate corporate misconduct and accounting irregularities.
For example, our senior colleague, Dick Thornburgh, the former Attorney General of the
United States, is currently serving as the Examiner of WorldCom. We understand the
sensitivity and confidentiality associated with information gathering that is critical to the
review of corporate governance matters. We anticipate that our substantial experience in
this regard will be of paramount importance to companies focused on homeland security

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