Background of
Chester Challenge, LLC.

Initial efforts to privately obtain a rational explanation for the accounting from Sun Company, Coopers & Lybrand, and Sun Company's controlling shareholder, then Glenmede Trust Company, failed. Glenmede's control of Sun lay in its control of the various Pew Charitable Trusts then comprising some 26 % of ownership of Sun Company stock.

After failure to obtain a rational explanation, Atkinson concluded that that the bookcooking was a securities fraud of some sort and caused an examination by the SEC. When the SEC concluded that the accounting was proper, an impossible conclusion from known and obvious facts, Atkinson concluded that subversion of the SEC enforcement process had occurred and brought the matter to the attention of the U.S. Attorney's Office (DOJ) in Philadelphia. He also filed a complaint with the Pennsylvania Accountancy Board against Coopers & Lybrand requesting that their license be revoked. Schorsch joined in the Pennsylvania Accountancy Board action. Schorsch and Atkinson concluded that the 1980 bookcooking not only violated the securities laws but also was in violation of the IRS tax code. Schorsch disclosed that tax code violation to the IRS.

In the meantime Sun Company entered into a 2/8/82 sham sale of the Sun Ship assets worth some $100 million to Edward E. Paden, who through the terms of the sale and through the papers of the late Senator Heinz has proven to be a front. The structure of that sale is depicted under Sale of Assets, a figure from a paper presented 12/6/95 before the Philadelphia Section of the Society of Naval Architects and Marine Engineers. In reality, facts have revealed that the total principal payment made to Sun was less that $1 million and that was made in May 1986 as an apparent attempt to convert the sham sale into a legitimate legal sale. The May 1986 events were part of an improper refinancing involving the Pennsylvania Water Facilities Loan Board under then Governor Thornburgh.

In May 1984 control of the assets was purportedly purchased by City Capital Corporation, an Alabama company incorporated a week after the Reagan election of 11/4/80, and headed in 1984 by Thomas C. Weller, Jr. This purchase of control (Paden retained 48 %) was made for "cents on the dollar." Relinquishing some $100 million in assets for pennies is suspect on its face. As noted in Paden Testimony, earlier Sun offered him the assets for no money.

In due course a major Navy shipbuilding contract was awarded to Pennsylvania Shipbuilding Company, successor with its affiliates to Sun Ship. Those affiliates were DDSR and MOEL as shown on the Corporate Chart and Legend. Atkinson and Schorsch allege that contract was awarded fraudulently and allege that it proceeded with fraud in all its modifications and subsequent default. The Navy spent over half a billion dollars for two tankers (Navy Oilers) that were never finished and are now rusting hulks worth some $2 million in scrap in the laid up fleet and continuing to cost taxpayer money.

Atkinson and Schorsch filed their allegations in two False Claims act lawsuits, both in Philadelphia Federal District Court. The first filed 2/4/92 was dismissed without prejudice. The second filed 12/5/94 was unsealed and served in October 1998. In the interim Atkinson and Schorsch through a 2/2/93 letter to Defense Secretary Aspin caused a year long investigation by the DOD Inspector General reported as Audit Report 94-069.

The failure of the Inspector General to get to the root of the perpetrated fraud, failure to assign blame, and acquiescing to the Navy's withholding from the IG audit team thousands of documents, along with other shortcomings prompted a protest letter to Defense Secretary Perry. When that letter was not answered it was brought to the attention of the House Subcommittee on National Security, then Chaired by Representative Conyers (D-MI). That Subcommittee prepared to hold hearings into this loss of over half a billion dollars and alleged fraud. Before that could happen the election of 1994 occurred and control of the house passed to the Republicans. Plans to hold hearings were dropped.

Schorsch then wrote to Senator Roth who had assumed the Chairmanship of the Senate Permanent Subcommittee on Investigations. The Permanent Subcommittee on Investigations did conduct an investigation, subpoenaed documents, deposed witnesses and ultimately announced and held two days of public hearings. Participating directly in the hearings were Senators Roth, Nunn, Lieberman, Grassley, McCain, and Thompson. The Subcommittee never reached a conclusion but published a transcript of the two days of hearings (S. Hrg. 104-167) with selected exhibits from the investigation. There was no published conclusion but the Subcommittee members permitted the staff to attribute the loss of half a billion dollars to Navy stupidity.

The Senate members engaged in much sound bite publicity and made certain public statements. Chairman Roth on Dan Rather's Evening News ranked this contract at the top of all procurement scandals he had seen. Senator Roth said it was "Inexcusable. Unexplainable." He characterized it "as a devastating indictment of the current state of the military procurement system."

Following the October 1998 unsealing and service of the False Claims Act suit, four years of legal jousting ensued over jurisdictional bars to proceeding by Atkinson and Schorsch. In March 1999 Atkinson and Schorsch formed Chester Challenge LLC with the principal objective of bringing the False Claims Act suit to successful conclusion. Filed on behalf of the United States, the suit seeks $1.6 billion from the defendants. Atkinson and Schorsch are Managers of Chester Challenge LLC. A second objective of the company is to reveal to the public the underlying acts, deception, illegalities, obstruction of justice, failures by politicians and the breakdown of white collar law enforcement that has permitted all of this to occur and concurrently led to the devastation of the city of Chester, PA where heretofore Sun Ship had been a major employer.