Part 10 Wedge....Here Comes The Judge....The Fall of Babylon

WEDGE FROM PEARL HARBOR TO 9/11 

HOW THE SECRET WAR BETWEEN THE FBI AND CIA 

HAS ENDANGERED NATIONAL SECURITY 

MARK RIEBLING

CHAPTER EIGHTEEN 

HERE COMES THE JUDGE 

ON TUESDAY MORNING, March 3, 1987, William Webster was working in his corner office at FBI headquarters, high above the traffic of Pennsylvania Avenue, when he received an urgent telephone call from the White House. Ronald Reagan’s voice had its usual warmth—the folksy, breathy, slightly scratchy timbre that put one automatically at ease—but today there was a barely detectable trace of weakness. “Bill, ” the president said after an exchange of pleasantries, “I’d like for you to take over CIA.” 

The timing of the offer was no accident, Webster knew. In about forty hours, the president was scheduled to deliver his first detailed response to the damaging findings of the Tower Commission, a board he had appointed to investigate the Iran-contra scandal. White House aides had previously hinted that Reagan would announce the new nominee for CIA director before his speech, sending a clear signal that the Agency would be reformed. But the president was having a tough time finding any takers for the post. After Gates’ nomination was junked, Republican heavy-weights John Tower, head of the president’s Iran-contra board, and James Baker, his chief of staff, had both declined to clean out Casey’s stables. As a Washington insider, Webster well knew that he was, at best, the fourth choice for a messy job. 

He thanked the president and promised to consider the offer. Leaving the White House on tenterhooks through much of the afternoon, Webster convened his FBI aides, consulted his old friend and former DCI Stan Turner, and talked to his three children. (His wife, Drusilla, had died in 1984.) At sixty-three, he was tiring of the bureaucratic life, and had rather been hoping that he might return to the less demanding, more cerebral work of a federal judge, perhaps even on the Supreme Court. He was also uncertain about just how he would adapt to the culture of secrecy at CIA. “The FBI’s one thing, ” his daughter, Drusilla, told him. “But, Daddy, that other place is scary.” 

Yet something deep within Webster was stirred by the prospect of running CIA. Part of it was perhaps an Everyman’s fascination with forbidden knowledge, a will to know what no one else knew, a desire to be inside. Another part of it was the chance to remake, in his own image, one of the most important institutions in the world. He had done as much in his nine years at the FBI, repolishing its public image and restoring morale after the congressional inquisitions of the 1970s. Surveillance of domestic radicals had been reduced to a level that seemed to satisfy even the American Civil Liberties Union; younger agents had been appointed to key posts; and Webster had kindled loyalty the same way he kept good press: by a painstaking attention to symbolic detail. 

It was a skill which J. Edgar Hoover had also possessed, and it had been manifest in Webster’s first act as FBI director, which was to remove Hoover’s bust from his office. Careful image-management had given Webster good relations with Congress, and he believed he could count on the House and Senate intelligence subcommittees if he headed CIA. Above all, Webster sincerely wanted to help the president, whom he much admired and liked; he saw CIA reform as part of the larger political picture, an important step in salvaging Republican credibility. After word of his pending nomination leaked out that afternoon —perhaps to force his hand—Webster made up his mind. 

It was simply not in him to deliver Ronald Reagan, and by extension the country, a crushing personal blow. Shortly after 6 p.m., he called back the president and accepted the job. 

“MAN WHO CLEANED UP FBI WILL TRY FOR ENCORE AT CIA”—or SO Said newspaper headlines. As Reagan had hoped, Webster’s reputation for personal integrity began to restore public confidence in CIA literally overnight. Where Casey’s past had included shady stock deals and plagiarism suits settled out of court, colleagues portrayed Webster as “totally honest, ” “the straightest arrow in Washington, ” a staid widower with only two vices, tennis and chocolate. As a man who had been studying, upholding, or enforcing the law nearly all his adult life, Judge Webster could be trusted to obey it. 

Known within the FBI as a strict administrator, as intolerant of mistakes as his religion (Christian Science) and the law he was supposed to uphold, he would surely clamp down on the “cowboys” in CIA’s Operations Directorate. “He doesn’t cut your head off if you make a mistake, ” said Jim Adams, who served as Webster’s chief deputy at the FBI in 1978, “but if you do anything to weaken the credibility of the institution, he’s very tough.” Here again, he was more like Hoover than most people realized: that discipline, or the fear of it, translated into respect and enhanced esprit de corps—the ’football-coach” or “drill sergeant” syndrome. 

Even those who felt his sting benefited from the aura of integrity he had maintained. If his FBI record was not unblemished, his image remained so. On his watch there had been protests over the entrapment of government officials in “Abscam”; lawsuits by disgruntled black and Latino agents who had not advanced; the accidental shooting death of a female agent by her colleagues; the conviction of FBI counterintelligence agent Richard Miller, who swapped secrets for sex with a Soviet mistress; and, not least of all, Howard’s escape to Moscow. But as Senate Intelligence Committee Chairman David Boren would say, “No one, not his harshest critics, would question [Webster’s] personal integrity or devotion to the rule of law.” For Reagan, who after six years was no longer the Teflon president, Webster promised to be at least a Teflon DCI. 

He also promised to end the FBI-CIA war, or at least to try. As Webster himself put it, he would be in a “unique position, having occupied director’s chairs on both sides, and knowing the arguments on both sides. And there are two sides to these arguments.” It was only logical, then, that he should judge interagency problems more “objectively” than his predecessors, as one of Webster’s aides suggested. The New York Times even predicted “a definitive end to a long period of feuding.” 

Historians of intelligence were circumspect, however. How would Webster, who had been living in the black and-white world of law enforcement, navigate in a universe that was all shades of gray? “Commanding a corps of clannish, spit-and-polish G-Men is slim preparation for managing the articulate intellectuals, technocrats, and covert operators who make up the CIA, ” cautioned Time magazine. Liaison officer Aldhizer, who heard rumors that Webster might be named, had at first refused to believe them; he was sure “the Agency would never stand for it.” Journalist Ronald Kessler compared the move to “choosing the editor of The New York Times to head its natural competitor, the Washington Post.” Historian Thomas Powers ventured that “CIA would rather be run by a Cub Scout den mother than a former head of the FBI.” 

As Webster’s Senate confirmation hearings began that spring, some CIA veterans did feel a certain unease. Intelligence analysts, who wanted to be led by Robert Gates, worried that the FBI director lacked any background in foreign policy or world affairs. Operations officers, who had regarded Casey as a kindred soul, feared that Webster was too cautious, too judicial for a business that demanded risks. Richard Helms, in retirement, came to Webster’s defense, pointing out that all DCIs had to be cautious, precisely because of the risks, or else they could end up wrecked on the rocks, like Casey. But to the skeptics, Webster seemed a bureaucrat with a business-school mentality. 

His longtime friendship with Stan Turner, and his pledge to purge the Agency of anyone remotely connected to Iran-contra, raised the specter of Carter-style cutbacks in covert action. At the very least, his appointment was bound to cause awkward moments, given that thirty-five of his FBI agents were still focusing on CIA’s role in contra resupply. Webster tried to soothe Agency fears, during his confirmation hearings, by pledging not to hurry in his house cleaning; by stonewalling Congress on sensitive documents seized by the FBI at Langley; and by backing, in principle, CIA’s right to kidnap terrorists overseas. Still, talk in the halls at Langley was that he was Hoover’s ultimate reprisal, a final stake-in-the-heart for the old OSS extralegal ethos, driven in by Congress with a mallet called Iran-contra. 

Congress believed that Judge Webster was the best man to impose a climate of legality at CIA, and confirmed his nomination. On May 26, leaving his former deputy John Otto temporarily in charge at the FBI, he was sworn in as the fourteenth director of central intelligence. “You are taking over an agency that probably in certain ways wasn’t too dissimilar from the FBI at the time you came in, ” one congressman told Webster. “Lack of mission and purpose, all sorts of activities that shouldn’t have gone on —and hopefully you can do the same job at the CIA that you did at the FBI.” 

That was precisely what some CIA officers worried about—that he would try to turn the place into another FBI. No one doubted that his appointment amounted to an organ transplant or a skin graft; the question was whether the body of the patient, CIA, would accept or reject the alien tissue. 

WEBSTER’S FIRST DIFFICULTY was adapting to a new routine. Directing the FBI had been a neatly defined nine to-five proposition, but CIA was more or less an all encompassing way of life. At 10 p.m. every evening, an armed Agency courier arrived at Webster’s red brick home, on a secluded street off Bradley Boulevard in Bethesda, Maryland, where the widower lived alone with a basset hound. From the courier Webster would receive an early draft of the President’s Daily Brief, a top-secret digest of facts and gossip. 

On a given day it might report on where Soviet leader Mikhail Gorbachev had last been seen, describe movements of other countries’ missiles or troops, or psychologically profile foreign dignitaries the president was scheduled to receive. Webster would read it before drifting off to sleep. At 7:15 a.m. the next day, a heavily armored CIA limousine and a “chase car” with security agents would draw up to the curb, to take Webster to the White House. The limousine featured three telephones: one to Langley, one to the president, and one ordinary, outside line, for making personal or social calls. There was little time for the latter, however, as Webster studied new cables that had come in, and updated the President’s Brief. 

At 7:55, he would present the brief at the White House, usually to James Baker, with whom he did not particularly get along. By 8:30, the limousine would sweep Webster through the main guarded entrance gate at Langley, into an underground parking garage. A private elevator took him to his seventh-floor suite. Throughout the day, Webster’s CIA guards remained posted just outside the door to his office, in a bulletproof fiberglass cubicle, their faces grayly lit by the monitors they always watched. 

Those guards soon became a problem. His daughter’s preconceptions about CIA were more on target than Webster expected; there was a spook factor. Every few weeks, technicians from CIA’s Office of Security swept his home and office for bugs, and checked the special devices that had been installed in his windows to prevent the KGB from listening in by parabolic laser beams. A special detail of personal guards was even assigned to live in the unused parts of the home. 

When Webster played tennis, the guards insisted on waiting for him courtside, intimidating his opponents. Even in the most genteel of settings, such as cocktail parties, they would hang back along the walls like underworld bouncers, statue-stiff, frowning if anyone asked their names. Webster sometimes wondered whether they were protecting him or watching him. He knew they had their jobs to do, but did grow angry—and threatened to send them to “charm school”—after they were rude to the wife of his new public-affairs officer, William Baker, who had also come over from the Bureau. 

In Baker’s case, as Webster’s, part of the “wooden security guards” problem may have been that he was not exactly “wanted” at CIA. Baker’s appointment, announced on Webster’s first day of work, had meant retirement for George Lauder, who had served for twenty years in the Operations Directorate and had shared Casey’s distrust of the press. Baker promised to be more forthcoming with the outside world. That chilled the blood of veteran clandestine officers, who Baker sensed “were less than enthusiastic about joining forces with an aggressive advocate of public affairs who had just gotten off the boat from the FBI.” 

When he was introduced in the Agency’s auditorium, no one clapped. Some in the audience were being investigated by the Bureau for their roles in Iran/contra; others feared for their friends; few supported the idea of a glasnost for secret intelligence. When Baker told the spies that they should now embrace the four “C’s” of candor, completeness, consistency, and correctness—all now codified in a new in-house manual on “Briefing Congress”—there was widespread snickering. As one officer later said, “The four C’s—God, that was just so FBI.” 

Some officers worried that Langley would be turned into a tour-bus stop, as FBI headquarters had been since the Hoover era, and those fears seemed confirmed by Baker’s plans to remake the Agency’s family day. It had been the idea of William Colby, back in 1974, to celebrate September 18, the anniversary of CIA’s founding, by letting spouses and children come to see where their relatives worked. Webster’s PR people now got the idea that the Agency could pass out CIA T-shirts, shorts, and caps to family members. After all, anyone could buy FBI jogging suits and souvenirs at Quantico. But the Office of Security vetoed Baker’s plan, fearing that children of covert officers might compromise their parents’ identities by wearing the stuff. 

Nevertheless, the new regime did manage to make its mark on the 1987 family day. While relatives were visiting Langley, CIA and FBI were executing the final phase of a plan to kidnap a terrorist overseas and bring him to the U.S. for trial. The target was Fawaz Younis, a Lebanese Shiite, who in June 1985 hijacked a Royal Jordanian jet in Beirut, badly pistol-whipped some unarmed government-militia members, then evacuated the plane and blew it up. 

Planning for Operation Goldenrod, as the hunt for Younis became known, had begun within a few days of Webster’s nomination. Although he’d resisted such extractions while FBI director, he now saw the chance to make a symbolic statement—not only as a warning to terrorists, but as reassurance to CIA cowboys who worried that he wouldn’t be gung-ho enough. So in spring 1987, the Agency’s Counterterrorism Center had dangled an informant into Younis’ life, and taped an admission of hijacking. Learning that he needed cash, CTC then lured Younis to a yacht in international waters off Cyprus, ostensibly to meet a narcotics kingpin. 

To make sure that there would be a “clean” case against him in U.S. courts, Webster let the FBI take the lead when Younis boarded the boat, on September 13. The trap was carefully set to distract his attention: Sunning themselves on deck, as he arrived, were two women in string bikinis, who were actually FBI agents. Younis was caught so completely off guard that, when his feet were kicked out from under him and he was slammed onto the deck, he broke both wrists. He was interrogated for four days on a nearby Navy ammunition ship, then transferred to the U.S. carrier Saratoga and flown to the U.S. in a Lockheed S3 Viking. The plane and its prisoner touched down in Virginia, and the story broke to the press, just as Webster inaugurated anniversary ceremonies at Langley, forty years to the day after CIA was officially founded. 

The timing was artful indeed. News stories about the Agency’s birthday, instead of just stressing Iran-contra, had an easy “handle” for highlighting the continuing relevance of the post-Casey CIA. The act was symbolic at other levels, too—proving, for instance, that Webster’s pledge to improve coordination between CIA and FBI was not just talk. In fact, Goldenrod was apparently the first successful overseas extraction in the long history of FBI-CIA liaison. In 1954, Hoover had nixed a plan to capture suspected Soviet spy Joseph Katz from a yacht off Israel; in 1979, CIA protests had prevented FBI agents disguised as Arab yachtsmen from capturing Robert Vesco in the Bahamas. But now the two agencies had finally pulled one off. 

Webster’s critics were not satisfied, however. Younis was small fry, not at all one of the world’s most wanted terrorists. And by treating the operation as a criminal case, Webster had created certain complications. The courts questioned the legality of Younis’ seizure, criticized his extended interrogation in international waters, and threw out some counts because of CTC’s rough play. He was eventually convicted of air piracy, but the whole thing would have been much simpler if Webster had just let the Israelis assassinate the man, which was how things had worked in the past. Instead, he had turned it into a media- relations sideshow and courtroom drama, which was essentially taking a J. Edgar Hoover approach. 

To his detractors, that seemed to typify what they felt was already a fault in Webster’s tenure: an FBI-type emphasis on public image, at the expense of secret substance. In the weeks following Younis’ arrest, almost as if to counteract the good publicity from that episode, such sentiments were vented more than once, in the press, by anonymous intelligence officials. The former FBI director, who knew the rules of the PR game, hit back with a blitz of interviews. The theme of this counterattack was that he was learning on the job. He had visited or would soon travel to sixteen countries on a “hello tour”; he was also leaning on Deputy Director Robert Gates, whose specialty was analyzing intelligence. 

Still, the Washington rumor mill was kept busy with accusations that Webster was a lightweight. He was criticized for enjoying too many perks, for being too detached, for escorting socialites instead of working late. Above all, he was attacked for a failure to adapt to the culture of secrecy. Disgruntled retirees alleged that he had personally blown a sensitive operation in August 1987, when visiting Argentina, by thanking the country’s chief of intelligence for cooperating in a case that the Argentines had no need to know about—especially since they were the targets. 

Although Webster also stood accused of being a slave to Congress, even his allies there were getting impatient, and they complained openly about one matter in particular, which likewise vexed many at CIA. This was the “aides” problem. Bill Baker was but the most visible member of an “FBI mafia” that had occupied the seventh floor at CIA headquarters. The group included Webster’s FBI chief of staff, John Hotis, and a bevy of “special assistants.” The assistants all held Ivy League law degrees, but none of them had any background in intelligence. They sealed off the judge like smug law clerks, which was what they were. 

They always seemed to accompany Webster to Capitol Hill, and intelligence committee staffers noted the DCI’s need to consult them before answering questions. At Langley they became known derisively as the “Munchkins, ” and one had to go see them if caught violating any of Webster’s new edicts, such as the one that forbade smoking in the headquarters building. The consequent edginess of some quite senior CIA officers was not eased when they had to interact with Webster’s longtime executive secretary, Peggy Devine. Even at the FBI, her willful protectiveness of Webster’s time had earned her the “Dragon Lady” reputation that had once been attached to Hoover’s secretary, Helen Gandy. In the bureaucratic context, that was actually something of a compliment; no one doubted the efficiency of Devine, or any of the other aides. The problem was not so much who they were as what they wanted to do. 

Redrawing the rules for secret operations, for instance. Webster assigned that project to Hotis, who had rewritten FBI guidelines in the Church era, and to Nancy McGregor, a twenty-eight-year-old law clerk. Their restructuring of the Agency’s Covert Action Review Group earned the enmity of many old-line intelligence agents, and of conservative policy types in the outside world. Webster himself compared CIA covert activities with the use of undercover agents by the FBI, and new rules reflected the Hooverian “accountability” model that had once driven William Harvey from the Bureau to CIA. 

In the past, operational review had been a fairly informal process, reflecting the action orientation and administrative looseness that had been a treasured part of the Donovan spirit. Now, as Robert Gates remarked, “they actually sit down and debate the issue. They talk about it; they go through a long checklist.” All current covert projects were reviewed, and Webster watched over the proceedings with an osprey’s eye. Some operations were tabled or terminated. “The Judge simply asks a lot of difficult questions and requires legal justification for every step taken, ” one CIA official lamented. “He is not a cowboy.” 

Webster’s long-promised Iran-contra purges brought that point fully home. By the end of 1987, all of Casey’s freewheeling favorites were gone. Joseph Fernandez and Allen Fiers were fired; Dewey Clarridge and Clair George took the hint and left. A half-dozen others were reprimanded, their careers effectively killed. George was replaced as head of the Operations Directorate by Richard Stolz, a thirty-one-year Agency veteran with some covert action experience, who had been a Webster classmate at Amherst. Stolz was not regarded as a bad choice, but there was great resentment about the way some of CIA’s best and most dynamic sons had been “hung out to dry” for doing what the White House asked. Some saw a double standard, noting that Webster’s 1978 punishments of FBI agents for illegal domestic spying had not been so harshly punitive. He had reasoned then that the G-men acted in good faith, believing their actions authorized by higher-ups; he had not offered CIA officers any such “out.” 

The purges were followed by a new round of press attacks on Webster, not all of them anonymous. Retired CIA operations man Tom Polgar complained that “the new watchword at the agency seems to be ‘Do No Harm’—which is fine for doctors but may not encourage imagination and initiative in secret operations…. Initiative is the distinguishing feature of the clandestine operator, but initiative is a tender flower requiring a very special climate…. Such conditions can only prevail when it is also well understood that extraordinary demands on the individual and the family will be balanced by extraordinary treatment in an elite.” 

A part of that extraordinary treatment had always included a certain leeway on matters involving the law, but now the FBI was even sicced on nine CIA Office of Security employees who sold a hundred rare misprinted $1 postage stamps that came across their desks. In the past, such windfalls had been part of the perks, or at most a cause for secret reprimand; after all, if not spotted by the employees, the stamps would have been stuck on letters, with no benefit to anyone. But Webster insisted that the offenders be dragged into court and tried for making a profit off public property. The message could not have been more clear. In big ways and small, CIA’s extralegal ethos was under siege. The last buccaneers were being made to walk the plank. 

WHILE WEBSTER and his aides were shaking up Langley, they also began a review of relations with the FBI. The lead was taken by Nancy McGregor. A graduate of Barnard College and Harvard Law, McGregor had been one of Webster’s administrative assistants at the FBI, and had not been happy about moving to CIA. Arriving at Langley, she found its personnel reticent and not easy to socialize with. She had tried to make an impact by pushing through specific projects; she was instrumental in setting up a day-care center at Langley, although even on such a minor matter the cultures clashed. (After haggling over what seemed excessive security demands, McGregor agreed to segregate the children of parents in CIA “covert” operations from those in “overt” work, and to mark cubbyholes for clothes with first names and numbers only—e.g., “Christopher 3” or “Michelle 7.”) McGregor would also change the format for internal Agency reports, which she did not think were written as clearly and logically as the Bureau’s. The documents were wordy, circumlocutious, and freighted with jargon and acronyms, which neither she, nor any of the other assistants, nor Webster himself could understand. 

That conceptual murkiness became a real problem for McGregor as she waded through Top Secret summaries of cases, such as the Howard Yurchenko affair, that both CIA and FBI had botched. For elucidation, she talked to some of the personalities involved. She got good cooperation on the FBI side, but at CIA she was hindered by the stubborn unwillingness of senior officials to share information with anyone except the director—and there were even questions about how much they might be holding back from him. CIA’s filing system, or systems, also made the job difficult. At the FBI, everything went in one file under an individual’s name. But at CIA, there were many different indexes, and it was not easy to know which one to search—or even which ones existed. Again, no one came forward to tell her. 

As McGregor pieced together the secret histories of cases gone bad, she began to see how each agency rationalized its performance and tried to pin blame on the other. What she didn’t see was any easy solution. She figured it would help, however, that a Webster friend had been named to head the FBI. Aldhizer and some others had been hoping that the White House might effect a “double switch” by giving the Bureau to someone from CIA, such as former Deputy Director John N. McMahon, but Reagan chose instead William Sessions. 

A tall Texan whose silver hair and outgoing personality made him a natural public emissary, Sessions had been considered a firm but fair-minded federal judge in San Antonio, where he had tried the accused assassins of John Wood, the first federal jurist murdered in the twentieth century. Webster had worked that case hard as FBI director, and the two had been on good terms since then. It wasn’t the closeness Webster had with an old college buddy like Stan Turner, but the DCI did hope to achieve a symbiosis at the top, at least for symbolism’s sake. 

The two were photographed together at Washington parties, and Sessions arranged for dedication of a Webster portrait at FBI headquarters. Both men knew that relations between heads of hierarchical agencies could send strong signals. That kind of wisdom had never come easy to hardball corporate lawyers like Donovan or Casey, who came from a world where organizations would sue each other, but it was second nature to veteran federal employees like Sessions and Webster. 

But the new dawn was clouded by a change of liaison officers. By the time Iran-contra broke, Jay Aldhizer had had enough. For eight years in the job, longer than anyone except Papich, he had done his best to break down some of the long-standing barriers, or at least to lower them. Though not operationally involved in CI, like Papich and Cregar, he had tried to bring together the personalities. There had been problems, especially in the Howard case, but Aldhizer felt that if the full record of cooperation were ever made public, the mishaps would seem comparatively exceptional and rare. 

In the last few years alone, the agencies had paired off in thwarting shipments of poison gas to Iraq, monitoring foreign students’ access to sensitive materials in U.S. libraries, and pooling technologies in electronic surveillance. Turf-crossings had been managed; the FBI had won acknowledgment of its right to operate overseas, and for five years the Courtship project had been quietly under way. But Aldhizer was nearing fifty, the age when many FBI agents took early retirement and began second careers, with fewer headaches and higher pay. It was time to move on. 

Before retiring in January 1987, Aldhizer recommended to Buck Revell that the liaison position be restored to the upper end of the government pay scale, where it had been during Papich and Cregar’s day. Although Aldhizer had to interact with secretaries, clerks, and whoever else could help, the majority of the people he dealt with at CIA were supergrades, and though they never made an explicit issue of their superiority in rank, he felt that some of them were pretty well conscious of it. Upgrading the liaison position would also help to keep one person in the job for a while, which Aldhizer thought was especially important with an agency as complex as CIA. It had been two years before he even began to think he understood the place, but the natural inclination—and the pattern before he had arrived—was to funnel through as quickly as possible to make supergrade. 

Revell promised to consider upgrading the liaison slot, but he never did, and Aldhizer’s worries about continuity proved to be well founded. His first successor, Robert Peter, wanted the liaison job badly, but after less than a year he moved on to become deputy legat in Rome. Following Peter, there were a couple of liaison officers, but neither lasted more than a few months. 

PETER’S POSTING ABROAD symptomized a growing problem that he himself faced during his brief tenure as liaison officer. As CIA director, Webster continued to encourage FBI overseas expansionism under Sessions, whose agents were pushing for counterspy work abroad. But Chief/ CI Hathaway was apprehensive about the competition, and one of his deputies ridiculed the “dial twirlers” that Sessions was sending overseas. “They check to see if safes are locked…. But they don’t actively look for Americans who have turned coat.” 

Since FBI agents were rarely cleared to see highly classified documents, the naysayers reasoned, they often lacked a “basis to ask informed and penetrating questions.” Although FBI counterterrorist agents had received some analytic training under the auspices of the CTC, Bureau CI agents were still thought to be handicapped by “a lack of sophisticated analysis.” 

As evidence of that shortcoming, CIA skeptics pointed to the FBI’s COINTELPRO-style harassment of the Committee in Solidarity with the People of El Salvador (CISPES), a U.S. group that acted as a public-relations arm for Marxist Salvadoran guerrillas. From 1981 to 1985, acting on tips from Frank Varelli, a “defector” from the group, the FBI spent ten work-years monitoring CISPES and 178 affiliated individuals or groups. Special agents purchased “subversive materials” from bookstores, infiltrated CISPES barbecues and bake sales, and discovered that some activists were in contact with former Weather Underground operatives in Dallas. 

But no charges were ever brought against CISPES members, and after Varelli failed a lie-detector test in 1985, the investigation was shut down. Varelli then joined up with opponents of U.S. Central American policy and, just as Jack Terrell had done to CIA in Iran-contra, exposed FBI operations of questionable legality. Senate investigators concluded that “This was not an investigation to intimidate foes of this administration, as some have alleged, ” yet chastised the FBI for going off on what amounted to a fruitless commie-hunt without better checking and analysis. 

Varelli’s information, Sessions admitted, “was not adequately verified by the FBI.” But why, Senator David Boren pressed Sessions, “were none of Varelli’s statements checked out with agencies who were more familiar with Salvadoran affairs, such as the CIA?” Sessions had no answer; he could only say that CIA had not been consulted about Varelli’s allegations Ten man-years of work could have been saved, Sessions conceded, if the Bureau had simply asked for analytical assistance from CIA.

Predictably enough, disclosure of poor liaison in the CISPES affair soon led to renewed rumblings for a superagency or CI “czar.” When current and retired intelligence experts called for a top-to-bottom reorganization of CI, at a Washington conference in early 1988, special weight was given to the ideas of those, like former Reagan aides Codevilla and DeGraffenreid, who inveighed against “arbitrary and cumbersome” splits. The main problem, all critics seemed to agree, was that no one person or agency was responsible for countering hostile intelligence. Judge Webster was opposed to radical changes in the CI framework, but he could sense which way the wind was blowing. There was a movement to centralize, and he moved to co-opt it—not only out of bureaucratic savvy, but in a desire to make the system more “cohesive.” 

In April 1988, at a classified location in Washington, Webster announced the formation of a new interagency Counterintelligence Center at Langley. CIC’s boss was the special assistant to the DCI for counterintelligence, Hathaway, who retained his title as Chief/CI. A key goal of the center, Webster explained, was to teach FBI and CIA personnel simply to recognize data of value to the other agency, for surely that was a precondition of sharing it. The re-education would be achieved “by putting people in each other’s offices.” An FBI agent was assigned fulltime to the new Center. The Agency also brought into the CI process some research and analytic units; Deputy Director for Intelligence Richard J. Kerr said the Center “was really in the business of trying to do analysis of what was going on, as opposed to looking at individual cases.” Centralization of intelligence was put at a premium to investigation, reflecting Webster’s heightened interest in looking at the ant farm that hostile intelligence was building, whereas at the FBI his job had been to find the tunnels and fill them. 

For all its heralded importance, some of CIC’s early missions seemed insignificant, even silly. In May 1988, staffers were quite intent on determining whether the KGB was tapping telephone calls from Nancy Reagan to her astrologer in San Francisco, where the Soviet consulate was known to target microwave-transmitted long-distance traffic. And in 1990, CIC officials traveled to Pensacola, Florida, to question six Army intelligence analysts, all of them with Top Secret security clearances, who had gone AWOL from the 701st Military Intelligence Brigade in Augsburg, West Germany, purportedly to seek and destroy the Antichrist. But those episodes might not have been as trivial as an outsider would initially think. The case of the AWOL analysts did not exactly instill confidence in the nation’s personnel security, and their “Antichrist” explanation might have merely been a cover story for other mischief. The first lady, for her part, could have inadvertently given the Soviets a stream of personal and political intelligence simply by saying, over insecure lines: ’Ronnie’s thinking about changing this policy or that policy. Are the signs right?” 

Preoccupied as it was with such matters, CIC was of little help in hashing out agreement on other issues, including a long-sought standardization of Top Secret security clearances. For five years, the Reagan administration had been trying to get the agencies to adopt a single standard, but—as had happened when the Eisenhower administration attempted to force the issue— the agencies were tangled in a fight over who would oversee the new system. “CIA does not want anyone looking over their shoulder, ” a congressional source told the Washington Post in November 1988. A House Intelligence Committee report blamed the failure to implement a common security policy on “turf consciousness.” 

Yet CIC’s first year was not without successes. In June 1988, its analysis caused Canada to oust seventeen alleged KGB officers for spying. And in August, the new unit, working with West German intelligence, broke a major spy network in NATO. The ring had been operating since the early 1970s, perhaps as part of a larger KGB initiative directed by Kim Philby. The key operative was a former U.S. Army sergeant, Clyde Lee Conrad, who until 1985 had guarded a safe that stored documents at a NATO base near Frankfurt. Conrad had reportedly supplied Hungarian Military Intelligence with U.S. Army plans to defend Europe, and the Hungarians had shared the data with Moscow. The case began to unfold as CIA discovered that secrets were being lost but was unable to pinpoint how. CIC took over analysis of the problem, and asked the FBI to tap the calls of a known Hungarian intelligence agent in Washington. That led to surveillance of a Conrad crony who met the Hungarians. The FBI played a key role in supervising the inquiry, and in monitoring the German case for prosecution in the U.S. 

Still, there were complaints about cooperation. “There were hints early on that there was a problem, ” recalled a congressional staffer familiar with the case, “and they [the agencies] didn’t coordinate.” Because Conrad was no longer actively reporting, CIA suspected that he might be a “throw-away, ” deliberately burned to protect other Soviet sources in NATO. Geer and the FBI thought this was Angletonian paranoia. They also suspected that CIA’s assistance was constrained by a desire to cover up a bizarre and embarrassing irony: Conrad, posing as a Hungarian intelligence agent, was paid $100,000 by CIA for information about an alleged U.S. Army spy ring working for the Hungarians. 

After the Conrad flap, Sessions and Webster signed a “Memorandum of Understanding, ” requiring CIA to brief the Bureau on breaking CI cases “in a timely fashion.” But critics contended that something more than the CIC was needed to ensure liaison. In November 1988, a group of current and former experts on spying, the Consortium for the Study of Intelligence, urged creation of a new body to monitor CI. The Consortium’s report was prepared by Geer, DeGraffenreid, and DDCI Robert Gates, and endorsed by National Security Adviser Brent Scowcroft, Senate Intelligence chairman Boren, and former President Nixon. Their report said that security failures in the “decade of the spy” had occurred, and were continuing, largely because of inadequate CI coordination. But Judge Webster insisted that everything was fine. 

As proof, Webster could soon point to liaison in another case solved by CIC, this one involving an unexpected enemy. American intelligence officials had not been alarmed when François Mitterrand and his socialists came to power in France in 1981, for there was little anti-American or pro-Soviet rhetoric. Unbeknownst to the U.S., however, a special economic spying capacity was created in 1982, when the old French intelligence service, the SDECE, was transformed into the Direction Générale de la Securité Extérieure (DGSE). By January 1987, the new French agency had determined that trade secrets from three U.S. companies could help bolster France’s sagging state-run industries: Texas Instruments, Corning Glass, and, most of all, IBM. By the fall of 1987, DGSE had an inside track on Big Blue’s strategic business decisions, including bids on contracts for high- tech research. 

That information helped a French electronics firm, Compagnie des Machines Bull, in some bidding wars. But the DGSE operation began to unravel in February 1989, apparently when a drunken French agent described it in general terms to an American friend. Because the case involved breach of international patent law, Webster arranged for FBI agents to be temporarily attached to the CIA station in Paris. The team achieved a level of cooperation “unprecedented in Agency history, ” according to one former Agency official, and cracked the case after seven months of patient work. In November 1989, the DGSE moles were found and fired, and French intelligence finally admitted its mischief. To prevent further damage to relations between the two countries, Webster flew over to see the French in January 1990 and “buried the hatchet.” 

But few counterintelligence cases would have outcomes that were so unambiguous, and CIC was especially stumped by a continuing pattern of losses for U.S. intelligence in Moscow. “Was it communications that were penetrated?” Webster later said, describing the questions being asked by CIA. “Was it human penetration? Was it happening overseas? They were trying to narrow that circle of possibilities.” Because Howard couldn’t have been responsible for all the rollups, suspicion had fastened again on the Moscow Embassy, especially when two Marine guards, Clayton Lonetree and Arnold Bracy, were arrested for espionage in December 1986. But that happened only after CIA officers interviewed Lonetree for four days without advising him of his rights, letting him have a lawyer, or calling in the FBI. For purposes of prosecution, the interrogations were useless. 

They proved none too valuable, either, for figuring out why Moscow Station was still burning. Although Bracy initially confessed that he was in love with a Russian woman named Violette, presumably a KGB agent, who had persuaded him to let Soviet agents into the code room, he soon recanted, and all espionage charges against him were eventually dropped. CIA analysts wondered, somewhat convolutedly, whether Bracy might have been put up to his “confession” by the KGB, in order to throw the U.S. off the scent of deeper penetrations. The KGB could have offered Bracy a choice: confess falsely to helping bug the embassy, and then we’ll rescue you through a spy swap, so you can live happily ever after with Violette. If you don’t, we’ll expose your relationship with Violette, declare publicly that you spied for us, and you’ll spend the rest of your life in jail. Whatever the reasons for Bracy’s confession, CIA in any case determined by 1988 that the embassy’s communications had not been compromised at all. 

The possibility of human treason therefore assumed a new plausibility, and liaison among the two agencies’ mole hunters took on a new importance. In acknowledgment of this, Webster and Sessions prepared a “memorandum of understanding, ” outlining a comprehensive process to ferret out security threats. Its key stipulation was that CIA would keep the FBI promptly informed of security cases, as had clearly not happened with Howard and Bracy. But FBI agents suspected that CIA was still holding back, and sensed a reluctance to probe suspicions fully. One FBI official would remember being told in the late 1980s that “something’s funny” in U.S. spy operations, and that several officers on Hathaway’s staff had started a probe. But the general consensus at Langley was that CIA had “other things to do.” 

That lack of institutional support left CIC staffers in a desperate and demoralizing position: seeing Russian sources snuffed out time and again, yet still unable to find the breach in security. Perhaps most disturbing, CIA’s operations seemed too carefully “wrapped up and disposed of, ” always in ways—such as Yurchenko “spy dust, ” his tip about Howard, or the Marine guards scandal —that deflected from the idea of a well-placed spy. 

Nevertheless, in 1989 CIC found one. 

DOWN TO THE END of the Cold War, probably no place in the world was so thick with spies as Vienna. It had been home turf for the KGB since the end of World War II, when the city had been for several years partitioned among the victors, leading to the aura of intrigue dramatized in Graham Greene’s thriller The Third Man. In the 1950s and ’6os, Richard Helms had routinely warned officers bound for Vienna about KGB sponsored attempts to kidnap or murder CIA assets; in the 1970s, the Soviets had chosen Vienna as the site to abduct and murder Nicholas Shadrin; in the 1980s, the city had been the KGB’s favorite place to meet with agents like Ed Howard and Clyde Conrad. But CIA had also built up a considerable apparat in the city. The emphasis was on technical surveillance, especially the tapping of telephones. By 1988, when CIC formed a Security Evaluation Office to boost anti-spy efforts at U.S. embassies, Hathaway had a lot of resources to bring to bear in Vienna, and the Soviets had a lot of fish to get caught in the net. 

In early 1989, the CIC tracking program established that a KGB illegal agent, traveling on a Finnish passport as “Reino Gikman, ” had received a briefcase from the former number-two U.S. diplomat in Vienna, Felix Bloch. An alarmed Hathaway immediately took the case to Webster, explaining that Bloch had access to a broad range of classified secrets, including encoded cable traffic, the identities of CIA officers in the embassy, and even the identities of some Agency sources. Although Bloch was not cleared for some of the most sensitive secrets, he would have known much about the Clayton Lonetree—Moscow embassy case, and could have given the KGB “feedback” on any number of projects. In his capacity as a consular officer, Bloch had also drafted reviews of high-tech exports to the Eastern bloc, consistently urging a soft line on trade restrictions. Bloch’s “M.O., ” which included sophisticated counter-surveillance precautions, suggested that he had been spying for a long time. 

On May 14, 1989, Gikman telephoned Bloch at his apartment in Washington, where Bloch was working for the State Department’s Canadian-affairs division. CIA was listening on the European end. Gikman, who was in Paris, pretended to be a stamp dealer. Bloch, an avid collector, said he just happened to be flying to Paris that very day. He hoped to see Gikman there the following evening, in the Restaurant Le Meurice. This lead was passed to French intelligence. The two men met as planned. Bloch placed under the table a black airline-type bag, and the KGB man took it with him when he left. The meeting was monitored by French agents, who learned that Bloch planned to see Gikman again two weeks later, in Brussels. 

The Brussels meeting created a predicament for Hathaway. He believed that Belgian intelligence was penetrated by the Soviets, and knew that its director did not have good relations with other Western services. CIA would have to provide its own coverage in Brussels, then. But in doing so, it would be violating a working agreement with the Belgian government. The whole station could be kicked out if the operation blew. Consequently, the Agency’s surveillance in Brussels was discreet—perhaps too discreet, for there was confusion about whether Bloch brought a bag to the meeting, and whether he left it with Gikman. 

Even so, the Soviets somehow detected the suspicions against Bloch. On June 22, Gikman called Bloch and said, in double-talk, that he wasn’t “feeling well.” He hoped Bloch didn’t “catch the same thing.” 

Now the Bureau took over the case, but Geer was not at all happy with the way CIA had managed the investigation. As in the Howard episode, the FBI should have been brought in earlier. CIA’s surveillance, as usual, had not been conducted with an eye toward prosecution, and now that Bloch seemed to be aware of the suspicions against him, getting such evidence would be almost impossible. Geer wondered, moreover, just how Bloch had found out about the investigation. By September 1989, the FBI was seriously investigating whether leaks about the Bloch investigation might have originated at Langley. Time magazine reported that “dozens of FBI agents have been rummaging through CIA…. What the FBI has learned so far is that about 150 officials knew that Bloch was under suspicion. That large number virtually guaranteed early disclosure.” 

In any case, the KGB’s warning to Bloch caused a need for immediate action, before he could flee or destroy evidence. Just hours after his June conversation with Gikman, FBI agents closed in on Bloch and interrogated him for almost three hours, openly accusing him of being a Soviet spy. Sessions later said that confrontation was the “least intrusive mode” of investigation, a view questioned by CIA. Bloch insisted the packages he passed the KGB man contained only stamps. He was not believed, and the Bureau placed him under open twenty-four-hour surveillance. To avoid a reprise of the Howard bungle, the Bureau’s coverage verged on overkill. Dozens of FBI agents were on Bloch’s tail from the moment he left his house each morning, following him even into public restrooms. In what soon became a media circus, the FBI agents were in turn pursued by a train of reporters. The case dragged on that way until November 1990, when Bloch was finally fired. But he was not arrested or charged, and the much-sought prosecution never materialized. 

The Bureau was embarrassed by its inability to nail Bloch, and faulted CIA. Geer felt there should have been better coordination between the FBI and CIA’s station in Brussels, working together to develop admissible evidence, and letting the Bureau take the lead as soon as possible. As one CI official told the press, the Bloch case “fell between the cracks.” 

Again came the calls for a fundamental restructuring, a real centralization of CI. Using unusually harsh language, a Senate Intelligence Committee report found that Webster’s CI reforms had “failed” because of “bureaucratic infighting.” Senator Boren believed that too many agencies were doing counterintelligence, using different procedures. “That’s one of the problems right now, ” he said. “No one agency in government is really responsible.” 

Webster had hoped that his new Counterintelligence Center would be responsible. But a 1990 Senate panel, headed by security lawyer Eli Jacobs, found that CIC had failed to overcome fragmentation. “Without some kind of coordinative function, ” warned one panelist who studied the problem, “people will simply run off, even if they are trying to do right, in all kinds of directions…. Correcting this deficiency is the single most important undertaking facing those … charged with protecting the nation’s secrets.” But the panel’s ability to correct that deficiency was limited, as Jacobs himself admitted, because “We addressed the counterintelligence problem within the existing organizational framework. We did not examine the need for changes to that framework.” 

Ken DeGraffenreid did, however. Since November 1989, he had been floating the proposal for a “National Counterintelligence and Security Assessment Center, ” a toned-down version of the superagency idea. He wanted, in effect, a CI czar to coordinate counterintelligence, much as William Donovan had once been appointed to coordinate foreign collection. Under the CI czar would be some thirty analysts and operators from various national security agencies. They would identify those secrets most in danger of being stolen; detect and evaluate strategic deception; and collate security measures both at home and abroad. DeGraffenreid realized that his proposal was likely to be fought by both FBI and CIA, but urged the Jacobs panel to consider legislation if the agencies would not go willingly along. “If it takes a hammer, ” he testified, “maybe it’s time for a hammer on these issues.” 

INSTEAD OF A HAMMER, the Bureau tried a woman’s touch. In mid-1989, the position of liaison officer went to FBI agent Barbara Campbell. This development could be seen as part of a larger trend in Western intelligence— Stella Rimington had already become deputy chief of Britain’s FBI equivalent, MI5, and would soon be named its head—but no “affirmative action” had operated in either case. An attractive, married brunette, Campbell came in with a good CI background, having served a half dozen years in the Soviet Section at headquarters and the Washington Field Office. She was enthusiastic about the liaison job, and impressed Agency officers with her grasp of the issues. A good listener and a quick study, she also had a cool head. Some CIA men had worried, with residual sexism, that she might be too “emotional” in crises, but she always erred on the side of reserve. 

Campbell understood that there would always be conflicts, even if the Agency was headed by a former FBI director who was naturally friendly toward his old ward. She knew from experience that CIA would get information and not recognize it as being of value to the Bureau, and that such information wouldn’t come over until something substantive happened. At that point, tempers would naturally flare: Why didn’t we get this before? How do we know we are getting all the facts now? The problems tended to cluster around CI matters, but were by no means confined to them. Both organizations were so big that there were many things going on between them in computers, medical services, and what Aldhizer had called “offbeat areas.” Coordinating the release of documents under the Freedom of Information Act, for instance: because there were no standard government criteria for determining how to sanitize a document, one agency might inadvertently declassify a piece of information that the other had excised. If the requestor had as efficient an operation as intelligence critic Morton Halperin, or as some of the conspiracy theorists, with computer-supported file systems to do the matching, there could be an occasional “Ah! Gotcha! The FBI has released this, and CIA didn’t release that—what’s the story here?” 

Ideally, Campbell would try to keep the parties in contact by arranging for FBI officials to call up their opposite numbers at CIA. In Aldhizer time, there had been secure green telephones between the organizations, located at various places in the Bureau. By the time Campbell took over, there was a green phone on almost every desk in the Intelligence Division, so that CI agents could dial a five-digit number and talk to their counterparts at Langley. But not all calls to the Agency could be handled by the Intelligence Division, and Bureau people would try to get things done on the regular telephone, “the black line, ” of which CIA people were deathly afraid. If a CIA employee’s name was mentioned on the black line, that might upset the Office of Security, which disciplined personnel whose identities were disclosed. Especially at the lower levels, such episodes could get things tremendously off-track. 

At the higher levels, meanwhile, Campbell’s task was complicated by a wide purge of CI personnel. At both agencies the moves were seen as reflecting displeasure over continuing CI failures, the Bloch case apparently having been the final straw. Hathaway retired on March 1, 1990, to be replaced by Theodore Price, about whom the Agency was careful to ensure that little was publicly known. By then James Geer, too, had retired, and was replaced by W. Douglas Gow, formerly in charge of the FBI’s Washington Field Office. Geer’s deputy assistant director, Gary Penrith, was transferred to Newark, and Revell was eventually demoted outright from the FBI’s number-three position to chief of the Dallas Field Office. The Bureau’s public-affairs office said that Geer had improved cooperation with CIA, but reporters noted that his departure came “at a time of debate between the FBI and CIA over the role of counterintelligence and which agency is best handling the assignment.” 

The Senate Intelligence Committee was also debating the issue, and sided with the Bureau. In October 1989, after being briefed on the Bloch affair, the Senate introduced a bill compelling CIA to inform the FBI immediately upon learning of any possible espionage by persons subject to U.S. law. “If this provision had been in effect, ” a Senate Intelligence Committee report said, “initial indications of espionage would have been reported promptly to the FBI, rather than just to … agencies without criminal investigative jurisdiction, i.e., CIA.” The Committee’s leaders, Senators Boren and William Cohen, were so upset with the Agency over its lack of prosecutorial savvy that they even suggested the Bureau should take over the Agency’s foreign spy-catching role. ’They [the FBI] have the most expertise in the field of counterintelligence, ” Cohen said. 

In the end, Webster was not ceded title to the house that James Angleton had built, but a frustrated Boren warned of future changes. Dividing CI geographically just didn’t make sense, he noted, since “obviously the threat [of spying] doesn’t stop at the border.” 

LIKE CASEY, Webster had more success in counterterrorism than in counterintelligence. After its baptism by bombing in Beirut, interagency CT had been aided by Aldhizer’s breakthroughs in technical and analytical cooperation, which had laid the framework for the Counter Terrorism Center, and the two sides were used to collaborating by the time Barbara Campbell came along. In March 1989, for instance, the Center brokered a joint FBI-CIA inquiry into the bombing of a van driven by the wife of Captain Will Rogers III, captain of the U.S. cruiser Vincennes, which had mistakenly shot down an Iranian jetliner. CIA analysts convinced FBI forensics experts that the explosive device had used a small fuse of balsa wood, attached to the undercarriage and ignited by engine heat, which would have been destroyed in the blast. And in September 1989, CTC foiled what may have been a plot to assassinate President Bush. After a defector from the Mèdellin cartel told the FBI that drug lords wanted to send hit men to the United States, possibly to kill the president, the CTC tracked four Spanish-speaking suspects to Edmundston, New Brunswick, a small town at the U.S. border. The men were traveling on fake Venezuelan passports, and had loaded three cars with submachine guns and three thousand rounds of ammunition. When arrested, they had been a seven-hour drive from President Bush’s summer home in Maine. 

But CTC’s real test came after December 21, 1988, when Pan Am Flight 103, bound from Frankfurt to the U.S., exploded at thirty thousand feet above Lockerbie, Scotland. Two hundred seventy persons were killed, including, by some accounts, several CIA officers on their way home from a Middle Eastern station for Christmas. The bombing had occurred despite a warning to CIA on December 5, apparently from the Mossad, that a Pan Am flight from Frankfurt to the U.S. would be bombed within two weeks. The tip had not been passed to the FBI for follow-up until after 103 was downed, at which point Sessions declared publicly that “The bureau believes that it was a hoax and not connected to Flight 103.” But independent investigations by the House Government Operations Transportation Subcommittee, the Airport Operators Council, and the National Business Travel Association faulted the two agencies for not pooling data before the bombing. 

To ensure the sharing of data afterward, CTC was immediately put on the probe. According to one U.S. official, the inquiry nevertheless became a “chaotic mess” of noncooperation. By April 1989, Vincent Cannistraro, one of the Agency’s senior officers at CTC, thought Iran had hired a Damascus-based radical Palestinian faction to carry out the operation. So certain was CIA of this that Webster briefed President Bush on the theory. But Neil Gallagher, chief of the FBI’s counterterrorism unit, argued that CIA’s case was not strong enough to stand up in court. “CIA believe they have a lot, but it’s a Styrofoam brick, ’ one FBI agent told the press. The Bureau was meanwhile working on its own thesis, and reportedly kept crucial information from Langley. Those FBI reports that were shared were denigrated by a CIA official under State Department cover as being “like essays from grade school.” But Webster recalled the situation differently. “Everybody got into the act quickly in Pan Am 103, ” he said. “Tremendous cooperation between all of us—CTC made a great contribution to the solution of that case with bits and pieces from FBI forensics, working closely at all levels, and nobody holding anything back.” 

The big picture, as far as it may be filled in, suggests that cooperation in the 103 case was difficult but good. In early 1990, diligent FBI search at the crash site located a fragment of microchip detonator that had triggered plastic explosives. Campbell turned the chip over to a CIA analyst, who determined that the fragment belonged to a consignment of timers produced by a Swiss firm for the Libyan government. Then came leads from a high-ranking Libyan intelligence officer, Abd Al-Majid Jaaka, who defected to the U.S. in Rome. There were no Hayhannen or Yurchenko problems this time: Jaaka walked into the U.S. Embassy and was interviewed by the FBI’s legal attaché, flown to the U.S., placed under CIA care, debriefed by both agencies, and eventually turned back over to the FBI for resettlement under the Federal Witness Protection Program. Jaaka convinced his handlers that two Libyan intelligence officials had prepared the explosives used to blow up the Pan Am jet. The agencies still disagreed about why the bombing happened: the Bureau believed Muammar Qaddafi sought revenge for American air strikes against his country in 1986, whereas CIA felt that Libya was only a proxy for Iranians avenging the Vincennes. But by sharing forensic evidence, and jointly debriefing Jaaka, the-two agencies had developed a credible case. Campbell had worked hard to broker and maintain that cooperation, and was especially proud when, on the basis of joint FBI-CIA efforts, the United Nations Security Council eventually ordered Libya to surrender for trial the two Libyans accused of preparing the bomb. 

When Qaddafi refused, however, Cannistraro and others at CIA, frustrated that the Libyans were “beyond the reach of U.S. law, ” began to question Webster’s legalistic approach to the case. CTC was patiently seeking indictments against the Libyans, which would allow the FBI to arrest them. That might be good public relations, but it would not deter future attacks by state-supported terrorists. To Cannistraro, terrorists themselves were “interchangeable parts, ” surrogates for state sponsors, and the only way to thwart the surrogates was to “take out” some of the sponsors, perhaps by using the Israelis. In this, Cannistraro was backed by right wing hawks in Washington, who assailed U.S. CT policy as a “paper tiger with nerf teeth, ” and by Newsweek magazine, which urged that America assassinate terrorist leaders outright. Because Judge Webster would not consider complicity in that kind of business, Cannistraro came to believe that CTC had become too bureaucratic, too much like the FBI, and in September 1990, shortly after Iraq invaded Kuwait, he resigned. 

He got out just as CTC, Webster, and FBI-CIA relations generally, were entering their finest hour. As President Bush began sending troops into Saudi Arabia, Iraqi-sponsored terrorist groups declared that they were waiting for a “green light”—possibly the start of war in the Middle East—to attack Western targets. CTC went on full alert. Analysts sifted through thousands of cables, searching for signs of planned attacks and refining profiles of known terrorist cells. CIA had known since at least 1986 that Iraqi embassies in nine European and Asian countries were distributing weapons in diplomatic bags to hit men and terrorists; the goal now became to disrupt the lines of communication between these field assets and their sponsors in Baghdad. By liaising with foreign security services, Webster arranged the arrest or expulsion of Iraqi diplomats, businessmen, and students. He also brokered covert actions of a more sensitive nature. Details of those latter operations remain classified, but Webster’s legalism appears to have been somewhat tempered by a wartime expediency. As he himself would say of William Stephenson’s adventurism in the U.S. during World War II: “When you’re at war, sometimes you need to reach to get things done.” 

Working from Webster’s tips, carried to FBI headquarters by Campbell in her briefcase, the Bureau meanwhile monitored thousands of terror suspects in the United States. Special watches were kept on the Trans-Alaska pipeline, on the nation’s Strategic Petroleum Reserves in Louisiana and Texas, on landmarks like Grand Central Terminal in New York, and even on Mormon churches—vulnerable because terrorist groups believed they worked closely with CIA. When CIA reported to Campbell that a New Jersey man, Jamal Wariat, had contacted the Iraqis and offered to assassinate President Bush, the FBI dangled an informant posing as an Iraqi intelligence officer, gleaned full details of the plot, then arrested Wariat. Similar teamwork, managed by Campbell, led to the arrest of suspected Palestinian terrorists in New Jersey, and foiled a scheme by Hamid Al-Amri, an intelligence operative assigned to Iraq’s United Nations delegation, to kill an Iraqi dissident in California.

By January 16, 1991, as the U.S. began bombing Iraq, both FBI and CIA believed that the terror situation was well under control. On that day, with FBI sharpshooters perched on roofs throughout Capitol Hill, CT experts from both agencies met with congressional leaders and presented evidence of what Senator Boren called “very close coordination between the FBI, in terms of monitoring any threat inside this country, with the intelligence organizations, CIA and other intelligence assets internationally.” In counterterrorism, at least for the past few months and for a few weeks more, the wedge no longer was. Campbell hardly slept during the war, but she kept open the information bridges. If there were any interagency gaps in the country’s CT defenses, terrorists certainly failed to find them. Attacks against symbols of U.S. influence did occur—a Woolworth’s store in Bonn was firebombed; there were small explosions at U.S. banks in Chile, and sporadic attacks in Lima and Athens —but terrorists scored no major successes. None of those whom Webster considered “the really heavy-hitters, ” such as the Popular Front or Abu Nidal, got into the act. There were no attacks on U.S. soil. In the murky world of counterterrorism, where success is judged by what does not happen, the scorecard on Desert Storm reflected the worth of the CTC, the continuing education of a former FBI director turned DCI, and the cumulative work of dedicated liaison officers, from Papich to Aldhizer to Campbell, who for decades had been working to make relations as good as they were, when all the chips were down.

CHAPTER NINETEEN 

THE FALL OF BABYLON 

DESPITE CTC’S UNDENIABLY impressive performance during Desert Storm, Webster himself did not come out of the war quite so well. Although CIA had foiled terrorists, and provided some good tactical data—including precise targeting for bombing runs against Iraqi nuclear installations—General Norman Schwarzkopf had complained about a lack of strategic insight on Iraqi intentions. Even Webster’s longtime defender, Senator Boren, griped that “The war might have been avoided if the President had been told six months earlier that this man is thinking of invading his neighbors.”

In fact, a CIA analyst had predicted the Kuwait invasion in June, and a warning was conveyed to the White House on August 1, only hours before Saddam attacked. But Webster had not lobbied too hard for that intelligence, perhaps out of fear that this would involve him in policy. Webster often maintained that “It is not our role to shape the policy, ” and his view on that was so strong that when Bush and his national security advisers started talking about policy matters, Webster insisted on leaving the room. The DCI held that his job was simply to collect and disseminate intelligence—and so, indeed, he had supplied the White House with information about the invasion before it occurred. But because the intelligence had not been prioritized, stressed, or otherwise pushed by Webster, the president’s national security advisers had not interpreted it as anything like a warning. This “facts-and only-the-facts” approach struck some as being pretty close to the old Hoover-style FBI refusal to analyze intelligence or recommend actions, so as to not be blamed for any outcome. The White House was said to want someone with better, or broader, foreign policy knowledge—or, failing that, someone who would go out on analytical limbs.

Some insiders felt that Webster was being made the fall guy for prewar U.S. coddling of Saddam; others saw the quiet hand of former CIA Deputy Director Robert Gates, then serving as assistant to National Security Adviser Brent Scowcroft. Gates had become a welcome member of the Bush-Baker inner circle, and there was a sense that Bush, whose managerial style emphasized personal relationships, would not mind seeing Gates take over CIA.

But perhaps the greatest perceived fault in Webster’s tenure was pointed up when the Soviets unexpectedly backed American Gulf policy. Although Moscow maintained more than a thousand military advisers in Iraq, and refused to commit forces for the invasion, the U.S. and the Soviets seemed to be allies for the first time since 1945. In this New World Order, CIA was somewhat “behind events, ” as Webster conceded. Soviet leader Mikhail Gorbachev had always seemed an inscrutable mystery, and CIA analysts found it impossible to predict what he might do. When he visited the United States in December 1987, an FBI-CIA Courtship task force had gone to elaborate, even absurd lengths to figure him out. He was secretly photographed at cocktail parties by waist cameras disguised as belt buckles, and CIA lip-readers studied hours of FBI films, hoping to decipher any confidential asides to his aides. But no one picked him up saying anything like “I’m going to let Eastern Europe go, ” and CIA was widely chastised for not seeing what was to come. “For a generation, the Central Intelligence Agency told successive presidents everything they needed to know about the Soviet Union, ” said Senator Daniel Patrick Moynihan, “except that it was about to fall apart.”

Leading Sovietologists both inside and outside CIA seemed baffled indeed by the disarray, for their traditional method of analysis had yielded virtually no clues as to what Gorbachev would do. When the new Soviet leader had assumed power in February 1985 after the death of Konstantin Chernenko, analysts like Roy Medvedev preoccupied themselves with trivial details in the Soviet press, and gained no larger view. “The black mourning frame printed around the second page [where the deceased leader’s picture was run] looked rather narrow, ” Medvedev observed. “It was only half the width of the frame used for Brezhnev and Andropov (3 millimeters rather than 6). It was still, however, a millimeter broader than the frames used for the second-page announcements of the death of senior Politburo members like Marshal Ustinov, who had died a few months previously.” There was nothing in the measurement of picture frames to suggest liberalization in the USSR; therefore, no one suggested it.

CIA’s top leadership acknowledged that it had fallen short in predicting Gorbachev’s reforms, but could provide no real excuse. “Who would have thought that just five years ago we would stand where we are today?” Robert Gates told Congress in late 1991. “Talk about humbling experiences.” Gates could have said: Our reporting was poor because our Moscow network was rolled up, coincidentally or not, precisely as Gorbachev was coming into power. Gates did not say this, however. Instead, he suggested that “We’re here to help you think through the problem rather than give you some kind of crystal ball prediction.” This anti-prediction line was echoed by the Agency’s deputy director, Robert Kerr, who told Congress: “Our business is to provide enough understanding of the issue … to say here are some possible outcomes. … And I think that’s the role of intelligence, not to predict outcomes in clear, neat ways. Because that’s not doable.”

Yet someone had predicted glasnost and perestroika, in detail, even before Gorbachev came to power. This person’s analysis of events in the communist world had even been provided to the Agency on a regular basis. But the American intelligence community had chosen not to listen—and the roots of that willful deafness could be traced back, ultimately, thirty years, to a series of developments that caused a clash of mind-sets between CIA and FBI.

In 1982, KGB defector Anatoliy Golitsyn had submitted a top-secret manuscript to CIA. In it, he foresaw that leadership of the USSR would by 1986 “or earlier” fall to “a younger man with a more liberal image, ” who would initiate “changes that would have been beyond the imagination of Marx or the practical reach of Lenin and unthinkable to Stalin.” The coming liberalization, Golitsyn said, “would be spectacular and impressive. Formal pronouncements might be made about a reduction in the Communist Party’s role; its monopoly would be apparently curtailed…. The KGB would be reformed. Dissidents at home would be amnestied; those in exile abroad would be allowed to take up positions in the government. Sakharov might be included in some capacity in the government…. Political clubs would be opened to nonmembers of the Communist Party. Leading dissidents might form one or more alternative political parties. Censorship would be relaxed; controversial books, plays, films, and art would be published, performed, and exhibited.”

Golitsyn provided an entire chapter of such predictions, containing 194 distinct auguries. Of these, 46 were not falsifiable at the time this book went to press (whether, e.g., Russian “economic ministries” Will “be dissolved, ” it’s too early to tell) and another 9 (e.g., Yugoslavia’s “prominent role” in East-Bloc liberalization) seemed clearly wrong. Yet of Golitsyn’s falsifiable predictions, 139 out of 148 were fulfilled by the end of 1993—an accuracy rate of nearly 94 percent. Among events correctly foreseen: “the return to power of Dubcek and his associates” in Czechoslovakia; the “reemergence of Solidarity” and the formation of a “coalition government” in Poland; a newly “independent” regime in Romania; “economic reforms” in the USSR; and a Soviet repudiation of the Afghanistan invasion. Golitsyn even envisioned that, with the “easing of immigration controls” by East Germany, “pressure could well grow for the solution of the German problem [by] some form of confederation between East and West”—with the result that “demolition of the Berlin Wall might even be contemplated.”

Golitsyn received CIA’s permission to publish his manuscript in book form, and did so in 1984. But at the time his predictions were made, Sovietologists had little use for Golitsyn or his “new methodology for the study of the communist world.” For the man who had once been ridiculed at CIA’s infamous “Flat Earth Conference” for claiming that the SinoSoviet split was false, it must have seemed yet another classic case of “They all laughed at Christopher Columbus.” John C. Campbell, reviewing Golitsyn’s book in Foreign Affairs, politely recommended that it “be taken with several grains of salt, ” while other critics complained that Golitsyn’s analysis “strained credulity” and was “totally inaccurate, ” or became so exercised as to accuse him of being the “demented” proponent of “cosmic theories.” The University of North Carolina’s James R. Kuhlman declared that Golitsyn’s new methodology would “not withstand rigorous examination”; in the London Review of Books, Oxford historian R. W. Johnson dismissed Golitsyn’s views as “nonsense.” British journalist Tom Mangold even went so far as to say, in 1990—after Golitsyn’s prescience had become clear—that “As a crystal-ball gazer, Golitsyn has been unimpressive.” Mangold reached this conclusion by listing six of Golitsyn’s apparently incorrect predictions and ignoring the 139 correct ones.

Golitsyn’s analysis was as little appreciated within CIA as it was in the outside world. “Unfortunate is the only term for this book, ” an Agency reader noted in an official 1985 review. A CIA analyst took Golitsyn to task for making “unsupported allegations without sufficient (or sometimes any) evidence, ” and for this reason would be “embarrassed to recommend the whole.” Golitsyn’s case was deductive, based on pattern-recognition and abstract principles; he had no transcript of a secret session in which Gorbachev said he would do all these things. Therefore, his predictions did not need to be taken seriously.

There had been a time, of course, when CIA’s conception of “evidence” was considerably less legalistic. This alternate conception, which came out of British literary criticism, had governed OSS/CIA counterintelligence for roughly thirty years, from 1943 to 1973. It had caused considerable conflict between FBI and CIA, in such matters as molehunts and disputes over the bona fides of defectors. Questions about the legitimacy of Yuri Nosenko or the loyalty of Igor Orlov were, to the FBI, only “unsupported allegations without sufficient (or sometimes any) evidence.” The FBI’s refusal to side with CIA on such questions had limited CI chief James Angleton’s ability to prove his suspicions about penetrations, false defectors, and possible KGB complicity in the killing of JFK. The result had been an increase in FBI-CIA tensions, an interagency feud over Golitsyn, a decrease in Angleton’s popularity at both agencies, the decentralization of his CI staff, and then his outright dismissal. The clash between Angletonian and Hooverian CI paradigms had then been resolved in a way which remade CIA counterintelligence philosophy according to the simple and direct methodology of the FBI.

If it had been otherwise—if CIA had not lost the war of philosophies to the Bureau; if the FBI had accepted Golitsyn; if Angleton’s looser conception of evidence had survived at CIA into the 1980s—the Agency would have perhaps been sensitized to Golitsyn and what he had to say. As it was, however, the defector had been put out to pasture after Angleton left, with a part-time consulting arrangement. He was free to send in “crank memos” and to publish his predictions in a book, but no one at CIA paid him much mind. After all, Golitsyn saw Soviet reforms as part of the Leninist disinformation strategy conceived back in 1959. For the strategy to succeed, the KGB would have to have so deeply deceived and penetrated CIA, with false defectors and moles, that it could effectively control American intelligence. But most at CIA discounted the possibility of false defectors, and there was still no firm proof of any mole. And perhaps most fundamentally, as the philosopher William James once noted, “we tend to disbelieve all facts and theories for which we have no use.” Who had any use, in the end, for Golitsyn’s belief that the coming glasnost and perestroika would merely constitute the “final phase” of a long-term KGB strategy to “dominate the world”?

One of Golitsyn’s predictions, however, could not be ignored, even if one rejected all else he said. This was his observation that “Liberalization in Eastern Europe on the scale suggested could have a social and political impact on the United States itself.” Specifically, “anticommunism would be undermined, ” while Western institutions that owed their existence to the perception of a communist threat, such as NATO and the U.S. intelligence community, “could hardly survive this process.” As Gorbachev himself put it in 1987, perestroika was “tantamount to an ideological catastrophe” for the West, because “it frustrat[ed] the chances of using the ‘Soviet threat’ bugbear, of shadowing the real image of our country with a grotesque and ugly ‘enemy image.’” Gorbachev’s key adviser Georgi Arbatov was even more explicit about what the Soviets planned. “We are going to do something terrible to you, ” he told U.S. journalists. “We are going to take away your enemy. The ‘image of the enemy’ that is being eroded has been absolutely vital for the foreign and military policy of the U.S. and its allies. The destruction of this stereotype is Gorbachev’s secret weapon.”

As the Soviet Empire fragmented during the late 1980s, U.S. policy professionals began to agree with Arbatov’s claim that, in light of developments in the communist world, “America also needs perestroika.” Many journalists and politicians now believed that the apparent disappearance of the communist threat made it necessary to reorganize American intelligence. In this new climate, Webster was widely criticized for failing to redefine the Agency’s mission.

In April 1991, a year and half after the East Bloc nations (to quote Angleton’s favorite poem) “whirled in fractured atoms beyond the circuit of the shuddering Bear, ” Webster did create a special task force to study what new threats might require CIA attention. But when no new paradigm was found, Senate Intelligence Committee staffers griped that Webster was more interested in his morning tennis matches than in working to refine a “vision.” That was probably an unfair rap, since any DCI inevitably looked to the White House for clues to the content of formal change, and Bush himself had long been criticized, even before his election as president, for “the vision thing.” The problem ran even deeper than Bush; the plain fact was that U.S. statesmen had been increasingly pragmatic and aphilosophical ever since the Civil War, and America’s intelligence community, as its foreign policy, had consequently been passive and reactive until aroused by events. The U.S. had been as unprepared for Saddam’s invasion of Kuwait as for the bombing of Pearl Harbor, and as surprised by the enslavement of Eastern Europe as by its liberation. Not until well after each new cataclysm occurred could any coherent new “vision” be produced. When it did not come overnight, the DCI was blamed.

Within CIA ranks, meanwhile, some officers still worried that “Mild Bill” Webster wanted them to uncloak their daggers. Despite his flexibility on legal matters during the Gulf War, some clandestine veterans were bitter about a return to strict clearance procedures. They also complained that Webster didn’t do enough to help the disbandment of the Agency’s Afghan rebels, and that he was still ignorant, after four years, about key details in the secret world. In some areas that latter charge was plainly false—Webster knew SCUD missiles cold, and could discourse at length about “krytons, ” used to make triggers for nuclear bombs. In fact, as will be seen, one of the reasons that Webster knew so much about nuclear nonproliferation was that CIA, fearing that legal action might jeopardize sources on Iraq’s atomic research, had failed to forward certain data to the FBI. But for the most part Webster did tend toward openness and full liaison, and critics argued that this often conflicted with the DCI’s duty to protect secret methods and sources. Sometimes the United States fell down quite hard on that score: in October 1989, two undercover agents, working inside Syria for Jordanian intelligence, were killed by terrorists after their identities were compromised in a diplomatic exchange with Syria. Although in one sense the U.S. was simply conducting good liaison, and may have saved the American ambassador from assassination, the episode also showed that liaison was only as good as the party with whom one liaised—a truth J. Edgar Hoover had applied too often, and Webster perhaps not often enough.

Sensitive to the political weather after thirteen years in Washington, and satisfied but tired from restoring luster to two directorships, Webster resigned in July 1991. McGregor, Hotis, Baker, and his other aides were going or were already gone, but the Webster legacy would survive them. If the “skin graft” had been rejected by the Agency’s operational elite, FBI and CIA had nevertheless been joined at the waist, albeit loosely, in the new “fusion center, ” CIC, and had been linked more tightly in the CTC. But above all, Webster had broken the spell of Casey, who for all his popularity in the DDO had put Langley under the old Chinese curse: “May you live in interesting times.” Whenever CIA became too interesting to Congress, or to the public at large, trouble had always followed; but for four years Webster had kept things fairly dull, at least to the outside world. Considering the situation when he arrived, with CIA officers being grilled about Iran-contra on national television, that was probably more than enough, on the ledger sheet, to make up for his failure to invent a new moral compass for American spies.

To define such a vision, however, would be the overriding task of Webster’s successor, Robert Gates. Gates would make some good progress in this sphere, assisted by the larger drift of world events. But his efforts would be cut short by a single cancerous lack of liaison, which had occurred on Webster’s watch.

IF BILL CASEY HAD BEEN a reincarnation of Donovan, Gates was the second coming of Richard Helms. Although Gates was an analyst from CIA’s Directorate of Intelligence, Helms an operative from the clandestine service, both had risen from within to replace less popular outsiders (Raborn, Webster). Like Helms, Gates was well educated but not personally wealthy; the son of a Wichita auto-parts salesman, he took a history major at the College of William and Mary, then drove to Washington in summer 1966 with everything he owned in the back of a Mustang, joining CIA just as Helms became director. Both men were personally cold and professionally driven. Gates had small blue eyes, pale skin, and few interests outside of work; everything about him seemed to symbolize unswerving purpose. A jogger like Helms, he rose before dawn to run on the streets near his home in the Virginia suburbs, and his office was adorned with busts of Churchill and FDR. Neither DCI was bound by ideology; Helms had worked with both Lyndon Johnson and Richard Nixon, and Gates was known as a “chameleon” because of his ability to adapt. During most of the 1980s, he had been one of Casey’s favorite right-wing hawks, but before and after that he was a member of the pragmatical “Kissinger Mafia, ” working closely with Kissinger protégé Brent Scowcroft. Finally, both Helms and Gates would end their public careers in trouble with Congress, trying to counter accusations that CIA had broken the law.

Gates’ tenure as DCI even began that way. Originally nominated in 1987, when Casey fell ill, Gates had withdrawn after the confirmation hearings became embroiled in questions about his own actions in Iran-contra. Gates was careful to woo the Senate Intelligence Committee the second time around, but in July 1990 the senators delayed confirmation hearings for two months while again researching the question of whether Gates had any role in the Iran-contra affair. Although testimony in late September suggested that Gates had some early warning about Oliver North’s mischief, no damning evidence was found. The Senate approved him by 64 to 31, in a clear victory for President Bush, and on November 12, 1991, Gates was sworn in.

Taking over at Langley, Gates was immediately challenged by accusations that CIA was an “obsolete tool, ” a Cold War relic whose functions could be better handled by other agencies. Senator Daniel Patrick Moynihan even introduced a bill calling for the Agency to be disbanded. As Gates’ spokesmen scrambled to identify new enemies to justify their work, one senior official said CIA was now worried about “green menaces, ” such as global warming and “hazardous waste disposal.” Those claims were justly derided, but other new threats soon convinced most critics that “the world remains a very rough neighborhood, ” as Gates would say. Most of the newly perceived dangers had domestic and foreign aspects, and countering those threats would thus require close liaison between CIA and FBI.

THE FIRST NEW THREAT was actually an old one. Russian attorney Dmitri Afanasiev said that “the KGB was abolished after Yeltsin took over, ” but this was not true. United States newspaper editors believed it was true, for there were headlines like “KGB Network Grinds to Halt, ” “Gorbachev strips KGB of duties, ” and, on the front page of The New York Times Magazine, “Closing Down the KGB.” Even William Sessions believed the hype, and announced plans to shift thirteen hundred agents from counter-KGB work to the Bureau’s Criminal Division. In fact, the KGB had not been closed down at all. Its classic espionage functions, and most of its foreign spy staff, had merely been transferred to a new unit, the SVR(Sluzhba Vneshnoi Razvedki, or External Intelligence Service). The chief of the new service, Yevgeny Primakov, claimed that he would not spy against the West, but in 1992 seven Russian intelligence defectors told otherwise. In London, SVR Colonel Viktor Ochenko tipped MI6 to fifty Russian spies. In Paris, Ochenko’s leads uncovered Russian penetration of a French nuclear site. In Rome, authorities broke up a ring of twenty-eight SVR agents, the largest Moscow-based network ever revealed in Europe. In Berlin, an employee of the U.S. mission was arrested for helping the Russians target U.S. Air Force personnel. In Brussels, five SVR agents were arrested for compromising a NATO battlefield communications system, as well as secret data on the U.S. space shuttle. And in the United States, a Russian intelligence defector was doling out leads to many hundreds of Americans, possibly more than a thousand, who had been spying for Gorbachev and Yeltsin. Among these spies, American counterintelligence officials came to believe, was a well placed Soviet agent in Langley.

Clues to his identity came from an unexpected source. After the breaching of the Berlin Wall in November 1989, West German officials captured many secret documents from the East German intelligence service, known as the Stasi. When German security police shared some of the take with the FBI, Bureau intelligence chief Doug Gow was shocked by how effective the Stasi had been. The East Germans had recruited Bonn’s top CI officer as a mole; successfully hidden for fifteen years Illich Ramirez Sanchez, the international terrorist known as “Carlos the Jackal”; and even had in their pay a waiter who served President Reagan on a visit to West Berlin. They also seemed to have excellent sources on the internal workings of American intelligence—entirely too excellent, Gow believed.

Although there was no hard evidence of treason, Gow had allowed Campbell to share the files with CIA. After a year, the documents had produced leads on about a dozen American spy suspects, including several within the U.S. government. Gow told reporters in October 1990, “I would think that there are probably a few Americans that are very worried right now.”

But for those who did have cause to worry, bureaucracy bought some time. From the very start, CIA and FBI argued over which agency would preside over examination of the Stasi trove. “There was infighting and jockeying, ” one intelligence official would remember. “It took time to hammer out all the rules. There were personality conflicts.” There were also piddling disputes over uniform standards for data retrieval, just as there had been thirty-five years earlier in CODIB, Angleton’s attempt to computerize German intelligence files captured from the Nazis. For months, no one could agree on whether the data should be stored on CDs or diskettes. And when agents from the FBI’s Washington Field Office tried to run down one live lead, they were stymied by CIA’s station chief in Bonn. The station chief, whom his British colleagues dubbed “the poison dwarf, ” reportedly rebuffed FBI agents’ requests for important files and human sources. Robert “Bear” Bryant, the head of the FBI field office, asked his bosses to approve an obstruction-of-justice investigation of the station chief, but his request was turned down.

The bickering was hushed only when German officials came forward with additional information that shamed and shocked everyone. Over the last decade, Bonn said, communist counterspies had identified, exposed, or otherwise compromised every CIA agent in East Germany. More troubling still was that the Stasi had not bothered to shut these sources down, but instead had used them to channel disinformation. Even CIA’s less paranoid executives doubted that such massive deception could have been pulled off without an “inside” source who could both pinpoint CIA agents and help steer the Stasi’s lying.

CIA finally agreed to join the FBI in a full inquiry. To smooth out the cooperative effort, Gates lunched in November 1991 with Attorney General William P. Barr in the director’s dining room at Langley. Through Campbell’s mediation a compromise was reached, granting both agencies equal access to the German files, and leading eventually to creation of a joint task force.

The Bureau contingent was headed by Leslie Wiser, a special agent supervisor at the Washington Field Office. The CIA side was overseen by Chief/CI Ted Price, who candidly presented Wiser with evidence of a whole string of CIA losses. Wiser had expected a grim picture, but was shocked to learn just how bad things were. In 1991, the Soviets had caught and killed perhaps the most valuable agent CIA had ever placed in Russian intelligence. The U.S. mole, code-named GT/PROLOGUE, had been head of the American targets section of the KGB’s Second Chief Directorate (counterintelligence)—the senior Soviet official in Moscow responsible for catching American spies. Wiser began using CIC computers to comb for patterns. He cross-indexed the names of those CIA officials who had known about the Stasi agents, as well as about GT/PROLOGUE and other cases that had gone bad —Tolkachev, Motorin, Martynov, Gordievsky, Yurchenko, Howard, Bloch. Was there any common denominator?

There was more than one. Roughly two hundred people had not only known the identities of the Stasi agents but had also been privy to one or more earlier failed operations against the Soviet Union. To whittle down the list, investigators queried the defectors who came over in 1992. Unsolved cases from the Stasi files and the defectors began to merge. It became clear that a small group of officers in CIA’s Soviet Division and CI Staff had been involved in most or all of the compromised operations. As in 1967 and 1986, all the suspects were quietly transferred. Among them was Rick Ames, the CIA officer who had originally vetted Vitaliy Yurchenko and pronounced him bona fide. Since returning from Rome in 1989, Ames had been made chief of the Soviet Europe Division’s Czechoslovak branch. Now he was moved to a less sensitive post, the Black Sea section at CIA’s Counter Narcotics Center.

Like the other suspects, Ames was polygraphed. During the first round of questions, his graph showed a jump, suggesting deception, when he was asked if he was withholding any financial information from the government. When the examiners confronted him with that result, he claimed to be distracted by some personal money matters. The explanation was accepted, and the next day Ames was “fluttered” again on the machine. During this second round, Ames did not get the graph totally level, which would have indicated truthfulness, but he did lower it. Like the other suspects, Ames was passed.

Still, CI experts had begun to doubt the reliability of machine-based deception testing. Recently it had been learned that for over twenty years, most U.S spies in Cuba, although they passed polygraphs, had been under Castro’s control. German double-agents had also beat the machine. So Wiser and Price could not rule out the possibility that a long-feared mole was among those who had passed the most recent round of lie-detector tests. CIC therefore began dealing “marked cards”—bits of distinctive intelligence—to each of the suspects, to see whether the information made its way to Moscow. If, for instance, only one suspect was given information that a “national” (nonexistent) agent was to meet his handlers at a certain street corner, and the Russians showed up to surveill the meeting, the leak could be traced easily backwards, to the mole.

WHILE THE HUNTERS patiently waited for their prey to spring the trap, Gates was preoccupied for most of 1992 with a dramatic rise in economic spying. Ferreting out French spies in IBM had only been an overture. The intelligence apparat of Matsushita, a Japanese multinational corporation, occupied two floors of a Manhattan skyscraper. Other Japanese firms were bribing executives and recruiting graduate students. New Moscow-based “business ventures, ” staffed disproportionately with “former” KGB agents, were also targeting technological and economic secrets. The advent of these “friendly spies” only Confirmed what Angleton’s researcher Raymond Rocca had said years before: that there were “no friendly services … only services of friendly foreign powers.” Gates believed that nearly twenty governments overall were spying on American business, some by hiring out-of-work spies from Eastern Europe. “We know that foreign intelligence services plant moles in our high-tech companies, ” he told Congress. “We know that they rifle briefcases of our businessmen who travel in their countries…. and I think that the CIA and FBI working together should take a very aggressive program against it.”

But working together in economic CI posed special dangers. When the Bureau determined that American companies or businessmen were being spied on overseas, Campbell had to share those data with CIA. The Agency then had to brief U.S. firms and seek their cooperation in tracing leaks or setting traps. Yet some business executives worried that, if they got help in rooting out moles, the Agency would come back later and demand spying or cover arrangements in return. Meanwhile, whenever CIA suspected that an American concern was being targeted in the U.S., it was supposed to take those suspicions to Campbell at the FBI. But the Bureau needed an entirely new and different database to track economic espionage. Until it developed one, cases had to be pursued with ordinary police fieldwork—and without warrantless peeks into the briefcases of foreign executives, whom the FISA classified as “U.S. persons” the instant they stepped onto American soil. When the FBI briefed American firms on operations against them, the information had to be generic enough to protect CIA sources and methods, but specific enough to permit corrective action. Even then, retribution was constrained by foreign policy. Neither CIA nor State—nor, for that matter, American companies—wanted to start a trade war. Given all the interagency angles, congressmen were naturally worried when Gates and Sessions testified on commercial espionage at a congressional hearing in April 1992. “Government agencies are just as persnickety as individuals are, ” Representative Bill Brooks warned his colleagues. “They’re suspicious of each other, just like they are foreign governments.”

GATES HAD INITIALLY HOPED that some structural reforms might make cooperation easier. In February 1992, he backed a plan by Senator Boren to “bring about the most sweeping changes in the U.S. intelligence community since the CIA was created in 1947”—and to narrow, in the bargain, the wedge between CIA and FBI. The proposal called for a new National Intelligence Center, a “world-class think-tank, ” headed by a director of national intelligence, the DNI, to whom CIA’s director and the FBI’s Intelligence Division would both report.

But if the plan promised to reduce internecine conflict, it also provoked public fears. When leaked to the press, on February 5, 1992, it produced scare headlines of a sort that had not been seen since February 1945, when Donovan’s proposed CIA plan was attacked as an “American Gestapo.” As previously, it was a politically conservative paper, concerned about “big government, ” that sounded the alarm. “Senator’s Plan Calls for Intelligence ‘Czar, ’” the Washington Times warned in a front-page banner headline. This new czar and his trenchcoated Cossacks would have “control over both domestic and foreign counterspying.” Even though this would mean that agencies were “compelled to cooperate, ” various authorities were quoted as saying it was a bad idea. Soviet intelligence defector Stanislav Levchenko urged that domestic and foreign intelligence be kept separate, “to avoid creating anything remotely similar to the KGB.”

Senator Boren backpedaled. He said he was not proposing that CIA snoop on Americans, but merely that the new DNI would control the Bureau’s counterintelligence budget. Nevertheless, press coverage continued to play up the specter of a national secret police, showing just how sensitive the idea of domestic spying remained in the American mind. Boren’s plan died, as did a virtually identical proposal introduced two months later by Gates. 

With no fundamental changes in the offing, Gates was still left with the problem of how to close interagency gaps. For instance, when the Bureau tried to block the visa for a Russian UN employee, suspecting he was the new RIS station chief or rezident, CIA protested that the Soviets would reciprocally block replacement of America’s Moscow station chief, who was nearing completion of his three-year stint. When the FBI complained about loosened travel regulations for Soviet arms-control inspectors in the U.S., CIA countered that parallel privileges for Western arms inspectors in Russia were more than worth the tradeoff. And around the time Webster announced his retirement, Campbell had to calm tempers when Bureau CI agents on surveillance in New York City wound up photographing a CIA officer working the same subject. “It was not what I would call an unusual occurrence, ” an exasperated FBI official said.

But perhaps the principal spur to Gates was his own admission, during confirmation hearings, that CIA had made mistakes in disseminating information to government agencies about the Bank of Commerce and Credit International (BCCI). Known to regulators as the “Bank of Crooks and Criminals, ” BCCI fostered a global looting operation that bilked depositors of billions of dollars, but its seizure in August 1991 revealed that the Pakistan-based bank had also run a global intelligence operation, complete with a Mafia-like enforcement squad operating out of Karachi.

Called the “black network” by its own members, it offered a self-proclaimed Federal Express service for the delivery of whores, gold, arms, drugs, bribes, extortions, kidnappings, and murders. The network aided Iraqi nuclear smuggling with fake letters of credit and false customs valuations, which constituted one source of CIA interest in BCCI. With the probable complicity of BCCI’s president, former Saudi intelligence chief Kamal Adham, the bank briefed CIA on Iraqi transactions, as well as on those of another client, the Abu Nidal terrorist group. And BCCI’s Panama City branch had hidden “slush funds” disbursed by CIA to Noriega for various covert projects, such as anti-Sandinista rebels in Nicaragua. 

In exchange for BCCI’s assistance on such matters, CIA had apparently refrained from reporting various BCCI transgressions to financial regulators and law-enforcement agencies. Senate investigators did learn that in 1988 Gates, as deputy director of CIA, had informed U.S. Customs about the bank’s role in money laundering. But no memos had been disseminated to the FBI, which had the domestic bank-fraud role, even though CIA knew that BCCI owned First American, a Washington bank. James Nolan believed that “CIA, on BCCI, was hampered by its foreign-targets mind-set. No one thought to say, They’ve got a branch in downtown Washington, what the hell is that?” Senate investigator Jack Blum was somewhat harsher, alleging that CIA had engineered “an enormous coverup.”

After the BCCI imbroglio, Gates announced that an Agency task force had completed a study on coordination with law enforcement. He would not disclose the study’s findings, but on April 1, 1992, newspapers reported that CIA was implementing unspecified “procedures” to keep the Bureau informed about possible illegalities, and “to make the scandal prone agency more accountable, to avoid another Iran-Contra affair.” Even as this announcement was made, however, poor FBI-CIA coordination in another bank-fraud investigation was already provoking a new Iran-contra-type scandal, affecting the course of a presidential election, and jeopardizing one of the most successful covert initiatives of all time.

BEFORE HE WAS FIRED in 1974, James Angleton had joined an initiative with Israeli and British intelligence to prevent Iraq, a Soviet client-state, from building an atomic bomb. Known within the Mossad as Operation Babylon, the project aimed to recruit human sources within Saddam Hussein’s nuclear program, and thus to monitor Iraqi progress, so that any punitive actions would proceed from a firm base of knowledge. Where possible, Babylon would even help Iraq buy, smuggle, and assemble the materials for its nuclear program, the better to hurt those efforts later on. To protect sources, a blind eye would be turned toward certain illegalities, if this meant keeping a window on what Saddam was doing. “Jim [Angleton] regarded intelligence as essentially amoral, ” Angleton’s chief of operations, Scotty Miler, would recall. “You can’t get in among black hats with a white hat.”

Babylon survived Angleton, and by the early 1980s its sources reported that Saddam was getting quite close to actually producing a nuclear device. Aided by CIA satellite intelligence, Israel unleashed a surgical air strike against Iraq’s main reactor at Osirak, destroying it on June 7, 1981. Saddam’s quest for the bomb had been set back by perhaps a decade, but the Iraqi dictator did not give up his nuclear dreams, and while submerging himself through most of the 1980s in a costly war against Iran, he vowed to conceal and decentralize his new A-bomb projects, so that they could never again be destroyed by a single strike. Huge “industrial” complexes were erected throughout Iraq, many covering thousands of acres. The Agency had plenty of satellite photos of those establishments, but, given strict travel restrictions in Iraq, they had little intelligence about exactly what was going on inside.

To find out, CIA turned to its National Collection Division (NCD), a special component of the Operations Directorate created in 1982 to recruit assets in the international business community. By debriefing those who traveled to or did deals with Iraq, NCD developed extensive files on Saddam’s new military projects. Some of the NCD’s “non-official cover” operatives, as they were called, operated far from embassies and CIA stations, without diplomatic immunity, and CIA would not acknowledge any links to them. As one senior intelligence officer would put it, “That’s about as hairy as it gets.” Among the sources accessed were officials at banks used by Iraqi intelligence, including the London branch of BCCI, which was using false customs declarations to assist Iraqi nuclear smuggling.

But the bank that really gave a window on Iraqi procurement was the Atlanta branch of Italy’s Banco Lavoro Nazionale (BNL). Since BNL was foreign-owned, the U.S. had legal authority to intercept its communications, and began doing so in 1986. It was learned that many Iraqi entities had almost daily contact with the bank, and that one BNL employee was especially close to Saddam Hussein’s son-in-law, Hussein Kamil, who supervised Iraq’s nuclear efforts. Kamil was furnishing “shopping lists” to Matrix-Churchill Ltd., a struggling British machine-tools company which Iraq covertly purchased with BNL loans in fall 1987. Matrix officials, in turn, used BNL funds to purchase prefab fiberglass factories, carbide tipped inserts for machine tools, even a copy of a research thesis by Albert Einstein.

Those transactions were monitored not only by CIA but by MI6, which learned from other sources that Saddam had ordered an all-out push to develop nuclear weapons, to be used on an Iranian city in a “grand-slam” reminiscent of Hiroshima and Nagasaki. Stepping up its anti-proliferation efforts with CIA and the Mossad, MI6 recruited three top Matrix executives to be double agents for British intelligence. The major informant was Paul Henderson, who had spied for Western secret services since the 1970s, when he frequently traveled behind the Iron Curtain on business. Upon returning from his various trips to Iraq, Henderson was chauffeured to a London safehouse, where MI6 officers debriefed him about Iraq’s nuclear progress.

CIA received “raw” (unanalyzed) reports from Henderson and the other moles, and though for security reasons the U.S. would be kept ignorant of the agents’ identities, the Agency was to play the lead role in piecing together and exploiting their “take.” In keeping with the Babylon strategy set down by Angleton fifteen years before, CIA decided to play along, to let Saddam get the technology, until such time as another Israeli raid or other punitive actions would be deemed necessary. Shutting down the BNL-Matrix operation would only cause Saddam to set up a new one, which would probably not be known to the West. A crackdown might also endanger the moles within Saddam’s network. Such worries were very much on the minds of the moles’ controllers, who, according to one British government memo, knew “from secret sources” that Matrix equipment might be used “in uranium enrichment for the development of nuclear weapons, ” but approved such exports to Iraq “because of the need to protect these sources.”

By August 1989, CIA reports revealed a detailed knowledge of Saddam’s nuclear efforts. Because the Iraqi effort was so highly centralized in Matrix and BNL, and because CIA and MI6 had penetrated both entities, the Iraqi network was as visible to Western intelligence as the glass-bisected tunnels of Webster’s proverbial ant farm. Analysts knew many of the precise locations of the hightech caves where uranium enrichment projects were under way, and BNL/Matrix sources tipped CIA whenever equipment was moved. Even better intelligence was promised by the prospect of a Matrix office in Baghdad, which would put CIA and MI6 right in the middle of Saddam’s nuclear mischief. The Agency did worry that Saddam’s secret networks would become even more complex, making it more difficult to monitor their spread. But as long as BNL funds kept flowing to Saddam, and Matrix-Churchill kept providing the technology, almost nothing could have happened without MI6 and CIA’s knowing it.

Except, of course, a raid by the FBI. 

THE FBI TEAM that raided BNL’s Atlanta branch in August 1989 had been created by the U.S. Justice Department four months earlier, on March 22, in the attempt to pool resources against financial crime. Faced with a wash of failed S&L and bank-fraud cases, Justice had organized FBI agents, federal attorneys, and regulators into local fraud working groups. The Atlanta group had seen no action until a disgruntled BNL employee had tipped the Bureau to “off-the-books” loans. Before alerting its local fraud group, the FBI had put out feelers to the Treasury Department, the local Customs office, the Federal Reserve, and the U.S. attorney in Atlanta—but not to CIA.

Barbara Campbell would wish, in retrospect, that the FBI’s Atlanta Field Office had asked her to run a check with the Agency. But she knew it was not feasible for agents working fraud cases, or other criminal matters, to clear every suspected wrongdoer routinely with CIA before making an arrest. The fraud unit would ask her to run a Langley check when agents suspected CIA links, but because the fraud unit was much less attuned to Agency interests than the Intelligence Division, its intuitions about Agency operations were generally poor. There was also a general doubt among criminal agents about whether the Agency would tell the FBI even if it did have an interest in a subject of investigation.

So the agents had not checked with CIA before bursting into the twentieth-floor offices of Atlanta’s Gas and Light Tower, a few minutes after 5 p.m. on Friday, August 4, 1989. Pushing past stunned secretaries and receptionists at BNL, they went straight for the file cabinets, dumped all the folders onto the floor, and began scooping stray papers into plastic garbage bags. This evidence, and a set of secret gray books, revealed that BNL not only had illegally loaned over $4 billion to Iraq, but was also funding Iraqi nuclear procurement. One of the persons soon wanted for questioning by the FBI was Safia Al-Habobi, Kamil’s deputy for nuclear programs.

Because of possible espionage implications, the FBI office in Atlanta kept its Foreign Counterintelligence desk in Washington advised of all developments. It was not long before FBI and Justice investigators began to worry that they might be blowing open some CIA operation. Greatest among the “stumbling blocks” to BNL prosecutions, according to one Justice Department memo, was “what knowledge and role, if any, the Central Intelligence Agency had or played in BNL dealings with foreign governments in general and Iraq more specifically.” The U.S. attorney in Atlanta therefore inquired of CIA “Whether the unauthorized BNL-Atlanta funding was orchestrated, approved, of directed by any facet of the U.S. intelligence community prior to August 4, 1989, ” and whether CIA “had any knowledge of illegal activities at BNL” before the FBI’s raid.

A year and a half later, CIA had still not replied. Various excuses were advanced by the Agency for this failure to assist the prosecution, including the idea that it had a faulty filing system. But as Thomas Powers has put it, “Adults need not linger over this explanation.” The real reason for nondisclosure was that certain secret CIA reports, if relayed to Campbell or to Main Justice, might be publicly exposed at the trial of BNL’s Atlanta branch manager, Christopher Drogoul. Some of these reports had come from sources in British intelligence, and could not be disseminated without violating the “third-agency rule, ” which stipulated that data passed from one spy service to another could be relayed to a third only with the originating agency’s permission.

“CIA was uncomfortable with just what would be discoverable and what wouldn’t, ” recalled one FBI agent who dealt with CIA officers in Rome, where most incidental intelligence on BNL was gathered. The FBI’s two top men in Rome at the time were James Frier, the legal attaché, and his deputy, Robert Peter, who in 1987 had briefly succeeded Aldhizer as liaison to CIA. According to Peter and Frier, CIA’s Rome station chief asked if he could discuss some of the BNL data he was sending to the U.S. In lunch-table conversations over a few glasses of wine, the FBI men tried to “educate CIA” about the rules of criminal investigation.

“This information is discoverable; this is exculpatory, ” Frier would remember telling the station chief. “The judge will have to get this.” 

“Well, it’s classified, ” the station chief said. 

“I don’t care if it’s classified, ” Frier insisted. “If the judge in Atlanta orders you to bring it in, you’re going to have to bring it in. Go back to your own legal people and ask them. Don’t count on me.” 

But the CIA man either did not understand the FBI’s advice or did not accept it. He cabled Langley on November 17, 1989, to report that an FBI representative had recommended against submission of the report. Apparently the station chief believed, as did his superiors, that Agency reports would not be subject to discovery in a criminal case unless they had been formally disseminated outside CIA.

If, at this juncture, Agency legal staffers had examined carefully the Classified Information Procedures Act, they would have learned that, FBI counsel notwithstanding, CIA reports were discoverable even if not formally disseminated outside the Agency. They also might have learned from Rome Station that at least one of the reports in question had technically been disseminated outside CIA anyhow, simply by virtue of being shown to the FBI legal attaché. On the other hand, it was undoubtedly more difficult for Justice to “discover” documents which they did not know existed. A CIA desk officer therefore cabled back Rome Station and advised against disseminating secret data to Justice or the FBI. As the officer later said, “it’s just as well to have fewer reports that are going to wind up in court.”

The prospect of secrets being exposed in court was chilling indeed to CIA officers, as well as their allies in MI6. Not only might documents be submitted as evidence, but double agents like Henderson could be at risk from Iraqi assassins, if Saddam suspected through trial disclosures that they were spies. Technical collection projects—the bugging of BNL’s telephone traffic—might also be revealed. The Agency could petition to keep sensitive information out of public purview, but there was no guarantee of success, and the price of failure was too great. As one CIA assessment put it: “The Agency cannot afford to submit so quickly to the preferences of other agencies when its own interests are at risk.”

But even as CIA carried out a de-facto coverup in the BNL case, fallout from the precipitous FBI raid was moving matters into a more desperate and dangerous sphere. The BNL bust had dried up Iraq’s single largest source of foreign capital. This meant not only that Saddam could no longer fund his nuclear projects, but that he might not be able to meet his foreign-debt payments, since he had been taking out loans to pay off loans. Unless he gained new revenue soon, such as from increased oil sales, the country would soon be bankrupt. So it was that, on August 2, 1990, Saddam sent tanks into oil-rich Kuwait.

Immediately after Iraq’s invasion, CIA conducted a special Oval Office briefing on Iraq’s nuclear capabilities and reported, based on BNL-Matrix sources, that Saddam was now believed to be only six months to two years from his first bomb. This briefing changed the way President Bush and his advisers viewed the Gulf crisis. It convinced them not only that armed intervention was necessary, but that it must occur before February 1991, when Iraq might conceivably become a nuclear power. CIA also apparently persuaded the administration that Saddam must not suspect BNL, Matrix, and other entities of being operated against him, lest he attempt to move uranium-enrichment equipment from compromised sites. While CIA’s National Collection Division debriefed any international businessmen who might know about Saddam’s nuclear projects, all had to proceed normally, as if the U.S. knew nothing. Indeed, law-enforcement officials in Atlanta later complained to Congress that Iraqi intelligence agents were permitted to leave the country, and Matrix-Churchill’s Cleveland office was permitted to remain open for nearly three months after the invasion. Attorney General Richard L. Thornburgh cautioned congressional investigators that BNL was “a sensitive case with national security concerns, ” and Sessions, by now partly briefed on Operation Babylon, warned prosecutors that continued prying could cause “serious damage to a very sensitive and important case.” The effect of this government pressure, as of CIA’s stalling, was to delay indictments in the BNL case—and to safeguard the Agency’s knowledge of Saddam’s nuclear research.

With the U.S. and Britain thus obstructing justice for purposes of wartime need, Saddam was kept ignorant, and on Sunday, January 16, 1991, U.S. F-117A Stealth bombers swept north from Saudi Arabia, toward the juncture of the Tigris and Euphrates rivers. Precisely because CIA and MI6 assets had helped fund, build, and equip Saddam’s nuclear establishment, and thereby penetrated it, allied bombers were able to target and destroy many of Iraq’s nuclear facilities during the first fortyeight hours of allied bombing. The scorecard was by no means perfect, and a later congressional inquiry would chastise CIA for underestimating the scope of Saddam’s nuclear research. But after the cease-fire, UN inspectors charged with dismantling Iraq’s nuclear program were struck by the precision of the intelligence that the U.S. had obtained on Saddam’s main atomic facility, Tuwaitha. Although most of the buildings in the complex proper were totally intact, the nuclear-research sectors—the radio-chemistry laboratory, reactor, and isotope separator —were simply gone.

Yet such intelligence coups, which the UN inspectors discovered throughout Iraq, came at great political cost. Congressman Henry B. Gonzalez, chairman of the House Banking Committee, had been looking into BNL since before the Gulf War. After asking CIA to release documents in the case, Gonzalez’s chief investigator, Dennis Kane, was privately warned against “poking into a vital project—namely, a secret operation to prevent Iraq from getting nuclear bombs.” But Kane and Gonzalez thought they smelled an attempt to cover up the Bush administration’s prewar decision to “coddle, powder, and diaper Saddam.”

Such rhetoric had not made the House Banking Committee popular with Webster, but Gates came in badly needing to prove something to Congress. So he did release to Gonzalez some CIA documents. Among them was a memo suggesting that BNL-Rome knew about Drogoul’s illegal loans to Iraq. This memo had been a subject of CIA-FBI confusion in Rome, and it had not been disseminated to FBI headquarters or to Justice, as U.S. prosecutors realized on September 14, 1992. On that date, Gonzalez announced that CIA knew about Italian government complicity in BNL’s illegal loans, but allowed Drogoul to stand trial on false charges that he had acted alone.

CIA was forced to concede that it had withheld documents, but claimed it had done so on the advice of the FBI. The Bureau denied this. By October, there had developed a three-way bureaucratic battle royal, with CIA, FBI, and Justice all trading accusations and launching inquiries. Sessions announced the FBI was undertaking its own probe of both CIA and the Justice Department in the case, and assured Senator Boren that this investigation would be “unfettered.” But when Sessions had dinner that weekend with a highly placed friend, the friend warned him: word in the intelligence community was that Sessions had become a marked man when he ordered an independent FBI dig into the Italian bank’s CIA links. “You’d better protect yourself, ” the friend said, “or you’ll be gone.” Three days later, the Justice Department announced that Sessions was being investigated by Justice for alleged ethics violations. In the press, anonymous government officials began attacking his competence to lead. His firing was only a matter of time.

For the moment, however, the main victim was not Sessions but President Bush. Only a year earlier, flush with his victory in the Gulf War, Bush had been riding a colossal 90-percent approval rating, the highest in American history. He had come to seem more vulnerable as the economy soured, but his Gulf victory still could hurt the newly named Democratic ticket, inasmuch as Bill Clinton had once evaded military service, and Al Gore had voted against Desert Storm. Any chance to deflate the Bush administration’s victory pride, and take away the moral high ground on Iraq, would therefore serve the Democrats well. Indeed, as Republicans were quick to point out, Gonzalez’s main allegations about a BNL “coverup” were made just before the Republican National Convention. Gore began accusing Bush of a “coverup bigger than Watergate, ” and “Iraq-Gate” attacks became a permanent part of Clinton’s basic rally speech in late October, just as Bush was beginning to gain in the polls. In effect, Iraq-Gate allowed Democrats to turn the issue of “character, ” which Republican strategists had tried to use against Clinton, back against Bush. Even lifelong conservatives like William Safire thought Bush was lying to the public over Iraq, and urged fellow Republicans to vote for Clinton.

Then the election was over; Bush had lost, and IraqGate was gone from the headlines, almost as suddenly as it had appeared. The affair had coincided exactly with Clinton’s run for the White House; afterward, the Democrats seemed strangely silent on the matter. In August 1993, they quietly disclosed the results of their own investigation, which found that neither Bush nor anyone else in his administration had done anything wrong.

CIA’s image had meanwhile been badly battered, especially by the revelation that it had withheld documents. Gates remained strangely unwilling to defend the Agency’s actions. The whole Iraq-Gate affair had stricken Langley, like the White House, with a kind of paralysis. Gates might have publicly disclosed that the FBI raid had threatened CIA-MI6 operations against Iraq’s bomb, and that CIA had a right to prevent this from happening. He might have said that, just as police allow undercover agents to engage in illicit activities to protect their covers, and offer immunity to collaborators for purposes of rolling up large criminal empires, so, too, intelligence services have the right—indeed, the duty—to protect sources and methods that could save millions of lives from nuclear death, even where this means not providing full support for criminal prosecutions.

But Gates did not say anything of the sort, nor could he have. The very real possibility of Iraqi retaliation against Western agents—including MI6 moles like Paul Henderson—limited CIA’s ability to extricate itself from the Iraq-Gate scandal, and prove its continuing relevance after the demise of the USSR, by admitting its penetration of Saddam’s nuclear program. Gates also knew that some of Iraq’s nuclear-related equipment remained hidden, and calculated that Matrix-BNL intelligence must be guarded jealously for possible use in future U.S. attacks. The wisdom of that policy was proved on January 17, 1993, when U.S. warships in the Persian Gulf launched forty- five Tomahawk missiles at the Zaafraynia nuclear facility, near Baghdad, destroying nuclear lathes that had been made by Matrix-Churchill, paid for by the Atlanta branch of BNL.

THREE DAYS BEFORE the Zaafraynia attack, CIA’s inspector general presented Gates with the results of an internal Iraq-Gate inquiry. “The U.S. Intelligence Community and the U.S. Law Enforcement Community have developed in very different ways, under starkly different pressures, to respond to unique missions and objectives, ” CIA’s inspector general wrote. “Some accommodations have been made on each side, yet the two have failed to address adequately the fundamental distinctions in their practices, procedures, and cultures.” Given “the increasing intertwining of domestic and international interests, ” as evident in the BNL affair, CIA had to find “a way to both protect sources and methods and assist criminal prosecutions.”

That sounded well and good, but the IG’s prescriptions for undoing this Gordian knot, which had tied up counterintelligence since the Hoover-Donovan days, revealed that the overseers were at some distance from the problems they oversaw. CIA was to adopt a policy that “all relevant information” should be disclosed to federal authorities, “unless there is a legal basis to withhold information.” But that already was the Agency’s policy, even before Iraq-Gate. Unanswered was the question of what constituted a legal basis for withholding, which had been the problem in BNL. The IG also recommended that Gates form “a task force … for establishing Agency relationships with law enforcement personnel.” The IG apparently did not realize that Gates had already created just such a task force, after the BCCI flap, fully a year before.

A report by the Senate Select Committee on Intelligence was somewhat more probing. After raising and then carefully stepping around the idea that CIA had wanted to protect “operational” information connected to BNL-Matrix, the report focused on themes of FBI-CIA conflict. Liaison between foreign intelligence and domestic security was marred by “numerous and significant ‘disconnects.’” Unlike CIA’s own inspector general, the senators at least knew of CIA’s task force, but they doubted it would solve the problem. Needed was a more comprehensive review by the attorney general and the DCI, “in conjunction with the congressional oversight committees.” Congress, in other words, did not want to be left out of any reform process. The committee report urged that CIA and FBI “address the desirability of new mechanisms … to ensure that appropriate coordination actually takes place, ” and suggested that officers at the operational level of each agency receive special training to make them sensitive to document-disclosure regulations. There might even be cause for “statutory change” to ensure that regulations for interface were obeyed and understood. Alas, like CIA’s inspector general, the Senate authors were unable, or unwilling, to specify just what those regulations should be.

Gates publicly backed the Senate report, and ordered the CIA to develop guidelines for possible collection, outside U.S. territory, of “information relating to potential or ongoing federal criminal investigations and prosecutions.” But that was to be one of his last acts as CIA director. Although any DCI was theoretically supposed to be apolitical, and Gates probably could have served a Democratic administration, his stewardship had been marred by a bitter and unusually public dispute with Justice and the FBI. The resulting turmoil had made it politically impossible for the new administration to keep him, and two days after Bush lost the election, Gates announced plans to retire.

He had been DCI in a difficult twilight time, during which journalists wrote tauntingly of “the last days of CIA, ” and policy wonks proposed abolishing the Agency as its reward for helping counter the apparently retreating Soviet threat. During his brief tenure, Gates had tried to adapt to this unexpectedly hostile climate by redefining the nation’s intelligence needs, by studying ways to improve links with law enforcement, and by “opening up” the intelligence community to people like Congressman Gonzalez. But if Gates, like any good spy, was a chameleon who survived by blending in, he and many others at CIA had found it impossible to change to the shade required for public openness. CIA’s inspector general, and the Senate Select Committee, saw the need for a different hue, but failed to pick it out. Perhaps what was needed, in the end, was a complete shedding of the skin.

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THE KEYS TO THE KINGDOM

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