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Meeting the Espionage Challenge Oct 1986.P65 99TH CONGRESS REPORT SENATE 2d Session } { 99-522 MEETING THE ESPIONAGE CHALLENGE: A REVIEW OF UNITED STATES COUNTERINTELLIGENCE AND SECURITY PROGRAMS REPORT OF THE SELECT COMMITTEE ON INTELLIGENCE UNITED STATES SENATE October 3 (legislative day, September 23), 1986. Ordered to be printed U.S. GOVERNMENT PRINTING OFFICE 64-2688 O WASHINGTON: 1986 SENATE SELECT COMMITTEE ON INTELLIGENCE [Established by S. Res. 400, 94th Cong., 2d Sess.) DAVE DURENBERGER, Minnesota, Chairman PATRICK J. LEAHY, Vermont, Vice Chairman WILLIAM V. ROTH, JR., Delaware LLOYD BENTSEN, Texas WILLIAM S. COHEN, Maine SAM NUNN, Georgia ORRIN HATCH, Utah THOMAS F. EAGLETON, Missouri FRANK MURKOWSKI, Alaska ERNEST F. HOLLINGS, South Carolina ARLEN SPEMR, Pennsylvania DAVID L. BOREN, Oklahoma CHIC HECHT, Nevada BILLBRADLEY, New Jersey MITCH McCONNELL, Kentucky ROBERT DOLE, Kansas, Ex Officio ROBERT C. BYRD, West Virginia, Ex Officio BERNARD F. McMAHON, Staff Director Eric D. Newsom, Minority Staff Director Dorthea Robertson, Clerk (II) CONTENTS Page I. Introduction and Summary 1 A. Background 1 B. Organization of the-U.S. Government to Meet the Hostile Intelligence Challenge 3 C. Counterintelligence: Learning the Lessons of Recent Cases 4 D. Security Countermeasures: Defending on Many Fronts 6 E. Budgetary Impact 9 F. Legislative Proposals 10 G. Respect for Individual Rights 11 II. The Hostile Intelligence Threat 12 A. Damage to National Security 12 B. Sources of the Threat 17 1. Soviet Union 17 2. Warsaw Pact and Cuba 18 3. Peoples Republic of China 19 4. Other Countries 20 C. Human Intelligence Techniques 20 1. Official Presence 21 2. Other Aspects of the Hostile Intelligence Presence 23 3. Recruited Agents 25 4. Soviet Methods of Recruitment 26 5. Technology Transfer 28 6. Active Measures and Disinformation 30 D. Technical Collection Operations 33 1. Interception of Communications 33 2. Other Forms of Electronic Surveillance 34 3. Penetration of Computer Systems 35 4. Imagery 36 E. Summary 37 III. Counterintelligence 38 A. Need for a Counterintelligence Strategy 39 B. Hostile Presence Limits 40 C. Counterintelligence Awareness Programs 45 D. Domestic Operations 48 1. Coverage of Establishments and Officers 49 2. Offensive Operations 50 3. Espionage Investigations and Prosecutions 52 E. Overseas Operations 56 F. Personnel Management and Training 56 IV. Security Countermeasures 58 A. A National Strategic Security Program 59 B. Personnel Security 65 C. Information Security 74 D. Communications, Computer and Emanations Security 80 E. Technical and Physical Security 85 F. Industrial Security 87 (III) Page G. Congressional Security 90 V. Appendixes 97 Appendix A. U.S. v. Whitworth, Affidavit of RADM William 0.Studeman and Declaration of John L. Martin 97 Appendix B. Defense Security Institute Analysis of the Harper Case 105 Appendix C. Defense Security Institute Analysis of the Bell/Zacharski Case 112 Appendix D. Defense Security Institute Analysis of the Cavanagh Case 126 Appendix E. US. v. Zukharov, Affidavit for an Arrest Warrant and Search Warrant; and Indictment 136 Appendix F. Forged letter from Herbert Romerstein to Senator David Durenberger; actual letter from Romerstein to LTG Robert L. Schweitzer; and forged letter from LTG Schweitzer to President Augusto Pinochet of Chile 142 Appendix G. Draft Senate Security Manual 146 99TH CONGRESS } SENATE { REPORT 2d Session 99-522 MEETING THE ESPIONAGE CHALLENGE: A REVIEW OF UNITED STATES COUNTERINTELLIGENCE AND SECURITY PROGRAMS October 3 (legislative day, September 23), 1986.Ordered to be printed Mr. DURENBERGER, from the Select Committee on Intelligence, submitted the following REPORT I. INTRODUCTION AND SUMMARY As espionage is ancient, so is counterintelligence. The Chinese military theorist Sun Tzu stated the principle in the fourth century B.C.: It is essential to seek out enemy agents who have come to conduct espionage against you. .1 Today, over two millennia later, the battle is still beingwaged. A. BACKGROUND At the beginning of the 99th Congress, the Select Committee on Intelligence initiated a comprehensive review of the capabilities of U.S. counterintelligence and security programs for dealing with the threat to the United States from Soviet espionage and other hostile intelligence activities. This decision was an outgrowth of eight years of Committee interest in these issues. The review is also consonant with the Committees mission to oversee and make continuing studies of the intelligence activities and programs of the United States Government, and to sub- mit to the Senate appropriate proposals for legislation and report to the Senate concerning such intelligence activities and programs. Senate Resolution 400, which established the Committee ten years ago, specifies that intelligence activi- ties include activities taken to counter similar activities directed against the United States. The Committees review had barely begun when the arrests of John Walker and two of his relatives began to make 1985 the Year of the Spy. In June, 1985, the Committee pledged that it would prepare a report to the full Senate at the earliest 1Sun Tzu, The Art of War, trans. by Samuel B. Griffith, Oxford University Press (London: 1963), p. 148. 2 possible time. In light of this Committees ongoing efforts, the Senate decided not to create a National Commission on Espionage and Security. On June 20, 1985, the Chairman of the Committee wrote to the President, saying, You and we share an historic opportunity both to dramatically improve U.S. counterintelligence and security and to demonstrate how Congress and the Executive can work together to achieve progress in sensitive intelligence areas. The ensuing fifteen months have generated an amazingly sustained interest in counterintelligence and security on the part of both policymakers and the public. There have been over a dozen arrests for espionage, nearly all leading to guilty pleas or verdicts; Americans and West Germans with sensitive information have defected to the Soviet Union and East Germany; and Soviets with sensitive infor- mation have defected to the West, and in one major case then returned to the Soviet Union. Most recently, the Soviet arrest of an innocent American journalist in retaliation for the U.S. arrest of a Soviet U.N. employee has made it clear that counterintelligence, while seemingly a peripheral element in superpower rela- tions, can even become the focus of U.S.-Soviet confrontation. The Year of the Spy was characterized by intensive Executive branch atten- tion to problems of counterintelligence and security. Of particular note were the efforts of the Department of Defense Security Review Commission, chaired by General Richard G. Stilwell, USA (retired), and the Secretary of States Advisory Panel on Overseas Security, chaired by Admiral Bobby R. Inman, USN (retired) and Executive branch steps to implement their recommendations. The Stilwell Commission led to significant progress in Defense Department personnel and information security policies, and the Inman Panel led to restructuring of State Department security functions and a major embassy rebuilding program around the world. The Committees efforts have encouraged, and have greatly benefited from, this sustained Executive branch attention to counterintelligence and security mat- ters. The Committee received an unprecedented level of cooperation from the President, the National Security Council staff, the Intelligence Community Staff, and the many departments and agencies with counterintelligence or security func- tions. Executive branch experts and policymakers testified in sixteen closed hear- ings on specific counterintelligence cases and current state of U.S. programs to counter hostile intelligence act les. cores of staff briefings and the provision to the Committee of many sensitive Executive branch studies enabled the Committee to compile the very best ideas and recommendations of those in government, as well as suggestions from security experts in industry. The Committee, in turn, evalu- ated those ideas and submitted a comprehensive set of recommendations for Ex- ecutive branch consideration. The Intelligence Authorization Act for FY 1986 included a statutory require- ment that the President submit to the House and Senate Intelligence Committees a report on the capabilities, programs and policies of the United States to protect against, detect, monitor, counter and limit intelligence activities by foreign pow- ers, within and outside the United States, directed at the United States Govern- 3 ment. The report was to included plans for improvements that the Executive branch has authority to effectuate on its own, and recommendations for improvements that would require legislation. To assist the Senate Intelligence Committee in its work, the conferees on the Act requested an interim report developed in consulta- tion with the Intelligence Committees. This Committee, in turn, prepared its own interim report, which it shared with the Executive branch last winter. The many good ideas and recommendations that the Committee obtained from Executive branch officials and studies had not yet been implemented for two ba- sic reasons: counterintelligence and security had failed to receive sustained atten- tion; and the ideas frequently challenged established ways of doing things, cut across bureaucratic lines of responsibility, or required substantial changes in re- source allocation. External events provided substantial impetus for interagency attention to these issues. The Committees efforts
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