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.




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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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.



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.



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.



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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