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Spies for Hire: Carlyle Group to Become Owner of “One of America’s Largest Private Intelligence Armies”

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The secretive investment fund the Carlyle Group is in the process of buying part of Booz Allen Hamiliton, the major military and intelligence contractor. We speak with investigative journalist Tim Shorrock, author of the new book Spies for Hire: The Secret World of Intelligence Outsourcing. [includes rush transcript]

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StoryJan 12, 2007Mike McConnell, Booz Allen and the Privatization of Intelligence
This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: The Carlyle Group is one of the world’s largest and most secretive investment funds. Nicknamed the Ex-President’s Club, Carlyle’s employees have included both President Bush, H.W. and George W. Bush, former British Prime Minister John Major, former Secretary of State James Baker, and former Defense Secretary Frank Carlucci. Amidst growing public scrutiny over its dealings, the company has recently scaled back its holdings in military contractors and its links to controversial political figures.

But that appears to be changing. On Friday, the intelligence firm Booz Allen Hamilton said it would sell its government-oriented unit to Carlyle Group for $2.5 billion. Booz Allen has been a major figure in the privatization of government intelligence. Current National Intelligence Director Mike McConnell was Booz Allen’s director of defense programs before his appointment last year. Booz Allen has been deeply involved in some of the Bush administration’s most controversial counterterror programs, including the infamous Total Information Awareness data-mining scheme. The Carlyle-Booz Allen deal awaits shareholder and regulator approval.

Tim Shorrock is the author of Spies for Hire: The Secret World of Intelligence Outsourcing. In a new article for CorpWatch, Shorrock says Carlyle’s purchase of Booz Allen would lead to its “re-[emergence] as the owner of one of America’s largest private intelligence armies.” Tim Shorrock joins us now from Washington, D.C. Welcome to Democracy Now!, Tim.

TIM SHORROCK: Thank you, Amy.

AMY GOODMAN: It’s good to have you with us. Well, start off by talking about the significance of Carlyle buying, if it’s approved, Booz Allen’s government unit.

TIM SHORROCK: Well, as you said before, as you said earlier, Carlyle has kind of scaled down its defense investments in recent years, but this is a major plunge back into it. Booz Allen Hamilton is one of the largest intelligence contractors in America and also plays a very strategic role, I would say, in US intelligence as an adviser to agencies such as the National Security Agency. And it also advises all the key combat commands of the United States military and other key agencies such as the Central Intelligence Agency and the National Geospatial-Intelligence Agency. And they don’t just provide technology. They provide, you know, all kinds of expertise and all kinds of management, consulting to these agencies, you know, help them decide how to spend their money down the road. And they have many, many people on staff who have played very senior roles in intelligence.

AMY GOODMAN: Can you talk about Michael McConnell and his journey from Booz Allen to National Intelligence?

TIM SHORROCK: Well, McConnell began as an intelligence officer in the US Navy. He became well known to Americans when he was the intelligence adviser to Colin Powell during the first Gulf War. And then after that, he was appointed to be director of the National Security Agency at the very tail end of the first Bush administration. He ran the National Security Agency, which of course does eavesdropping and surveillance on telephone calls and emails all over the world, including in the United States. He ran the NSA for a few years, and then he went directly to Booz Allen, where he became the director — he was a vice president of Booz Allen, he was a director of their military intelligence programs.

The important thing for readers — for listeners to know about the military intelligence is that the Pentagon controls about 85 percent of the entire intelligence budget. And so, when we’re talking about military intelligence, we’re talking about a huge swathe of intelligence. And so, in that position, he advised the NSA, he advised many of the other agencies. And so, he played a very important role in intelligence. And I would say that people like McConnell, when they’re in the private sector playing this kind of consulting role to the agencies, they might as well be called an intelligence official with a proviso that they are working for the private sector. So then, as you also mentioned, during his time at Booz Allen, they played an important advisory role in many important Bush’s administration programs, such as Admiral Poindexter’s program, which was designed to, you know, collect all kinds of information on American citizens to root out — to allegedly root out terrorism here.

AMY GOODMAN: Tim Shorrock, can you lay out what you call the intelligence-industrial complex?

TIM SHORROCK: Well, in my book Spies for Hire, I describe this intelligence-industrial complex as a $50 billion industry, and I base that on what our intelligence budget is now and figures I’ve gotten on the percentage of money that’s actually spent on contracts. It’s about 70 percent of our entire intelligence budget goes to private contracts.

So this complex is about — I would say about a hundred companies. There’s many more, but, you know, a hundred companies that really play important roles have major contracts. And they range in size from Lockheed Martin and companies like Northrop Grumman, big defense contractors that we usually associate with, you know, building planes or big ships are very involved in intelligence at all levels, to small companies like Spectel, which is a little company in Virginia that employs about 200 or 300 people with high-level security clearances who go and work for the CIA and other agencies and missions in places like Iraq and Afghanistan.

You also have companies like Booz Allen, which are more like consulting companies that have millions of dollars, hundreds of millions of dollars in contracts with the agencies. Booz Allen, I might add, also not only has contracts with the various agencies, but as well as with the Office of the Director of National Intelligence. So they’re advising our intelligence leaders on, you know, what kind of technology to buy, all aspects of intelligence.

AMY GOODMAN: As you say, Mike McConnell, the Director of National Intelligence, is the first contractor in US history to take the leading role in the US intelligence community.

TIM SHORROCK: That’s right. And that’s a pretty important fact for people to know. I mean, in the past, leaders of the intelligence — there’s only been, you know, two directors of National Intelligence under the intelligence, so-called, reform bill that passed in 2004. The first one was an ambassador, Negroponte, and then McConnell took over. But never in the past has there been someone gone straight from the private sector to running US intelligence. They always come out of the — in the past, it was always the Director of Central Intelligence was the director of all intelligence, was the President’s primary adviser on intelligence. So here, you have somebody who spent, you know, over a decade as a very high-level private consultant running intelligence operations for profit being the President’s primary adviser on intelligence.

AMY GOODMAN: Tim Shorrock, start naming names. Talk about the US corporations, the multinational companies that are involved in the intelligence-industrial complex.

TIM SHORROCK: Well, like I said, there’s a lot of companies that people recognize, because they’re big defense contractors, and they’ve grown — like Lockheed Martin, Northrop Grumman, Raytheon, BEA Systems of Britain, for example — they’ve grown in intelligence by — often by buying smaller companies and putting together intelligence units of their own.

There’s also companies like — at sort of the middle level, I call them, companies like CACI International (CACI), which as listeners know is — was one of the contractors involved in the prisoner abuse scandal at Abu Ghraib. They’re a very, very important intelligence contractor, and they operate at all levels of all the agencies, from the CIA to the NSA to many military intelligence agencies.

There’s other companies here in Washington. There’s one called Mantec International, for example, that does a lot of work for the National Security Agency, particularly in places like Iraq and Afghanistan, where they’re out actually on the frontlines, you know, tracking enemy weapons systems and listening in on conversations between insurgent groups and helping the US military track people down.

So, it covers a very wide range of companies. And probably most of these companies, very few people know about them.

We talked at the top of the hour about Carlyle buying Booz Allen. Carlyle, in 2003, bought a company called QinetiQ, which is spelled with a Q. It’s a British company. And QinetiQ used to be the defense intelligence research group or research unit of the British military, and it was privatized in the early part of the Bush administration. The Carlysle Group bought it, pumped hundreds of millions of dollars of investment capital into it, and it was — already had contracts —- QinetiQ already had contracts with the Pentagon, various defense agencies here. But with Carlyle’s money, they really advanced into the intelligence market. And with that capital, QinetiQ bought five or six medium— sized intelligence companies and really expanded into the intelligence-industrial complex.

And that’s sort of typical of the way companies expand. They buy companies primarily for the contracts they hold with intelligence agencies. So Carlyle did it with QinetiQ. Then they sold their holdings, made about a half-a-billion-dollar profit off of it. And then, they’ve obviously been looking around and decided Booz Allen would make a very profitable investment. And I’m sure over the next few years we will see a fair amount of expansion from Booz Allen, as Carlyle pumps in more capital and they buy other companies and grow even larger.

AMY GOODMAN: We’re talking to Tim Shorrock, investigative journalist. His new book is out; it’s called Spies for Hire: The Secret World of Intelligence Outsourcing. We’ll come back to this conversation in a minute.


AMY GOODMAN: We continue our conversation with Tim Shorrock. Spies for Hire is his book, The Secret World of Intelligence Outsourcing. Tim, finishing up on Carlyle taking over Booz Allen, if approved, of course Carlyle gained great notoriety after the September 11th attacks. They were having their big meeting in Washington at the Hay-Adams, and their big investors — some of their big investors — were the bin Laden family, not Osama bin Laden, but bin Laden — other bin Laden brothers. And in the end, you know, there were the Bushes, there were James Baker, and there were the bin Ladens. They were forced to sell out, is that right?

TIM SHORROCK: Yeah, they — after that news appeared — I think it was first reported in the Wall Street Journal — they quickly asked the bin Laden family to withdraw their investment, which they did. But they have a lot of investment from — I mean, you know, Carlyle is a private equity fund, and what they do is they get investments from very large investment funds, many of them overseas. Many American pension funds controlled by US unions, such as the Service Employees International Union, have very large investments in Carlyle. The California Public Employees’ Retirement System, for example, actually owns five percent of the Carlyle Group. So they’re well connected to various facets of American capital. And, yes, the bin Ladens pulled out. Lately, they’ve had investment from a large government investment fund in Abu Dhabi. But a lot of these people, as you mentioned earlier, like George Bush, Sr. and James Baker, have withdrawn, but they still employ many, many people who have come from high-level positions within government and clearly have analyzed what the markets are and what potential profit there is in a company like Booz Allen.

AMY GOODMAN: So, can you talk about — what does it mean when private companies are working with the CIA, in terms of the top-secret information that they have? You begin your prologue with a man named John Humphrey, a former CIA officer. Talk about what he said.

TIM SHORROCK: Well, I was at an intelligence conference, and this man from — he was from CACI International — was speaking about sort of the general experience of contractors, and he was saying how difficult it was to be in a position like in Abu Ghraib, when you’re a contractor and you have the government asking you to do things and the rules are unclear. And he was expressing some real discomfort about a contractor being in that role.

And I was rather stunned, because I had never heard anyone from CACI express any remorse or any second thoughts about what had happened at Abu Ghraib. Their CEO — his name is Jack London — went on a huge media offensive, which they’re still on. They just published a little pamphlet about their — you know, how badly they were treated during the Abu Ghraib scandal. But the fact is, you know, you have contractors like this that create a profit center out of interrogating enemy prisoners. They create a profit center out of interrogating prisoners in Guantanamo.

When did this begin to be part of American capitalism, when you have very sensitive operations like this — in some cases, operations we shouldn’t even be doing — become profit centers? I think this is an extremely dangerous trend. And lately, there’s been some attempts in Congress — right now, there’s an attempt in Congress to have some legislation that would keep contractors out of this area of interrogation, keep them out of the area of renditions, where they’re flying people, capturing people in places like Syria or, you know, in Italy and flying them to places where they can be tortured by other governments. There’s been private corporations involved in that, as well.

AMY GOODMAN: And you point out chain of command issues, where you will have one of these private contractors telling soldiers what to do.

TIM SHORROCK: Well, that’s exactly, apparently, what happened in Abu Ghraib. And the problem is, you know — there’s been a lot of testimony, and there’s been a really good film, was made about — that included shots from Abu Ghraib and interviews with prisoners, and there’s now a lawsuit that’s been filed by the Center for Constitutional Rights against CACI International for its role there.

But from what we do know from testimony at some of the trials of the lower-level people that were at Abu Ghraib that were eventually convicted for their role in the abuse is that, in fact, some of the worst practices there were endorsed and pushed by some of these contractors, they claim in the trials and some of the other testimony, from people from CACI International. For example, introducing the use of attack dogs to frighten and terrorize prisoners there, that was actually in part introduced by individuals from this company.

And, you know, we know the people at the top, Donald Rumsfeld, Stephen Cambone and others who wanted to step up the practices there at Abu Ghraib, they’ve never — they’ve always escaped responsibility, and so did the companies. And this problem of like, where is the legal responsibility when they break the law, is still yet to be clarified.

AMY GOODMAN: Tim Shorrock, you write about a report that was suppressed last year, official information about the scope of intelligence outsourcing. Can you talk about what happened?

TIM SHORROCK: Well, when I started writing this book and researching this book, I was sort of drawing on figures I had done. I did an article for Mother Jones a few years ago where I had estimated, based on interviews with quite a few people here in Washington, that the total outsourcing in intelligence was about 50 percent; about half the budget at that time, I thought, I estimated, was being spent on contracts. And by 2006 or so, I was looking for some firm figures, 2007.

And finally, the Office of Director of National Intelligence actually commissioned an internal study. They ordered all the agencies, all the sixteen agencies of the intelligence community, to provide them with figures about how much contracting went on in their specific agencies, what the major companies were, the percentage, the breakdown of the work force between contractors and government employees. And they put this report together. There was a lot of press reports in the New York Times, LA Times, other places that were following this, where people were expecting, and it seemed like they were going to actually release sort of the basic — you know, the top figures of this, so the American people and Congress would get a good idea of the extent of contacting.

But when the time came to release this report, Admiral McConnell, who of course had come from one of the major contractors and had knowledge of and contacts with all the companies that were involved, they decided not to put it out. And so, I think the report was released to certain members of Congress who have access to highly classified material, but it was not released in general in Congress and certainly not to the American people.

But the figure that I got about a year ago — I got a leaked document that was an unclassified document that was a pie chart that showed 70 percent — that’s seven-o percent — of our intelligence budget money going into the hands of private contractors. So the fact is that, you know, the American people aren’t told this by the American government, and many people in Congress have no idea of the extent of contracting, and it’s supposed to be their job to provide oversight to our intelligence community. And when you have — they don’t even have knowledge of what’s going on with 70 percent of the budget. That makes oversight a little bit of a joke.

AMY GOODMAN: The Office of the Director of National Intelligence, ordering a study of contracting with the sixteen agencies that make up the community, when it came time to release, the office said no? They refused to make it public?

TIM SHORROCK: That’s right. They said this information would help America’s enemies. It would — you know, it would basically — would help — you know, I guess they were talking about al-Qaeda. If al-Qaeda or somebody like that knew that, you know, 50 percent of the CIA was outsourced, that would help them in some way. But that’s all — you know, you can figure a lot of this stuff out from public information. I talked to a lot of people and got some pretty firm estimates.

Some of the agencies, to their credit, do provide a breakdown. For example, the Defense Intelligence Agency, which provides intelligence for the Joint Chiefs of Staff and the Secretary of Defense, told me that 35 percent of their workforce is private-sector contractors. The National Geospatial-Intelligence Agency, which provides imagery, satellite — secret satellite imagery and mapping to military units and also to national intelligence agencies, their workforce is 50 percent contractors. The National Reconnaissance Office, which is one of our most secret agencies and controls all military spy satellites, their contracted workforce is 95 percent, so it’s a huge proportion of their workforce.

AMY GOODMAN: And you have some other astounding figures. At least half to 75 percent of people at NSA headquarters — the NSA, National Security Agency, many times larger than the CIA — are contractors, 50 to 75 percent contractors working in the private sector.

TIM SHORROCK: Right. The NSA was one of the agencies that basically refused to talk on any level to me about this, but that’s what I’ve been able to gather from talking to people who actually work for — people employed by companies that are contracted to the NSA.

But what your listeners need to understand is that a lot of these contractors actually work in these buildings. So the National Security Agency is up — just up the road from here in Fort Meade, Maryland. They have a huge black building where they all work. And so, many of the people actually working inside that building are contractors working for Booz Allen Hamilton or Lockheed Martin or General Dynamics Information Systems. All the companies we’ve talked about, they’re actually sitting there doing this classified work.

And the NSA has been a real sort of pioneer in the use of outsourced intelligence. They went into it really heavily in the late 1990s and started expanding their contractor base from a few hundred companies, now where it’s, you know, literally in the thousands. And so, that means that, you know, we know the NSA tracks and listens to our conversations, listens to literally millions and millions of conversations, cell phones, email communications overseas, as well. And so, that analysis, a lot of that analysis, is being carried out by private-sector companies with people with high-level security clearances.

AMY GOODMAN: Before we end, Tim, I wanted to go to a piece you’ve just broken in <a href= http://www.salon.com/news/feature/2008/05/19/al_haramain/ >Salon.com called “Blacklisted by the Bush Government.” Explain.

TIM SHORROCK: Well, this is a story about how NSA surveillance can have a domestic impact. I write about an Islamic charity that was based in Saudi Arabia that was under investigation, that has been under investigation by the US government for ties to terrorism. They had a fairly large chapter that they invested in in Oregon, in Ashland, Oregon. This was in the late 1990s, where they became affiliated. And so, my story is about the effects of this investigation on this Oregon chapter, which, based on the reporting I did, there are no — there are no — there’s no evidence of connections to terrorism. Yet, by declaring them specially designated global terrorists, they were able to shut the organization down and basically drive it out of business with no evidentiary hearing, no ability by these people to challenge the evidence, which is all classified. All the important evidence is classified. I find it a severe distortion of our justice system and very alarming.

AMY GOODMAN: Can you talk about the players involved? Talk about the Saudi sports star.

TIM SHORROCK: Oh, Soliman Al-Buthe is one of the key figures in this story, and he was — the charity was called the Al-Haramain Islamic Foundation. And the man I talk — I went to Saudi Arabia to interview him, he was an adviser to them, and he helped set up Al-Haramain in Oregon. He’s now an environmental figure. He’s a government official in the city of Riyadh, where basically his job is inspecting all restaurants, you know, for health problems. And so, he’s called a specially designated global terrorist, as well, and he’s called that by the UN because the US designated him as such. He also has not been able to see any classified evidence. The US says he’s a terrorist. But I think — you know, last year, the US embassy in Riyadh invited him to a function, and which they rescinded after it was reported in the Portland Oregonian.

But a lot of people like that that I met in Saudi Arabia, they’re called — they’ve been accused of being terrorist supporters in some way by the United States, but they operate there freely and they seem to have a lot of love for the United States. So when I met this man Soliman, he loves to watch the Lakers. He has his TV all the time to Chris Matthews of MSNBC. And it was kind of humorous to think of him as a terrorist. But I think the problem is, the organization itself in some of the countries that it operated in, according to US intelligence, did provide money and supplies to some Jihad groups overseas. But the issue is, the actual evidence can never be seen, and so we have to trust —- we’re supposed to trust the US government’s judgment on this. And I think in the -—

AMY GOODMAN: And you begin your piece with this conversation that he, in Saudi Arabia, is having with his lawyers in the United States, and he’s trying to figure out how to pay them. And, well, then you tell the story of what happens and who’s listening.

TIM SHORROCK: Right. Well, the significance of the Al-Haramain case is that this man, Soliman Al-Buthe, that I interviewed was on the phone with two of his lawyers here in the United States in March 2004, at a period when the NSA surveillance program was being questioned by the Justice Department. His conversation was monitored by the National Security Agency without a warrant. The only reason the Al-Haramain lawyers found out about it was they were given a document by accident by the Treasury Department, which does these investigations of global terrorists and puts the financial screws on them. They accidentally gave them an NSA document, highly classified document, that showed they were under surveillance.

On the basis of that document, they have sued the National Security Agency for warrantless — for violating FISA, violating the 1978 law that regulates foreign intelligence by the NSA. And that lawsuit is the only lawsuit still in play in which the NSA warrantless program of the Bush administration might be found illegal by a federal judge in a federal court.

AMY GOODMAN: Tim Shorrock, I want to thank you very much for being with us, investigative journalist, author of the new book Spies for Hire: The Secret World of Intelligence Outsourcing.

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