UPDATE 3-Pentagon inspector faults U.S. oversight of BAE

(Adds BAE spokesman comment)

By Jim Wolf

WASHINGTON, May 1 (Reuters) - U.S. technology going into the F-35 Joint Strike Fighter aircraft may have been compromised by unauthorized access at facilities and computers belonging to BAE Systems Plc (BAES.L), the Pentagon's inspector general said in a report made public on Thursday.

The report did not cite any examples of any feared leaks. It said advanced U.S. aviation and weapons know-how "may not be adequately protected" at BAE, which is also working on a competing fighter aircraft.

Headquartered in Farnborough, England, BAE is the biggest overseas contractor on the Lockheed Martin Corp (LMT.N)-led F-35. The radar-evading aircraft is being developed by the United States and eight foreign partners, including Britain.

BAE also plays a key role in the rival Eurofighter Typhoon aircraft, noted the report obtained under the Freedom of Information Act by the Project on Government Oversight, a private watchdog group.

"The advanced aviation and weapons technology for the JSF program may have been compromised by unauthorized access at facilities and in computers at BAE Systems, and incomplete contractor oversight may have increased the risk of unintended or deliberate release of information to foreign competitors," said the Pentagon's Office of Inspector General.

"With contractors such as BAE Systems Plc, and its subsidiaries working on competing aircraft, the U.S. government needs to implement effective management accountability and security controls to safeguard JSF technologies," it added.

BAE Systems Inc, the U.S subsidiary of BAE Systems Plc and the largest foreign-owned or foreign-controlled defense contractor in the United States, said it strongly disagreed with the inspector general's suggestion that information may have been compromised at BAE plants.

"There is no basis whatsoever for that conclusion," said Greg Alan Caires, a BAE spokesman in Arlington, Virginia.

"BAE Systems also strongly disagrees with the suggestion that we did not perform required audits and fully comply with our Special Security Agreement. That suggestion is simply false."

The Joint Strike Fighter family of aircraft is the Pentagon's costliest planned acquisition program ever at nearly $300 billion for more than 2,450 fighters.

BAE is developing information systems and sensor for the F-35, designed for the Air Force, Marine Corps and Navy as well as for export sales.

As a U.S. company operating under foreign ownership, control or influence, BAE is subject to complex security reporting requirements under the Special Security Agreement, or SSA.

But the Defense Security Service, a Pentagon arm, "did not always employ sufficient controls to evaluate and correct potential unauthorized access to classified U.S. technology," the report said.

For instance, the service did not obtain and assess, prior to the inspector-general's audit, a number of BAE reports' discussing "security weaknesses in controls over classified technology at BAE Systems facilities for 2004 and 2005," it said. The numbers of reports and security weaknesses at issue were blacked out in the declassified version made public.

BAE Systems stated that all information contained in the internal audits was privileged and not available to the U.S. government, the report said, despite what it called a requirement in the SSA that the contractor submit these to the Pentagon for review and appropriate action.

Britain and Italy take part in both the JSF and Eurofighter Typhoon programs, the report said, adding the Typhoon has been actively promoted in Norway, Denmark and Turkey, which are also co-financing the F-35. (Editing by Tim Dobbyn, Phil Berlowitz, Richard Chang)