MANY EXECS MAKE TREK FROM U.S. INTELLIGENCE TO SILICON VALLEY FIRMS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP99-00418R000100280003-9
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 22, 2016
• Document Release Date: May 10, 2012
• Sequence Number: 3
• Publication Date: October 30, 1988
• Content Type: OPEN SOURCE

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Declassified in Part -Sanitized Copy Approved for Release 2012/05/10 :CIA-RDP99-004188000100280003-9
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Many execs ma ~e trek
from U.S intelligence
to Silicon Valley firms
By Evelyn Richards
Mercury News Staff Writer
As the defense industry in Sili-
con Valley turns more and more to
super-secret work, its companies
are increasingly enticing into their
top ranks officials linked to U.S.
intelligence agencies.
In the latest and most public
example, John McMahon, formerly
the second-highest official at the
Central Intelligence Agency, was
chosen in August to head Lockheed
Corp.'s massive Sunnyvale unit.
McMahon, ESL Inc.'s Robert
Kohler and numerous executives
at smaller firms make up a largely
hidden network that binds Silicon
Valley to the nation's defense and
intelligence agencies, among them
Iht y
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DIVES OF
SILICON VALLEY
the CIA, the National Security
Agency and the Defense Intelli-
gence Agency.
These business leaders are often
the mast influential element of Sil-
icon Valley's secret society, ahush-
hush world in which 30,000 em-
ployees with. high-level security
clearances work on sophisticated
projects that they can say little or
nothing about.
Alumni of Washington defense
and intelligence agencies "are
hired first and foremost for their
expertise," said Paul Stares, a
Brookings Institution foreign poli-
cy research associate. But, he said,
companies also seek out former
public officials who "can perhaps
provide them with contacts inside
the government ... to gain other
sales for the company."
Some observers are more blunt.
McMahon, a 34-year CIA veter-
an with broad agency experience,
was hired by Lockheed in 1988 be-
cause he "carried connections, and
they are very valuable in this
world," said Angelo Codevilla, a
Hoover Institution senior research:
fellow at Stanford University. As a
conservative former staff member
of the Beasts Select Committee on
Intelligence, Codevilla often dis-
agreed with McMahon on policy
issues.
Congress, responding .to a grow.
ing concern over the cozy relation-
ship between the government and
its contractors, this month ap-
proved additional rules designed to ,
prevent companies from buying in-
fluence during procurement sego-
nations. Existing regulations limit
the contact certain government
employees can have with their for.
met agencies.
But the new legislation goes fur-
ther to require firms to certify be-
fore they can win government con-
tracts that they have not tried to
recruit future employees among
the procurement officials involved
in evaluating the bids.
A 1987 General Accounting Of-
Tice report on the "revolving door"
phenomenon noted that people who
Leave the .Defense Department to
work for contractors "might be
perceived as using their contacts
with former colleagues at (Defense
Department) to the benefit of the
defense contractor and to the det-
riment of the public."
"I'm sure there are abuses," said
William Perry, a former undersec-
retary of defense for research and
engineering and a key player in
Silicon Valley's defense industry
both before and since his govern-
ment tenure. "There are so many
people who have come from gov-
ernment to industry and back that
you just have to believe there are
abuses out there," said Perry, who
said he knows of no such instances
locally.
In fact, many industry insiders
say the perception is not borne out
in practice. "Obviously when you
hire people, they have to execute
(their jobs) or bring in business.
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But you don't hire them to bring in
Contract X," said William Phillips,
president of Maxim Technologies
Inc. of Santa Clara and a former
Defense Department official, -
Instead, industry officials say
that firms that snare former gov-
ernment workers can become
more effideat by using the insight
they gain into their customers'
needs and methods.
'It silso 6e~ t6e government'
.'People .fin the government
side can steed. them in the right
direction," safd William Mehuroa;:"
a Fortner National Security Agency
official who now works in ttte Slli-
coa Valley. "It not Daly helps com-
it also helps the govern.
Lockheed President Daniel TeI-
1ep said McMahon was hired in
1988 as executive vice president
for plans and programs at the mis-
siles and space division because he
was knowledgeable "in fields im-
portant to our future," not because
of his government ties.
Though be ended his 34-year CIA
career as the No. 2 man to William
Casey, McMahan's tenure included
supervising many sides of the
agency, such as clandestine human
operations, data anarysis and elect
tropic intelligence gathering. He
ado coordinated activities of sev-
~erel other intelligence agencies.
McMahon, 59, who refused to be
interviewed for this article, was
promoted by Lockheed to division
president in August in a mazked
departure from the corporation's
Past practice of filling the top slot
with home-grown executives.
The CIA alumni roster the vat-
ley also includes Kohler, president
of FSL in Sunnyvale since 1986.
Kohler joined the defense contrac-
~ ~~' a Yost as a vice president
at Lockheed and after nearly 20
years at the CIA. Edward Juch-
mewia heads ESL International
Inc.. and Charles Roth is a vice
~wau,in~ton Pon
The New York Times
The W~In9ton Times _
The Wall Street Journal _
The Chrtstian Science Monitor
New York Daily News
USA Today
The Chicago Tnbune
Declassified in Part -Sanitized Copy Approved for Release 2012/05/10 :CIA-RDP99-004188000100280003-9
 Declassified in Part -Sanitized Copy Approved for Release 2012/05/10 :CIA-RDP99-004188000100280003-9
.. a
president at Argasystems in Sun-
nyvale. Roth, through a spokes-
. woman, refused to confirm wheth-
er he was employed by the agency.
A secret past
One of the most obscure compa-
niea, Deskia Research Group in
Santa Clara, is run by a man whose
own ?career is in part cloaked in
secrecy. George Deakin formerly
had a public life in Silicon Valley
- sen'~8 ~ president of Applied
Technology nearly 20 years ago
and as chairman of the predeces.
sor trade group to the American
Electronics Association. But he
then worked in Washington in what
the head of another local defense
company described as a "very
highly classified" government ot-
fice.
Sources said Deakin was among
a select group of advisers to the
director of central intelligence, the
top official who oversees the CIA
and other portions of the govern-
ment's intelligence community.
Deakin did not return several
telephone calls.
Sometime`; the ties are indirect.
Two Silicon Valley firms - Ultron
Labs and Elsie Corp. -are owned
by a firm controlled by Admiral
Hobby Inman, former chief o the
National Security Agency, Inman,
one of the mast well known former
intelligence officials, held high-
ranking positions in the CIA and
the Defense Intelligence Agency as
well as heading the NSA, the secre-
tive government operation
charged with intercepting foreign
communications and a major pur-
chaser of equipment and parts
from Silicon Valley.
And Inman claims to have a
"shopping list" for other corporate
buys in Santa Clara Valley.
The links are often forged by
part-time government service.
Ray Leadabrand, who heads Bay
Area operations for Science Appli-
cations International Corp., claims
men~ership on the scientific advi-
sort' committee to the Defense In-
t ~ genre Agency and other pan.
"If you're interested on the gov-
ernment side of knowing where
things are going," Inman said, Sili-
con Valley "is the natural place
you would look to try to draw in
some talent to serve on advisory
p~~ ;,
Elden the most unsuspecting Sili-
con Valley managers can find
themselves lured into the intelli-
gence world.
Three Silicon Valley business
people who are not associated with
major defense companies said they
bave in the past been asked by the
CIA to gather technical data in
foreign countries.
One was asked to photograph
equipment at a European trade
show, another was requested to
gather details about certain prod-
ucts during business trips overseas
and the third was regularly de-
briefed after foreign travel by
agents whom he thought repre-
sented the CIA.
Although the CIA is believed to
have offices in San Francisco and
Mountain View, Sharon Basso, an
agency spokeswoman would not
comment on its presence. But she
acknowledged that the agency is
likely to extract foreign intelli-
gence data from businessmen who
travel overseas.
Debriefing businessmen
"We talk to them about what
they saw, what their perceptions
are of the political situation, the
economic situation.... It could be
specific or ~ very generic," Basso.
said.
The FBI, too, solicits aid for its
counterintelligence efforts from
valley executives. The agency,
which is responsible for detecting
spies inside the United States, has
established links with dozens of Sil-
icon Valley firms. The rntripatues
report on their executives' travel
Plans, and when the managers re-
turn, the FBI sometimes questions
them about any unusual occurreno-
es.
"When people travel, they're
prime targets for hostile intelli-
gence, and they're away from our
turf," said David Szady, superviso-
ry special agent at the FBI's San
Francisco office. "We want to
know how (foreign agents) try to
recruit, and from that we can try
to see who's spying in Silicon Val-
ley."
Mercury.Netus Staff Writers Pete
Carey and Christopher H. Schmitt
contributed to this report.
Declassified in Part -Sanitized Copy Approved for Release 2012/05/10 :CIA-RDP99-004188000100280003-9