Spies for Hire

by Tim Shorrock

  SIMON & SCHUSTER

  1230 Avenue of the Americas

  New York, NY 10020

  Copyright © 2008 by Tim Shorrock

  All rights reserved, including the right to reproduce this book or portions thereof in any form whatsoever. For information address Simon & Schuster Subsidiary Rights Department, 1230 Avenue of the Americas, New York, NY 10020

  SIMON & SCHUSTER and colophon are registered trademarks of Simon & Schuster, Inc.

  Library of Congress Cataloging-in-Publication Data

  Shorrock, Tim.

  Spies for hire: the secret world of intelligence outsourcing /

  Tim Shorrock.—1st Simon & Schuster hardcover ed.

  p. cm.

  Includes bibliographical references and index.

  1. Intelligence service—Contracting out—United States. 2. Intelligence service— United States. 3. National security—United States. 4. United States—Foreign relations—1989–. 5. United States—Military policy. I. Title.

  JK468.I6S49 2008

  327.1273—dc22 2008006900

  ISBN-13: 978-1-4165-5351-9

  ISBN-10: 1-4165-5351-7

  Visit us on the World Wide Web:

  http://www.SimonSays.com

  For Roxanne

  CONTENTS

  PROLOGUE

  1. The Intelligence-Industrial Complex

  2. Booz Allen Hamilton and “The Shadow IC”

  3. A Short History of Intelligence Outsourcing

  4. The CIA and the Sacrifice of Professionalism

  5. The Role of the Pentagon

  6. The NSA, 9/11, and the Business of Data Mining

  7. Intelligence Disneyland

  8. The Pure Plays

  9. The Rise of the National Surveillance State

  10. Conclusion: Ideology, Oversight, and the Costs of Secrecy

  ACKNOWLEDGMENTS

  NOTES

  About The Author

  Prologue

  ON MAY 9, 2006, John Humphrey, a former CIA officer making his way up the management ladder of one of the nation’s largest intelligence contractors, made a stunning disclosure to Intelcon, a national intelligence conference and exhibition at a hotel in Bethesda, Maryland. Outsourcing, Humphrey declared, was out of control. Contractors deployed in Iraq and other hotspots overseas were making decisions and handling documents that, in earlier times, had been the sole responsibility of U.S. military and intelligence officers. This had caused a “paradigm shift” in the relationship between government and the private sector, and left companies like his in an untenable position.

  Five years ago, “you’d never have a contractor supporting an operation on the field where they’re making a recommendation to an officer,” said Humphrey. Nor would you find a contractor “making little contributions here and there” in the reports intelligence officers sent back to Washington. “This concerns me a lot, the way these lines are blurring,” he went on. “We shouldn’t be involved in some of these intelligence operations, or the planning, or the interrogations and what have you.”1 Unless government started taking more responsibility in the field, he warned, the “blowback” for the contracting industry could be profound.

  The intelligence professionals in the room looked stunned. They had just sat through two days of upbeat discussions about the annual $10-billion expansion of U.S. intelligence budgets and the opportunities that money presented for defense contractors, information technology vendors, and former national security officials who still held their top secret security clearances. Upstairs in the exhibition hall, thirty-five companies were displaying the latest high-tech spying equipment and competing to recruit new employees, who could earn up to three times government pay by migrating to the private sector. Words like “blowback” did not come easily at such gatherings.

  But this speaker, and the corporation he represented, had an exceptional story to tell. Humphrey was employed by CACI International Inc., a $1.8-billion information technology (IT) company that does more than 70 percent of its business with the Department of Defense. For many years, CACI had been one of the Pentagon’s favorite contractors. It was particularly respected for its professional evaluations of software and IT products supplied to the military by outside vendors. During the late 1990s, CACI moved heavily into military intelligence when the Pentagon, its budget reduced by nearly 30 percent from the days of the Cold War and unhappy with the quality of intelligence it was getting from the CIA, began bringing in private sector analysts for the first time.

  This proved to be a prescient move for CACI when nineteen Muslim fanatics linked to Al Qaeda, the global terrorist organization then based in Afghanistan, steered three hijacked jetliners into the World Trade Center and the Pentagon on September 11, 2001. In the aftermath of the worst terrorist attack in American history, the Intelligence Community began scouring Washington for analysts, covert operatives, translators, and interrogators it could deploy in the hunt for the perpetrators, and to fill the ranks of hastily organized counterintelligence centers at the Central Intelligence Agency and other government agencies. CACI, which already had a small army of trained and cleared intelligence specialists holding security clearances, was perfectly positioned to pick up the slack.

  Between 2002 and 2006, CACI signed dozens of new contracts, acquired twelve companies, and more than tripled its revenue, from $564 million a year to nearly $2 billion. Its astonishing growth catapulted the company from a bit role in IT to one of the key players in what has become a $50-billion-a-year Intelligence-Industrial Complex. “CACI is a cash-flow story,” Dave Dragics, CACI’s chief operating officer, boasted to investors in 2006. “Whenever you hear bad news, it’s usually good news for us.”2

  But along the road to this gravy train, CACI stumbled. The trouble began in the summer of 2003, when Donald Rumsfeld’s Pentagon, shocked by the resistance to its occupation of Iraq, began filling Iraqi prisons with thousands of people suspected of participating in the insurgency. The U.S. Army, however, was desperately short of interrogators, particularly anyone with military experience. Through the Department of the Interior, which had subcontracted management of the Pentagon’s IT contracts in 2001, the Army renewed several contracts it had signed during the Bosnian war with Premier Technology Group, a small intelligence shop that CACI acquired in 2003. Within weeks of CACI’s acquisition, its PTG unit dispatched two dozen former military interrogators and prison guards to Baghdad’s Abu Ghraib prison. Many of them were unaware of the nature of the work they would face.

  Tasked with the job of rooting out the leaders of the insurgency, some CACI employees directed military interrogators to use techniques on Iraqi prisoners that were, to put it mildly, far outside the norm of civilized conduct. Reports of the mistreatment soon made their way to U.S. commanders in Iraq, who appointed an Army general to investigate conditions at the prison. In the spring of 2004, CACI was thrust into the public limelight when the Army’s report, along with hundreds of graphic photographs of Iraqis being tortured and humiliated, were leaked to the press. The Bush administration was thrust into one of its most serious foreign policy crises. After leaving the Pentagon in 2006, Rumsfeld would call Abu Ghraib the worst thing that happened during his five and a half years as secretary of defense (despite being the architect of the U.S. occupation of Iraq, however, he never took responsibility for the actions of his soldiers and contractors).

  The details of what CACI’s people did at Abu Ghraib were the subject of an insightful book, Chain of Command: The Road from 9/11 to Abu Ghraib, by Seymour Hersh, the reporter who broke the Abu Ghraib story, and the events recalled in excruciating detail by former Iraqi prisoners in a 2007 film made by Hollywood producer Robert Greenwald called Iraq for Sale: The War Profiteers. Two internal Army reports conclude
d that CACI’s contract interrogators introduced some of the most brutal practices employed at the prison, including the use of attack dogs. The images of one naked prisoner, cringing in terror as a German shepherd snapped his teeth just inches from the man’s genitals, horrified the world. Combined with the testimony of several guards who followed the orders of the CACI and Army interrogators, the pictures convinced U.S. military tribunals to convict two of the dog handlers for assault. But no case was ever made against CACI’s men: even though one of CACI’s employees, a former prison guard named Steven Stefanowicz, was identified at trial as suggesting the use of the dogs, he has never been charged with a crime. Nor has CACI itself.

  Instead, J. P. “Jack” London, CACI’s chairman and CEO, made it his life’s mission to exonerate his company from any wrongdoing. From the moment the Abu Ghraib story broke in 2004, London fought back with a vengeance, attacking journalists who printed stories about the scandal, and generally castigating anyone who dared to suggest that CACI bore any responsibility for the abuse.* At the other extreme, London called Steven Stefanowicz, the man who helped introduce the use of attack dogs at Abu Ghraib, a model employee and praised him for doing “a damned fine job” in Iraq.

  The Pentagon, far from chastising its wayward client, continues to reward CACI: despite the unresolved issues involving CACI’s role at Abu Ghraib, the Department of Defense has awarded CACI millions of dollars in new contracts, including a three-year, $156 million contract signed in 2006 to provide IT support and training to instructors at the Army’s Intelligence School in Fort Huachuca, Arizona. The Office of the Secretary of Defense has hired CACI for two contracts, worth more than $20 million in total, to support the Pentagon’s transformation initiatives and manage its classified and unclassified computer networks supporting homeland security and the global “war on terror.”3 In a lucrative arrangement announced in December 2006, the Army placed CACI in an elite group of companies allowed to bid on $35 billion worth of IT and logistics contracts over the next twenty years.

  In his remarks to the intelligence conference,* Humphrey, who had worked as a CIA agent in Europe for more than ten years before joining CACI, was careful not to accept, or even apportion, any blame for what happened at the prison. The individuals involved in the “Abu Ghraib incidents,” as he called them, “had the best intentions.” A contractor at an internment camp is in “a very stressful situation. You’re being told you have to do this, that you’re the only one who can do this.” Contractors, he concluded, “need to settle back down to being in a supportive role.” Inside the government, “there’s a little too much right now of ‘let’s get a contractor and life is good.’ There needs to be more of a setting of a line.” To date, his speech is the most detailed and honest analysis of Abu Ghraib to come from CACI.

  I asked CACI if I could interview London or another executive about Humphrey’s allegations and the company’s work in Iraq. Jody Brown, CACI’s vice president for corporate communications, replied by e-mail. CACI, she said, could not confirm information regarding “employees, vendors, or anyone associated with the company,” and has posted a “comprehensive” report on its Web site called Facts About CACI in Iraq. “The subject you have selected for your book is interesting and quite timely,” Brown added. “As you seem to be aware, considering your interest and coverage of the company over the past two years, we provide high-value critical information technology services to the U.S. government. Our services are aligned with the nation’s highest priorities to prevail in the war on terrorism, secure our homeland and improve government services to our citizens. Most of the services we provide in this area are classified and therefore by contract we cannot discuss them.”

  What happened at Abu Ghraib, and CACI’s refusal to discuss it, stands as a kind of high-water mark for intelligence contracting. In 2006, the year Humphrey delivered his comments, the cost of America’s spying and surveillance activities outsourced to contractors reached $42 billion, or about 70 percent of the estimated $60 billion the government spends every year on foreign and domestic intelligence. Unfortunately, we cannot know the true extent of outsourcing, for two reasons. First, in 2007, the Office of the Director of National Intelligence (ODNI) refused to release an internal report on contracting out of fear that its disclosure would harm U.S. national security interests. Second, most intelligence contracts are classified, allowing companies like CACI to hide their activities behind a veil of secrecy.

  This book is an attempt to pierce that veil.

  Our story will begin with a broad overview of America’s new Intelligence-Industrial Complex, the agencies it serves, its key industrial players, and the former high-ranking national security officials who run its largest companies. After that, we’ll take a close look at Booz Allen Hamilton, one of the government’s most important contractors, and learn how retired Navy Admiral J. Michael McConnell, the former director of Booz Allen’s intelligence business, is remaking the nation’s intelligence agenda as director of national intelligence. Next, we’ll turn to the history of outsourcing in intelligence, focusing primarily on how contracting advanced during the administration of Bill Clinton and the reign of former CIA director George J. Tenet over national intelligence.

  After that, we’ll bore in on the key intelligence agencies—the CIA, the many agencies under the command and control system of the Pentagon, the National Security Agency (NSA), and the National Geospatial-Intelligence Agency (NGA). We’ll then take a closer look at the companies, such as CACI and ManTech International, that depend almost entirely on intelligence contracts for their revenues. That will bring us to domestic intelligence and the role of the private sector in the NSA’s warrantless surveillance program. In the final chapter, we’ll also look at the process of oversight in Congress, particularly as the new Democratic majorities in the House and Senate have tried to shed light on the Bush administration’s actions and the role contractors have played in them.

  Before embarking on the narrative, allow me to state a major caveat. This is a book about the business of intelligence. It doesn’t claim to be an authoritative study of intelligence under the Bush administration. Nor do I claim any special expertise in the inner working of the Intelligence Community. I leave that job to the many excellent reporters out there covering intelligence as a daily beat. But that aside, contracting provides a unique window into intelligence. By ferreting out companies and what they do, we will learn much about how U.S. intelligence operates and what the CIA, the NSA, and other agencies have been up to over the past ten years, both at home and abroad.

  1

  The Intelligence-Industrial Complex

  “We can’t spy…If we can’t buy.”

  —TERRI EVERETT, SENIOR PROCUREMENT EXECUTIVE IN THE OFFICE OF THE DIRECTOR OF NATIONAL INTELLIGENCE, IN A PRESENTATION TO A CONFERENCE ORGANIZED BY THE DEFENSE INTELLIGENCE AGENCY, MAY 14, 2007

  SOMEWHERE IN Northern Virginia, tucked inside an innocuous and unmarked office complex called Liberty Crossing, is a cavernous room loaded with high-tech communications and computer gear and staffed 24/7 by analysts and action officers from all sixteen agencies that comprise the Intelligence Community. The monitors and video screens in the room cast an eerie glow as the staffers pore through classified reports and images flowing into the room from every corner of the globe. The few reporters who’ve been allowed to enter this secure facility are sworn not to disclose its exact location. When they do talk about it, they inevitably compare it to the fictional headquarters of the Counter Terrorism Unit in the Fox hit series 24 or the mock intelligence station in The Bourne Ultimatum, the Matt Damon thriller that depicts a rogue CIA officer relentlessly pursuing a dissident agent around the world using the latest in digital surveillance and eavesdropping technology.1

  This is the National Counterterrorism Center (NCTC), the electronic hub of the U.S. Intelligence Community and the heart of the national security state established by the administration of President George W. Bush in the aftermath of Septemb
er 11. Since opening its doors in 2005, the NCTC has been the government’s central collection point for monitoring global threats to national security. Its analysts have at their disposal more than thirty separate government computer networks, each carrying more than eighty unique sources of data. As they go about their tasks, they draw on human intelligence from the Central Intelligence Agency, communications intercepts from the National Security Agency, and domestic reports from the Department of Homeland Security, the FBI, and local law enforcement agencies around the country.2

  The center’s chief product, the Threat Matrix, is a highly classified status report that forms the centerpiece of a daily eight A.M. teleconference led by the NCTC’s director, former federal prosecutor Michael Leiter. That meeting is beamed, via secure video, to the White House, the CIA, the NSA, and other key offices in and around Washington. The center also maintains the nation’s central repository of known and suspected terrorists, and compiles highly classified briefing books for the Office of the Director of National Intelligence and the White House. In the fight against terrorism, “the best asset we have is the people represented right here in this building,” President George W. Bush declared during a visit to Liberty Crossing in 2006.* Behind him in the shadows, dozens of men and women dressed in suits and military garb stood at attention next to their computer stations. It was an impressive sight, designed to convince a skeptical public that the U.S. government was drawing on all its resources to prevent another 9/11 and protect the American people.

  But it was all a charade. More than half of the people working in the center, then as now, are private sector contract employees, working not for the government but for the dozens of companies that do business with the Intelligence Community.* Most of them are employees of large defense contractors that dominate the intelligence landscape, such as Booz Allen Hamilton, Science Applications International Corporation (SAIC), BAE Systems, and Lockheed Martin. Others work for the dozens of small and medium-sized information technology companies that have crowded into Washington to feed its insatiable appetite for outsourced government services. And quite a few have walked out of the NCTC as government employees and walked back in as contract employees.