Good Hunting: An American Spymaster's Story

by Jack Devine

  At The Arkin Group, 9/11 and the subsequent mysterious anthrax attacks had a significant impact on our business. Up until then, our clients were mostly concerned about the risks they faced doing business overseas. Now these same clients were concerned about the risks to their companies and families right here in New York. Business continuity and emergency planning are typically the orphan children at the bottom of a corporate manager’s to-do list. For financial firms in particular, these issues were now front and center. Quickly we recruited a cutting-edge group of WMD and terrorism researchers and medical experts to help us respond to our clients’ concerns. Many of our clients, who could afford to hedge any risk, wanted to know what could be done. At their urging, we evaluated military-grade gas masks, hazmat suits, mail sanitizers, escape vehicles, and pop-up WMD shelters. We mapped out safe locations away from likely terrorist targets and put together a team that could detect biological, chemical, and radiation hazards at public events.

  Perhaps our most important contribution to the safety of our clients, however, was to help them institute standard operating procedures so that managers were prepared to take control during a crisis. Much of this training was drawn from my Agency experience. When the H1N1 pandemic flu emerged with such rapidity and uncertainty, we had already helped several companies and law firms prepare for just such an eventuality.

  In the immediate aftermath of 9/11, Paul Tudor Jones, the billionaire founder of the enormously successful Tudor Investment Corporation, hired us with a proposition that was difficult, to say the least: securing Madison Square Garden before, during, and after a benefit concert sponsored by his Robin Hood Foundation for 9/11 victims, first responders, and their families. The concert was to be held on October 20, and concerns about another terrorist incident were high. In addition to the World Trade Center attack, New Yorkers had been coping with a series of mysterious anthrax attacks starting on September 18. In his trademark take-the-bull-by-the-horns style, Jones asked if we could provide a system for monitoring the Garden for any traces of radiological, chemical, or biological material. A tall order at any time, it was especially so in the fall of 2001, before companies started to specialize in terrorism and WMD preparedness and response options for the private sector. Luckily, we worked with an extremely adept and well-connected British biomedical research scientist and physician with deep ties to government experts in chemical, biological, radiological, and nuclear (CBRN) detection. With his assistance, we brought in a government-level CBRN monitoring team to work with the professional Garden security team to inspect the heating and air-conditioning system and set up and man high-tech monitoring devices throughout the concert.

  A year later, Paul Tudor Jones and Mark Dalton invited me to attend their management conference in the Bahamas to talk to their top investment team leaders about the situation in Afghanistan and the unfolding terrorist challenge. The presentation went well, and I was invited to join them in a game designed to test their strategy and risk management skills. As you might imagine, most of the successful people in this field make money for their investors by smartly developing risk management strategies for investments. As in the Agency, managers must decide on a moment-by-moment basis how much risk they can withstand to gain a meaningful reward. Also as in the Agency, they rely heavily on quality information to make this judgment call.

  In the game, financial bets were made with different-colored marble-like balls, with each color representing a different value. The lowest value was white and the highest purple. It was fascinating to watch each team develop its own investment strategies to maximize growth potential. As the game unfolded, in a collegial but highly competitive way, it became clear that while those playing the white ball made a steady modest profit, you could not win without playing the high-risk purple ball.

  The lesson applies to intelligence (both in government and the private sector) as well as investment: you can’t prevail without taking on strategic risk. It is not enough to play it safe. Thinking back to a mid-career course I attended at the Agency in the 1970s, I recalled that one of the occupation tests showed the highest correlation between my intellectual makeup and that of an investment banker! At the time, I had had no idea what an investment banker did for a living and was surprised that I hadn’t correlated closer with the legal, military, or educational profession. But dealing with risks is very much a day-to-day experience in the operational world, and something that prepared me well for the private sector.

  A month after the Twin Towers’ collapse, Abdullah bin Laden, a Harvard Law School alumnus and Osama bin Laden’s half brother, sought out Stanley as an adviser in protecting the Bin Laden family, and its $5 billion Saudi-based construction conglomerate, from a public relations onslaught. Even though a large part of the Bin Laden family was involved in legitimate business and had disowned Osama, it would be a hard sell after the tragedy of September 11, which could have tarnished our brand. Stanley and I declined the offer without a second thought, even though it would have been financially lucrative.

  We had no shortage of work. In Russia, our skills have always been in high demand, both because of the enormous investment opportunities and the serious potential land mines. When things go wrong there, investors must turn to a legal system that is opaque and not particularly responsive to foreigners. We employ multiple sources to verify trustworthiness and study the information we are given over time to evaluate the Russians’ strengths, weaknesses, and reliability. We often start by giving a source a small case and seeing what he or she produces. Over time, these particular Russian assets have gained our confidence by operating with transparency and consistently producing high-quality work. One of our clients was a U.S.-based technology company with a Moscow subsidiary. When the CEO and his Russian partner had a disagreement over strategy, the Russian partner attempted to hijack the subsidiary. His first step was to threaten our client and imply that he had connections to Russian intelligence. The Russian partner even threatened to have our client arrested if he came to Moscow to try to negotiate their differences. His next step was to use the joint venture’s workforce to develop software for a different technology company in his name. In order to shed some light on the validity of the threat, we asked one of our Russian contacts to reach out to local security officers to see what kind of connections the partner actually had. We found that the partner was not affiliated with Russian security.

  We were also able to make connections with former government officials, who assisted our client in regaining control of the company. The information we provided enabled our client to reassert his ownership of the company and deal more forthrightly with the partner. However, had my contact been inquiring about a national security matter, we could not have relied on our Russian contact.

  Another country fraught with difficulties for the foreign investor is China, where we quickly began handling cases relating to fraud or stolen intellectual property. One of our more intriguing cases involved a U.S. financial firm that had the good fortune to detect the theft almost immediately. The firm’s investment strategy was governed by quantitative analysis, so when a Chinese-American employee downloaded the proprietary model that governed the firm’s trading strategy onto dozens of hard drives and took off to China, the company’s executives naturally were very fearful of the potential damage to the company’s reputation and profits. Our client thought the employee might try to sell the information to competitors in China, give it to the government, or in some way exploit it for his own benefit. Either way, it would have seriously compromised their bottom line. With our help they eventually were able to make contact with him, negotiate a deal, and recover the hard drives.

  I found during my years at the CIA that it was very hard to surveil someone for twenty-four hours without losing him. Putting somebody under surveillance in a denied area, such as in China, presents a significant challenge. But we developed the capability, working with former police and security officials, to put surveillance on someone quickly anywhere in the
United States and in virtually any foreign country.

  An interesting aspect of the China surveillance matter was that we used a combination of intelligence and investigative work, much as we did at the Agency during my tenure as chief of the CNC, and this would become the hallmark of TAG’s evolving methodology. One of our earliest cases using this methodology involved a client that had developed a genetically altered agricultural product and had attempted to bring it to market in Argentina. The company’s executives were not familiar with Argentina, and their representatives in Buenos Aires had advised them to go ahead and plant the crop without going through the government approval process. The company was about to learn an important lesson about national sovereignty. Not long after they planted the crop, their representatives were threatened with arrest for violating Argentine agricultural policies and laws. The client turned to Stanley for help, and he told them, “You don’t have a legal problem, you have a government relations problem. You need help from people who can walk you through the appropriate process.” Argentina is typically rather friendly toward genetically modified products, but it does not like to be treated as a second-rate power whose rules can be ignored. Through our contacts, we enlisted a former minister of agriculture as a consultant, and the minister was able to guide our client through the process properly and get the necessary authorizations.

  Our success building The Arkin Group came as the administration of President George W. Bush seemed to be heading inexorably to war in Iraq. I never understood the White House’s obsession with Saddam Hussein, which was clearly draining resources and attention from Afghanistan and the hunt for Osama bin Laden. The brilliant takedown of the Taliban in Afghanistan in the fall of 2001 by the CIA, U.S. Special Forces, and air force and navy pilots, leveraging many of the relationships that remained from the covert operation we ran in the late 1980s, was soon to be squandered. Who could have imagined that the Taliban would reemerge in 2007 while we prosecuted a “surge” in Iraq to keep the administration’s war of choice from the abyss of defeat.

  I knew the invasion of Iraq was a fait accompli when Secretary of State Colin Powell presented a dossier of seeming intelligence gems to the UN Security Council in February 2003 to make the case that weapons inspections had failed to keep Saddam from developing deadly biological and chemical weapons. The administration wanted UN authorization to invade Iraq and seize Saddam’s WMD. While the foreign ministers of France, Russia, and China were not swayed and favored stepped-up inspections, the Bush administration was undeterred. I watched Powell’s briefing on the television in the office conference room with some of my staff, and I remember Powell’s exhortations vividly. I was surprised to see Tenet, who seemed quite tense and uncomfortable, sitting behind Powell. Apparently his presence was required to symbolize intelligence support for what Powell was saying. I was put off by Powell’s presentation because it felt more like an attorney’s theatrical courtroom argument than an objective, independent intelligence analysis. Powell held up a small vial that could easily hold a teaspoon of anthrax. Less than a teaspoon had thrown the U.S. Postal Service into chaos a week after the September 11 attacks, Powell said, while Saddam had yet to account for 16,500 liters of anthrax. When I returned to my office, I expressed my unhappiness with Powell’s presentation to Rob Thomson, a senior staff member. While we were dissecting what Powell had said, a call came in from a former seventh-floor CIA colleague. He thought Powell’s performance was terrific. “They will rue the day they made it,” I said of those in the Bush White House. My old colleague seemed baffled by my skepticism, which did nothing to dampen his enthusiasm.

  At the time, I believed Saddam Hussein had weapons of mass destruction. However, as I had been reminded by some of my UN contacts, weapons inspectors had been to Iraq years earlier and had witnessed the destruction of many weapons. Not all the so-called weapons of mass destruction were accounted for. Consequently, my assumption, like that of my UN contacts, was that some remained, but less than the administration was alleging. In any case, I did not see the immediacy of the WMD threat and felt it had been hyped. We could have addressed Iraq with force at any time, and we should have let the inspectors complete their mission. Then, as now, I believe we should have kept the focus on Bin Laden in Afghanistan and continued to monitor the situation in Iraq until we had a better fix on the amount of weapons and Saddam’s intent.

  By June 2003, two months after U.S. forces easily toppled the Iraqi regime and sent Saddam into hiding, furious efforts to find Iraq’s weapons caches had turned up nothing and the full dimensions of this intelligence failure were beginning to emerge. A year later, Powell was pressing the CIA for an explanation of how the intelligence it had assembled for him had proved so flawed. I don’t give Powell a pass on this. He was a sophisticated consumer of intelligence and had spent a great deal of time being briefed on all the CIA material. He was smart enough to know that he was serving as a pitchman that day at the UN Security Council.

  In July 2004, portions of a classified review by the Senate Select Committee on Intelligence were released that were critical of the CIA for its prewar intelligence. The committee revealed, as noted earlier, that the Agency’s most compelling intelligence, about the existence of mobile biological weapons labs, had come primarily from an Iraqi defector in the hands of German intelligence whose code name was Curveball. It was subsequently revealed that doubts about Curveball had been circulating inside the Agency and that CIA officials supposedly tried to warn Agency leadership and Powell of this on the eve of Powell’s UN presentation. When I learned of the Curveball story, I was incredulous. I still cannot believe that the White House went with Curveball’s information as its primary intelligence. And if there truly were officials inside the Agency with grave doubts about Curveball, they should have done everything in their power to keep Powell from using that intelligence at the UN, including filing formal written protests, which as far as I know do not exist. I remain baffled by the Agency’s action on this, and I’m still not confident that I know the full story.

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  One of TAG’s more satisfying domestic cases involved our work in 2004 on behalf of Peter Kalikow, a New York real estate magnate and former owner of the New York Post. Kalikow, who was chairman of the Metropolitan Transit Authority at the time, had become the subject of an unusually damaging smear campaign in the New York press. Someone was wrongly portraying him as being in serious financial turmoil by placing phony full-page legal notices in The New York Times and the New York Post listing all his four-hundred-plus creditors from a decade-old bankruptcy proceeding. The phony notices urged the creditors to call Evergence Capital Advisors to seek further restitution, claiming Kalikow had failed to make full disclosure at the time of the bankruptcy. The claim was false, but that did not stop creditors from hiring lawyers and calling Evergence. Kalikow retained Stanley, and thus TAG. Through meticulous investigative work, we were able to trace the ads back to the New York attorney Marc Dreier, who had placed them on behalf of a Kalikow rival, Sheldon Solow. Strangely, Solow’s gripe was that he had loaned Kalikow $7 million during Kalikow’s bankruptcy and Kalikow had paid it back too early! Dreier himself turned out to be a sleazy character who would later be sentenced to twenty years in prison for defrauding hedge funds and other investors—ironically, including Solow—of $400 million by selling them phony promissory notes. In this instance, our evidence was so solid that Stanley and his colleague Randy Mastro of Gibson Dunn persuaded a bankruptcy judge, who called the stunt “tacky, shabby, base, low, malicious, petty, nasty, unsavory,” to fine Solow and Dreier $335,000.

  Another TAG client, the National Basketball Association, had occassional overseas issues. A particularly delicate matter involved the review of Mikhail Prokhorov, a Russian billionaire bachelor who had agreed to pay $200 million for an 80 percent share of the New Jersey Nets and a 45 percent stake in the team’s new arena in Brooklyn. The case proved extremely complex and challenging, beginning with Prokhorov’s arrest in Janua
ry 2007 by French police in Courchevel, an opulent ski resort in the French Alps, reportedly on suspicion of providing his guests with prostitutes. He was released four days later, with no charges filed, but the episode allegedly led the Russian government to pressure Prokhorov to sell his 26 percent share in Norilsk Nickel, the largest nickel producer in the world, to his business partner. Speculation swirled in Moscow that Prokhorov had been set up in Courchevel, though French police said they had been investigating Russian prostitution at the resort for some time. Despite the colorful publicity, extensive research revealed that Prokhorov had no ties to organized crime and that his financials qualified him to become an NBA owner. He took control of the Nets in May 2010.

  In the summer of 2007, the NBA asked us to investigate a referee who had been accused by his neighbors of petty harassment. The FBI later discovered through wiretaps that the referee had placed bets on NBA games through a high school buddy, leaving no discoverable signs of his gambling activity. Commissioner David Stern rightfully noted—as the CIA had found with Aldrich Ames and the FBI discovered with Robert Hanssen—that rogue employees can betray their organizations and engage in criminal activity despite the best compliance procedures. As a result of this incident, Stern tasked TAG to develop, along with the NBA, a robust vetting program for all referees. With the referees’ cooperation, we reviewed them annually for red flags that might indicate a vulnerability to gambling.