Spies for Hire

by Tim Shorrock

  SI’s top executives are all veterans of the intelligence contracting industry. Ray Oleson, executive chairman, and Walter Culver, vice chairman, previously worked in senior positions at CACI International and Computer Sciences Corporation, one of the NSA’s premier contractors. SI “defines, designs, develops, deploys, trains, operates and maintains information technology and network solutions for the Department of Defense and federal civilian agencies,” Antle told the Wall Street Transcript in 2006.65 It prides itself on its ability to bring “rapid solutions” into its customers’ hands, particularly in the area of defense transformation, where SI analysts “support the shift to net-centric warfare so our military can respond more quickly to threats across the globe.”66 Key customers include the National Security Agency, the U.S. Air Force, the Department of Homeland Security, and the Missile Defense Agency.

  Because of its high-visibility role as an adviser for the NSA, SI has filled its management team and board of directors with former high-ranking intelligence officials. Among them, as we have seen, is the NSA’s former top acquisition executive, Harry Gatanas. John Stenbit, one of SI’s directors, was appointed in 2004 after working in the Pentagon as chief information officer and assistant secretary of defense for command, control, communications, and intelligence. In those positions, Stenbit managed the Pentagon’s netcentric warfare systems used in the initial stage of the wars in Afghanistan and Iraq. He was also one of the founders of the Counterintelligence Field Activity, the controversial Pentagon intelligence unit; according to an SI press release, Stenbit played an instrumental role in linking CIFA with other intelligence agencies to “share information needed to pursue terrorists in the United States and abroad.”67 Before coming to the Pentagon, Stenbit spent thirty years at TRW, the intelligence contractor now owned by Northrop Grumman.

  Other SI directors include Maureen Baginski, the former director of SIGINT at the NSA and a twenty-five-year veteran of that agency (she’s also on the board of INSA, the intelligence association), and retired Army General R. Thomas Marsh, the former chairman of President Clinton’s Commission on Critical Infrastructure Protection and commander of the electronics division at Hanscom Air Force Base in Massachusetts, where many of the Air Force’s networking systems were first developed.

  MTC Technologies Inc.

  MTC is headquartered in Dayton, Ohio, home of the sprawling Wright-Patterson Air Force Base, one of the most important research centers in the black world of military intelligence. The company was created by a group of former Air Force officers specifically to take certain Air Force operations private. Ninety-six percent of its revenues comes from contracts with the Department of Defense and the Intelligence Community, 77 percent of those as a prime contractor. According to material distributed at the FBR investors conference, MTC commands a staff of 2, 900, including more than three hundred with the highest security clearances necessary “to work on the federal government’s most sensitive projects.” Its revenues rose significantly after the U.S. invasion of Iraq, from $189 million in 2003 to $415 million in 2006.

  One of MTC’s most lucrative contracts is with Beale Air Force Base in California, where MTC technicians and analysts schedule the flights of America’s fleet of U-2s, the surveillance warhorse known as the Dragon Lady. That is a major enterprise—MTC also trains U-2 pilots and maintains the aircraft. That takes its personnel all over the world, including Iraq, where the U-2s provide “around the clock support to warfighters in Afghanistan and Iraq.” U-2s also fly sorties out of Osan Air Base in South Korea and Taif Air Base in Saudi Arabia. The U-2 project is probably the “one US Air Force contract” that MTC executives said was responsible for 26 percent of its revenue, which rose significantly in 2005 to $373 million.

  MTC describes itself as a disciple of the Rumsfeldian techno-vision of warfare. “Today, the task of defending our Nation against war, terrorism and tyranny has changed dramatically,” it states on its Web site. “With the nature of warfighting changing, the face of battle has evolved into urban warfare against a phantom enemy.” As a result, it says, U.S. military forces in Iraq and Afghanistan have an “increasing need for real-time” intelligence, surveillance, and reconnaissance (ISR) and “joint-force sharing” of information technology. Those areas “will be beneficiaries of continued, and perhaps increased, government spending to outsource its needs.”

  Among the contracts listed in MTC’s 2004 annual report were projects to maintain and modify aircraft for the Pentagon’s Special Operations Forces as well as other specialized surveillance and attack aircraft, such as the B-2 Stealth bomber and the B-52. MTC analysts also support the White House Communications Agency in providing secure communications for President Bush when he flies on Air Force One. But MTC’s purview goes way beyond tactical intelligence; it is also deeply involved in what it calls the “strategic” agencies doing intelligence collection and analysis—the CIA, the NGA, the NRO, and the NSA.

  At Fort Meade, it provides “technical development” support for signals intelligence and helps collect and analyze the highly classified measurement and signatures intelligence known as MASINT. Its contractors serve as liaison officers from the Defense Intelligence Agency (which has jurisdiction over MASINT) to the offices of the Joint Chiefs of Staff, each Combatant Command, and the State Department. Among the “tasks and capabilities” it specializes in are psychological operations (PSYOPS), electronic warfare, imagery analyst training, and R&D coordination and execution. At the FBR investors conference, it listed growth areas as providing sensors and sensor analysis for the Predator and Global Hawk UAVs, intelligence training, and “all aspects of the Global War on Terror.”

  Unusual for an intelligence contractor, MTC was founded by a foreign-born entrepreneur. Raj Soin, a mechanical engineer raised and educated in India, moved to the United States in 1969 and founded MTC in 1984 with only $1, 700.68 Its key staffers are former Air Force intelligence officers. They include retired Brigadier General Billy J. Bingham, who runs the company’s National Security Group responsible for MTC’s intelligence contracts. Bingham capped his thirty-year career in the Air Force as deputy chief of the Central Security Service of the NSA and later served SAIC as director of its SIGINT program. The ubiquitous Ken Minihan, another retired Air Force general who was NSA director for four years, also sits on MTC’s board of directors.*

  Applied Signal Technology Inc. (AST)

  One of the NSA’s leading providers of digital signal processing products is Applied Signal Technology. Gary L. Yancey, its co-founder and CEO, spent his entire career in intelligence as a contractor, starting with the defense division of GTE Sylvania. At the FBR investors conference, he described AST as a provider of solutions for intelligence, surveillance and reconnaissance and “global security,” with a special focus on “high-tech eavesdropping.” AST is one of the purest of the pure plays: a full 84 percent of its work is with intelligence agencies, and about 90 percent of it is through sole-source contracts awarded without competition. Most of those appear to be with the NSA.

  Like the other pure plays, AST has experienced dizzying growth over the past five years. Between 2002 and 2006, its revenues more than doubled, from $76 million to $162 million. The company doesn’t lobby, but claims on its Web site to devote “significant resources” toward understanding the SIGINT needs of the Intelligence Community through “frequent marketing contact” with government contracting officials. John P. Devine, who has been an AST director since 1995, is the NSA’s former deputy director for technology and systems and, before that, was its chief of staff.

  AST’s specialty is communications intelligence, or COMINT. That is the science of collecting foreign intelligence from global telecommunications systems. The NSA and other agencies use AST equipment to scan through millions of cell phone, microwave, ship-to-shore, and military transmissions. “We select signals for further analysis,” said Yancey. This area of AST’s business is driven primarily by the global war on terror. “The political instability in
certain regions such as the Middle East, Eastern Europe, Africa, and Central and South America and the ongoing counterterrorism campaign have heightened the United States Government’s need to be able to monitor activities in foreign countries,” AST explained in its 2005 annual report.

  Another area of expertise is electronic intelligence, or ELINT, which are signals emanating from enemy weapons systems. This is an important piece of military counterintelligence carried out by NSA teams on the ground in places like Iraq and Afghanistan. U.S. agencies are turning to AST, its annual report said, because “the same countries that have political instability and terrorist activities are modifying older Soviet-deployed weapon systems as well as developing new weapons systems.” Under its government contracts, AST is investing in ELINT processors that can locate and characterize these systems. According to Yancey, the company teamed with Northrop Grumman and Lockheed Martin to place the equipment on high-altitude UAVs, which the company believes will be “the platform of choice for future ELINT missions.”

  The company also invests heavily in sensors that process imagery, heat, acoustics, and magnetic effects to help the U.S. military and the IC find and pursue terrorists. “As the counterterrorism campaign is focused on individuals and groups of individuals worldwide,” AST says on its Web site, “ISR requires ‘tip-off’ information from physical phenomena that can indicate regions where the U.S. government should concentrate its SIGINT and human intelligence (HUMINT) resources for more effective ISR.”

  Argon ST Inc.

  Argon is the successor to Raytheon’s E-Systems Inc., long considered one of the crown jewels of the intelligence industry for its production of electronic spying technologies for the CIA and the NSA. Under the leadership of CEO Terry Collins, Argon has emerged as one of the leading developers of command, control, communications, intelligence surveillance, and reconnaissance (C4ISR) for the military. “This is the fastest growing part of the Defense Department’s budget,” notes Collins, who estimates the C4ISR business as a $40 billion plus market.69 Argon has seven hundred employees, a majority of whom hold Top Secret/Sensitive Compartmented Information (TS/SCI) clearances, one of the highest available.70

  Argon had over $400 million in revenue in 2006, up from $80 million in 2003. It provides sensors and security equipment for NSA signals intelligence operations and is the dominant supplier of communications intelligence to the U.S. Navy, which accounts for 69 percent of Argon’s revenues. The COMINT equipment it deploys in submarines is used by the Navy to “prosecute and exploit adversary electronic transmissions,” the company says on its Web site. Argon also sells C4ISR equipment to the CIA, the DIA, and the National Reconnaissance Office, and in 2006 began testing equipment designed to counter IEDs in the battle-torn Iraq city of Fallujah. Its technology, Argon says, is deployed on “a broad range of military and strategic platforms,” including surface ships, unmanned underwater vehicles, UAVs, and land mobile vehicles. Its largest overseas market is the United Kingdom, where it provides “highly interoperable systems” between U.K. and U.S. naval forces.

  Argon has gone against the general trend of industry consolidation in intelligence. The origins of the company date back to the 1980s, when Collins, Argon’s CEO and chairman of its board, was an engineer with a defense contractor called Engineering Research Associates, later called E-Systems. It was a dominant supplier of electronic surveillance and warfare systems to the CIA and the DIA, working on such classified projects as upgrading the P-3C antisubmarine patrol plane. E-Systems was acquired in 1996 by defense giant Raytheon, which “imposed a steely corporate environment” on the unit, according to an account in Washington Technology.71 That didn’t sit well with Collins and several other associates at the company, so they struck out on their own in 1997 to form Argon Engineering. In 2004, the company merged with a smaller company that developed SIGINT systems and sensors for the intelligence community and was renamed Argon ST. (It seems just a matter of time until Argon and the other pure plays are snatched up by one of the big defense contractors; as we’ve seen time and time again, small-to medium-sized companies that know how to make money in this business have a limited life as independent entities.)72

  Most of Argon’s board members are former executives with Raytheon E-Systems. But in recent years, Collins has brought in two prominent intelligence veterans to serve as directors. One of them, Peter Marino, is the chairman of the NGA’s National Advisory Board and worked previously at E-Systems and the CIA, where he was director of the Office of Technical Services. Marino also sits on an intelligence task force of the Defense Science Board, a group of experts who provide technical advice to the Pentagon, and is co-chairman of the CIA’s Senior Advisory Group. Another new Argon director, Maureen Baginski, worked twenty-six years for the NSA, where her jobs included lead analyst for the Soviet Union and SIGINT director. As we saw earlier, she is also affiliated with SI International and INSA.

  As a result of appointments like these, Argon and its fellow pure plays are well placed to expand their business in the Intelligence Community. One area where their technology has been particularly useful is the analysis and interpretation by the NSA of the millions of telephone calls, e-mails, and Internet messages traveling through the U.S. communications system. That new form of communications intelligence and its close alliance with private sector telecommunications and IT providers is the subject of the next chapter.

  9

  The Rise of the National Surveillance State

  TEN DAYS BEFORE Christmas in 2005, the New York Times ignited a political firestorm. In a front-page story that had been over fifteen months in the making, it revealed that the National Security Agency, under a secret directive signed by President Bush in October 2001, was monitoring thousands of international phone calls, e-mails, and fax messages involving U.S. persons without obtaining warrants from the secret foreign intelligence court established by Congress in 1978 to protect Americans from abuse by the Intelligence Community. Within twenty-four hours, President Bush confirmed the story, which up to that point was known only to a few administration officials and a handful of lawmakers allowed to share the nation’s most secretive operations. In a live radio address from the White House, Bush explained that, in the aftermath of September 11, he had authorized the NSA to “intercept the international communications of people with known links to Al Qaeda and related terrorist organizations.” He argued that the NSA’s actions were legal under the considerable powers granted to him under the Constitution and the congressional resolution approving the use of force in Afghanistan and authorizing the president to take military action against the perpetrators of the 9/11 attacks.

  Air Force General Michael Hayden, the deputy director of national intelligence and the former director of the NSA, made a highly unusual appearance at the National Press Club a few weeks later to reassure the public that the program was lawful and narrowly focused. “This is hot pursuit of communications entering or leaving America involving someone we believe is associated with Al Qaeda,” he said, delivering a line that the NSA and the Bush administration stuck to with almost religious conviction for the next two years.1 By January 2006, the program had been given a name: the Terrorist Surveillance Program. Between 2001 and 2007, Bush reauthorized the warrantless program more than thirty times, and finally ended it in January 2007, when U.S. Attorney General Alberto Gonzales announced that NSA surveillance would henceforth be returned to the supervision of the court established by the 1978 Foreign Intelligence Surveillance Act. The surveillance program, a Department of Justice lawyer disclosed during a 2007 court hearing on a privacy lawsuit against AT&T, remained classified at “the top secret/SCI level beyond those of top secret.”2

  Aside from the intrusive nature of the NSA’s eavesdropping and wiretapping programs, the primary reason for the secrecy was the critical role played in NSA surveillance by the nation’s largest telecommunications companies. Since the moment the NSA began listening in to telephone calls in which one party, whether
in the United States or overseas, was suspected to be associated with Al Qaeda, carriers including AT&T and Verizon reportedly granted to the NSA complete access to their powerful switching systems that connect international telephone and Internet networks to the U.S. domestic communications system. This allowed the NSA to tap “directly into some of the American telecommunications systems’ main arteries” carrying telephone conversations, e-mail communications, and Internet postings, New York Times reporters Eric Lichtblau and James Risen concluded in one of their lead stories on the NSA’s intelligence-gathering program.3 Thanks to Director of National Intelligence Mike McConnell, we now know this for a fact. In August 2007, McConnell disclosed what the administration and the industry had been trying to hide for seven years: that the private sector was deeply involved in the NSA’s monitoring of domestic and international phone and Internet traffic. “Under the president’s program, the terrorist surveillance program, the private sector has assisted us,” McConnell declared in an interview with the El Paso Times during an intelligence conference in that city.4 “Because if you’re going to get access, you’ve got to have a partner.”

  McConnell’s apparent motivation for breaching what had until then been considered a state secret was to make the case for giving the companies that assisted the NSA immunity from the more than two dozen lawsuits they faced for violating privacy laws and FISA. “Now if you play out the suits at the value they’ve claimed, it would bankrupt those companies,” McConnell said. “So my position was we have to provide liability protection to these private sector entities.” As this book was going to press, Congress was still debating McConnell’s—and the Bush administration’s—audacious request to grant after-the-fact immunity to the telecom giants. “Those in the private sector who stand by us in times of national security emergencies deserve thanks, not lawsuits,” McConnell pleaded in December 2007 in an article strategically placed in the opinion section of the New York Times. He approvingly quoted the Senate Intelligence Committee, which had endorsed his proposal, and declared that the “possible reduction in intelligence that might result” from a delay in granting immunity “is simply unacceptable for the safety of our nation.”5 The nation’s very security was at risk, he was saying. A month later, Vice President Cheney laid out the stakes for the administration. Without liability protection for the telecommunications companies, he told the Heritage Foundation, “our ability to monitor Al Qaeda terrorists will begin to degrade, and that we simply cannot tolerate.”