Intelligence: Crisis in Spooksville

By Richard Lacayo

Life could be worse for the Central Intelligence Agency. There are no jeering crowds in front of its headquarters in Langley, Va., and no one has tried to pull down the statue of agency founder William ("Wild Bill") Donovan. Nonetheless, the meltdown of Soviet power has startled the CIA nearly as much as it has the KGB. So long as the Soviet Union faced off against the U.S., the chief mission of American intelligence gathering could be summarized in a microdot: watch Moscow and all its worldwide doings. Now, confronted by the spectacle of a dissolving Soviet Union, intelligence agencies face the question of whether they should be refashioned for a world in which counting Soviet missile silos may be less important than tracking the intentions of well-armed Third World dictators or keeping tabs on the Japanese trade ministry.

That's one reason why the stakes are unusually high this week as the Senate Select Committee on Intelligence conducts hearings on George Bush's choice of Robert Gates, the Deputy National Security Adviser, to be the next director of the CIA. Whoever holds that job will have to put the sprawling intelligence community on a new path and defend the agency against critics who are calling for it to be downsized or disassembled.

The discussion about the CIA's future, however, has been overshadowed by questions about Gates' past, most notably the extent of his involvement in the Iran-contra affair. That issue scuttled his first shot at the job four years ago, when Ronald Reagan proposed him as agency chief following the resignation of William Casey. Gates had to withdraw because of skepticism in Congress over his claim that Casey had kept him in the dark about the contra-supply operation. The job went instead to then FBI Director William Webster. When Webster announced his retirement in May, Bush nominated Gates in the hope that Congress had lost interest in Oliver North's misadventures.

That might have been the case if Iran-contra prosecutor Lawrence Walsh had not unveiled a major surprise in July. Just days before the scheduled start of Gates' hearings, Alan Fiers, a former top CIA official, pleaded guilty to withholding information from Congress about his own knowledge of the contra- supply operation. With Fiers willing to testify about the involvement of former CIA colleagues, Walsh's investigation was suddenly rejuvenated: How much of the Iran-contra operation had been directed by the CIA? And just which CIA officials took part?

Fiers' testimony led to the indictment two weeks ago of his boss, Clair George, the CIA's former chief of covert operations. In a federal courtroom last week George pleaded innocent to the 10-count felony indictment, which alleges that he lied to three congressional committees and to the grand jury that Walsh convened to probe the Iran-contra scandal. If convicted on all counts, George faces up to 50 years in prison.

On the day of George's arraignment, in another chamber of the same courthouse, Walsh got a surprise of his own. Last year a federal appeals court overturned Walsh's conviction of North on one charge. In order for the convictions on two remaining charges to stand, Walsh was directed to show that none of the witnesses at North's trial had relied on his highly publicized 1987 testimony to Congress, which North had delivered under a grant of immunity. During a courtroom hearing last week, Robert McFarlane, Ronald Reagan's National Security Adviser, stunned members of Walsh's team by insisting that his own testimony at North's trial had been deeply tainted by familiarity with North's Senate appearances. McFarlane's contention makes it more likely that all remaining charges against North will be thrown out. That would leave Walsh facing the question of whether to try North again from scratch.

Of greater concern to the White House is the possibility that George or Fiers -- each was below Gates on the CIA chain of command -- might implicate Gates. Nonetheless, the Senate committee has been assured by Walsh that so far his investigation has not turned up any evidence that would lead to Gates' indictment. Bush once again reiterated his support for the nominee last week, and Administration strategists hope that with the help of Oklahoma Democratic Senator David Boren, the committee chairman and another Gates supporter, the nomination will reach the floor of the Senate anywhere from two weeks to six months from now.

All this unwanted attention comes at a time when the CIA is trying to reshape its duties in a rapidly changing world. Vincent Cannistraro, a former CIA chief of counterterrorism operations, has even suggested that the CIA is an "obsolete tool" whose functions could be handled by the other branches of the national-security bureaucracy, which include the National Security Agency, responsible for eavesdropping; the Reconnaissance Center, which handles satellite imaging; and the enormous, separate intelligence arms of the military services. New York Senator Daniel Patrick Moynihan has called for the CIA to be dissolved and its responsibilities turned over to the State Department. If that is not possible, Moynihan says, the agency should shrink its budget, a classified figure that is currently between $25 billion and $30 billion a year. "Downsize, downsize," Moynihan advises. "Don't look for silly, quasi-cold war tasks like 'Find the narcoterrorists' or 'Steal the economic secrets of Albania.' "

+ Intelligence officials know there is grumbling about their performance in the recent past. In the years before the Ayatullah Khomeini came to power, the CIA failed to gauge the depth of resistance to the Shah among the people of Iran. Saddam Hussein's invasion of Kuwait last year also caught the U.S. by surprise. "The war might have been avoided if the President had been told six months earlier that this man is thinking of invading his neighbors," says Senator Boren.

The U.S.S.R., whatever shape it takes, will remain a major focus of intelligence efforts. Even a rump Soviet Union is likely to be a formidable, if less truculent, nuclear power, while the unsteady new republics that have declared their independence will need to be watched. At the same time, the KGB's morale may be hurt, but its espionage division remains unchanged. By some estimates, it still maintains roughly 23,000 operatives in other nations. It is not inconceivable that the Soviet agency might try to rebuild its reputation by scoring a triumph abroad, such as filching technological secrets.

But U.S. intelligence agencies will also have to be reconfigured to fit the new map of the world. In an age of small countries that are bristling with arms, one likely new target of attention will be small and middle-size nations that have considerable military arsenals and an inclination to use them. "We've got to look at the proliferation of missiles, both medium and long range, and the issue of weapons of mass destruction, chemical, nuclear and biological," says Representative Dave McCurdy, the Oklahoma Democrat who is chairman of the House intelligence committee. Other jobs would involve keeping close tabs on terrorist groups and drug traffickers.

A more controversial new role is economic-intelligence gathering. In the absence of a communist superpower, the foremost peacetime conflict will be economic competition among nations. In that race the CIA could help give American companies an edge by ferreting out industrial and technological information from foreign companies and government ministries. National trade strategies, technological advances, even the bids being made by foreign companies for contracts open to American firms -- all could be collected by the CIA.

But there are real pitfalls to stealing industrial secrets. In a world of multinationals, how do you even identify an American corporation? And how should agencies make information available without favoring one company over another -- a prospect that opens the way to the possibility of corporations bribing American agents to get access to information that would give them an advantage over other American companies.

More important, the practice would place the U.S in the uncomfortable position of spying regularly on allied nations. Then again, some of them have already jumped into the race. On a segment last week of the NBC news program Expose, Pierre Marion, the former chief of French intelligence, admitted that his government has been spying on U.S. corporations and their executives in France. Marion, who headed the French spy agency DGSE in 1981-82, told of a 10-year effort that stole secrets from Corning Inc., a producer of glass and fiber optics; IBM; and Texas Instruments. According to Expose's investigations, French spies may be posing as flight attendants and passengers on Air France in order to eavesdrop on the conversations of American business travelers. "In economic competition we are competitors," he explained.

The debate about how information should be gathered is also heating up. On one side are those who favor greater reliance on technical means, such as satellite photography and electronic interception of official communications. On the other side are the proponents of what the spy business calls "humint" -- human intelligence, better known as infiltrators, informants and spies.

Though collecting from the skies is expensive, it allows access to places that were once unreachable, such as Soviet ICBM sites. But such data do not always reveal intentions. Aerial surveillance showed that Saddam had moved his army to Iraq's border with Kuwait last summer. It could not reveal whether he intended that merely as an act of intimidation or as a prelude to attack. Neither will technical spying prowess be able to predict popular uprisings like those that swept across Iran in 1979 or the Soviet Union this year. "You don't sense the mood of the bazaar from a satellite 100 miles in space," says George Carver, a scholar at the Center for Strategic and International Studies who was the CIA's special assistant to the director of Vietnamese affairs from 1966 to 1973. "To do that you need human beings in there mixing it up."

American intelligence gathering is also hobbled by the familiar Washington turf wars, especially the competition between the CIA and the various branches of military intelligence. Some blame that rivalry for the fact that during the 1989 invasion of Panama, American troops spent four days locating General Manuel Noriega. CIA defenders contend that the agency was kept in the dark about the invasion until a few hours beforehand, thus limiting what it could do. "There is too much cowboyism going on, too much effort by agencies to duplicate the work," says New Mexico Representative Bill Richardson, a member of the House intelligence committee. "They don't share information."

The director of Central Intelligence is nominally in charge of all U.S. intelligence-gathering operations, but the Secretary of Defense is de facto boss of defense agency intelligence. He's "the 900-lb. gorilla in intelligence," argues Richard Helms, who was CIA chief under Lyndon Johnson and Richard Nixon. There are calls for the creation of an intelligence czar with unassailable authority. Failing that, critics are insisting that the warring agencies work out clearer terms of cooperation that the next CIA chief can unequivocally enforce.

However the CIA defines its mandate, the agency will have to be headed by someone who not only has a sharply analytical mind but would be a director Congress could fully trust. There are few who doubt that Gates fits the first description. It is now up to the Senate to decide whether he fits the second as well.

With reporting by Dan Goodgame and Bruce van Voorst/Washington and William Mader/London