by Tim Shorrock
Many of Tenet’s closest aides at the CIA have gone into business as well. Joan A. Dempsey, who was Tenet’s representative to the rest of the IC as the CIA’s director of community management, is now a vice president of Booz Allen Hamilton, where she works with another former CIA director, R. James Woolsey. Another Tenet aide who’s gone into the intelligence business is retired Air Force General John A. Gordon, the CIA’s deputy director from 1996 to 2000. He is an adviser to Abraxas, a Virginia contractor that became notorious in the CIA for recruiting new employees in the CIA cafeteria, and a director of Detica Inc., a British defense and intelligence contractor that has rapidly expanded its U.S. business over the past two years.*
Connections with the private sector are especially close at the NSA, where outsourcing has grown rapidly since the late 1990s. Retired Admiral Mike McConnell went directly from his director’s post at the NSA to Booz Allen, and has now jumped back to the government as director of national intelligence. Retired Air Force Lieutenant General Kenneth A. Minihan, McConnell’s predecessor at the NSA, is now a member of the board of directors of six major intelligence contractors, including ManTech International, BAE Systems, and MTC Technologies Inc. Another former NSA director, William O. Studeman, was vice president of Northrop Grumman from 2002 to 2005, and Barbara McNamara, a former deputy director, is on the board of directors of CACI International. Essex Corporation, an important NSA contractor we will meet in Chapter 6, was founded and almost entirely staffed by former NSA officials and scientists.
Being part of the revolving door doesn’t necessarily require support for the war in Iraq. Richard L. Armitage, who was deputy secretary of state during the first four years of the George W. Bush administration, is a stellar example. Armitage is best known as the “nonpartisan gunslinger”* who accidentally leaked the fact that Valerie Plame, the wife of Iraq war critic Joseph Wilson, was working undercover for the CIA. After 9/11, he was Colin Powell’s closest ally during the bitter disputes inside the Bush administration over the war. His opposition to Bush’s policies, however, hasn’t stopped him from cashing in on his government service.
A few months after leaving the State Department in 2005, Armitage joined the board of directors of ManTech International, an important intelligence contractor that has an extensive presence in Iraq and Afghanistan. Previously, during the 1990s, he’d served on ManTech’s advisory board and was also on the board of directors of CACI International, a key ManTech competitor in the market for outsourced intelligence services. More recently, Armitage—who earns most of his income from his eponymous consulting firm—has become active in private equity funds, which provide much of the venture capital for intelligence start-ups. From 2005 to 2007, Armitage was on the Defense and Aerospace Advisory Council of Veritas Capital, which owns DynCorp International and several other military and intelligence contractors. In 2007, he joined the advisory board of DC Capital Partners, a defense-and intelligence-oriented buyout firm with some $200 million in assets. One of its first acquisitions after Armitage came on board was Omen Inc., a Maryland company that provides IT services to the NSA; the fund has since combined Omen with two other acquisitions to form a new company called National Interests Security Company LLC, which will have more than 350 employees, many of them with top secret or higher security clearances.28*
In all of these positions, Armitage is in good company. ManTech’s board includes two former high-ranking intelligence officials: Richard J. Kerr, a thirty-two-year veteran of the CIA, where he last served as deputy director; and retired Vice Admiral David E. Jeremiah, the former vice chairman of Colin Powell’s Joint Chiefs of Staff, who now sits on the President’s Foreign Intelligence Advisory Board and is a paid adviser to the National Reconnaissance Office. At DC Capital, his fellow advisers include Jeffrey Smith, the CIA’s former general counsel. And at Veritas Capital, he rubbed shoulders with retired Army General Barry McCaffrey and retired Marine Corps General Anthony Zinni.
Former high-ranking officials bring tremendous value to a government contractor seeking new work or a private equity fund looking for companies to buy. “You understand the decision-making process inside the Beltway, and that is liquid gold,” said Roger Cressey, who worked in President Clinton’s National Security Council as deputy director of counterterrorism and is now a partner in Good Harbor Consulting, a company he founded with his former boss at the NSC, Richard Clarke. Cressey, who is a terrorism consultant for NBC News, adds that the influence of a retired official lasts only a limited period of time after he or she leaves office. “You have eighteen to twenty-four months to translate your Rolodex into real services,” he told an intelligence conference in 2005.29
But the value of a CIA director or national security official goes much further than a Rolodex. Because high-ranking officials have been privy to classified and top secret information for years, they have details about intelligence programs, covert operations, and the internal affairs of other countries that few others can claim. George Tenet, for example, has extensive inside knowledge about intelligence services in Saudi Arabia, the United Kingdom, and Pakistan, as well as secret U.S. operations in Iraq, Afghanistan, and Somalia; that would be extremely useful information for companies hoping to win contracts from the CIA, the NSA, and other agencies working in those countries.
Booz Allen’s Joan Dempsey received some of her early training as a naval intelligence officer listening to Soviet bomber and submarine traffic at Misawa Air Base in Japan, a key NSA listening post. During that time, she told an industry reception in 2004, her agency fought “huge battles” with the NSA over information sharing. Her Naval Security Group, she said, “wanted to get near real-time intelligence we were collecting on the Soviet fleet out to our naval battle groups operating in the Pacific, but NSA felt that dissemination would put its sources at risk. That was my first experience with data owners believing that controlling intelligence was more important than using it.” Experiences like that would be valuable to Booz Allen, where Dempsey advises the Office of the DNI on these very issues.30
Moving back and forth between industry and government is a long tradition in Washington, and perfectly legal: the only restriction senior government officials face in accepting private sector employment is a one-year prohibition from contacting their agency. But that, many analysts say, is a thin reed of protection for a public concerned about undue influence on the political process. “The way they get around some of this is, you don’t get hired, you go on the board,” says Lawrence Korb, a former assistant secretary of defense with the administration of Ronald Reagan. When someone is placed on a board of directors, Korb explains, “you don’t even need the lobbying restriction because, theoretically, you’re not working for the company, you’re on the board.”31
Inside the industry, former high-ranking officials like Tenet and Dempsey are seen as rainmakers—that is, as people with the knowledge and contacts to bring in contracts from government agencies. The key to understanding contracting, I was told, is that it’s not about agencies contracting with a company so much as an agency contracting with an individual they know and trust; in a sense, the company is irrelevant. “Contracting officers contract with individuals,” said R. J. Hillhouse, who studied the intelligence contracting industry for several years in preparation for writing her espionage thriller, Outsourced. “When that person moves, his contract niche moves with him, unless overridden by a boss who likes someone else better. So it’s not about favoring large or small companies, but which ones are able to attract a rainmaker.”32
An industry insider described to me how the system worked. “To compete and win, the primes hire former top government and military officials in business development roles,” said the insider, who spoke to me in May 2007 on the condition of anonymity. “That’s how the game is played. It’s all about relationships. Without them, any government contractor will go out of business, no matter how good its product or service is. Tenet was not hired by a contractor because he’s smart. He was h
ired because he still has relationships, influence, access, and favors to call in.” (Tenet, through a spokesman, declined to comment, and his co-author and spokesperson, Bill Harlow, told me all of Tenet’s business ties “were a matter of public record.”)
As we’ll soon see in Chapter 3, intelligence contracting is best understood as part of the federal government’s embrace of outsourcing and the Pentagon’s use of private firms to carry out some of the tasks of war fighting and empire building. Intelligence “is like everything else,” says David Isenberg, an independent national security analyst who has closely studied the phenomenon of military contracting. “In the new, slimmed-down post–Cold War military, the phrase of art is, we will concentrate on our core competencies, and anything other than firing an artillery round, firing a tank, firing an M-16, or dropping a bomb is not a core competency. Everything else is up for grabs.”33
The fruits of that philosophy can be seen most clearly in the Middle East. Over the past six years, corporate names such as Halliburton, Bechtel, and Blackwater have become as familiar to the public as the mountain villages of Korea and the jungle hamlets of Vietnam were to earlier generations of Americans. In Iraq and Afghanistan, the enormously complex job of nation building was outsourced to these and other large U.S. corporations—a practice that would have been unthinkable during the postwar occupations of Japan and Germany, which were planned years in advance.
And as the war intensified in Iraq, escalating into a full-blown insurgency in 2003, the Pentagon turned to private military companies to provide basic security to U.S. diplomats and the contractors supporting the occupation. Today, more than 180, 000 civilians, including Americans, foreigners, and Iraqis, are working in Iraq under contract to the U.S. government, compared to 160, 000 U.S. soldiers, and a few thousand civilian government employees.34 In September 2007, in a notorious incident that underscored the dangers of relying on private security forces, a squad of armed security guards working for Blackwater USA opened fire on a car carrying civilians in downtown Baghdad, killing nearly two dozen people.
Meanwhile, back on the home front, the government has relied on contractors to manage everything from hurricane relief to border security. Some of the same companies hired by the Bush administration to rebuild Iraq’s infrastructure were sent by the Department of Homeland Security to rebuild New Orleans and the Gulf Coast after Hurricane Katrina; neither plan succeeded, and both were suffused with cost overruns and corruption. The big defense contractors that build and operate classified IT systems for the Intelligence Community provide the same products and software for the Department of Homeland Security, which spends more than half of its $42-billion budget for outsourced services.
By 2007, contractors were so ubiquitous in Washington that they had become a virtual shadow government, and the total number of contracts was valued at $400 billion a year—more than double what it was in 2000. Even the government’s online database for tracking contracts, the Federal Procurement Data System, had been outsourced.35 With 40 percent of the federal workforce expected to retire between 2007 and 2012, contractors believe that these trends could continue almost indefinitely. The government “must outsource as a means of survival,” Kenneth C. Dahlberg, SAIC’s chairman and chief executive, assured investors in a 2007 conference call. Because the federal government “must deliver safety to the people,” Dahlberg added, the market for government outsourcing is likely to increase 3 to 5 percent a year well into the decade.
The recent big surge in intelligence contracting was fueled by record spending on national security programs after September 11, 2001. The Bush administration and Congress, determined to prevent further terrorist attacks, ordered a major increase in intelligence spending and organized new institutions to fight the war on terror, such as the NCTC. To beef up these organizations, the CIA and other agencies were authorized to hire thousands of analysts and human intelligence specialists. Partly because of budget and personnel cuts made during the 1990s, however, many of the people with the skills and security clearances to do that work were in the private sector. As a result, contracting grew by leaps and bounds as intelligence agencies rushed to fill the gap.
Timothy R. Sample, a former CIA case officer and the executive director of the Intelligence and National Security Alliance, blames decisions made by the George H. W. Bush and Bill Clinton administrations for that gap. “After the Cold War, we as a government decided, wrongly I think, to build down our intelligence capability, and we have yet to recover from that,” he says—a view shared by many of his colleagues. “So when people get excited and react to the level of contracting within the IC, they tend to forget that, especially post-9/11, the major issue was speed,” he adds. “After 9/11, where do you go? You go to where that expertise resides when government decided it didn’t need you anymore, and that’s within industry. So I have a hard time with the concept that massive contracting for intelligence is a problem.”36 (Sample speaks from experience: he left the CIA to take a job with General Dynamics Information Technology, a major CIA contractor.)
But technology played a crucial role as well. By the 1990s, commercial developments in encryption, information technology, imagery, and satellites had outpaced the government’s considerable efforts in these areas, and intelligence agencies began to turn to the private sector for technologies they had once created and developed in-house. “At the end of the day, outsourcing ended up being a reaction to the reality of the marketplace,” says Stan Soloway, the executive director of the Professional Services Council, the primary lobby for federal contractors. “Over the last thirty-five years, the ownership of technology has changed almost entirely in this country, from primarily government-driven and government-run, to privately created and privately owned. When that happens, the workforce and the skill sets typically go with it. If you wanted to do development science in the old days, you’d go to NASA or the Defense Department. Now you can go to any one of hundreds of R&D firms around the country.” The government, he says, is “now competing in the open market for talent with everybody else.”37
But, as we shall see, the problem with this “open market” is that contractors, whether in intelligence, defense, or homeland security, owe their allegiance to their company, and not the taxpayer. “There’s something civil servants have that the private sector doesn’t,” David M. Walker, the comptroller general of the United States, told the New York Times in an extraordinary interview in 2007. “And that is the duty of loyalty to the greater good—the duty of loyalty to the collective best interest of all rather than the interest of a few. Companies have duties of loyalty to their shareholders, not to the country.”38
Ironically, the Intelligence Community, one of the government’s largest users of contractors, has reached the same conclusion. Among the many slides posted by the Defense Intelligence Agency during its May 2007 conference on acquisition was one titled “Government Employee vs. Contractor Employee.” Two items were high on the first list: people working for the government, the DIA said, had a “fiduciary obligation to serve the public good” and “no profit motive.” In contrast, contractors have a “fiduciary duty to [their] employer only,” and operate out of a “profit motive.” At a time when the Intelligence Community is under fire for politicizing intelligence, those are critical differences.
“It’s hard enough for a government analyst to tell it like it is and be just one step removed from the president,” says Raymond McGovern, a twenty-seven-year veteran of the CIA’s analytic division who once delivered the CIA’s daily briefing to President George H. W. Bush. “But think how much more difficult it is for an analyst who’s working for Booz Allen Hamilton or SAIC. There’s pressure there; there’s much more freedom for people to tailor their analysis to something they think the contracting officer would like.” The problem with outsourcing is simple, he says: “Contractors are in it for the money.”39 If that is the case, few companies have been as skilled in profiting from intelligence as Booz Allen Hamilton. That’s
where we begin our story.
2
Booz Allen Hamilton and “The Shadow IC”
WHEN MIKE MCCONNELL was appointed by President George W. Bush as the director of national intelligence in January 2007, he appeared to be the ideal candidate to replace John Negroponte, the first DNI, a diplomat more accustomed to the public art of statesmanship than to the dark and dirty worlds of espionage and surveillance. In contrast, McConnell’s spying credentials were impeccable: for five years during the Clinton administration, he had been the director of the National Security Agency and, before that, had served as Colin Powell’s chief intelligence officer when Powell headed the Joint Chiefs of Staff during the first Gulf War. McConnell had also worked closely with Vice President Dick Cheney during his earlier incarnation as secretary of defense, and Cheney, President Bush’s viceroy for intelligence matters, had played a critical role in his appointment as DNI.
Part of McConnell’s attraction to Cheney was his background in military operations. McConnell had devoted his career to expanding the reach of intelligence to front-line soldiers, and was perfectly aligned with the Pentagon’s strategy to harness the NSA and the other national collection agencies in providing overhead imagery and signals intelligence to war-fighters on the ground in Iraq and Afghanistan. The admiral’s martial background won strong praise from President Bush, who introduced McConnell to the nation as a man with “decades of experience ensuring that our military forces had the intelligence they need to fight and win wars.”1 Bush further noted that his new DNI had “worked with the Congress and with the White House to strengthen our defenses against threats to our information systems,” and said McConnell would offer “the best information and analysis that America’s intelligence community can provide.” Intentional or not, however, the president failed to mention the most significant part of the retired admiral’s experience.
