HPSCI REPORT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89B01356R000200230018-4
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 46
• Document Creation Date: December 23, 2016
• Document Release Date: March 2, 2012
• Sequence Number: 18
• Publication Date: February 10, 1987
• Content Type: MEMO

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ROUTING AND RECORD SHEET
(i Securit Concerns
Policy Branch/PP
TO: (ORker designation, room number, and
building)
A/EO
DD/PS
D/S
27 February 1987
OFFICER'S
INITIALS
f6l
COMMENTS (Number each comment to show from whom
to whom. Grow a lino across column after each comment.)
FORM 610 (TIONS * U.S. Government Printing Office: i $5-4*4-8"AI1N
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AM
DDA 87-0243
10 February 1987
Deputy Director
for Administration
NOTE FOR: Director of Security
SUBJECT: HPSCI Report
think.
of the HPSCI Report--U.S.
o
y
p
Concerns
Enclosed is a c
Counterintelligence and Security -
I would like to have written reactions
1986. and
from OS keyed to the findings a es 3 through 8'
pages
recommendations sections on
i don't want a monstrous paper at this time, but
learn what you
in bullet form I would like to
William F. nelly
Attachment
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U.S. HOUSE OF REPRESENTATIVES
PERMANENT SELECT
COMMITTEE ON INTELLIGENCE
WASHINGTON, D.C. 20515
February 5, 1987
Mr. David D. Gries
Director
Office of Congressional Affairs
Central Intelligence Agency
Washington, D.C. 20505
The Committee released this report yesterday. It
has not been printed up yet.
Sincerely,
' ~iw-
Thomas K. Latimer
Staff Director
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ST!VE" K. SOW. ASSOCMTE COUNSEL
February 4, 1987
Honorable Jim Wright
The Speaker
U.S. House of Representatives
Washington, D. C. 20515
Dear Mr. Speaker:
Attached is a report prepared by the Permanent Select Committee on
Intelligence during the 99th Congress entitled "United States
Counterintelligence and Security Concerns - 1986." It is the hope of the
Co:rrnittee that the publication of this report will lead to improvements in
U.S. counterintelligence and security capabilities.
fl :losure
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1ST SESSION COMMITTEE PRINT
UNITED STATES COUNTERINTELLIGENCE
AND SECURITY CONCERNS - 1986
REPORT
BY THE
PERMANENT SELECT COMMITTEE
ON INTELLIGENCE
HOUSE OF REPRESENTATIVES
FA BRUARY, 1987
U.S. GOVERNMENT PRINTING OFFICE
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REPORT ON ESPIONAGE AND U.S. COUNTERINTELLIGENCE
AND SECURITY MEASURES
EXECUTIVE SUMMARY
Over the past several years, a dangerous upward trend in successful
espionage operations against the United States has occurred. Present and
former U.S. Government employees with access to sensitive classified
information have played the key roles in each operation. Damage to U.S.
national security has been significant and is still being estimated.
Deeply concerned over these developments, the House Permanent Select
Cocaaittee on Intelligence has spent a great deal of time investigating this
alarming situation. This report represents one outcome of the investigation.
From its early days, the Administration has focused considerable attention
and effort on improving the effectiveness of U.S. counterintelligence.
Concomitantly, the House and Senate Intelligence Committees have authorized
significantly increased funding for counterintelligence and urged that
counterintelligence concerns assume a higher priority within the Intelligent:
Co=unity. These efforts have e.:evated the morale, status and numbers of
counterintelligence personnel, helped cope with security investigation
backlogs and encouraged new initiatives in some operational and policy areas.
:c:.ethless, it has become apparent that historical inadequacies in
counterintelligence and countermeasures are so deepseated and pervasive that
fundamental problems remain. These must be addressed now with renewed
ceterrination and vigor.
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_z From its hearings and interviews, the Committee has determined that
serious security deficiencies exist in a number of areas within the U.S.
intelligence community. These deficiencies include faulty hiring practices,
inadequate and inefficient background investigations, lack of full
coordination and information exchange between agencies, insufficient adherence
to the "need-to-know" principle, over-classification of security documents and
proliferation of personnel clearances, thoughtless firing practices, and
over-reliance on.polygraph exams.
The Committee recognizes that the intelligence community has acknowledged
some of the problems addressed in this report and that some of the solutions
suggested herein already are being implemented. The Committee applauds these
efforts, but urges still greater attention to counterintelligence issues,
beginning with acknowledgment that manifest failures have reflected systemic
inadequacies rather than mere aberrations or unavoidable risks. In general,
within the intelligen^e community there appears to remain insufficient
appreciation for the importance of counterintelligence concerns, an attitude
aften reflected in inte.-nal agency budgetary and policy prioritizations.
Moreover, despite some recent improvement, the fragmented components of the
counterintelligence community remain uncoordinated, divided and turf-conscious
in v.-tually every substantive area, ranging from simple informatiorL-.haring
or investigation to policy formulation and counterintelligence operations.
Dramatic improvement will require fundamental shifts in attitudes as well as
in approaches and practices. This report concentrates almost exclusively on
personnel and other security issues, but the adequacy and effectiveness of
U.S. Government efforts in other counterintelligence areas should be
a-exa-ined as well.
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'The Committee- urges-the Director of Central Intelligence- and other key
officials within the intelligence community to undertake all possible
measures, beginning with those suggested in this report, to correct these
deficiencies and to raise the level of vigilance against hostile espionage
activity.
The Committee further stands ready to facilitate and to support
appropriate remedial actions in this vital area.
The Committee makes the following key findings:
1. Security weaknesses represent a serious management failure in the U.S.
intelligence community.
2. Weaknesses in the process of selecting personnel for initial
employment in U.S. intelligence agencies constitute a key threat to national.
security.
3. Seni:r managers of U.S. intelligence agencies have downplayed the
seriousness of counterintelligence and security failures and have not taken
adequate measures to correct deficiencies.
4. The polygraph is a useful tool in security screening of personnel, but
the U.S. intelligence community places excessive reliance on the value of the
polygraph interview.
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- =5. The attitude prevalent -among intelligence community personnel that
those who have "passed" a polygraph interview are an elite of unquestionably
loyal employees with respect to whom security precautions may be relaxed is
dangerous, especially in light of recent espionage cases in which foreign
spies successfully "passed" CIA polygraph interviews.
6. No adequate mechanism exists within the government for ensuring that
information of counterintelligence and security value possessed by one
intelligence agency is available to other intelligence agencies which would
benefit from it.
7. The potentially most damaging long-term development in classified
information security practices is erosion of the principle that access to
classified information requires not only the requisite clearances and special
access approval, but also a need to know the information to perform official
duties.
8. Too many clearances are granted.
9. Too much information is classified than. would not reasonacly cause
da~.age to the national security.
10. Superficial background investigations often do not discover alcohol,
dr::g, and financial problems.
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11.- No focal point exists within the government for centralized storage,
retrieval, and dissemination of background investigation information.
12. Financial pressure, not ideology, constituted the primary motivation
of many spies apprehended in the United States in recent years.
13. In several recent espionage cases, intelligence agency employees
satisfied security standards at the time of employment, but after employment
decided to engage in espionage, and never were subject to routine security
reinvestigation after employment.
14. Former employees of intelligence agencies who had access to sensitive
secrets may pose as potentially great arisk to security as current employees
with such access.
15. Other than-the intelligence committees of the house and the Senate,
the Congress has no personnel, physical, document and communications security
programs which meet or exceed all applicable executive branch security
standards.
16. Dangerous laxity exists in the communications and computer security
practices of many federal agencies.
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_._. The cocsaittee makes the. following.key recommendations:
1. U.S. intelligence agencies should undertake a coordinated review of
their hiring practices.
2. The President should authorize an independent group of experts outside
the intelligence community to examine thoroughly the damage to U.S.
intelligence capabilities resulting from recent espionage cases and to urge
needed adjustment of U.S. intelligence collection techniques.
3. All U.S. intelligence agencies should be required to report as
appropriate to the Director of the Federal Bureau of Investigation or the
Director of Central Intelligence information they possess which raises a
suspicion of possible espionage.
4. U.S. intelligence agencies should institute a rigorous need-to-know
policy to govern access to classified information and back that policy by
disciplinary action against employees who breach that policy.
5. The Director o`. Central Intelligence should consider establishing a
system for dissemination of intelligence with minimal source identification,
restricting full knowledge of sources only to those who absolutely need to
know.
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-6. The executive branch and the Congress should work to standardize,.
expedite, and adequately fund the security clearance process. The Secretary
of Defense, in consultation with the Director of Central Intelligence, should
examine whether the Defense Investigative Service (DIS) can serve adequately
the personnel security background investigation needs of the military
departments and defense agencies and should consider whether such departments
and agencies should undertake their own background investigations and whether
they should contract with private firms for such investigations. The Congress
should carefully examine the budget request for DIA within the FY 1988 Defense
budget review process.
7. Background investigations should focus more on the financial status of
the subjects of the investigations.
8. Periodic reinvestigation of personnel with access to sensitive
compartmented information, i.e. the nation's most sensitive intelligence
secrets, should be given priority equal to that of initial investigations.
9. Legal and administrative mechanisms should be established to ensire
that agenci.:s which possess ;sformation of security relevance on an emp'o1,ee
or applicant for employment of another agency share that information with that
agency.
10. The National Security Council, the Attorney General, the Secretary of
Defense, and the Director of Central Intelligence should review jointly
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executive.-branch policy with respect to former government personnel and
personnel of government contractors who had access to sensitive compartmented
information and consider changes, such as requiring exit interviews and a
separation non-disclosure agreement, to deter post-employment unauthorized
disclosures of classified information.
11. The leadership of the House of Representatives should examine the
feasibility of establishing uniform security procedures for House committees,
offices and organizations which meet or exceed executive branch standards.
12. The Federal Bureau of Investigation should establish a program of
rewards for information leading to the arrest of individuals for espionage.
13. Strict, rigidly applied communications and computer security
practices should be established within the U.S. government.
14. The Attorney General, the Director of the Federal Bureau of
Investigation and the Director of Central Intelligence should consider
realigning some FBI surveillance resources to high priority intelligence
targets. The Congriss should carefully weigh the amount of, re.,,,urces
requested for this purpose in the FY 1988 budget review process.
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INTRODUCTION
From 1984 to 1986, twenty-seven U.S. citizens were charged with
espionage To date, all but one (Craig Smith) who have been brought to trial
have been convicted. Among this number were naval officers John and Arthur
Walker,.John's son Michael and friend Jerry Whitworth, both sailors; naval
intelligence analyst Jonathan Pollard; FBI agent Richard Miller; ex-NSA
specialist Ronald Pelton; CIA analyst Larry Wu Tai Chin; and CIA secretary
Sharon Scranage. Never apprehended was fugitive ex-CIA officer Edward Howard,
who is now in Moscow.
These examples of espionage did not occur in a vacuum. The Committee
receives regular reporting from the intelligence community concerning the
vigorous, well-financed and widespread efforts of the Soviet Union and its
cor:.Wunist allies to steal U.S. national security information. The occasional
arrest of diplomats, United Nations employees and foreign commercial
representatives reveals only the tip of the iceberg of foreign espionage.
That espionage efforts are highly productive for hostile foreign nations can
be seen in the sometimes startling technological advances in Soviet weaponry
and in the compromise of formerly productive U.S. intelligence operations.
Ageinst this background of pervasive espionage, the question raise?i by the
espionage cases reviewed by the Committee, all of which directly concerned the
corpror..ise of codes or intelligence activities, was whether the U.S.
intelligence co=unity and the larger national security community maintained
adequate security. Were the individuals involved in these cases - trusted,
fully cleared, some with years of experience or high marks for performance -
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indicative of systemic flaws?. - Are there others like them and, if so, how
could they be detected? How carefully did responsible government officials
answer these questions and how vigorously did they pursue necessary remedies?
The following espionage cases were but a few examined by the Committee and
reveal staggering, long term damage to national security:
During a 15-year period, John Walker provided the Soviets with code
cards and the plans to code machines used widely by the Navy. The
Soviets undoubtedly read many of the classified messages concerning
submarine movements and tactics sent using these machines during that
period.
-- Jerry Whitworth also provided other code cards and code machine plans
that allowed the Soviets access to the same kind of messages both
before and after Walker retired. He also provided copies of coded
messages and other classified information about U.S. aircraft
carriers.
-- For two years, Jonathan Pollard provided thousands of highly
classified intelligence reports to Israel, including reports the U.S.
chose to share with no other country.
-- Ronald Pelton, in a series of ^landestine meetings with the Soviets
in Washington and Vienna, provid2i detailed information on NSA's
efforts at breaking Soviet codes and intercepting sensitive Soviet
military communications. In those meetings, he gave the Soviets a
good description of many U.S. signal intelligence capabilities
against the Soviet Union and betrayed collection programs it had
taken decades to establish.
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For 30 years, Larry Wu Tai Chin spied for China. During the last
nine years of his career at CIA, he saw, and in turn gave to the
Chinese, a great many classified CIA analyses about China.
Sharon Scranage betrayed the identities of CIA agents in Ghana and
perhaps in other African countries. Her disclosures crippled CIA
capabilities in Ghana.
-- Edward Howard betrayed the most sensitive operations of the United
States in Moscow, which had a severe adverse impact on U.S.
collection of intelligence in Moscow.
Most of the Americans who were caught spying between 1984 and 1986 had no
ideological commitment to another foreign country. They sold U.S. secrets for
financial reasons. Although some - like the Walkers, Whitworth and Chin - had
exemplary careers, the behavior of others - Pollard, Miller, Scranage and
Howard - offered warning signs to their superiors and co-workers. Often these
problems were ignored or given insufficient attention by management. In the
Jonathan Pollard case, co-workers' reports of his suspicious behavior led to
apprehension and arrest.
The Committee has pursued the questions raised by recent espionage cases
by examining the intelligence damage assessments on each spy, reviewing the
investigations that led to each arrest, and studying carefully the conclusions
drawn by executive branch officials and the changes undertaken to rectify
problems identified. The Committee concentrated in its hearings, interviews
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and follow-up questions and- answers on cases having particular relevance to
the intelligence community. The conclusions drawn by the Committee thus apply
to the intelligence community particularly, but clearly have relevance to the
wider national security community, which is governed by many common security
standards and practices. Although the Committee's examination has been
limited in terms of the numbers of cases reviewed and the short time span, the
implications of this representative sample are so disturbing that they demand
review. Security is a critical aspect of every intelligence function.
Intelligence operations by their nature must remain secret. Threats to that
secrecy threaten the viability of a wide range of essential national security
functions that are critically dependent upon intelligence.
Overall, the Committee perceives a serious management failure in the U.S.
intelligence co=unity. Major flaws exist in implementing existing security
procedures, including the granting of too many security clearances, improper
document handling, violations of the need-to-know principle, poor supervision
.of personnel with access to classifies information and a lack of coordination
between agencies on security matters, to name but a few shortcomings.
Underlying all of these problems has been a lack of either urgency or top
priority at depart-ental and lower levels with respect to needed security
changes, despite the high priority given to counterintelligence issues over
recent years by the White House and by the Congressional intelligence
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-cormittee-s. Once the glare of public scrutiny-leaves the problems of
espionage and security, the Committee is concerned that the political will to
advance security programs and maintain high levels of attention and necessary
funding for their implementation will not be sustained. The very size of the
U.S. national security community, its complexity and lack of unitary
management and the historically lower priority assigned to security concerns
have produced cynicism and failure to change in the past and could once again.
The Committee has discovered a disturbing lack of judgment on the part of
the U.S. intelligence community in its hiring practices. Jonathan Pollard was
hired even though he had frequently boasted to friends that he was an agent of
Israel's intelligence agency, the Mossad. He later engaged in espionage for
Israel once he had gained employment with the U.S. intelligence community.
The CIA hired Edward Howard despite an extensive history of using hard
drugs. This serious error was compounded when he was then given detailed
information on several of U.S. intelligence's most sensitive collection
operations before his probationary period had been completed (with
accompa.,ying polygraph). 'Ihe information he provided the Soviet Union ':Ias
severely damaged U.S. intelligence collection capabilities.
The CIA conducted its own investigation into this case. Yet, curiously,
in this investigation, CIA management focused more attention and action
(including reprimands) on the manner by which Howard was fired once management
hac ciscovered he was a problem and gave relatively little attention to how he
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was_hired. in the first place. The extent Qf Howard's drug use was underplayed
in this review.
The Committee is disturbed that one CIA manager testified that no one was
responsible for hiring Howard, that "the system" hired him. That is an
unacceptable way to hire people who will have access to the nation's most
sensitive intelligence secrets.
The Committee recommends that U.S. intelligence agencies undertake a
coordinated review of their hiring practices. Senior management needs to take
a serious look at why persons with a history of hard drug usage or with
serious perzonality flaws have been hires in the past.
The Stillwell Commission and others have assumed that basic security
screening procedures are adequate and that problems connected with background
investigations can be resolved through better implementation of existing
procedures and through increased manpower. This assumption is questionable.
Given the large number of new cases to be processed, the sizeable existing
backlog and the requirements for additional reinvestigations, it is doubtful
whether the current procedures can ever ensure more than a superficial
background probe. Moreover, it is uncertain whether existing criteria for
risk assessment and selection are adequate. The intelligence community must
search for methods that highlight those cases upon which tc expend intensive
effort, that establish clearer criteria for acceptance or rejection and that
-inirize the man-hours expended on an average case while maximizing an
investigation's quality. Examples of areas which appear to deserve more
research attention include: more systematic and comprehensive research on the
perscnalities, character and life-style of past spies; how to apply this
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knowledge under- present day standards of social conduct; computerization of
some processing; and adaptation of personality-based profiling accepted in
other social science disciplines as an element to be considered in the
screening process.
The Committee also urges management to focus more attention on separation
from duty practices within the intelligence community. These practices could
include in-depth exit interviewing. Such interviews have proved highly
beneficial in the private sector by identifying weaknesses in the organization
not readily apparent to a supervisor in day-to-day operations and not likely
to be volunteered by a serving employee.
The Committee has found a puzzling, almost nonchalant attitude toward
recent espionage cases on the part of some senior U.S. intelligence
officials. The Committee understands that "there will always be spies" but
the attitude of some officials toward these cases raises concern that
significant security breaches are not being taken seriously.
As an example, the Committee was struck by the manner in which Navy
officials underplayed the disclosure of the Wa1k!r spy ring in closa3 session
before the Committee while other government officials publicly and more
accurately described them as extremely grave. Similarly, the Committee has
had difficulty obtaining from CIA officials clear statements and judgments
about the damage caused by the Howard case. while the long term damage caused
by Howard's disclosures may be difficult to gauge, certain damage must be
asst:-ed. Yet CIA officials have avoided enumerating such matters to the
Ccr-, ittee.
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A-further- concern of the Committee pertains to intelligence community use
of the polygraph. Two spies employed by CIA - Karl Koecher, a Czech agent,
and Larry Wu Tai Chin, a Chinese agent - took polygraph tests while they were
spying for these countries but were not disqualified. Despite this knowledge,
CIA officials have stated to the Committee that "quality control" problems
caused this failure of the polygraph. The CIA and other intelligence agencies
have used the polygraph in the past to detect other attempted espionage, but
the Committee is very concerned that the present community attitude is not
sufficiently critical of its present dependence on polygraph results. The
Committee believes that the intelligtnce community needs to place a~ditionai
emphasis on other means, such as background investigations, of checking the
loyalty and trustworthiness of its employees, contractors, and others involved
in intelligence activities. The Committee is puzzled by the lack of
commitment of necessary resources to make clearly indicated improvements in
the background investigation process.
Members of the Walker family spy ring betrayed key U.S. Navy submarine
technology. This technology led to improvements in Soviet submarines sooner
than expected. These notable improvements in Soviet capabilities apparently
were not considered as indicators of espionage. This lack of openness to the
potential for espionage, or the rated phenomenon o? institutional
Overconfidence in U.S. advanced technology weapons such as submarines, leads
the Ccr.ittee to recct