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Has the Government Legalized Secret Defense Spending? |
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Saturday, 19 January 2019 09:20 |
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Taibbi writes: "October 4th, 2018, was a busy news day. The fight over Brett Kavanuagh's Supreme Court nomination dominated the cycle."
Aerial view of the Pentagon building. (photo: Bill Clark/Getty Images)
Has the Government Legalized Secret Defense Spending?
By Matt Taibbi, Rolling Stone
19 January 19
While a noisy Supreme Court fight captivated America last fall, an obscure federal accounting body quietly approved a system of classified money-moving
 ctober 4th, 2018, was a busy news day. The fight over Brett Kavanuagh’s Supreme Court nomination dominated the cycle. The Trump White House received a supplemental FBI report it said cleared its would-be nominee of wrongdoing. Retired Justice John Paul Stevens meanwhile said Kavanaugh was compromised enough that he was “unable to sit as a judge.”
#NationalTacoDay trended on Twitter. Chris Evans told the world production wrapped on Avengers 4.
The only thing that did not make the news was an announcement by a little-known government body called the Federal Accounting Standards Advisory Board — FASAB — that essentially legalized secret national security spending. The new guidance, “SFFAS 56 – CLASSIFIED ACTIVITIES” permits government agencies to “modify” public financial statements and move expenditures from one line item to another. It also expressly allows federal agencies to refrain from telling taxpayers if and when public financial statements have been altered.
To Michigan State professor Mark Skidmore, who’s been studying discrepancies in defense expenditures for years, the new ruling — and the lack of public response to it — was a shock.
“From this point forward,” he says, “the federal government will keep two sets of books, one modified book for the public and one true book that is hidden.”
Steven Aftergood of the Federation of American Scientists’ Project on Government Secrecy was one of the few people across the country to pay attention to the FASAB news release. He was alarmed.
“It diminishes the credibility of all public budget documents,” he says.
I spent weeks trying to find a more harmless explanation for SFFAS 56, or at least one that did not amount to a rule that allows federal officials to fake public financial reports.
I couldn’t find one. This new accounting guideline really does mean what it appears to mean, and the details are more bizarre than the broad strokes.
The FASAB ruling adds a new and confusing wrinkle to what little we know about levels of spending in the intelligence community. Officially, the fiscal year 2019 appropriation is $81.1 billion, which breaks down to $59.9 billion for the National Intelligence Program, along with $21.2 billion for the Military Intelligence Program.
This made a few headlines, as Trump’s “black budget” request was described as the largest in history. However, as Aftergood notes, even the high FY ‘19 numbers do not include spending for “classified DoD operations and procurement.” Add now the possibility of future “modifications,” and the real answer for how big a share of national spending belongs to the intelligence community is probably “God only knows.”
Given that the intelligence budget number the government admits to is already larger than the annual defense budgets of all but two countries on earth (our own and China’s), it seems natural to ask: what are we getting ourselves into?
The story of openly secret budgets really began in 1949, with the passage of the Central Intelligence Agency Act. The law exempted the newly christened spy agency from public financial disclosure.
The CIA Act was a radical departure from the Constitution, which is clear about public accounting (emphasis mine):
“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
The CIA Act created a blunt constitutional carve-out.
“The sums made available to the Agency may be expended without regard to the provisions of law and regulations relating to the expenditure of Government funds,” the law read. “For objects of a confidential, extraordinary, or emergency nature, such expenditures to be accounted for solely on the certificate of the Director…”
In other words, while other government agencies had to account for their expenses, the word of the CIA director was good enough when it came to what they’d spent and why.
In a few accidental disclosures in the Fifties, CIA expenses appeared as Department of Defense line items, despite the fact that the CIA is not a Defense agency.
No one much worried over this issue until the early Seventies. That’s when a series of scandals — from botched assassination attempts abroad to the discovery of legally proscribed domestic spying programs — invited closer scrutiny of the CIA. The most famous oversight effort came in the form of Idaho Senator Frank Church’s famed 1975 committee hearings scrutinizing America’s intelligence agencies.
At roughly the same time as the Church hearings, an insurance adjuster named William Richardson got fed up and filed suit against the U.S. government. Richardson wanted secret CIA budgets declared unconstitutional. He barely made the news (his suit was a page 8 blip in the New York Times).
Nonetheless, he went all the way to the Supreme Court, and by a thin margin (a 5-4 vote) the court ruled against Richardson, upholding the concept of secret budgets.
Chief Justice Warren Burger wrote the majority opinion. Citing an earlier ruling, he in essence said a random citizen whose only problem was that he didn’t know where his taxes were going did not have standing to waste the high court’s time.
“A taxpayer,” Burger wrote, “may not ’employ a federal court as a forum in which to air his generalized grievances about the conduct of government.’”
Fast-forward 16 years, when, in the second year of George H.W. Bush’s presidency, Congress passed the Chief Financial Officers Act of 1990.
This new law was aimed at curbing “billions of dollars” said to be “lost each year through fraud, waste, abuse, and mismanagement” of public budgets.
It demanded that 23 major federal agencies — including the Departments of Defense, Justice, Interior and many others — designate a CFO and file regular reports.
These reports were to be in the form of “complete, reliable, timely and consistent financial information for use by the executive branch.”
To create a more uniform standard for this reporting, the government created FASAB in that same year. The new “Accounting Standards” bureau was designed to help make apples-to-apples comparisons between budgets of government departments. With the passage of the CFO Act, the Pentagon was supposed to begin delivering intelligible numbers about its expenditures. It did not.
Year after year passed without audits. Finally, Congress appropriated money to hire outside auditors like Ernst & Young to do the work, which was to be completed last year.
On November 15th, 2018, however, the Department of Defense failed its first audit, which was conducted by 1,200 auditors. This was after 26 years of what Sen. Chuck Grassley (R-IA) called “hard-core foot-dragging.”
“We failed the audit, but we never expected to pass it,” Deputy Secretary of Defense Patrick Shanahan said at the time.
That the Pentagon failed its audit was no surprise. There had already been significant hints that even the supposedly legal version of defense budgeting was an indecipherable morass.
On the day before 9/11, for instance, then-Defense Secretary Donald Rumsfeld announced that, according to some estimates, “we cannot track $2.3 trillion in transactions.” The following day’s events obviously distracted the media from that shock announcement.
In 2015, the Office of the Inspector General found the Army alone — which had a budget of $122 billion that year — had $6.5 trillion in “yearend adjustments” they could not “adequately support.”
Skidmore recalls being dumbfounded by the numbers.
“When I saw that first report from 2015, with the $6.5 trillion, I thought, ‘That’s impossible, that can’t be,’” he says.
2018 was to be the year when we finally got answers to questions about defense spending. Early results were not encouraging. Outside auditors found that just one Pentagon outfit, the Defense Logistics Agency, could not account for over $800 million in construction transactions.
Later that year, the DoD flunked its audit, and little-known FASAB quietly issued a new guidance that may make future disclosures even more remote. The new rule appears to smooth the way for permanent classification of national security expenditures.
Formal discussion of the new FASAB rule seems to have begun on August 30th, 2017, at a meeting of the FASAB board. In a staff briefing memo sent to board members ahead of the meeting, a 1999 declaration from then-CIA Director George Tenet argued against the disclosure of “topline budget numbers” for things like the National Intelligence Program — you know, the program that the was budgeted at $59.9 billion for 2019.
“Disclosure of the budget request reasonably could be expected to provide foreign governments with the United States’ own assessment of its intelligence capabilities and weaknesses,” Tenet said in 1999. “The difference between the appropriation for one year and the Administration’s budget request for the next provides a measure of the Administration’s unique, critical assessment of its own intelligence programs.”
In the briefing memo sent ahead of the meeting, it was suggested FASAB “allow certain types of departures from other standards when needed.” However, these “departures” would be limited to public financial statements, and in amounts that would “reconcile in aggregate” to schedules or other documentation subject to review.
From there, the Board solicited comments from a series of federal agencies and outside experts about the efficacy of allowing secret “modification[s]” of public financial statements.
In reply came 17 comment letters, including from private accounting firms like KPMG and Kearney & Company. Most of the federal agencies solicited seemed more than happy with the idea of having the authority to “modify” their public financial disclosures. Homeland Security gave a big thumbs-up.
“DHS agrees with the Board’s overall proposed approach for protecting classified information. Classified information should be protected,” it wrote, with redundant satisfaction.
This made sense, coming from Homeland Security. Why, however, was the Department of Housing and Urban Development so thrilled? Ben Carson’s agency seemed actively pleased with the idea of allowing the government to move accounting line items from one agency to another.
“If an entity’s identification would disclose there is classified information,” HUD’s comment letter read, “it makes sense to include that organization in another entity.”
I asked assistant director of FASAB Monica Valentine if such a thing could happen under the new rule: “Could an expenditure be moved from [Department of Defense] to HUD?”
“Because of the classified nature of this topic, I will not respond to specific examples,” Valentine replied.
However, another government source told me flat out that the new rule would not involve moving line items between agencies. It’s not clear, however, how firm a line that is.
Late last year, for instance, we saw an incident in which two employees of the National Reconnaissance Office and the NSA were arrested for procurement fraud in Colorado in a case involving a classified signals intelligence program. In that instance, the site turned out to be owned by the Department of Health and Human Services.
In any case, not all of the comment letters FASAB solicited last year were positive. Several expressed serious concerns. Perhaps the harshest reply came from the office of the Inspector General for the Department of Defense, which flatly disagreed with the proposed changes.
“This proposed guidance is a major shift in Federal accounting guidance,” the agency wrote. It added, “This approach would likely make the financial statements misleading to all but a select few individuals that are aware of the Interpretation.”
Others expressed concern that under the new rules, federal agencies would not even be required to tell the public they’ve made a “modification.”
KPMG, for instance, wrote, “We believe that component reporting entities should be required to disclose that modifications of presentations and omissions of disclosures were made.”
Kearney & Co. didn’t see the need for such a major change, and suggested continuing the current practice of simply redacting sensitive information.
“Financial statements of classified entities should remain classified or redacted like other classified documents before release to the public,” they wrote.
The firm added, “Allowing only select individuals to view and accept the interpretations would limit due process and transparency.”
Despite these and other objections, on October 4th of last year, FASAB issued a news release about SFFAS 56. The text of the new rule strongly resembled the original proposal. The money quote:
This Statement permits the following
– an entity to modify information required by other standards if the effect of the modification does not change the net results of operations or net position;
– a component reporting entity to be excluded from one reporting entity and consolidated into another reporting entity
In plain English, the new guidance allowed federal agencies to “modify” public financial statements, with essentially a two-book system. Public statements would at best be unreliable, while the real books would be audited in “classified environment[s]” by certain designated officials.
When I asked FASAB who would be doing the auditing in “classified environment[s],” they answered:
“Please contact the federal entity’s Office of the Inspector General for questions pertaining to who does the auditing in a classified environment.”
This new rule is not confined to a few spy agencies. It appears to allow a stunningly long list of federal agencies to make use of new authority to “modify” public financial statements.
The Treasury Department’s definition of a “component reporting entity” includes 154 different agencies and bodies, from the Smithsonian Foundation to the CIA to the SEC to the Farm Credit Administration to the Railroad Retirement Board. The notion that any of these agencies could now submit altered public financial reports under the rubric of national security is mind-boggling.
When asked why this authority extended to so many agencies and not just those with national security mandates, FASAB replied:
“We use a standard scope paragraph in all of our standards. We have never named specific reporting entities in the scope paragraph. Also – we cannot anticipate what the name of a future entity might be. It is simply more practical to make the standards broadly applicable.”
In a strange twist, paragraph 8a of the new rule seems to insist that modifications may only be made if it does not “change the net results of operations.” In conversations with federal officials, this was stressed to me, that the new rule would not allow for changes to “total net cost” line items on public financial disclosures.
However, paragraph 8c of the same rule reads:
“An entity may apply Interpretations of this Statement that allow other modifications to information required by other standards, and the effect of the modifications may change the net results of operations and/or net position.”
This directly contradicts 8a, and seems to allow in some cases for changes even to total net position numbers. When asked on the record if 8c opened the door for greater changes, FASAB answered, “We cannot speculate about the changes.”
One thing is certain: the taxpayer who opens up a federal financial statement expecting to find correct numbers will no longer be sure of what he or she is reading. Bluntly put, line items in public federal financial statements may now legally be, for lack of a better word — wrong.
Moreover, the state is not required to include a disclaimer telling the reader that modifications have been made.
“FASAB’s answer would probably be they would use this authority responsibly and only when necessary,” says Mandy Smithberger of the Project on Government Oversight. “Unfortunately, that goes against fifty years of experience when it comes to national security spending.”
“That’s what makes this so crazy. The list of agencies is so long,” says Skidmore. “If you don’t even know what’s been modified, why bother reading a summary for any of them?”
This obscure new accounting guideline should be understood in the context of a longstanding debate about the need for budget transparency versus the need to “protect” classified information.
The Brown-Aspin Commission, formed by Congress in the mid-Nineties to examine a series of intelligence-related issues, was sharply critical of the non-transparent accounting of intelligence programs.
“Information on intelligence programs has not been organized to facilitate decision-making,” the Brown-Aspin authors wrote, “or to provide outside reviewers, such as [Office of Management and Budget], with an informed view.”
The commission was dismissive of the idea that publishing bulk amounts of national security expenditures posed any kind of risk. The CATO Institute reported at the time that three former CIA directors also agreed with the assessment. Nonetheless, the commission’s suggestions on this issue were not implemented.
Other democracies, including nations with whom we share intelligence like Australia, New Zealand, Canada and Britain, publish their intelligence budgets.
Beyond these guidelines, the United States already admits very little detail in its national security financial reports.
Despite what Tenet appears to have argued, it’s hard to understand what possible justification there could be in concealing from the public sheer amounts of spending for agencies like the CIA, NSA or the Defense Intelligence Agency.
“If this authority is used to obscure those top-line numbers,” says POGO’s Smithberger, “that would suggest the potential for abuse.”
Smithberger expressed hope that someone in Congress would make an official effort to learn more about what the new ruling means, and how exactly it will be implemented.
Given the government’s track record in failing to force transparency out of the Pentagon, it’s hard to have a lot of confidence answers will be forthcoming.
Catherine Austin Fitts was Assistant Secretary for Housing and Urban Development during the George H.W. Bush administration. She’s been working with Skidmore on defense accounting issues for two years.
She was so alarmed about the new FASAB ruling she commissioned an in-depth study of “Standard 56” for her site, the Solari Report. In the introduction, the report writes bluntly that SFFAS 56 is:
“…taking government accounting practices from laxly enforced reporting standards to a new benchmark entirely–expressly approved obfuscation of reporting and, in some cases, outright concealing financials.”
Reached by email, Austin Fitts was pessimistic about the meaning of the new rule.
“The White House and Congress just opened a pipeline into the back of the US Treasury,” she wrote, “and announced to every private army, mercenary and thug in the world that we are open for business.”
What the rule actually will mean in practice is not clear. But it’s not hard to imagine how it could be employed. A quick look in the historical rearview mirror offers more than a few hints.
The Iran-Contra affair was, at its core, an accounting issue. In it, a group of actors used proceeds of weapons sales to fund unauthorized support of Nicaraguan rebels. Money was moved from one place to another, with the public cut out of the loop.
Is it possible this new authority would make such behaviors, if not legal exactly, at least legally invisible?
This would fall in line with the pattern of post-9/11 America. So much about intelligence programs in the War on Terror era seems already beyond oversight.
We’ve been told little-to-nothing about drone assassinations and warrantless detention, and it took a high-profile whistleblower like Edward Snowden to break the news of a vast new domestic surveillance program (something about which former National Intelligence Director James Clapper was willing to lie under oath).
A legalized dualistic system for public financial reporting would therefore just be the latest blow to federal transparency, but it would be a big one. It would be nice to get a few answers before paying taxes into a black box becomes a permanent feature of American life.
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Trump Offers Pelosi $130,000 to Keep Quiet |
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Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=9160"><span class="small">Andy Borowitz, The New Yorker</span></a>
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Friday, 18 January 2019 13:16 |
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Borowitz writes: "In an indication that he has reached his breaking point with the Speaker of the House, Donald J. Trump is offering a hundred and thirty thousand dollars to keep Nancy Pelosi quiet, White House aides confirmed on Thursday."
Speaker Nancy Pelosi. (photo: Brendan Smialowski/Getty)
Trump Offers Pelosi $130,000 to Keep Quiet
By Andy Borowitz, The New Yorker
18 January 19
 The article below is satire. Andy Borowitz is an American comedian and New York Times-bestselling author who satirizes the news for his column, "The Borowitz Report." 
 n an indication that he has reached his breaking point with the Speaker of the House, Donald J. Trump is offering a hundred and thirty thousand dollars to keep Nancy Pelosi quiet, White House aides confirmed on Thursday.
According to those aides, Trump floated the idea of a six-figure payment to silence Pelosi during a closed-door meeting on Wednesday night, in which he asserted that he had done “a million of these deals.”
Trump’s effort to mute Pelosi faces a number of obstacles, however, including the fact that the person who has crafted such agreements for Trump in the past, Michael Cohen, is not available to perform such a service now.
Additionally, any agreement to silence Pelosi could face constitutional hurdles, since one of Pelosi’s principal duties as Speaker is to speak.
At the Capitol, Pelosi said that she would reject Trump’s proposed payment and added that she would offer him no money whatsoever to prevent him from delivering this year’s State of the Union address.
“I am asking for an hour of silence from Donald Trump, and you can’t put a price tag on that,” she said.
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I'm Furloughed. I'm Also Disabled. I Have to Choose Between Care and Keeping the Lights On. |
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Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=49979"><span class="small">Kings Floyd, Vox</span></a>
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Friday, 18 January 2019 13:16 |
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Floyd writes: "Right now, there is a line that separates those who can afford to outlast Trump's government shutdown and those who may not be able to. As a young disabled woman now living without a paycheck, I'm not sure if I can make it."
Federal workers wait for food distribution to begin on Saturday at a pop-up food bank in Rockville, Maryland. (photo: Ian Stewart/NPR)
I'm Furloughed. I'm Also Disabled. I Have to Choose Between Care and Keeping the Lights On.
By Kings Floyd, Vox
18 January 19
For furloughed workers with disabilities, our independence is at stake.
 ight now, there is a line that separates those who can afford to outlast Trump’s government shutdown and those who may not be able to. As a young disabled woman now living without a paycheck, I’m not sure if I can make it.
The shutdown has gone on for weeks, and once again, the Republican Party is turning its back on the millions of Americans who live with disabilities. Thanks to President Trump, I am on furlough and am forced to live without a paycheck, leaving me unable to pay independently for my daily medical needs unless I receive help from friends and family.
Like many people in the disability community, I use Personal Care Assistants, or PCAs, on a daily basis. In addition, I rely on a system that includes spouses, friends, doctors, physical therapists, and mental health professionals who work with people with disabilities and chronic illnesses.
Every morning, I need help getting ready for my day, including getting out of bed, getting food, and bathing. I often cannot leave my apartment without some assistance. If accidents happen, such as when I fell a few days ago in my apartment, I need help getting off the floor, retrieving first aid, and feeding myself.
But the workers in this system need to be paid, and for people with disabilities, these costs are not always covered by insurance. Those of us who cannot afford these services are frequently forced to give up independence and live in medical institutions.
Personal care is a pillar in allowing many in the disabled community to have jobs, social lives, to live on their own — to be more independent. And Trump is threatening that.
I pay out of pocket for PCAs, as opposed to going through an insurance or care agency, because it allows me to be more in control of who I hire. Now that I am furloughed, I have less money to pay them. On my regular paycheck, I spend more than a third of my income on personal care services. But now that I’m furloughed, I’m forced to prioritize my care based on what I can afford.
This shutdown has led me and many of my peers to face questions such as, “Do I pay for my prescriptions or do I pay my electric bill?” I have an epilepsy disorder, and when I did not have the funds to pay the copay for my medication, my treatment was interrupted for four days because my utility bill automatically withdraws from my bank account. I did not have the immediate funds to pay for both.
I was able to pull together money to get back on my medication, but if this shutdown continues, I may have a difficult decision to make. Trump is literally making me choose between keeping my life and keeping the lights on.
This is an unspoken struggle of the government shutdown: It puts out-of-pocket medical necessities at risk. If and when the government does resume, I will be able to revert back to my normal level of care — but I will also have to spend more time and resources recovering from this period of interrupted care. I have to work harder to take care of myself because I currently cannot pay for help, leaving me weak and unable to complete larger tasks and chores I could have done.
If the government does not reopen soon, I run the risk of losing my ability to pay my PCAs. I want to keep working, I want to keep supporting myself, but the government shutting down will soon prevent me from being independent.
Trump lauds the idea of an American dream, and the American dream includes everyone; people with disabilities are no exception. Why is he taking away my chance to create mine?
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FOCUS: The Vice President's Men |
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Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=37702"><span class="small">Seymour Hersh, London Review of Books</span></a>
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Friday, 18 January 2019 12:04 |
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Hersh writes: "When George H.W. Bush arrived in Washington as vice president in January 1981 he seemed little more than a sideshow to Ronald Reagan, the one-time leading man who had been overwhelmingly elected to the greatest stage in the world."
George H.W. Bush. (photo: AP)
The Vice President's Men
By Seymour M. Hersh, London Review of Books
18 January 19
 hen George H.W. Bush arrived in Washington as vice president in January 1981 he seemed little more than a sideshow to Ronald Reagan, the one-time leading man who had been overwhelmingly elected to the greatest stage in the world. Biography after inconclusive biography would be written about Reagan’s two terms, as their authors tried to square the many gaps in his knowledge with his seemingly acute political instincts and the ease with which he appeared to handle the presidency. Bush was invariably written off as a cautious politician who followed the lead of his glamorous boss – perhaps because he assumed that his reward would be a clear shot at the presidency in 1988. He would be the first former CIA director to make it to the top.
There was another view of Bush: the one held by the military men and civilian professionals who worked for him on national security issues. Unlike the president, he knew what was going on and how to get things done. For them, Reagan was ‘a dimwit’ who didn’t get it, or even try to get it. A former senior official of the Office of Management and Budget described the president to me as ‘lazy, just lazy’. Reagan, the official explained, insisted on being presented with a three-line summary of significant budget decisions, and the OMB concluded that the easiest way to cope was to present him with three figures – one very high, one very low and one in the middle, which Reagan invariably signed off on. I was later told that the process was known inside the White House as the ‘Goldilocks option’. He was also bored by complicated intelligence estimates. Forever courteous and gracious, he would doodle during national security briefings or simply not listen. It would have been natural to turn instead to the director of the CIA, but this was William Casey, a former businessman and Nixon aide who had been controversially appointed by Reagan as the reward for managing his 1980 election campaign. As the intelligence professionals working with the executive saw it, Casey was reckless, uninformed, and said far too much to the press.
Bush was different: he got it. At his direction, a team of military operatives was set up that bypassed the national security establishment – including the CIA – and wasn’t answerable to congressional oversight. It was led by Vice-Admiral Arthur Moreau, a brilliant navy officer who would be known to those on the inside as ‘M’. He had most recently been involved, as deputy chief of naval operations, in developing the US’s new maritime strategy, aimed at restricting Soviet freedom of movement. In May 1983 he was promoted to assistant to the chairman of the Joint Chiefs of Staff, General John Vessey, and over the next couple of years he oversaw a secret team – operating in part out of the office of Daniel Murphy, Bush’s chief of staff – which quietly conducted at least 35 covert operations against drug trafficking, terrorism and, most important, perceived Soviet expansionism in more than twenty countries, including Peru, Honduras, Guatemala, Brazil, Argentina, Libya, Senegal, Chad, Algeria, Tunisia, the Congo, Kenya, Egypt, Yemen, Syria, Hungary, East Germany, Czechoslovakia, Bulgaria, Romania, Georgia and Vietnam.
Moreau’s small, off-the-record team, primarily made up of navy officers, was tasked with foreign operations deemed necessary by the vice president. The group’s link to Bush was indirect. There were two go-betweens, known for their closeness to the vice president and their ability to keep secrets: Murphy, a retired admiral who had served as Bush's deputy director at the CIA; and, to a lesser extent, Donald Gregg, Bush’s national security adviser and another veteran of CIA covert operations. Moreau’s team mostly worked out of a room near the National Military Command Centre on the ground floor of the Pentagon. They could also unobtrusively man a desk or two, when necessary, in a corner of Murphy’s office, which was near Bush’s, in the Old Executive Office Building next to the White House.
The Reagan administration had been rattled by a wave of Soviet expansionism and international aggression that had begun before the president took office. In 1979, even before their incursion into Afghanistan, the Soviets had taken over the old airbase at Cam Ranh Bay in the former South Vietnam, which had been extensively rebuilt and updated by the US during its losing war. It was a base heavy with symbolism for the American and British navies – in December 1941, three days after Pearl Harbor, Japanese dive bombers operating from Cam Ranh sank two of Britain’s premier battleships – and the Soviet decision to expand there was seen by some senior admirals as an alarming affront. And a revolutionary increase in America’s capacity to intercept and decode Soviet signal traffic in the year before Reagan came to power led to the discovery by analysts at the National Security Agency of a ring of Soviet sleeper agents inside the United States, many of them working in federal jobs with – the Carter White House feared – access to national security data.
A former military officer who worked closely with Moreau recalled the early tensions that prompted Bush to increase the targeting of Soviet operations. Moreau’s actions were aimed at limiting Soviet influence without provoking a confrontation. ‘We saw the Russians sorting out their internal politics and expanding economically,’ the officer recalled. ‘Its military had become much more competent, with advances in technology, nuclear engineering and in space. They were feeling good about their planned economy and believed that their state control of education from cradle to grave was working, and it seemed as if the Russians were expanding everywhere. We were in descent; our post-Vietnam army was in shambles; morale was at rock bottom, and the American people had an anti-militarist attitude. There was a sense of general weakness, and the Russians were taking advantage of it. They had developed the MIRV’ – the multiple independently targetable re-entry vehicle, a missile carrying several nuclear warheads – ‘and were putting ICBMs on wheels and hardening nuclear silos. This was at the time when it became clear that the president was drifting, and was not an effective leader.’
By 1983, it was plain to those who worked on national security for the White House that Reagan wouldn't or couldn't engage with intelligence or counterintelligence matters. Bush had emerged, by default and very much in private, as the most important decision-maker in America's intelligence world. ‘He controlled the strings,’ the officer said. ‘We ran small, limited operations that were discreet, with a military chain of command. These were not long-term programmes. We thought we could redouble our efforts against the Soviets and nobody would interfere. And do it in such a way that no one could see what we were doing – or realise that there was a masterplan. For example, the published stories about our Star Wars programme were replete with misinformation and forced the Russians to expose their sleeper agents inside the American government by ordering them to make a desperate attempt to find out what the US was doing. But we could not risk exposure of the administration’s role and take the chance of another McCarthy period. So there were no prosecutions. We dried up and eliminated their access and left the spies withering on the vine.’ Once identified, the Soviet sleepers who worked inside the federal bureaucracy were gradually dismissed or moved to less important jobs, in the hope that the low-key counterintelligence operation would mask the improvements in the US’s capacity to read sensitive Soviet communications. ‘Nobody on the Joint Chiefs of Staff ever believed we were going to build Star Wars,’ the officer said, ‘but if we could convince the Russians that we could survive a first strike, we win the game.’ The aim of the game was to find a way to change the nuclear status quo of Mutual Assured Destruction, or seem to do so. ‘We wanted the Russians to believe that we had removed the M from MAD.’
In the beginning, the officer told me, ‘there was a great fear that the Russians were ten feet tall. What we found was total incompetence.’ Moreau’s team were amazed to find how easy it was to reverse Soviet influence – often with little more than generous offers of American dollars and American arms. Across the Third World – in countries such as Chad, Senegal and Côte d’Ivoire – the offer of advanced American electronics and communications equipment was also invaluable. ‘The Russians simply were not liked abroad,’ the officer said. ‘They were boors with shoddy clothing and shoes made out of paper. Their weapons were inoperative. It was a Potemkin village. But every time we found total incompetence on the part of a Soviet mission, the American intelligence community would assume that it was Soviet “deception”. The only problem was that it was not deception. We came to realise that the American intelligence community needed the threat from Russia to get their money. Those of us who were running the operations were also amazed that the American press was so incompetent. You could do this kind of stuff all over the world and nobody would ask any questions.’
Congress, and the constitution, were at first no more of an obstacle to Bush and Moreau’s covert operations than the press. The one member of Congress who knew what was going on was Dick Cheney, a close friend and confidant of Bush’s from their days together in the Ford administration. In 1976, in the aftermath of the Church Committee’s inquiry into CIA abuses, standing intelligence committees had been set up in both the Senate and the House, charged with holding the CIA and other intelligence agencies to account. But it was understood by all those involved in the vice president’s secret team that these committees could be bypassed, even though the laws governing covert intelligence activities had been stiffened: there was now a legal requirement that all covert CIA and military intelligence operations had to be made known to the committees through a formal, written document known as a ‘finding’. But there was a big loophole in the legislation, in the view of the vice president’s men. ‘There was no requirement for a finding for merely asking questions,’ the officer said, ‘and so we’d make routine requests for intelligence assessments from the CIA through the Joint Chiefs and the National Security Council. Our basic philosophy was that we were running military’ – not intelligence – ‘operations and therefore did not have to brief Congress. So we could legally operate without a finding.’ He was describing an ingenious procedure for getting around the law: one that would be put into use again after 9/11, when Cheney, by then vice president, triggered the unending war on terror. ‘The issue for Moreau was how do we take advantage of what the CIA has to offer – its people, with their language skills and its networks and assets overseas,’ the officer said. ‘The disadvantage was if we used the CIA in an intelligence context, we had to get a finding. We decided to get around the law by using agency people in what we claimed was a “liaison capacity”.’ The next step was ‘to attach the CIA operators to military units as liaison who were working for Moreau. Casey knew his CIA was being cut out and so he became more active where he could – in Latin America.’ As a precaution, the team prepared written findings when CIA men or information were being made use of – but they were put ‘in a safe’, to be produced only if anyone in Congress found out what was going on.
Moreau was contemptuous of Casey and ‘thought the CIA was a crazy organisation that had no concern about the consequences of its covert actions’, according to the officer. He remembered Moreau telling his subordinates on the secret staff: ‘I’m accountable to the vice president and you motherfuckers are accountable to me. The agency is not accountable to anybody – not the president, not Congress, not the American people. They will do whatever they want to support their mission, which is defined by them.’ Cutting out the CIA leadership – though using their resources where needed, partly through the good offices of Dan Murphy, who had many connections inside the agency – was key to Moreau’s operations. ‘From the beginning our philosophy was no publicity,’ the officer said. Enlisting the agency formally would involve findings, and relying on ‘the CIA’s knuckle-draggers’ – paramilitary units – ‘who were seen as too dumb and too incompetent. But by using only the military we inadvertently laid the groundwork for what we have now – a Joint Special Operations Command essentially out of civilian control.’
One of Moreau’s confidants was Alfred Gray Jr, a marine who rose from enlisted private to general. He was someone who could be trusted to do the dirty jobs that were seen as inevitable in combating the spread of communism in the Third World. By the early 1980s, Gray was a two-star major general commanding a division of the marines; he would be made commandant of the Marine Corps in 1987. If there were people to hurt, he would get it done and leave no footprints. ‘Gray was profane and tough as nails,’ the officer said. ‘He tells us: “I can do that. We’ve got guys who can do stuff.” And the marines are organised, unlike the navy. Whenever there are two marines together, one is senior to the other.’ As the team’s activity stepped up, the officer told me, they began compiling ‘hit lists’. ‘The CIA would provide us with lists of bad guys from the files of the Drug Enforcement Agency, the Justice Department and the National Security Agency, much of it focused on the drug war and anti-communist operations. A lot of it was in Mexico, Colombia, Peru, Ecuador and of course Nicaragua. We were doing the same thing then that the administration is doing now – only now it’s institutionalised with JSOC. Back then we used the marines and Delta Force, and there was no reason, as today, to say anything to the Joint Chiefs. Moreau’s strategy was to act in advance to pre-empt terrorism. “Why wait for it to take place?”’
Moreau’s activities have remained secret, and, as I learned while reporting on this aspect of history, those who knew of his activities at the time remain sceptical that they can be written about today. ‘I’m aware of what you’re referring to,’ one senior defence official told me. ‘And Art Moreau was just like “M”. But you are working in an area that remains highly classified, and even today it may be too sensitive to reveal the rudiments of our intelligence networks. I doubt if any records still exist.’
Over the course of 1983, Moreau’s team was given a target that would prove much tougher than the Soviets – terrorism in the Middle East. Sixty-three American diplomats, intelligence experts and military personnel, along with civilian employees, were killed when the US embassy in Beirut was bombed in April 1983, and six months later 241 military personnel, most of them marines, were killed in an attack on a barracks at Beirut airport. The US embassy in Kuwait was bombed in December that year, and there was a wave of kidnappings of Westerners – among them William Buckley, the CIA station chief in Beirut, who would die in captivity.
A particular target was Muammar Gaddafi. ‘By 1981 Gaddafi was beginning to get more and more bizarre,’ the officer said. ‘He was making a lot of moves into our hemisphere: selling air-to-surface missiles to Argentina, selling Hind attack helicopters to Nicaragua, supplying aid to Peru, supporting the government in Venezuela, and even dealing with the Popular Front in Palestine. He also closed the Gulf of Sidra to our 6th Fleet. We had to take care of Libya. Gaddafi was a primary military and oil threat, and he became a strategic target.’
An assassination was planned, using Casey’s CIA assets in Libya, the officer said, and because of the CIA’s involvement the administration was required to inform the congressional leadership about aspects of the plan via a highly classified finding. This was promptly leaked by someone in Congress, so Moreau’s team thought, and the operation called off – allegedly. Moreau’s people continued to support the Libyan opposition. In May 1984, the National Front for the Salvation of Libya, an opposition group that would later be clandestinely supported by the CIA, failed in an attempt on Gaddafi’s life. Eight rebels were killed along with eighty government soldiers, according to published reports. Gaddafi responded by executing three members of the Muslim Brotherhood and arresting and torturing thousands of others. One of the Americans involved in the plot was Major-General Richard Secord, who had resigned from the air force in 1983 after being accused of improper dealings with a former CIA officer. Secord, who had a long career in special operations, pleaded guilty in 1989 to a felony count for lying to Congress about his role in the Iran-Contra affair, but never came close to spending a day in jail. His sentence of two years on probation was reversed the following year.
Moreau’s operations were described, indirectly, in The Reagan Imprint (2006) by John Arquilla, who teaches in the special operations programme at the United States Naval Postgraduate School. Arquilla wrote about a secret 1984 White House memorandum – NSDD 138 – that authorised ‘sabotage, killing … pre-emptive and retaliatory raids, deception and a significantly expanded [intelligence] collection programme, aimed at suspected radicals and people regarded as their sympathisers’. Arquilla reported that the memorandum (which wasn’t declassified until 2009) triggered intense controversy inside the government, and the directive was never implemented in full. He added that Bush ‘was initially cool to the idea as well, though he eventually warmed to it’.
It seems likely, from the suggestive reference to Bush, that Arquilla knew more than he could write, or wanted to write. The officer remembered the bitter internal dispute over the memorandum, which was promulgated well after Moreau’s team began its activities. ‘The irony was, of course,’ the officer said, ‘that as we racked up some amazing successes, the administration took credit and defence and the agency each thought the other was responsible.’
There were a few hints of Moreau’s real authority in the early Reagan years. A 2010 US army history of the 1983 decision to invade the Caribbean island of Grenada includes a paper by Edgar Raines of the US Army Centre of Military History. It recounts a series of secret planning meetings in which Moreau, while junior to others present, ‘was in many ways the most influential person in the room … Moreau’s ideas thus had a way of reaching the very highest echelon of government. It made him a force with which to reckon.’ Raines notes that Moreau had managed to direct the most sensitive operational decision-making to the Special Situation Group, a committee of the most senior policymakers chaired by Bush. None of this was made public at the time.
A memorandum declassified in 2008, written in April 1984 by Richard Kerr, then deputy director of the CIA, noted that the agency’s ‘products’ – its intelligence reports and estimates – were being cut off by Moreau and his team, and not reaching the chairman of the Joint Chiefs of Staff. ‘I have the feeling,’ Kerr wrote plaintively, ‘that if we are going to get something past Admiral Moreau we will need to send it via the briefer with a note . . . asking that it be called to the attention of the chairman.’ Moreau himself received the full range of CIA products. ‘Admiral Moreau’s interests,’ Kerr added, ‘are all subjects, worldwide.’
Another hint came in Colin Powell’s 1995 autobiography – he was military aide to the secretary of defence, Caspar Weinberger, at the time of the Grenada invasion. Powell wrote that Moreau
came to me one morning with an odd revelation. The secretary’s office was not getting some of the most curious traffic that the NSA plucked out of the air. On his own hook, Art had decided to share this withheld material with me. What I read enraged me … The content of the messages was startling enough, but what troubled me just as much was why the secretary’s office should be cut out of the loop.
Powell, who shared his boss’s scepticism about the value of a war on terror, showed the intercepts to Weinberger. Weinberger – equally furious – asked where they had come from. ‘I explained,’ Powell wrote, ‘that they were bootlegged to us by Admiral Moreau, who got them from the NSA.’ ‘And don’t I control the National Security Agency?’ Weinberger asked. There was no suggestion in Powell’s book that either he or Weinberger challenged Moreau’s access to intercepts deemed too sensitive for the secretary of defence.
‘Bush was petrified that the president would say the wrong thing to outsiders about what was going on, and he was hanging around the Oval Office,’ the officer said. ‘You never knew whether the president might start talking about an operation in China or into Vietnam.’ Reagan was kept out of trouble at important national security meetings by being given a script. ‘My colleagues and I would write a talking paper for the president before meetings that resembled movie scripts, because the Old Man knew scripts as a reference. We were constantly updating the script, because if we made a dumb mistake, he would read it. We’d talk among ourselves about where to put the emphasis for certain words and phrases.’ In Deadly Gambits, his 1984 study of arms control, Strobe Talbott showed what happened when Reagan didn’t have a script. During a conversation about arms control with a group of congressmen, the president suddenly proclaimed: ‘Land-based missiles have nuclear warheads, while bombers and submarines don’t.’ ‘Even as he said these words,’ Talbott wrote, ‘his voice dropped and wavered, as though he had forgotten his lines and knew there was something not quite right about his attempt to improvise.’
Casey was another source of tension, the officer said. He ‘was going around giving the impression that he was a super spook, but nobody on the inside cared because he had no juice. We knew he was over the hill and living on his past glory with the OSS’ – the Office of Strategic Services, the CIA’s wartime predecessor. He may have run Reagan’s election campaign, he may have been controlling the US operation in Afghanistan, but the military men working with Moreau saw him as ‘bizarre, unpredictable, out of control and dishonest’. Murphy made sure to be kept up to date on what Casey was up to. The CIA’s director got his chance of glory in Nicaragua, whose Sandinista government was inordinately feared by Reagan and Casey as a dire threat to the United States. Casey was able to get his way because of a rare error of judgment by Moreau, who had brought Marine Lieutenant Oliver North onto the secret team. The Iran-Contra story, as seen from inside the Moreau operation, has little in common with the public record. Bush, known to his friends and aides as ‘Poppy’, was also worried about Nicaragua and Daniel Ortega, the Sandinista leader, and was instrumental in the decision to give clandestine American support to the Nicaraguan opposition force known as the Contras. Moreau’s team inevitably became involved: a high-risk proposition for the group because Congress had passed an amendment barring the use of American funds for support of the Nicaraguan opposition. There was no question about Bush’s part in what would become the Iran-Contra scandal. ‘Dan Murphy and Poppy would sit down and work it out about the Contras,’ the officer said. ‘They saw Ortega as turning Nicaragua into a Russian puppet state. “We can’t have that. This is our turf. We have to protect Guatemala and Honduras and Panama.” So I and my colleagues on Moreau’s team wrote findings about covert actions going after Daniel Ortega.’
But it was important to keep Casey out of the way, the officer said, in order ‘to protect our real operations’. Unfortunately, the person charged with protecting the vice president’s inside team was Ollie North, then on the staff of the National Security Council. ‘We were in different parts of the White House’ – where conspiracy was a constant – and ‘North’s job was to keep Moreau up to date on all NSC operations. North was a plant.’ It became clear to the Moreau team that the CIA’s Casey-led operations in support of the Contras were veering out of control. Casey had been busy illegally raising millions of dollars for the Contras from ‘concerned’ American citizens and foreign countries, including Saudi Arabia and Brunei, whose leaders were seeking favour with the White House. ‘Moreau thought that Casey’s actions in support of the Contras were stupid and a time bomb,’ the officer said. ‘What had begun as a quiet op designed by Moreau to influence public opinion inside Nicaragua was becoming a political football. So Moreau calls on his boy Ollie and tells him to get involved with the Contra issue and keep it from getting out of control. He picked the wrong guy. North was loyal and enthusiastic, but he was fucking dumb.’ North saw a career path through keeping in with Casey – but then the operation took a ludicrous turn after Buckley’s kidnapping in Beirut in March 1984 by members of the group that would soon call itself Hizbullah.
A plan developed to sell anti-tank and surface-to-air missiles to Iran, via the Israelis, in return for Iranian help in releasing Buckley and the other prisoners (the government of the Ayatollah Khomeini, who had overthrown the shah in 1979, was viewed with great hostility by the Reagan administration). Profits from the arms sales would then be used to finance support for the Nicaraguan opposition – in direct violation of the congressional ban. ‘Ollie brings in Dick Secord and Iranian dissidents and money people in Texas to the scheme, and it’s gotten totally out of control,’ the officer said. ‘We’re going nuts. If we don’t manage this carefully, our whole structure will unravel. And so we’ – former members of Moreau’s team who were still working for Bush – ‘leaked the story to the magazine in Lebanon.’ He was referring to an article, published on 3 November 1986 by Ash-Shiraa magazine in Beirut, that described the arms for hostages agreement. He would not say how word was passed to the magazine, nor did he acknowledge that with this leak Moreau’s group was acting with as much self-interest, and as little regard for the consequences, as Moreau had accused the CIA of doing. The officer explained that it was understood by all that the scandal would unravel in public very quickly, and Congress would get involved. ‘Our goals were to protect the Moreau operation, to limit the vice president’s possible exposure, and to convince the Reagan administration to limit Bill Casey’s management of covert operations. It only took a match to light the fire. It was: “Oh my god. We were paying ransom for the hostages – to Iran.”’
Moreau was gone by the end of 1985: at the recommendation of Bush, he had received his fourth star and was rewarded for his high-pressure double duty in the White House by being appointed commander of US naval forces in Europe and Nato forces in southern Europe. There was another factor: on 1 October 1985, Admiral William Crowe replaced John Vessey as chairman of the Joint Chiefs of Staff. The formidable Crowe had been filled in, up to a point, on the clandestine operations inside the vice president’s office. ‘He got a whiff of what was going on,’ the officer said. Crowe quickly disbanded Moreau’s secret team and returned its officers to navy duty. There would be no undeclared operations on his watch. The roof could have fallen in the following November, when the Iran-Contra scandal became public. The congressional inquiry that followed focused on Reagan, and what he did and didn’t know. Bush was mostly out of the line of fire, and so was Moreau. Casey, meanwhile, was diagnosed with a brain tumour in December 1986, and left office within days. He died five months later.
If Casey had not taken ill, the officer assured me, ‘he would have been the fall guy, and taken one for the Boss’ – the president. Bush, with his seemingly secure run for the presidency in 1988 under threat, flew into a panic about the burgeoning scandal. He had played a major role in the sure-to-fail scheme; a comprehensive inquiry might well discover the 35 or so earlier covert operations – many of them successful – that he and the Moreau group had conducted. The team’s carefully prepared findings, none of which had been given to Congress, were destroyed, as were any other records of the extraordinary operations unit. Moreau suffered a major heart attack in December 1986, while on duty, and died soon afterwards at a military hospital in Naples.
Secrecy, internal rivalries and illegality had doomed Moreau’s project but, for all its flaws, there were some in the defence establishment who felt, as Moreau did, that extraordinary efforts were needed to combat international terrorism. ‘How ironic it is,’ a senior defence official told me, ‘given all the interest now in waging covert warfare, that the very real opportunity to pre-empt al-Qaida, and launch a war decades before 9/11, was squandered by a mix of overzealous, sometimes misguided operators and bickering administration officials.’
In 1986, as the Iran-Contra scandal turned toxic, the immediate problem for Vice President Bush was political survival. Too many outsiders – men like Oliver North – knew too much. The vice president began keeping a diary – with notable fake elements – late in 1986, as the scandal was being investigated by the special prosecutor Lawrence Walsh. The diary wasn’t turned over to Walsh’s inquiry until after Bush’s defeat in the 1992 presidential election, despite relevant subpoenas dating back to 1987. It begins with the sentence: ‘This is November 1986, the beginning of what I hope will be an accurate diary, with at least five and maybe 15 minutes a day on observations about my run for the presidency in 1988.’ But Bush was unable to restrain himself, repeatedly wondering whether North and his close associate on the National Security Council, Admiral John Poindexter, would ‘do the right thing’ when testifying before Congress. The ‘right thing’, of course, was for North and Poindexter to lie and not say what they knew about Bush’s involvement. At one point, Bush refers to allegations in the media that he has not come clean on his part in the scandal, and adds: ‘The implication being that I was some way linked in to the diversion of funds to the Contras or that I was running a secret war’ – which, of course, was precisely what he had been doing. Later, writing about the arms for hostage agreement, he says: ‘I’m one of the few people that know fully the details, and there is a lot of flack and misinformation out there. It is not a subject we can talk about.’
Bush’s unconscious seemed to spin out of control again when he was summoned in December 1986 by the Tower Commission, a three-member investigating group put together by the White House in a failed attempt to head off the Walsh inquiry. ‘The testimony before the Tower Commission, I think went well,’ Bush wrote. ‘I made several suggestions to them … [and] they include no more operations by the NSC; CIA to conduct covert operations; formalise process of the NSC staff; clearly [no more] oral findings, and failure to follow up on these covert operations was wrong. Nobody had any dream that these kinds of things were going on.’ He was once again describing what Moreau’s group had been doing. The diary, had it been turned over earlier, as Bush’s team of lawyers certainly understood, would have led to a great deal of further questioning, and possibly to an indictment.
Walsh reluctantly ended his far from satisfactory inquiry in 1993. Convictions his staff won at trial were later overturned or suspended, as in North’s case; others were pardoned by Bush before he left office. One of Walsh’s last acts was to determine whether there was a case against Bush for his initial refusal to turn over the diary. He decided against it after concluding that there was little likelihood of a successful prosecution. The same general conclusion had been reached two years earlier, before the existence of the diary became known, by Christian Mixter, a senior attorney on Walsh’s staff. While there was much evidence that Bush had attended most of the important meetings on Iran-Contra, Mixter wrote, his role as ‘a secondary officer’ to the president made him less likely to be criminally liable for the actions he took. Mixter’s analysis was not made public until 2011.
There is no evidence that Walsh or any of the lawyers on his staff found out about the existence of Moreau’s special operations group, though it was clear to some that there was more to know. John Barrett, who now teaches at St John’s University School of Law in New York, spent five years working for Walsh and came away, as he told me, with ‘a very strong sense that the water was way deeper than we could see. And who knew what was below. I concluded that we were at the mercy of the executive branch.’ He added that Archibald Cox, the Harvard law professor who was in charge of the Watergate investigation in 1973, had been able to turn for help to John Dean – the White House counsel who testified in public about the presidential cover-up. Unlike Cox, ‘we didn’t have an intelligence insider.’
The Washington press corps was equally in the dark. Scott Armstrong, a Washington journalist who spent years researching US policy on Iran, recalled a pleasant lunch he had long after the Iran-Contra inquiry with Don Gregg, Bush’s national security adviser. The conversation inevitably turned to the Iran-Contra days and Armstrong told Gregg that he and other journalists had always been interested in his role. Gregg’s answer, as Armstrong recalled it, was crude and mysterious: ‘You guys [in the press] were always sniffing around my ass, and Dan Murphy passed right by you.’
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