Orbit of Influence: Spy Finance and the Black Budget

A spy satellite silently drifting across suburban Virginia and Maryland would
count hundreds of buildings that are part of the vast and mostly hidden
"intelligence-industrial complex." It is a network that stretches from coast to
coast and around the world, reaching far into space and deep under the oceans.
Although it is administered by government officials, this complex is
engineered, manufactured, deployed, and maintained by private industry. Around
Washington, from Reston and Tysons Corner, Virginia, to Columbia and Fort
Meade, Maryland, the intelligence-industrial complex generates tens of billions
of dollars a year in profitable government contracts that go to a handful of
big contractors and scores of smaller subcontractors--with a grateful flowback
of campaign funds from industry to compliant congressmen.

Certainly there is a legitimate place for secret intelligence operations in the
modern state. But political circumstances might suggest that this complex, like
other government-dependent industries, is due for serious downsizing. With
President Clinton and Congress desperate for budget cuts, the intelligence
community has offered a steady stream of embarrassing scandals, from the
Aldrich Ames affair to the reports that the CIA and the Defense Intelligence
Agency hired alleged psychics for what the agencies called "remote viewing."
This January, a congressional investigation revealed that the National
Reconnaissance Office (NRO), a supersecret agency whose existence was publicly
acknowledged only a few years ago, lost track of a $2 billion slush fund
because it was so highly classified even top intelligence officials had no
control over it.

But if the recent past is indicative, even losing $2 billion may not be enough
to incur the wrath of federal spendthrifts. In 1995, while the intelligence
community was still reeling from the Ames scandal and budget savings were in
short supply, the White House and Congress quietly agreed on an uneasy freeze
in the intelligence budget, leaving spending about where it was: around $28
billion. (Republicans in Congress, who initially pushed for an increase,
settled on the status quo while promising a substantial hike next year). And,
while the $28 billion figure represented a 20 percent fall from peak spending
levels in 1987, the intelligence budget stands fully 50 percent higher (in
adjusted dollars) than it was in 1980, at the height of the Cold War. Post-1987
cuts in spending derived almost entirely from the elimination of spy systems
targeted exclusively against the territory of the former Soviet Union.

Despite the utility of expensive satellite reconnaissance systems and listening
devices, such as the ones that helped mapmakers in the Bosnian peace accords,
there is a strong argument to be made that the cash outlays for the
intelligence community's space program could be radically reduced. But these
expenditures are sustained by a voracious military appetite for ever greater
quantities of intelligence data--and, equally important, by the power of
lobbyists and campaign money. Only a select handful of legislators and their
staff members are privy to the intelligence appropriations process. In this
cozy, cloistered world the members are the frequent beneficiaries of donations
from--and frequent targets of lobbying by--intelligence contractors. Both
within the intelligence bureaucracy and congressional oversight committees,
staffers routinely work hand in glove with industry lobbyists, often in the
explicit hope that "playing ball" with the contractors will pave the way for
private employment down the road.


BOYS AND THEIR TOYS

Despite the James Bond-inspired romantic notions of intelligence
agencies, and despite the widespread belief that the CIA and other intelligence
agencies spend most of their time and money on covert operations, such
activities account for only 1 percent of the intelligence budget. Much of the
rest--amounting to tens of billions of dollars--pays for high-technology
satellites, electronic eavesdropping devices, staggering arrays of ground
processing stations, and vast computer systems. And behind each one of those
high-tech gizmos stands a contractor.

Some of these companies are familiar; some are known only to insiders. The
biggest ones, who build and maintain the costly satellites and other systems,
can be counted on one's fingers: Lockheed Martin, TRW, Rockwell, Hughes,
Boeing, E-Systems, General Dynamics, and McDon nell Doug las. John Pike, a
Federation of American Scientists analyst who has studied the U.S.
intelligence-industrial complex, marvels at the scope of their presence.
Standing over a table and pointing at a map, Pike highlights the contractors
scattered around Westpark, in Tysons Corner, Virginia, just down the road from
CIA headquarters. "Here's TRW, Unisys, and Wang," he says. "And over here is
PRC, Honeywell, GTE Spacenet, MCI, BDM, Data General, PSI, and MITRE Corp."

It's not just this geographic clustering that gives these companies an in with
the intelligence bureaucracy. Driv ing through the same area with a former CIA
officer offers a sense of how close the agencies and contractors have become:
"Right over here, in that building, is where I went to get training in
intelligence tradecraft," he says, pointing to one of the odd-looking unmarked
build ings around the Westpark-Westgate complex. These companies, in other
words, do not merely supply the intelligence community with equipment; they
have become its surrogate support system.

Like most private-public partnerships, this one has spawned its own version of
the revolving door that allows the contractors to cultivate networks of
influence. Many senior and mid-level intelligence people hope to win
high-paying jobs working for the contractors when they leave their agencies,
and the opportunities for such employment are vast. The CIA's own 4,000
intelligence analysts are dwarfed by the more than 40,000 analysts who work for
private companies that have government intelligence contracts. "When I was at
the CIA ten years ago, it was understood that if you played ball with the
contractors, you would get a $250,000 job when you left," says Robert Steele, a
former Marine and CIA clandestine-services officer who is a prominent critic of
the way U.S. intelligence is organized. "I think the price has come down to
$125,000."

Another factor improving the contractors' standing within the
intelligence community is the pro-technology sensibility of the bureaucracy's
current leadership. Perhaps more than at any other time in their history, the
CIA and the Pentagon today are guided by leaders who are nearly religious in
their devotion to high-tech intelligence systems, and who come directly out of
industry.

Before becoming CIA director, John Deutch, a chemist from the Massachusetts
Institute of Technology who had been appointed to a number of U.S. intelligence
advisory boards, served on the board or a corporate committee for a wide range
of defense and intelligence contractors. They included Martin Marietta, TRW,
United Technologies, the MITRE Corporation, and SAIC, where he was paid
hundreds of thousands of dollars. It was enough money that upon taking his
Pentagon job in 1993, Deutch, like Defense Secretary William Perry, had to
receive a special conflict-of-interest waiver from then-Defense Secretary Les
Aspin.

Perry's involvement with the industry also spans the decades. Thirty years ago
Perry, a mathematician, built a company called ESL Inc., which was a pioneer in
software technology for spy satellites and electronic eavesdropping equipment.
In 1978 Perry sold ESL Inc. to TRW, which is today a major NRO contractor.
Around that time, Perry won for himself the nickname "Godfather of Stealth,"
for his role in advancing the work on the radar-evading technology while he
served as chief of the Pentagon's research and engineering work. After Ronald
Reagan's 1980 win, Perry stayed on as a top aide to Caspar Weinberger at the
Defense Department.

Together, Perry and Deutch--along with Paul Kaminski, the undersecretary of
defense for acquisitions and technology--own part of a small but significant
intelligence contractor, Cambridge Research Associates of McLean, Virginia. The
troika denies any conflict of interest: A Pentagon spokesperson says that the
officials' financial involvement with the firm had nothing to do with recent
Pentagon and intelligence-community contracts won by Cambridge, which won
plaudits for a "virtual reality" system for creating images of Bosnia from
satellite surveillance data. But the revolving door around which Deutch and
Perry circulated, crossing back and forth from the contracting world to U.S.
officialdom, seems at the very least to have helped protect the intelligence
budget from the kind of scrutiny other programs have received. And it means
that the intelligence-industrial complex has been able to present a mostly
united front when it approaches Congress for its annual appropriation, except
perhaps for the rivalry among contractors for the intelligence dollar.



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DOLLARS FOR DEVICES

What cements the relationship between government and contractor, of
course, is the steady stream of campaign contributions to the members of
Congress with jurisdiction over the intelligence budget.

Florida's Tenth Congressional District provides a prime example. Curled around
Tampa Bay like a sleepy iguana, the Tenth is home to C.W. "Bill" Young, a
65-year-old Republican who is currently a senior member of the House Permanent
Select Committee on Intelligence (HPSCI). Originally known as a retirement
enclave, the Tenth today encompasses a thriving base of intelligence-industrial
firms, including Lockheed Martin, E-Systems, and Honeywell.

According to figures compiled by the National Library on Money and Politics,
since 1989 Young has pulled in more than $135,000 from the relatively small
number of companies' PACs that make up the industrial base of the intelligence
community. That total includes $29,000 from Lockheed Martin and another $24,750
from E-Systems, a highly secretive Texas-based firm that derives about 80
percent of its $3 billion annual sales from contracts with the U.S.
intelligence community.

Young, a staunch defender of a strong U.S. military, also draws mightily from
the rest of the defense industry's PACs. In just the 1993-94 cycle, even before
the Republican majority had seized control of Congress, Young drew more than
$66,000 from defense PACs, including $14,750 from Lockheed Martin and $8,000
from E-Systems. Lobbyists for the biggest players among the intelligence
contractors are frank about the role played by campaign money. "The name of the
game in Washington has become more and more big money for senatorial and House
campaigns-- and contractors feel they have to be competitive," says a lobbyist
for one big satellite manufacturer. In a sentiment expressed nearly unanimously
by lobbyists, staffers, and legislative experts, the general pattern of
campaign giving by virtually every company means that the individual
contributions tend to cancel each other out when it comes to competitive bids.
Yet whether or not that was true of the past, the future promises to be
different, thanks to the consolidation of Lockheed, Martin Marietta, and Loral
into the mega-contractor Lockheed Martin.

Builder of billion-dollar spy satellites and launchers, the Bethesda-based
Lockheed Martin is by far the nation's largest intelligence manufacturer,
absorbing all by itself more than half of the estimated $7 billion budget for
the National Reconnaissance Office, according to a former senior intelligence
official. Within the intelligence manufacturing community Lockheed Martin is
also the most generous financier of congressional campaigns. Among the top ten
defense-related political action committees during the 1993-94 cycle,
Lockheed's ranked first with $592,000, Martin Marietta's second at $530,000,
and Loral's ninth with $273,000 in campaign contributions. Together, the
Lockheed-Martin-Loral combination would have totalled $1,395,000 in PAC
spending, more than three times the size of its nearest rival, General
Dynamics, and dwarfing its rivals among suppliers to the intelligence
community.

A lobbyist for one of the company's rivals says nervously. "If you look at
Lockheed Martin's PAC, now with Loral, they could probably afford to give
everybody in the Congress $10,000 [the maximum allowable under federal law]."
His estimate is slightly exaggerated: Lockheed Martin theoretically could
afford to give the maximum $10,000 to only 139 members. But that's still more
than enough to cover the handful who are privy to the intelligence
appropriations process.


CARDINALS OF THE CAPITOL

Like several of the members of the House Permanent Select Committee on
Intelligence, Florida's Bill Young plays an important role in a related House
committee that deals with national security issues. As chairman of the National
Security Subcommittee of the House Appro priations Committee, Young is one of
the so-called "cardinals" that wield power over the federal budget--and help
shepherd the $28 billion intelligence budget through the rest of the Congress.
Young's colleagues on the subcommittee are Jerry Lewis, a California Republican
whose 40th District includes an air force base and the China Lake Naval Weapons
Center, and Norm Dicks, a Washington Democrat who--like Senator Henry "Scoop"
Jackson before him--is widely seen as Boeing's representative in Congress.
Parallel to the presence of Young, Lewis, and Dicks on the appropriations
subcommittee, two other members of the HPSCI serve on a second related
committee, the House National Security Committee and its Sub committee on
Military Research and Development: Republicans Robert Dornan of California and
James Hansen of Utah.

Out of the 435 members of the House of Representatives, only this handful--the
16 members of the HPSCI and a small group on the appropriating and authorizing
subcommittees--is allowed into the charmed circle that is given information
about the supersecret, classified programs that make up the NRO, NSA, and other
U.S. intelligence agencies. "It's a small community," says a senior lobbyist
for one of the largest members of the intelligence-industrial fraternity. "I
know every one of the intelligence staffers, and the related appropriations
staffers."

Secrecy limits the circle of players on the industry side, as well. Lobbying on
intelligence programs is so highly classified that in some of the companies'
Washington representatives' offices, not even the lobbyists themselves are
cleared to have access into the highly secret nature of the classified
programs. At Rockwell, for instance--a company so closely identified with the
intelligence community that the controversial new Virginia headquarters of the
NRO was initially disguised as a Rockwell facility--lobbyists can only usher
specially cleared company officials in to meet with congressional oversight
staffers, and then they have to leave the room.

Lobbyists for Lockheed Martin, E-Systems, Rockwell, and TRW agree that because
intelligence issues are so complicated, the staff exerts unusual influence with
the members, a fact that inevitably strengthens the industry's hand. According
to Robert Kohler, a longtime CIA official who is now a vice president at TRW,
in recent years direct contacts between contractors and Hill staffers have
increased, further entrenching the lobbyists in the budget process. "There was
a time when contractors were not allowed to talk to the committees, by those of
us in the government," says Kohler. "When I was working on this stuff, I would
not have allowed one of my contractors in there. . . . Now, every contractor in
the world goes down there and tells his story--and guess what? An awful lot of
those stories don't have to do with the national need."

A small number of staffers, a tiny handful of lobbyists, plus a big bundle of
PAC contributions and behind-the-scenes lobbying on programs whose very
existence is closed to the public--that is a formula for sustaining bloated
intelligence spending well into the next century.


FROM LOCKHEED WITH LOVE

A recent debate over spy satellites was indicative of the relationship
between lobbying and budget-making. Although much of the story remains shrouded
in secrecy, sources on Capitol Hill say the crux of the dispute was whether to
begin building smaller surveillance satellites. For years, the intelligence
community had been relying on "large-platform" satellites--30,000-pound
behemoths that could carry extensive imagery and eavesdropping systems.
Recently some staffers and experts had begun advocating investment in smaller
satellites--in the 2,000- to 3,000-pound range--that were less expensive,
easier to launch, and more maneuverable once in space.

Enter once again Lockheed Martin, the primary contractor for building the
larger satellites. According to staffers on various oversight committees,
Lockheed Martin lobbied heavily against the switch. "Right now, Lock-Mart's
kind of got the big satellite market sewn up, whereas if you are talking small
satellites, all kinds of other people would like to build those puppies," says
John Pike. "You buy this stuff by the pound. And you're going to be paying less
money for a 2,000- or 3,000-pound small satellite than you are for one of these
30,000-pound Battlestar Galacticas."

Making the case for Lockheed Martin was Norm Augustine, a longtime Washington
insider. A confidant of CIA directors, secretaries of defense, and other
officials, Augustine was actually mentioned as a possible successor to former
CIA Director James Woolsey (himself an ex-director of Martin Marietta) who
resigned in 1994. That move never panned out, but Augustine remains close with
Deutch, who like Augustine began his career working for McNamara in the 1960s
Pentagon.

Of course, it wasn't just Augustine's own cachet that got attention on Capitol
Hill. Perhaps by coincidence--perhaps not--the districts with members of the
House Permanent Select Committee on Intelligence overlay with almost artistic
perfection on top of a map of states in which Lockheed Martin has facilities.
More than half of the committee--10 out of 17 HPSCI members during 1995--come
from the three states where Lockheed Martin has its largest concentrations of
plants: California (4 members, 27,600 Lockheed Martin workers), Texas (3
members, 19,500 workers), and Florida (3 members, 15,500 workers). Four other
members come from states where Lockheed Martin has a very large presence: New
Mexico, Colorado, New Jersey, and Pennsylvania.

And, finally, there is Newt Gingrich. Just outside Speaker Gingrich's district
in suburban Atlanta, in the neighboring district of freshman Republican Bob
Barr, is a huge Lockheed Martin plant employing some 12,500 people. Since the
earliest days of his career, Gingrich has had a close relationship with
Lockheed Martin--so close, in fact, that Lockheed Martin officials say they are
worried his ties to the company may become a liability. "I would say that Newt
Gingrich becoming speaker, and a very controversial one, was not helpful to
Lockheed," says a Lockheed Martin source. "He becomes a lightning rod, and some
people, particularly Democrats, would like to embarrass him, would like to cut
off programs because of him. We wanted to downplay any relationship between the
speaker and Lockheed."

But at the start of the 104th Congress, in January 1995, Gingrich took steps to
insure that he would be in a position to defend Lockheed Martin and the
intelligence-industrial complex. Breaking with tradition, Gingrich named
himself as ex officio member of the HPSCI, thus ensuring that he and his staff
would have more than a casual acquaintance with intelligence policy.

According to HPSCI staffers, Gingrich was not a passive player during 1995,
often involving himself in the intricate details of the intelligence-community
authorization process. Not only that, but since the HPSCI is a select
committee, all of its members were handpicked by Gingrich, and they serve at
his pleasure. (One demonstration of this power came in 1995, when Gingrich
threatened to remove HPSCI Chairman Larry Combest, a Texas Republican, from the
committee leadership because of a dispute over agricultural policy.) Sources
close to Gingrich say that he chose members who would favor increased
intelligence spending and, by including members from the Appropriations and
National Security Committees, helped grease the wheels under the budget for the
spy community.

Over the years, Gingrich has benefited from the financial support of Lockheed
Martin. During the 1993-94 election cycle, Lockheed gave Gingrich the $10,000
maximum allowed, and Martin Marietta kicked in another $2,000. In addition,
Lockheed contributed $10,000 to the Progress and Freedom Foundation, the think
tank that is closely identified with Gingrich and the Republican right. (PACs
from Hughes, Boeing, E-Systems, Rockwell, and other intelligence contractors
have also contributed, though not as heavily, to Gingrich's campaigns.)

All of this conferred upon Augustine and Lockheed Martin tremendous clout in
the satellite debate. In public testimony before the HPSCI Augustine declared
that proponents of building smaller, lightweight satellite systems would have
to wait. "`Smallsats' certainly represent an intriguing new technology," he
said, but "we should continue to work on existing systems so that we will have
proven assets to fall back on should `smallsats' or other new technologies need
a lengthy, evolutionary process." Behind the scenes, sources at the HPSCI say,
Augustine and Lockheed pushed harder, worrying that the switch was too much,
too fast, and that the company would suffer financially from the change.

In the end, Lockheed's arguments carried the day. Congress and the NRO agreed
that the smallsat option merited further study but that, for the moment,
Lockheed Martin's large satellite construction would continue as planned.
Gingrich's Solomon-like position satisfied Lockheed Martin's fondest desires
without antagonizing less mighty players such as TRW and Rockwell, who could
reasonably expect a share of the NRO appropriation somewhere down the line.


BLACK BUDGET OR BLACK HOLE?

Former Senator Howard Metzenbaum, Demo crat of Ohio, ruefully remembers
his annual struggle to declassify intelligence spending and make the CIA budget
a matter of public record. Like many others, he believes that the real reason
that the intelligence community opposes declassification of the budget is that
it would lead members of Congress, the media, and the public to question the
amount being spent. "There was not really an attitude of cutting back, or
holding down wasteful intelligence spending, even when there was strong
evidence of waste, bad judgment, inefficiency," recalls Metzenbaum. Members of
the oversight committees were rarely interested in making cuts, he says.

Equally blunt is California's Democratic Congressman George Brown, a former
member of the HPSCI who was dropped from the committee after mentioning the
NRO--before the organization's existence was officially declassified and made
public in 1992. The intelligence oversight committees "are scared out of their
pants at the possibility of going against the intelligence community in an area
where they could be accused of playing fast and loose with national security,"
says Brown. "You still have a very protective system, including the two
committees."

With the congressional committees operating in secret, and with the
powerful alliance of spy agencies and contractors in support of key programs,
the Pentagon feels free to demand an ever higher level of intelligence flow.
Rapid advances in intelligence technology have opened up nearly limitless
possibilities for military commanders, and few people seem to be asking: Do we
need all this stuff?

Compared to the grainy black-and-white photographs taken by U-2 spy planes in
the 1960s, today's satellite intelligence is so vast, detailed, and nearly in
real time that it would have been unimaginable to the generals who ran the
Vietnam War. Even in the past decade, U.S. intelligence satellites have
expanded their capabilities rapidly. During the 1980s, according to a paper by
the Federation of American Scientists' John Pike, the intelligence budget
soared from about $18 billion in 1980 to a peak of $35 billion around 1987.
And, though the budget has fallen perhaps 20 percent since then, that
investment created a Cold War system of satellites and ground stations that
provides almost unheard-of intelligence capabilities.

Meanwhile, the principal target of the intelligence community, the Soviet
Union, has evaporated. "At the end of the Cold War, the target system that we
were collecting against has gone down by an order of magnitude, at the time
that our collection capabilities have gone up by an order of magnitude," says
Pike. "The collector-target ratio is about 100 times higher than it was during
the end of the Cold War."

Defenders of the intelligence community say that the world is a more dangerous
and complex place without the Soviet Union, and that America's spies and spy
satellites must follow rogue nations like North Korea and Iraq, along with
villains like terrorists, drug traffickers, and weapons dealers. Like the
Pentagon planners who say that the United States must rearm to fight two
regional wars at once, regardless of how unlikely that might be, spy planners
argue that the constellation of satellites must be redundant in order to be
able to respond to two simultaneous world crises.

But Gary Sojka, a former Hill staffer who oversaw the NRO budget, thinks that
argument is a smokescreen. During the Cold War, he says, the intelligence
community was dealing with far more hot spots and troublesome villains than it
is today, in addition to the added burden of watching Soviet missile silos,
tank concentrations, and harbors. "One reason that intelligence budgets are
secret is that it serves the purpose of the [NRO's] program managers," Sojka
says. "If they weren't secret, people would ask why these spending levels could
not be reduced. They have a sizable interest in keeping these budgets secret
just to protect the amount of money they get."

Besides, excessive secrecy may also compromise strategic decisions about how to
spend intelligence money--if not how much to spend in the first place. Steele,
the former CIA clandestine-services officer, worries all the money on expensive
surveillance equipment is misplaced: "We are spending way too much on
technology and not enough on analysis and open sources," he says. "What has
happened is that the industrial community is serving as an understudy, as a
second layer to the intelligence community, to the point that it writes the
statements of work for its own contracts," Steele fumes. "If you allow the
contractor to write the statement of work, you are allowing the contractor to
sell you whatever it is they can do, rather than meeting your needs. And that
is happening every day throughout the intelligence community."

The good news is that as more stories of waste in the intelligence community
leak out, political pressure for more accountability may ensue. One of the most
disturbing revelations about the $2 billion NRO slush fund, whose existence
became public early this year, was that even Deutch neither knew of its
existence nor had the power to control it. That drew the attention of the
entire Congress, and one can only hope that impulse will carry over to the
other protected projects of the intelligence-industrial complex.



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