State Department Counterintelligence: Leaks, Spies, and Lies

by Robert David Booth

  On March 9, 1998, in an article entitled “Agents Investigate State Department Security Breach,” the Washington Post reported that DS and FBI agents were investigating an incident where an unidentified man appeared outside the secretary of state’s executive office and walked off with “top secret” documents in full view of two secretaries. An unidentified official exclaimed, “No one has drawn the conclusion that this was benign, but clearly this did not represent the MO of any spy. It was not clandestine. We do not know whether any national security information has been compromised.” At that time I was deputy chief of DS/CI and would have to disagree with the anonymous department officer who briefed the press about the incident.

  Around 7:00 a.m. on February 5, 1998, an individual described as standing over six feet tall, wearing eyeglasses, and sporting a pony tail with a State Department identification card dangling from his neck by a metal necklace, entered the 7-2 corridor just outside Secretary of State Madeline K. Albright’s seventh floor executive office. Without introducing or identifying himself or even saying “Good morning” to Shirley M. Hachey and “Susan” that morning’s office managers, he walked over to a wooden credenza on top of which was an accordion file with nineteen folders, one of which contained that morning’s National Intelligence Daily (NID). Nicknamed the “Super Pouch,” the CIA’s “top secret” NID contains NSA reports and reports about clandestine operations conducted by the CIA and DOD, including National Reconnaissance Office satellite photography. The State Department’s copy of the NID, which normally consists of ten to twenty pages, is transported by a CIA courier in a locked canvas-style briefcase. The documents are turned over to INR, which quickly sorts through and identifies the information most affecting America’s foreign relations for immediate delivery to the secretary of state. Arriving at her office in the morning, it is the first official documents the secretary of state peruses.

  The unknown individual, dubbed “Mr. Brown Tweed Coat” (BTC) by later investigators for the jacket he was described as wearing that day, started to comb through the folders, much to the discomfort of the two office managers, who did not recognize the individual. About two minutes after his initial appearance, Hachey asked BTC if she could be of help. He responded, “We have got to keep this paper moving,” a common department phrase, and he continued his search of the folders for about another minute.

  At that point, Hachey stood up and asked BTC more forcibly if he needed help. Sensing that his time was running out, without saying a word, BTC removed all the NID documents that were in a folder, tucked them in a brown vinyl briefcase, walked out of the secretary’s suite, and proceeded down a narrow corridor lined with the framed portraits of former secretaries of state. He hasn’t been seen or heard from since.

  Minutes after BTC departed the secretary of state’s suite, the two office managers sensed something was amiss. As one would tell the FBI and DS agents later, it was clear to her that BTC was thumbing through the classified papers in search of one specific document. They reported the incident to their supervisors, who reacted calmly to the incident with the false belief that BTC was from INR and had come to take specific documents back to their office. William J. Burns, the executive secretary for the secretary of state, called “Mary” in INR and asked for her assistance in verifying if an INR employee fitting BTC’s description had been sent by INR to retrieve documents from the “Super Pouch.”

  The description of BTC did not fit the profile of anyone Mary knew in INR, so she conducted a few telephone calls to INR employees asking if anyone had personally gone, directed someone to go, or knew of anyone who had gone to the secretary’s suite to review “Super Pouch” documents. No one admitted responsibility. A little nervous at this point, Mary transmitted this e-mail message to over 320 department employees at 1:05 p.m.:

  “S/S [the Secretary’s Office] called a little while ago to say that a tall man wearing glasses had come up and taken some things out of their INR pouch this morning. They would like me to verify that the person in question is from INR. Calls to the usual suspects who routinely take intelligence up and back from the 7th floor have not turned up the answer. Would the person who went up to S/S please let me know so I can put their minds at ease. Thanks much.”

  By the close of business that evening, neither INR nor the secretary of state’s office had notified DS about the missing NID, and Mary had received only a couple of disclaiming e-mails.

  By late morning of Friday, February 6, a full twenty-four hours after the loss of the “‘top secret” NID documents, after no one in INR confessed to being BTC, and after having received fewer than twenty-five e-mail responses to Mary’s request for assistance, INR and the secretary’s office began to raise the alarm. Even though DS had a full time SA assigned to INR to assist with security issues, SA “Chip” McElhattan was kept in the dark until late Friday afternoon. Finally around 4:00 p.m., the deputy secretary’s office called DS and SA Thomas McKeever, the director of investigations and counterintelligence, was notified. DS/CI was alerted to the loss of the NID around 4:30 p.m. and immediately started to devise an investigative plan.

  There was no question in my mind, given the description of events that had transpired the day before, that BTC had been directed by a very bold foreign intelligence agency to search for a specific document. Was it information concerning our forthcoming war with Iraq or the role of NATO peacekeepers in ex-Yugoslavia? Moreover, BTC sported a State Department identification badge around his neck. Did we have another department employee who was a clandestine penetration agent? DS/CI was ready to begin interviews, but as I started to make my preliminary telephone calls to INR officials in the HST, most people had gone home for the weekend or were not answering their phones or e-mails. It was nearly 6:30 p.m. If my small squad of six DS/CI agents had walked over to the HST and had attempted to enter nineteen separate INR office spaces unannounced, waving badges, talking about missing documents while trying to obtain interviews, we would have looked worse than the Keystone Cops. My decision was that the investigation would have to wait until Monday.

  Promptly at 7:00 a.m. on Monday, February 9, DS agents met in SA McKeever’s tiny but orderly office space to review the situation. To my delight and amazement, “Chip” McElhattan had started his own inquiry late Friday and over the weekend and, with the assistance of SA John Finnegan, had already interviewed the two office managers and developed additional information. But the long and short of it was that we quickly decided that since the missing documents were “stolen” US government documents and not “missing” department papers, the FBI needed to be involved. Theft of classified documents is not just every day, ordinary, regular theft. Section 1924 of Chapter 93 of 18 United States Code (Title VIII), Section 808, makes it a felony, punishable by a fine up to $1,000 and imprisonment for not more than one year, or both, if an individual without authority knowingly removes classified US information with the intent to retain the material at an unauthorized location. That was how the FBI became the lead investigative agency in the BTC matter with DS assisting.

  Suspicions quickly fell on one disgruntled FSO but were dismissed. The CIA was circulating the rumor that BTC was a department employee who was threatening to leak sensitive materials if “his/her concerns are not accommodated.” The FBI interviewed hundreds of sources, administered polygraph examinations, and even searched the private residence of a government employee. All to no avail. Whoever did take the NID documents did so purposefully. BTC is without question a foreign intelligence penetration agent. Despite deputy spokesman James Foley’s assertion that “[w]e certainly take the incident seriously and we are determined to get to the bottom of it,” we did not. I wonder if BTC still works inside the department.

  Part 4

  Inside the Castle

  The King hath note of all that they intend by interceptions which they dream not of.

  —WILLIAM SHAKESPEARE

  Chapter Thirteen

  In 1999, the SVR deployed a team of clan
destine intelligence officers (IOs) working under diplomatic cover at its Russian embassy in Washington, DC, to penetrate the HST and install a high-quality transmitter in a seventh floor conference room. The seventh floor houses the offices of the secretary of state and most other senior department officials. A technical penetration by a foreign intelligence agency of a guarded US government building in the middle of our nation’s capital was no small feat.

  Responsibility for the security lapses allowing the successful SVR operation falls squarely on the shoulders of senior members of the State Department whose administrative decisions opened the doors of the department to clandestine IOs who took advantage of their largesse—and America’s secrets. In this instance, the Black Dragons’ ill-considered actions directly contributed to the relaxation of access control measures at the HST that facilitated the SVR IO’s penetration of the building.

  I was involved from the beginning in a joint DS/FBI counterespionage operation to uncover, exploit, and eventually seize the transmitter and neutralize the Russian technical intelligence officer overseeing the mission. It was called Operation Sacred Ibis, and it was one of the most significant cases of my career.

  In 1992, Sheldon J. Krys, then assistant secretary of state for the Bureau of Diplomatic Security, directed DS’s Office of Domestic Operations to issue unclassified Circular C92-19, dated June 24, 1992, which was sent to all department personnel. The Black Dragons had handpicked Krys, a career Foreign Service officer with minimal security, intelligence, or law enforcement experience, for the job. The circular read, “Effective immediately Russian and Romanian diplomats no longer require an escort while in DOS facilities. They will [be] processed the same as any other visitor. This leaves no countries on the required escort list.”

  The circular was issued on the heels of an April 2, 1992, unclassified memorandum sent from Douglas L. Langan, the executive director of the Bureau of European Affairs, to James W. Sandlin in DS’s Domestic Operations branch, requesting that building escorts be eliminated for Bulgarian diplomats: “With the rapid political evolution of Bulgaria, we no longer see a legitimate security need to require building escorts for Bulgarian diplomats. Accordingly, we ask that you lift this requirement effective today and advise the appropriate guards and reception personnel. We are considering whether to lift this requirement for the remaining two countries on the required escort list: the Soviet Union and Romania. We anticipate a firm response soon.”

  Senior State Department officers had come to the erroneous conclusion that a mere three years after the dismantling of the Berlin Wall and a forty-year Cold War, Russian, Bulgarian, and Romanian diplomats, including their intelligence officers, were suddenly trustworthy, benign individuals. The DS rank-and-file officers strongly disagreed with the decision but were powerless to countermand it because the leadership of the department’s security organization was firmly in the hands of the Black Dragons.

  So why did Langan anticipate a firm and positive response to his request “soon?” The answer was simple: his professional colleague Sheldon Krys and the building’s senior management had already discussed the foreign diplomat escort policy and decided it must be changed. It was a done deal beforehand. Prior to Langan’s memo and Kris’s directorship of DS, senior department officials had unsuccessfully argued with their DS counterparts that the end of the Cold War meant that the outdated and rigid security practices should be relaxed to accommodate changing times and a new geopolitical reality. As far as they were concerned, Russian diplomats no longer represented a threat to the State Department.

  Until Krys’s June 1992 ruling, diplomats from Russia and other former Soviet bloc countries were required to present themselves to the department receptionist at the HST diplomatic entrance. There they would identify themselves and provide the name of the department official being visited. The receptionist would then call the receiving office, confirm the visit, and ask for the name of the department escort, who would then come down to the reception desk at the diplomatic entrance. The escort would shepherd the diplomat past the uniformed guards and security checkpoints.

  Most DS managers expressed the belief that the real impetus for the change came from Kris’s Black Dragon colleagues as well as, and importantly, the building’s support staff, who simply did not want to be bothered with the onerous, time-consuming task of escorting Russian diplomats and others to and from the diplomatic entrance on C Street.

  Shortly thereafter, Krys left DS and supreme Black Dragon Anthony Cecil Eden “Ace” (the nickname for him used by many in DS) Quainton assumed the mantle as the assistant secretary of state for diplomatic security in 1992. Ace joined the State Department in 1959 after completing his BA from Princeton (1955) and BLitt from Oxford (1958). Rising rapidly through the ranks of the Foreign Service, he served as US ambassador to the Central African Empire (1976–1978), Nicaragua (1982–1984), Kuwait (1984–1987), and Peru (1989–1992). Assuming the leadership of DS, he immediately began to implement a closely-held program to cut DS resources, technical counterintelligence missions, budget, and personnel (specific numbers redacted by State); at the same time, he attempted to transfer DS’s criminal investigative and protective authority to the FBI, USSS, and other federal agencies. The Black Dragons were becoming nervous about DS’s evolving law enforcement and security responsibilities and feared that DS’s new missions—counterterrorism, dignitary protection, and criminal investigations, including assignment to nationwide multi–law enforcement agency Joint Terrorism Task Forces—detracted from the traditional role and image of the State Department. They claimed that the changes were for budgetary reasons and that the White House’s mandate to “reinvent the government” with the “peace dividend” produced by the end of the Cold War meant, among other changes, that DS’s core missions needed to be re-evaluated, but the DS agents were not convinced.

  In 1993, Ace began downsizing the Office of Counterintelligence by reducing agent and analyst positions by half and the budget by 75 percent (specific numbers redacted by the State Department). The numbers alone spoke to his intentions to gut the organization. Assistant Secretary of State David Carpenter testified before Congress in 2000:

  “Following the fall of the Soviet Union, DS was authorized to hire only a handful of agents, engineers, and civil service security personnel. Twenty percent of DS positions worldwide were reduced. Rules and regulations concerning security were loosened to the point that holding employees accountable for security issues became more difficult. . . .

  “Let me give you a few examples of how DS programs were streamlined during that period. Among the activities affected was our office of counterintelligence. The number of positions was reduced from 41 to 26 and funding for the program was cut from $225,000 to $65,000. Staffing for programs in the Department that handle procedural and informational security issues was reduced by more than 50 percent. . . . The Department’s reaction to imposed fiscal constraints and a popular opinion that the Cold War had ended and now the world was a better place had devastating consequences for DS programs.”

  When news of Ace’s enthusiastic stewardship of the scorched earth program for DS became known to the special agents, he became perhaps the most reviled individual ever associated with DS. Lacking any law enforcement background, he was distrusted and disliked by the rank and file agents. He left DS in December 1995 and assumed the position as the director general of the Foreign Service. His potential nomination as US ambassador to India in 1997, where he had served as a young officer from 1966–1969, was effectively torpedoed by stealthy DS special agents. He retired from the Foreign Service shortly thereafter. Ace would later admit that his actions as assistant secretary for DS “effectively ruined [him] with a large number of people” in DS.

  The Ace directives represented an abrupt about-face from previous attempts to build up the DS counterintelligence force, which directly resulted from the fallout of the 1987 arrest and eventual conviction of former US Embassies Moscow and Vienna Marine security g
uard Sergeant Clayton J. Lonetree for spying for the SVR. Secretary of State George Shultz put it succinctly when he said on April 8, 1987: “We didn’t break into their embassy; they broke into our embassy. They invaded our sovereign territory, and we’re damned upset about it.”

  The buildup of the DS counterintelligence function continued in 1988 in response to the FBI/DS investigation of career FSO and suspected SVR penetration agent Felix Bloch, the former deputy chief of mission to our embassy in Vienna. Barely five years later, the Black Dragons had determined that the Russian bear was in full hibernation.

  Perhaps Messrs. Langan, Krys, and Ace had forgotten that scarcely seven years earlier President Ronald Reagan ordered the expulsion of eighty SVR, GRU, and Ministry of Foreign Affairs Russian diplomats working in the United States in an attempt to disrupt their hostile intelligence operations inside the United States. The SVR’s successful recruitment of American agents resulted in the arrest of over twenty Americans in 1985 alone, the so-called “Year of the Spy.” Maybe according to the Black Dragons, Russians IOs working under bogus diplomatic cover no longer represented a counterintelligence threat. Under Ace’s leadership, Circular C92-19 was revalidated. Having worked and socialized with clandestine IOs—both friendly and unfriendly types—assigned to foreign embassies during his numerous overseas tours, how could Ace so easily forget that intelligence services routinely used their Foreign Ministries to infiltrate their agents as bona fide diplomats in Washington, DC, and elsewhere? To Ace, this well-known practice obviously did not present a serious security risk after 1992. But then again he was merely carrying out the will of the Black Dragons who ran the department. He was not about to cross swords with them over such a trivial matter, which would have been a career limiting act of disloyalty. And he had the US ambassadorship position in New Delhi in sight.