[Senate Report 107-51]
[From the U.S. Government Publishing Office]




107th Congress                                                   Report
 1st Session                     SENATE                          107-51
_______________________________________________________________________




                         COMMITTEE ACTIVITIES

                               __________

                             SPECIAL REPORT

                                 of the

                    SELECT COMMITTEE ON INTELLIGENCE

                          UNITED STATES SENATE

                  JANUARY 6, 1999 TO DECEMBER 15, 2000




                 August 3, 2001.--Ordered to be printed




                            C O N T E N T S

                                                                   Page
 I. Introduction......................................................1
II. Legislation.......................................................3
      A. Intelligence Budget.....................................     3
      B. S. 1009 Intelligence Authorization Act for FY 2000......     3
      C. S. 2507 Intelligence Authorization Act for FY 2001......     5
      D. S. 2089, The Counterintelligence Reform Act for FY 2000.     6
      E. S. 1902 Japanese Imperial Government Disclosure Act of 
          2000...................................................     7
III.Oversight Activities..............................................8

      A. Hearings................................................     8
           1. Counterintelligence................................     8
           2. Counterterrorism...................................     8
           3. Counterproliferation...............................     9
           4. Counternarcotics...................................    10
           5. Denial and Deception...............................    11
           6. Ballistic Missile Analysis.........................    11
           7. State Department Security Breaches.................    11
           8. National Security Threats to the U.S...............    13
           9. Covert Action Quarterly Reviews....................    14
          10. Kosovo.............................................    14
          11. Russia.............................................    15
          12. The People's Republic of China (PRC)...............    16
          13. Colombia...........................................    16
          14. Iraq...............................................    16
          15. India/Pakistan.....................................    17
          16. Cyber Security.....................................    17
          17. Y2K................................................    18
          18. Lt. Commander Michael Speicher.....................    18
          19. Nazi War Crimes....................................    20
          20. Encryption.........................................    20
          21. CTBT...............................................    21
          22. FISA and the Technology Challenge..................    21
          23. Pan Am 103.........................................    22
          24. Intelligence Needs of Unified Commanders...........    22
          25. NIMA/TPED..........................................    23
          26. Unauthorized Disclosure of Classified Information..    24
      B. Investigations and Inquiries............................    25
          1. China Investigations................................    25
          2. PRC Nuclear Espionage, Department of Energy Security 
              and Counterintelligence Matters, and the Wen Ho Lee 
              Case...............................................    30
          3. Deutch Mishandling of Classified Material...........    31
          4. USS Cole............................................    32
      C. Community Issues........................................    33
          1.  Activities of the CIA in Chile.....................    33
          2. Oversight of Intelligence Community Inspectors 
              General............................................    33
          3. Classified Information Procedures Act (CIPA)........    34
          4. POW/MIA Analytic Capability in the Intelligence 
              Community..........................................    35
          5. Counterdrug Intelligence Plan.......................    36
          6. Judicial Review Commission on Foreign Asset Control.    36
          7. National Commission for the Review of the National 
              Reconnaissance Office..............................    37
      D. Audits..................................................    37
          1. NIMA................................................    38
          2. Covert Action.......................................    38
          3. Other...............................................    38
      E. Technical Advisory Group (TAG) Reports..................    38
          1. Signals Intelligence--Rebuilding the NSA............    39
          2. Human Intelligence--Bringing Technology in from the 
              Cold...............................................    40
          3. MASINT--Funding and Organizing to Realize Potential.    41
          4. IMINT--Keeping the Customers Satisfied..............    41
IV. Confirmations....................................................42
      A. James M. Simon, Jr., Assistant Director of Central 
          Intelligence for Administration........................    42
      B. John McLaughlin, Deputy Director of Central Intelligence    42
 V. Support to the Senate............................................42
VI. Appendix.........................................................43
      A. Summary of Committee Activities.........................    43
          1. Number of Meetings..................................    43
          2. Bills and Resolutions Originated by the Committee...    43
          3. Bills Referred to the Committee.....................    43
          4. Publications........................................    43




107th Congress                                                   Report
                                 SENATE
 1st Session                                                     107-51

======================================================================



 
    COMMITTEE ACTIVITIES--SPECIAL REPORT OF THE SELECT COMMITTEE ON 
  INTELLIGENCE, UNITED STATES SENATE, JANUARY 6, 1999 TO DECEMBER 15, 
                                  2000

                                _______
                                

                 August 3, 2001.--Ordered to be printed

                                _______
                                

        Mr. Graham, from the Select Committee on Intelligence, 
                        submitted the following

                             SPECIAL REPORT

                            I. Introduction

    The Senate Select Committee on Intelligence (SSCI) was 
established in 1976 by Senate Resolution 400 to strengthen 
Congressional oversight of the programs and activities of U.S. 
intelligence agencies. Throughout its history, the Committee 
has sought to carry out its oversight responsibilities in a 
nonpartisan manner. During the 106th Congress, the Committee 
continued this tradition in crafting important intelligence 
legislation, conducting investigations and audits into 
Intelligence Community and other national security issues, and 
authorizing and as necessary, increasing or reallocating--
funding for a wide array of U.S. intelligence activities.
    As part of its oversight responsibilities, the Committee 
performs an annual review of the intelligence budget submitted 
by the President and prepares legislation authorizing 
appropriations for the various civilian and military agencies 
and departments comprising the Intelligence Community. These 
entities include the Central Intelligence Agency, Defense 
Intelligence Agency, National Security Agency, National Imagery 
and Mapping Agency, National Reconnaissance Office, as well as 
the intelligence-related components of Department of State, 
Federal Bureau of Investigation, Department of the Treasury, 
and Department of Energy. The Committee makes recommendations 
to the Senate Armed Services Committee on authorizations for 
the intelligence-related components of the U.S. Army, U.S. 
Navy, U.S. Air Force, and U.S. Marine Corps. The Committee also 
conducts periodic investigations, audits, and inspections of 
intelligence activities and programs.
    The Committee's charge is to ensure that the Intelligence 
Committee provides the accurate and timely intelligence 
necessary to identify and monitor threats to the national 
security to support the executive and legislative branches in 
their decisions on national security matters, ensure that U.S. 
military commanders have the intelligence support to allow them 
to prevail swiftly and decisively on the battlefield, and to 
ensure that all intelligence activities and programs conform 
with the Constitution and laws of the United States of America.
    Following the dissolution of the Warsaw Pact and the Soviet 
Union, the U.S. Intelligence Community has reviewed, 
redirected, and expanded its efforts to monitor both 
traditional and emerging national security threats, including 
so-called ``asymmetric threats,'' confronting the United 
States. The emergence and growth of transnational threats such 
as the proliferation of weapons of mass destruction, 
international terrorism, information warfare, narcotics 
trafficking, and international criminal organizations presents 
the nation and the Intelligence Community with challenges 
requiring different policies, programs, technologies, and 
structures. These challenges are compounded by dramatic 
advances in telecommunications technology, including the spread 
of strong encryption, and the growth of foreign denial and 
deception activities designed to conceal, or mislead as to, 
activities of concern to U.S. intelligence collectors, 
analysts, and policymakers. As new challenges and threats 
confront the country, the Committee plays an ever more 
important role in ensuring that the Intelligence Community 
adapts to and meets these evolving threats and intelligence 
challenges.
    The need to modernize the Intelligence Community's 
infrastructure--both ``hardware'' (e.g., collection, 
communications, dissemination, and support systems) and ``human 
software'' (e.g. leadership, motivation, innovation, language 
skills, and analysis) with which the Community approaches the 
future--was a central theme of the Committee's work in the 
106th Congress. As in the 105th Congress, the Committee built 
upon the work of the SSCI Technical Advisory Group (TAG) in 
identifying problems, solutions, and opportunities for 
Committee action.
    Reflecting the recommendations of the TAG as well as other 
problems and shortfalls identified by the Committee, the 
Committee in the 106th Congress has continued to fight, with 
some success, to increase the overall level of intelligence 
spending above the President's budget request, while reducing 
or reallocating funds from programs and activities that were 
poorly justified, redundant or lower in priority. The Committee 
sought to focus on the most imminent and critical challenges 
facing the Intelligence Community, including an aging U.S. 
signals intelligence (SIGINT) collection system, and serious 
shortfalls in the Tasking, Processing, Exploitation, and 
Dissemination (TPED) of intelligence from satellites and other 
collection platforms. In addition, the Committee continued to 
concentrate additional resources and attention on the five 
areas of counternarcotics, counterterrorism 
counterproliferation, counterintelligence, and effective covert 
action.
    The Committee focused special oversight and legislative 
attention on counterintelligence and security matters, 
including The People's Republic of China (PRC) nuclear 
espionage and a series of security problems at theDepartment of 
State. In addition to its investigation into PRC espionage and security 
problems at the Department of Energy, the Committee conducted extensive 
investigations into satellite and missile technology transfers to the 
PRC, the PRC efforts to influence U.S. policy, and the mishandling of 
highly classified information by former Director of Central 
Intelligence John Deutch. The Committee also adopted a provision--later 
vetoed by President Clinton--to deter leaks of classified information.
    During the 106th Congress, the Committee conducted 99 
hearings and on-the-record meetings. Of these, 57 were 
oversight hearings, 12 were budget hearings (including 
conference meetings with the House committee), 20 were 
legislative hearings, eight were business meetings, and two 
were nomination hearings. The Committee also held 17 on-the-
record briefings and more than 250 off-the-record briefings.

                            II. Legislation


                         A. Intelligence Budget

    The Committee conducted annual reviews of the fiscal year 
2000 and fiscal year 2001 budget requests for the Director of 
Central Intelligence's National Foreign Intelligence Program 
(NFIP), and the Department of Defense's Joint Military 
Intelligence Program (JMIP) and Tactical Intelligence and 
Related Activities (TIARA). As part of its review, the 
Committee received testimony from senior Intelligence Community 
officials and evaluated the detailed budget justification 
documents submitted by the executive branch.
    The Committee is concerned that for a number of years, the 
funding allocated for intelligence activities has been 
inadequate. While some reallocation of national resources was 
inevitable after the end of the Cold War, the Committee 
believes the time has come to increase funding for intelligence 
activities to ensure timely and adequate warning of threats to 
our national security in a complex and challenging security 
environment. The Committee identified substantial shortfalls in 
modernization programs for some agencies that can only be 
addressed by additional resources, or a realignment of 
priorities for intelligence expenditures.
    The Committee also has recommended a five year realignment 
of resources for fiscal years 2001-2005, should the executive 
branch choose not to increase the allocation of resources for 
intelligence.
    During the 106th Congress, the Committee maintained its 
commitment to advanced research and development efforts 
community-wide and strengthening U.S. capabilities in the areas 
of counterproliferation, counterterrorism, counternarcotics, 
counterintelligence and covert action.

           B. S. 1009, FY 2000 Intelligence Authorization Act

    On May 11, 1999, the Committee reported S. 1009, the 
Intelligence Authorization Bill for Fiscal Year 2000. The bill 
provided the annual authorization for appropriations for 
intelligence activities and included several legislative 
provisions. Some of these provisions:
          Authorized the intelligence activities and programs 
        for the Central Intelligence Agency (CIA), the 
        Department of Defense (DOD), the Defense Intelligence 
        Agency (DIA), the National Security Agency (NSA), the 
        Department of the Army, the Department of the Navy, the 
        Department of the Air Force, the Department of State, 
        the Department of the Treasury, the Department of 
        Energy (DOE), the Federal Bureau of Investigation 
        (FBI), the National Reconnaissance Office (NRO), and 
        the National Imagery and Mapping Agency (NIMA).
          Authorized investigative components, such as the 
        Federal Bureau of Investigation (FBI) and internal 
        Intelligence Community investigative or security 
        elements, to access computers of individuals handling 
        classified data, with the consent of the individual.
          Expanded the definition of ``agent of a foreign 
        power'' under the Foreign Intelligence Surveillance Act 
        (FISA) to include the classic illegal spy who comes to 
        the United States under a false identity and remains 
        hidden for many years before being tasked to conduct 
        espionage.
          Expanded the discretion available to government 
        officials under the Immigration and Nationality Act to 
        permit naturalization of persons who have made an 
        extraordinary contribution to the national intelligence 
        mission and who were otherwise disqualified because of 
        past membership in the Communist Party or other 
        totalitarian organization.
    On the floor, the Senate took up the intelligence 
authorization bill passed by the House and struck all of the 
House bill after the enacting clause and inserted a substitute 
text, consisting of the text of S. 1009 and amendments. In 
conference, members of the House Permanent Select Committee on 
Intelligence (HPSCI) and the SSCI met to seek agreement on the 
authorization of appropriations for fiscalyear 2000 and to 
resolve differences in the legislative provisions in the House and 
Senate bills. The HPSCI receded from its disagreement to the amendment 
of the Senate with an amendment that was a substitute for the House 
bill and the Senate amendment. The conference report passed both houses 
and was signed by the President on December 31, 1999, as P.L. 106-120. 
The provisions of S. 1009 described above remained in the final 
conference report. In addition, the conference report:
          Established procedures for blocking assets of foreign 
        narcotics traffickers who pose an unusual and 
        extraordinary threat to national security (the 
        ``Foreign Narcotics Kingpin Designation Act'') and 
        created a Judicial Review Commission to evaluate and 
        report on remedies available to U.S. persons affected 
        by the blocking of assets of foreign persons.
          Required a declassification review and critical 
        analysis of an intelligence estimate on Vietnam-era 
        personnel who are listed as prisoners-of-war or 
        missing-in-action personnel (POW/MIA).
          Established the Commission for the Review of the 
        National Reconnaissance Office (NRO) tasked with 
        reviewing the roles and missions of the NRO to ensure 
        that the Intelligence Community acquires the most 
        efficient technologically capable, and economical 
        satellite collection systems.
    The Foreign Narcotics Kingpin Designation Act was added to 
the Senate bill as an amendment during floor consideration. The 
conferees debated at length the issue of the judicial review 
available to U.S. persons whose assets may be affected by the 
blocking of assets of foreign drug kingpins. The conferees 
agreed to appoint a Judicial Review Commission to study whether 
adequate judicial review was available and report back to the 
Committees.
    The POW/MIA provision in the conference report was a floor 
amendment to the Senate bill and was accepted by the managers. 
The NRO Commission provision was added at conference. The 
managers agreed that the functions and missions carried out by 
the NRO are essential to the provision of timely intelligence 
to policymakers and military leaders and that a review of the 
NRO was necessary to ensure that it was performing its tasks in 
a high-quality and cost-effective manner.

           C. S. 2507, FY 2001 Intelligence Authorization Act

    On April 27, 2000, the Committee reported S. 2507, the 
Intelligence Authorization Bill for Fiscal Year 2001. The 
Senate passed the bill on October 2, 2000, with several 
amendments. The bill, as passed by the Senate:
          Authorized the intelligence activities and programs 
        for the Central Intelligence Agency (CIA), the 
        Department of Defense (DOD), the Defense Intelligence 
        Agency (DIA), the National Security Agency (NSA), the 
        Department of the Army, the Department of the Navy, the 
        Department of the Air Force, the Department of State, 
        the Department of the Treasury, the Department of 
        Energy (DOE), the Federal Bureau of Investigation 
        (FBI), the National Reconnaissance Office (NRO), and 
        the National Imagery and Mapping Agency (NIMA).
          Criminalized the knowing and willful disclosure of 
        classified information by persons with authorized 
        access to such information to persons not authorized to 
        receive the information. This provision was intended to 
        close a gap in current law, which criminalizes only 
        leaks of ``defense information'' or other specified 
        categories of intelligence information. The Departments 
        of Justice and State, the CIA, and the Executive Office 
        of the President all supported the provision as adopted 
        by the Senate.
          Required the Director of Central Intelligence, in 
        consultation with the Secretary of Defense, to create 
        an analytic capability for intelligence relating to 
        prisoners of war and missing persons. The analytic 
        capability would extend to activities with respect to 
        prisoners of war and missing persons after December 31, 
        1990.
          Required the Director of Central Intelligence, in the 
        wake of high profile security breaches at the State 
        Department, to certify State Department compliance with 
        applicable standards regarding the handling, retention, 
        or storage of Sensitive Compartmented Information (SCI) 
        material.
          Strengthened the CIA Inspector General's (IG) 
        Congressional reporting requirements in cases of 
        possible wrongdoing by senior CIA officials, in 
        response to the CIA's failure to report in a timely 
        fashion, security violations by the former Director of 
        Central Intelligence, John Deutch.
          Amended the Drug Kingpin Act of 1999 to provide U.S. 
        citizens with civil due process rights in the event 
        their assets are seized or affected pursuant to the 
        Act.
          Amended the Intelligence Authorization Act for Fiscal 
        Year 1995 and the Foreign Intelligence Surveillance Act 
        to require additional coordination within, and among, 
        the U.S. federal agencies investigating and prosecuting 
        espionage and other cases affecting national security. 
        It clarified, in statute, certain obligations of the 
        affected agencies, ensured accountability in 
        decisionmaking by agency heads, and codified current 
        law and practice with respect to determinations of 
        ``probable cause'' under the FISA statute.
          Created a Public Declassification Board, on a pilot 
        program basis, that would be charged with advising the 
        President on government-wide declassification efforts, 
        while ensuring the protection of national security 
        interests.
          Created a process for the declassification of 
        documents related to the Japanese Imperial Government 
        similar to the process established for the Nazi War 
        Crimes Disclosure Act.
    S. 2507, as passed by the Senate, was supported by the 
Administration in a Statement of Administration Policy (SAP) 
issued on October 2, 2000. The Senate then requested a 
conference with the House and amended H.R. 4392 with the text 
of S. 2507, as amended.
    In conference, all of the Senate provisions were included 
in the conference report except for the provision relating to 
the Drug Kingpin Act. House conferees argued that the Congress 
should not act with regard to this issue until the Judicial 
Review Commission on Foreign Asset Control issued its report as 
required by law. (The Commission issued a report on December 4, 
2000 and the Committee expects to revisit the issue in the 
Fiscal Year 2002 authorization bill.)
    The conferees also discussed section 304, relating to 
unauthorized disclosure of classified information, and section 
501, relating to contracting authority for the National 
Reconnaissance Office. Amendments relating to both of these 
provisions were rejected by the conferees.
    The conference report was approved, unanimously, by the 
Senate and the House on October 12, 2000. Unfortunately, 
despite the support of the heads of the affected agencies for 
section 304 and the previous written statements by the White 
House in support of the legislation, President Clinton vetoed 
the bill on November 4, 2000, citing his opposition to that 
provision.
    Following the veto, on November 13, 2000, the House 
reintroduced and passed the conference report in the House as a 
new bill, H.R. 5630. H.R. 5630 did not include the provision 
regarding ``leaks'' of classified information that led to the 
President's veto. The Senate considered and passed H.R. 5630 on 
December 6, 2000, with an amendment by Senator Allard to strike 
section 501, relating to contracting authority by the National 
Reconnaissance Office. The House considered and passed the bill 
on December 11, 2000, without amendment. The President signed 
the bill on December 27, 2000 as P.L. 106-567.

         D. S. 2089, The Counterintelligence Reform Act of 2000

    In response to some of the issues identified in the 
investigation of espionage at the Department of Energy labs, on 
February 24, 2000, Senators Specter, Torricelli, Thurmond, 
Biden, Grassley, Feingold, Helms, Schumer, Sessions, and Leahy 
introduced the ``Counterintelligence Reform Act of 2000'' (S. 
2089). In early April 2000, the Select Committee on 
Intelligence held a closed hearing to receive testimony on S. 
2089 and other issues involving the Foreign Intelligence 
Surveillance Act (FISA). The bill was considered by the Senate 
judiciary Committee on May 18, 2000, and ordered favorably 
reported with an amendment in the nature of a substitute. On 
May 23, 2000, S. 2089 was reported to the Senate and 
immediately referred to the Select Committee on Intelligence 
pursuant to Senate Resolution 400, 94th Congress, on the same 
day. The Committee, by a vote of 15-0, ordered the bill 
favorably reported with amendments on July 18, 2000. The bill 
was considered by the Senate as an amendment by Senator Specter 
to the Intelligence Authorization Act for Fiscal Year 2001, and 
was enacted as part of that legislation (P.L. 106-567).
    The bill delineates coordination responsibilities within 
and among the U.S. Government agencies investigating and 
prosecuting espionage cases and other cases affecting national 
security. The legislation clarifies, in statute, the 
obligations of each of the affected agencies in an espionage 
investigation, ensures accountability in decisionmaking by 
relevant agency heads, and codifies current law and practice 
with respect to a determination of ``probable cause'' under the 
FISA. The Committee's amendments to the bill are detailed in 
Senate Report 106-352, which accompanied S. 2089.

    e. s. 1902, japanese imperial government disclosure act of 2000

    S. 1902, the Japanese Imperial Army Disclosure Act, was 
introduced by Senators Feinstein, Wellstone, Grams, Boxer, 
Levin, and Hatch on November 10, 1999. The bill was approved by 
the Judiciary Committee on May 18, 2000, without amendment, and 
referred to the Select Committee on Intelligence, pursuant to 
Senate Resolution 400, 94th Congress, on June 7, 2000. The 
Committee considered the legislation on July 18, 2000, and 
approved it with amendments.
    The Act established a Japanese Imperial Army Records 
Interagency Working Group to review, for declassification, 
records pertaining to the Japanese Imperial Army and 
governments allied with, or cooperating with, the Imperial Army 
of Japan. The bill set out standards for the interagency 
working group to use, when reviewing the documents. In 
addition, it allowed for expedited processing of the Freedom of 
Information Act (FOIA) requests relating to Japanese Imperial 
Army records. The Committee amended the legislation to ensure 
the protection of intelligence sources and methods, by deleting 
a provision that would have eliminated the Director of Central 
Intelligence's obligation under the National Security Act of 
1947 to protect operational files.
    This legislation was considered by the Senate as an 
amendment by Senator Feinstein to S. 2507, the Fiscal Year 2001 
Intelligence Authorization bill. That amendment was approved by 
the Senate, and the Japanese Imperial Army Records Disclosure 
Act was considered in conference as a Title of H.R. 4392. In 
conference, the provision was amended to apply to the Japanese 
Imperial Government rather than the Japanese Imperial Army and 
additional changes were made to ensure protection of sources 
and methods. The legislation was enacted as part of the 
authorization legislation (P.L. 106-567).

                       III. Oversight Activities


                              a. hearings

1. Counterintelligence

    In recent years, the Committee has become increasingly 
concerned about the ability of existing U.S. 
counterintelligence structures, programs, and policies to 
address both emerging threats and traditional adversaries using 
cutting edge technologies and trade craft in the 21st Century. 
The Committee made its views known to the nation's senior 
intelligence and counterintelligence officials. Many of them 
shared these concerns.
    On March 8, 2000, during a closed hearing before the SSCI, 
DCI George Tenet, FBI Director Louis Freeh, and Deputy 
Secretary of Defense John Hamre unveiled a draft proposal 
entitled ``Counterintelligence for the 21st Century.'' This 
plan, generally referred to as ``CI 21,'' resulted from an 
extensive review assessing existing counterintelligence 
structures and capabilities to address emerging, as well as 
traditional, counterintelligence threats. The drafters of the 
CI 21 plan found current U.S. counterintelligence capabilities 
to be ``piecemeal and parochial,'' and recommended adoption of 
a new counterintelligence philosophy--described as more policy-
driven, prioritized, and flexible, with a strategic, national-
level focus--as well as a restructured national 
counterintelligence system. CI 21 proposes significant changes 
in the way the United States Government approaches, and 
organizes itself, to meet the threat of foreign espionage and 
intelligence gathering.
    After additional interagency review, the revised outlines 
of the CI 21 plan were presented to the Committee on July 26, 
2000. The Committee will hold hearings on a Presidential 
Decision Directive (PDD) signed on December 28, 2000 
establishing the CI 21 structures, authorities, and 
responsibilities.

2. Counterterrorism

    Terrorism threatens American lives and interests around the 
world. The continuing and evolving terrorist threat was 
demonstrated by the October 12, 2000 terrorist attack on the 
USS Cole as it refueled in Aden, Yemen.\1\ Ensuring that the 
Intelligence Community is well positioned to support the United 
States Government's efforts to counter terrorism remains among 
the Committee's highest priorities. In addition to extensive 
classified briefings at the staff level, the Committee held 
several hearings on the counterterrorism topic, as well as 
exploring counterterrorism issues in other hearings on the 
intelligence budget and other matters.
---------------------------------------------------------------------------
    \1\ The Committee's staff inquiry into the question of whether our 
intelligence capabilities were fully utilized prior to the attack on 
the USS Cole is addressed in this report's section on ``Investigations 
and Inquiries.''
---------------------------------------------------------------------------
    On February 9, 2000, the Committee held a hearing to 
receive the Intelligence Community's comprehensive assessment 
of the terrorist threat against the United States, the status 
of U.S. counterterrorism efforts, including the recent efforts 
to defeat the so-called ``Millennium'' threat, the resources 
devoted to countering the threat and any projected resource 
shortfalls.
    The Committee subsequently received an off-the-record 
briefing by the Special Assistant to the President for National 
Security Affairs and National Coordinator for Counterterrorism, 
as well as the Director of the DCI's Counterterrorism Center, 
the FBI's Assistant Director for Counterterrorism and the 
Department of State's Coordinator for Counterterrorism.
    On June 8, 2000, the Committee held an open hearing to 
receive the report of the National Commission on Terrorism, 
known as the ``Bremer Commission,'' prepared pursuant to P.L. 
277. Testifying before the Committee were Ambassador L. Paul 
Bremer III, Commission Chairman, as well as Commission Vice 
Chairman Maurice Sonnenberg, and Commissioners R. James 
Woolsey, Jane Harman, and Juliette N. Kayyem.
    The purpose of the hearing was to inform the Committee of 
the intelligence-related findings and recommendations contained 
in the Commission's unclassified report entitled ``Countering 
the Changing Threat of International Terrorism.'' The Committee 
noted that the Commission echoed the Committee's concern 
regarding the evolving threat posed by international terrorism. 
These concerns were noted in the Committee's May 4th report 
accompanying the Committee's Intelligence Authorization Bill 
for Fiscal Year 2001. In that Report, the Committee stated 
that: ``The Committee continues to be extremely concerned by 
the threat posed by international terrorism to our nation's 
security, and to the lives of Americans here and around the 
world.'' The Commission highlighted the Members' concern that 
``in addition to traditional weapons such as hijacking and car 
bombs, terrorists' attacks are ever more likely to include 
chemical, biological, radiological, and nuclear weapons.'' The 
Committee also noted, in that report, that the terrorist 
threats faced during the millennium celebrations were deferred 
rather than defeated.
    In his opening statement, the Chairman applauded the 
Commission for highlighting the terrorist threat, the critical 
importance of intelligence in countering terrorism, and the 
need to fund and strengthen these capabilities, in particular 
human intelligence, on an urgent basis. The Commission also 
highlighted an urgent need to rebuild the National Security 
Agency. The Commission's report states that: ``The National 
Security Agency is America's most important asset for technical 
collection of terrorism information, yet it is losing its 
capability to target and exploit the modern communications 
systems used by terrorists, seriously weakening the NSA's 
ability to warn of possible attacks.'' In this regard, the 
Commission Report cited the Senate Select Committee on 
Intelligence's Technical Advisory Group, whose reports on the 
NSA identify significant and expanding technology gaps. 
Rebuilding the NSA was the Committee's highest priority in its 
budgetary actions for Fiscal Years 2000 and 2001.
    The Bremer Commission further raised concerns regarding 
policy restrictions that have impeded collection of 
intelligence by elements of the Intelligence Community legally 
authorized to undertake such collection. The Committee is 
continuing to review this issue as part of its on-going 
oversight.

3. Counterproliferation

    There is no more disturbing trend than the proliferation of 
nuclear, biological, and chemical (NBC) weapons and the 
missiles to deliver them. As Director Tenet testified before 
the Committee, ``Over the next 15 years, . . . our cities will 
face ballistic missile threats from a wider variety of actors--
North Korea, probably Iran, and possibly Iraq. * * * As 
alarming as the long range missile threat is, it should not 
overshadow the immediacy and seriousness of the threat that 
U.S. forces, interests, and allies already face overseas from 
short and medium-range missiles.'' At a minimum, American 
leaders seeking to defend U.S. interests overseas, against 
states or groups armed with such weapons, will have to reckon 
with an expanded threat of attack against U.S. forces, allies, 
or the U.S. homeland, dramatically changing their risk-benefit 
calculus in a given contingency.
    On June 10, 1999, the Committee held a closed hearing to 
provide Members with an up-to-date understanding of the current 
proliferation threat and to assess the relative value of 
responses to counter or mitigate that threat. The Committee 
heard testimony from senior members of the Intelligence 
Community with responsibility for intelligence activities and 
analysis regarding proliferation, as well as from outside 
experts on proliferation issues.
    The Committee also has received numerous briefings on 
proliferation-related topics, including a briefing on the 
export of military technology by thePeople's Republic of China 
(PRC). At the time, the Senate was about to consider two pieces of 
legislation relating to the PRC. The first was legislation proposed by 
Senator Thompson (S. 2645) that would require annual reviews of PRC 
proliferation activities and possible sanction of Chinese proliferators 
or other PRC activities. The second was legislation to grant the PRC 
permanent normal trade relations (PNTR) status (S. 2277)--a condition 
for final agreement between the United States and China to open the way 
for PRC membership in the World Trade Organization. Among the issues 
discussed in the Senate debate on these two bills were: Chinese 
proliferation; Chinese military and especially missile modernization, 
human rights abuses, the Chinese economy, and the impact of increased 
trade with the United States on democratization of the PRC. The purpose 
of the briefings was to provide Members with the current intelligence 
information regarding these issues in anticipation of Senate debate on 
the two bills.

4. Counternarcotics

    The Committee held a closed hearing on July 29, 1999, to 
receive a general overview of the national security threat 
posed by international drug trafficking, as well as a 
description of the U.S. Government's efforts directed against 
this threat. The situation in Colombia was addressed in detail, 
with particular emphasis placed on those Colombian insurgent 
groups which actively participate in, and derive their funding 
from drug trafficking.
    While the primary focus of the hearing was on Colombia, the 
witnesses also presented information on those foreign 
governments, or defacto governments, that actively participate 
in, or provide support for drug trafficking. This discussion 
included information regarding the Revolutionary Armed Forces 
of Colombia (FARC), the insurgent group which controls nearly 
two-thirds of Colombian territory, and the Taliban regime in 
Afghanistan. Additionally, the witnesses discussed the merits 
of establishing a component within the Drug Enforcement 
Administration to facilitate the sharing of intelligence 
valuable for national security while protecting law enforcement 
and prosecutorial equities.

5. Denial and deception

    The Committee has been deeply concerned about the increase 
in foreign denial and deception efforts directed against U.S. 
intelligence collection. Denial and deception refers to efforts 
to conceal, or mislead with respect to, activities of interest 
and concern to U.S. policymakers such as military deployments, 
development of weapons of mass destruction, and political 
intentions. Denial and deception threatens the national 
security by depriving U.S. policymakers and military leaders of 
timely and accurate intelligence of threats to U.S. interests. 
The Committee held one briefing for Members and a number of 
staff briefings on denial and deception issues. The Committee 
increased funding for activities to counter denial and 
deception, and has directed actions designed to focus 
Intelligence Community resources and management attention on 
this critical intelligence challenge.

6. Ballistic missile analysis

    As discussed elsewhere in this report, a critical threat 
facing the United States today is the threat of attack by 
ballistic missiles bearing nuclear, biological or chemical 
weapons. The Intelligence Community has no more serious 
challenge than to monitor this threat and no more serious 
responsibility than to get this analysis right. On September 
30, 1999, the Committee held a closed hearing to receive 
testimony from the National Intelligence Officer for Strategic 
and Nuclear Programs on the analysis and findings of a National 
Intelligence Estimate (NIE) titled ``Foreign Missile 
Developments and the Ballistic Missile Threat to the United 
States Through 2015.'' The NIE concluded that during the next 
15 years the United States most likely will face 
Intercontinental Ballistic Missile (ICBM) threats from Russia, 
China, and North Korea, probably from Iran, and possibly from 
Iraq, although the threats will consist of dramatically fewer 
weapons than today due to significant reductions expected in 
Russian strategic forces.
    The Committee found that the NIE incorporated a number of 
improvements in the rigor and quality of the analysis, 
including many based on the recommendations of the Commission 
to Assess the Ballistic Missile Threat to the United States 
(also known as the Rumsfeld Commission) in its July 1998 
Report.

7. State Department security breaches

    During the 106th Congress, the Committee held hearings and 
staff briefings to review significant security breaches that 
occurred at the Department of State. The Committee believes 
this series of incidents reveals serious deficiencies in 
security awareness, practice, and culture at the State 
Department.
    In February 1998, an unidentified man, wearing a tweed 
jacket entered the Secretary of State's seventh floor office 
suite and removed classified documents, including documents 
classified as Sensitive Compartmented Information (SCI). The 
man, in this ``tweed jacket incident'' has never been 
identified and the documents have never been recovered. 
Additionally, poor procedures for handling classified 
information resulted in the Department's inability to 
reconstruct which documents were taken. Without such 
information, a full and complete damage assessment was not 
possible.
    On December 8, 1999, the FBI detained a Russian 
intelligence officer, Stanislav Gusev, as he was recording 
transmissions from a bug implanted in a piece of chair rail, in 
a conference room within the Department of State headquarters 
building. Gusev's detention capped a six-month investigation 
that began when the FBI spotted the Russian intelligence 
officer loitering near the State Department. Following 
surveillance and observation of Gusev, technical 
countermeasures discovered the remotely-activated device in the 
conference room. Gusev was declared persona non grata and was 
required to leave the United States.
    The FBI and State Department continue to investigate who 
was responsible for planting the bug and what sensitive 
materials discussed in the conference room may have been 
compromised. Recreating the extent to which Russian 
intelligence or other personnel, may have had access to the 
room in question has been complicated by the fact that from 
1992 until August 1999, there were no escort requirements for 
Russian (or other foreign) visitors to the State Department.
    In January 2000, a laptop computer containing highly 
sensitive classified intelligence materials, including SCI 
material relating to weapons proliferation, was discovered to 
be missing from the State Department Bureau of Intelligence and 
Research (INR) and is presumed stolen. Despite an obligation 
under the National Security Act of 1947 to keep the 
intelligence committees ``fully and currently informed of all 
intelligence activities'' including ``significant intelligence 
failures,'' the Committee was not informed of the loss of this 
laptop computer until after the Washington Post reported the 
story in April 2000.
    Following the ``tweed jacket'' affair, the SSCI, in the 
Annex to the Intelligence Authorization Act for Fiscal Year 
1999, directed the State Department Inspector General (IG) to 
review and report on State Department policy and procedures for 
handling classified information within the State Department 
Headquarters facility. The September 1999 IG report, entitled 
``Protecting Classified Documents at State Department 
Headquarters,'' found that ``[t]he Department [of State] is 
substantially not in compliance with the DCIDs [Director of 
Central Intelligence Directives] that govern the handling of 
SCI.'' (emphasis in original) In response to the IG Report in 
the Annex to the Intelligence Authorization Act for Fiscal Year 
2000, the Congressional intelligence committees required (1) a 
report from the DCI evaluating the State Department's 
compliance with all DCIDs related to the protection of 
Sensitive Compartmented Information, (2) a State Department 
report on specific plans for enhancing the security of 
classified information within the State Department and (3) full 
implementation, as appropriate, of the recommendations found 
within the Inspector General's report.
    The February 2000 DCI report noted that an independent 
review by the CIA and the Community Management Staff confirmed 
that the State Department was not in compliance with applicable 
DCID requirements, and concluded that certain additional steps 
were required to ``improve security practices in Department 
offices where SCI is handled and discussed, as well as to 
strengthen SCI document control and accountability.'' In its 
report the State Department identified a number of actions or 
proposed actions it intended to take in response to the IG 
Report.
    In the wake of the missing laptop computer incident, 
Secretary of State Albright declared her intention to transfer 
positions and responsibility for ensuring the proper security 
and handling of SCI material from the State Department's Bureau 
of Intelligence and Research to the Bureau of Diplomatic 
Security (DS). At that time, the Committee expressed its 
concerns regarding this transfer, including the need to ensure 
continued DCI oversight over SCI material at the State 
Department and the requirement that this function should be 
funded through the National Foreign Intelligence Program (NFIP) 
budget. Such oversight and budgetary authority is critical to 
ensure effective implementation of measures to protect 
intelligence information at the State Department. In the fall 
of 2000, the DCI's Community Management Staff and the 
Department of State agreed to measures designed to ensure 
continued DCI oversight of the protection of SCI material and 
continued funding for this function within the NFIP.
    In the Intelligence Authorization Act for Fiscal Year 2001, 
the Committee required the Director of Central Intelligence, in 
the wake of high profile security breaches at the State 
Department, to certify State Department compliance with 
applicable standards regarding the handling, retention, or 
storage of SensitiveCompartmented Information material. 
Elements of the State Department that the DCI does not certify as in 
compliance, or that do not receive a DCI waiver, may not retain or 
store SCI information until they are certified as compliant.
    Additionally, the Committee, in the report accompanying the 
Intelligence Authorization Act for Fiscal Year 2001, directed 
the State Department Inspector General to conduct annual 
reviews of State Department policies and procedures for 
protecting classified information at the State Department for 
the next five years to determine progress in this area.
    The Committee has taken numerous steps to improve the 
security situation at the State Department and will continue 
this focused oversight in the future.

8. National security threats to the United States

    The Committee continued its practice of opening each new 
session of the Congress with open and closed hearings reviewing 
the Intelligence Community's assessment of current and 
projected threats to the national security of the United 
States. These annual hearings form the backdrop for the 
Committee's budget authorization process, as well as provide a 
rare public forum for discussion of national security threats 
by the nation's top intelligence officials.
    In his February 2, 2000 appearance before the Committee, 
Director of Central Intelligence George Tenet emphasized the 
interplay between traditional and emerging threats and modern 
military technologies, in particular, ballistic missiles, 
chemical, nuclear and biological weapons, and information 
technologies.
    ``Over the next 15 years * * * our cities will face 
ballistic missile threats from a wider variety of actors [in 
addition to Russia and the PRC]--North Korea, probably Iran, 
and possibly Iraq,'' the DCI testified. The DCI noted that, 
``in a very real sense, we live at a moment when the past and 
the future are colliding. In other words, today we must still 
deal with terrorists, insurgents, and others who have hundreds 
of years of history fueling their cases--but the chances are 
they will be using laptop computers, sophisticated encryption, 
and weaponry their predecessors could not even have imagined.''
    The DCI expanded upon these themes, noting that traditional 
ethnic hatreds and conflicts once frozen within the global 
competition between two Cold War superpowers are now thawing in 
Africa, the Caucasus, and the Balkans. At the same time, a 
growing perception of so-called American ``hegemony'' has 
become a lightening rod for the disaffected. Such an 
environment of rapid change makes the United States even more 
vulnerable to sudden surprise.
    Throughout the 106th Congress, the Committee focused on 
these and other threats and challenges to the security of the 
United States. It concentrated much of its attention on 
unconventional and asymmetric threats, including threats posed 
by the proliferation of weapons of mass destruction and high-
technology, and state-sponsored and non-state terrorism. In 
particular, the Committee recognizes that this dynamic change 
and uncertainty continues, driven by significant transitions in 
key states and regions throughout the world, the activities of 
``rogue'' states and terrorist groups, rapid technological 
development and proliferation, continuing international 
criminal activity, and resentment of U.S. political, economic, 
military, and social dominance.
    The transcript of the Committee's February 2, 2000 hearing, 
``Current and Projected National Security Threats to the United 
States'' (S. Hrg. 106-580) was printed and made available to 
the public.

9. Covert action quarterly review

    Throughout the 106th Congress, the Committee continued to 
conduct rigorous oversight of covert action programs. The 
Committee reviews these programs to ensure their methods and 
objectives are consistent with U.S. foreign policy goals, and 
are conducted in accordance with all applicable U.S. laws. The 
Committee pursues its oversight responsibilities with the 
understanding that covert action programs can be a significant 
factor in accomplishing vital foreign policy objectives. At the 
same time, to be successful, such programs must be consistent 
with the ideals and principles of our nation. During the 106th 
Congress, the Committee established, with the Central 
Intelligence Agency and the National Security Council, a 
process to conduct regular quarterly written assessments of the 
covert action programs. The Committee believes this reporting 
requirement will improve both the implementation and oversight 
of covert action programs in the future.

10. Kosovo

    In the 106th Congress, the Committee closely monitored 
developmentsin Serbia and Kosovo and the corresponding 
intelligence issues that emerged in the course of NATO's first-ever 
offensive combat operations. The Committee has continued to follow 
events in the former Yugoslavia, including intelligence issues relating 
to the NATO implementation force in Kosovo, and analysis of recent 
political developments in Serbia.
    The Committee examined the intelligence track record with 
regard to the crisis in Kosovo and the Balkans--what we knew, 
when did we know it, what were the analysts telling the 
policymakers?
    On April 14, 1999, the Committee held a closed briefing on 
the military and intelligence implications of the crisis in 
Kosovo, with testimony by General John Gordon, Deputy Director 
of Central Intelligence; General Patrick Hughes, Director of 
the Defense Intelligence Agency; and Phyllis Oakley, Assistant 
Secretary of State for Intelligence and Research.
    The Committee also was interested in how the worldwide U.S. 
collection posture was affected by the Balkan crisis, with 
special emphasis on hard target coverage. Finally, the 
Committee undertook an examination of collection requirements 
and opportunities facing the United States and the NATO 
Alliance in Kosovo.
    In 2000, the Committee focused on the ``intelligence 
lessons learned'' from the Kosovo military campaign, 
culminating in a May 10, 2000 briefing from the outgoing 
Supreme Allied Commander Europe, General Wesley Clark. That 
briefing touched on the problems associated with NATO Alliance 
intelligence sharing during the air campaign and the 
implications for timely intelligence of the ``war-making-by-
committee'' approach that characterized the early stages of the 
Kosovo operation.

11. Russia

    Over the past two years, the Committee has sought to stay 
abreast of fast-paced developments in Russia by holding closed 
briefings on the full range of national security and 
intelligence issues associated with these changes. The 
Committee has concentrated its attention on issues associated 
with Russia's proliferation of nuclear and missile technology, 
especially to Iran, Russia's evolving security relationship 
with the PRC, as well as monitoring Russian nuclear issues.
    Russia's interests coincide with those of the United States 
and our allies from time to time. They often do not. Regional 
instability in the former Soviet Union, in particular in the 
Caucasus or Central Asia, could threaten U.S. interests, 
especially if such instability were to spiral out of control or 
tempt external intervention.
    The long term impact of the Duma elections in December 
1999, Yeltsin's surprise resignation, and the advent of 
Vladimir Putin as Yeltsin's successor remain unclear. The 
Committee focused its attention on how these recent leadership 
changes will affect Russian's foreign and security policies. 
Although Russia's need for integration into international 
economic institutions and access to financing and key markets 
may make a wholesale return to the confrontation of the Cold 
War unlikely, Russia, especially under Putin, is likely to 
persist in efforts to counter what it perceives as U.S. 
dominance by using all the tools remaining at its disposal.
    Russian domestic developments will have a great inpact on 
stability in Eurasia and on Russia's capacity to act abroad. 
The Committee recognizes that the United States has a major 
interest in Russia's domestic transformation, although our 
ability to affect the outcome is severely limited.

12. The People's Republic of China (PRC)

    The People's Republic of China is perhaps the preeminent 
national security, foreign policy, and intelligence challenge 
facing the United States in the post-Cold War world. In the 
106th Congress, the Committee held a total of 26 hearings on a 
wide range of intelligence, counterintelligence, and policy 
issues relating to the PRC. Many of these activities are 
described in greater detail in sections of this report covering 
the Committee's investigations into missile and satellite 
technology transfers to the PRC and PRC efforts to influence 
U.S. policy, and PRC nuclear espionage, Department of Energy 
counterintelligence and security matters, and the Wen Ho Lee 
investigation and prosecution.
    Given the PRC's emergence as a strategic competitor of the 
United States, it is critical that U.S. policymakers have a 
complete, objective, and accurate understanding of the goals, 
intentions, motivations, capabilities, and prospects for change 
of the world's most populous nation. To that end, the Committee 
directedactions to ensure that the CIA Directorate of 
Intelligence applies rigorous external contrarian scrutiny to its 
analysis of the PRC.

13. Colombia

    On January 25, 2000, President Clinton announced a Colombia 
Assistance Package to help ``strengthen the Colombian economy 
and democracy, and fight narcotics trafficking.'' The 
assistance package totals approximately $1.3 billion spread 
over fiscal years 2000 and 2001. The assistance provided by the 
United States is part of a $7.5 billion plan set forth by 
Colombian President Andres Pastrana to battle Colombia's 
narcotics, military, and economic problems. Colombia plans to 
provide $4 billion towards this effort with the remainder 
coming from other international assistance. ``Plan Colombia'' 
has five major components: helping the Colombian Government 
push into the coca-growing regions of southern Colombia, which 
are now controlled by insurgent guerrillas; upgrading Colombian 
capability to aggressively interdict cocaine and cocaine 
traffickers; increasing coca crop eradication; promoting 
alternative crops and jobs; and increasing protection of human 
rights, expanding the rule of law, and promoting the peace 
process.
    On February 3, 2000, the Committee held a closed hearing on 
the situation in Colombia, with specific focus on the proposed 
assistance package and additional funding for intelligence 
activities included in the President's supplemental 
appropriations request The witnesses were asked to provide 
analysis on the political and military situations in Colombia; 
to describe current narcotics trafficking activity within that 
nation; to explain the rationale for the $1.3 billion 
supplemental request for Colombia; and to describe how 
additional intelligence funding would be used. The hearing also 
explored the involvement of armed guerrilla groups and 
paramilitaries in the drug trafficking business. The Committee 
will continue to monitor closely developments in Colombia and 
the contribution of U.S. intelligence agencies to U.S. policy.

14. Iraq

    During the 106th Congress, the Committee continued its 
extensive oversight of intelligence collection and analysis in 
support of U.S. policy towards Iraq. Since the end of the Gulf 
War, Iraq's intransigent rejection of United Nations 
resolutions regarding Iraq's programs to develop weapons of 
mass destruction, unwillingness to accept international 
inspectors, and continued belligerence towards its neighbors 
have been a serious concern for the United States and its 
allies. Throughout this period, American military personnel 
have been in a constant state of alert and are often engaged in 
combat operations in the course of enforcing the northern and 
southern no-fly zones established in Iraq in the wake of the 
Gulf War.
    In 1999 and 2000, the Committee held a number of closed 
hearings and briefings to review intelligence collection and 
analysis on Iraq, intelligence support to U.S. military forces 
in the area, and support to the efforts initiated under the 
Iraqi Liberation Act (ILA) of 1998. In addition, Committee 
members and staff received numerous classified briefings 
throughout the 106th Congress on intelligence regarding Iraq's 
missile, chemical, biological, and nuclear programs, and the 
status and intentions of Saddam Hussein's regime.

15. India/Pakistan

    In the summer of 1999, after five decades of tension and 
three wars, Pakistan and India engaged in military clashes over 
Kashmir. Fighting between India and Pakistan and India and 
Kashmiri separatists resulted in more than a thousand 
casualties. Tensions remained high in 2000. The acquisition of 
nuclear weapons capability by both countries, demonstrated by 
nuclear tests in 1998, heightens concern that tensions between 
India and Pakistan could erupt with little warning into full-
scale war, possibly escalating rapidly to nuclear war. 
Providing warning in such a situation is a critical challenge 
for the U.S. Intelligence Community.
    In addition to staff briefings, on May 24, 2000, the 
Committee received a classified briefing by senior intelligence 
officers on India and Pakistan. The purpose of this briefing 
was to provide Members with an update on the ongoing tensions 
between India and Pakistan and the current status of their 
military capabilities.

16. Cyber security

    The United States increasingly has become reliant on 
certain critical infrastructures, i.e., the physical and 
computer-based systems essential to the operation of the 
economy, government, and public health and safety. These 
include telecommunications, energy, banking and finance, 
transportation, water systems, and both governmental and 
private emergency services. On July 22,1999, the Committee held 
a closed hearing to review the Intelligence Community's role in 
securing our nation's critical information infrastructure.
    As the information technology revolution links and 
automates critical components of our infrastructure, our 
reliance on computers and advanced telecommunications creates a 
new potential vulnerability to computer attack, in addition to 
the more traditional threats from physical attack, equipment 
failure, human error, and weather.
    During the 106th Congress, Committee Members and staff had 
numerous classified briefings regarding the role of the 
Intelligence Community in identifying information warfare 
threats and warnings, and in providing technical expertise to 
both defend against computer attacks and investigate actual 
computer intrusions. The Committee will continue its oversight 
of this growing threat to our national security.

17. Y2K

    On September 15, 1999, the Committee held a closed hearing 
on the Year 2000 (Y2K) computer issue and its potential impact 
on the U.S. and other nations.
    The Y2K problem originated from the lack of information 
storage capacity in the first few generations of computers. 
Because storage capacity was at a premium, programmers decided 
to designate a year by its last two digits (i.e., 88 instead of 
1988) in order to save computer memory space. This practice was 
common until the mid-1990s. As a result many computer experts 
feared that older computer hardware devices and software would 
incorrectly recognize the two digits representing the year 2000 
(00) as the year 1900, and that this problem would cause 
computer hardware and software to freeze up or shut down. Also, 
because computers connected in a network are interdependent, 
newer systems connected to hardware and software susceptible to 
the Y2K problems also would suffer difficulties even if the 
newer systems were Y2K compliant. Many believed that the Y2K 
problem had the potential to cascade through computer networks 
or systems dependent on computers susceptible to the Y2K 
problem.
    While the U.S. Government and American companies applied 
significant time and resources to addressing the Y2K issue 
prior to December 1999, information technology experts 
expressed concern that most foreign governments and companies 
had not adequately prepared for this problem. As a result many 
computer experts feared that Y2K failures might cause 
catastrophic failures in these nations' industrial sectors and 
facilities.
    The Intelligence Community prepared analyses on the 
possible effects of the Y2K problem in various nations, and how 
these consequences could have affected U.S. policy and 
interests abroad. Despite alarmist predictions by both the 
Intelligence Community and private sector analysts, the vast 
majority of computer systems worldwide were prepared for the 
Y2K issue and the failures that did occur were adequately 
contained and remedied without significant damage.

18. Lt. Commander Michael Speicher

    U.S. Navy Lt. Commander ``Scott'' Speicher was shot down 
over Iraq on January 17, 1991, the first night of the Gulf War. 
He was subsequently declared ``Killed in Action'' (KIA). For 
several years, the Committee has been concerned that LCDR 
Speicher has never been adequately accounted for.
    The issue surfaced in the 105th Congress when the New York 
Times ran a front page article that reported that Admiral 
Stanley Arthur, then Vice Chief of Naval Operations and 
formerly Commander of Allied Naval forces in the Persian Gulf 
during the Gulf War, believed ``that Commander Speicher had 
ejected successfully and survived.'' The Committee's interest 
centered on the role and impact of intelligence on the 
Government's accounting of LCDR Speicher, and what the 
Committee increasingly came to view as the discrepancy between 
the available intelligence information and the Navy's 
determination that LCDR Speicher had been killed on the night 
of January 17, 1991.
    In July 1999, Senator Pat Roberts asked the SSCI to conduct 
an inquiry into the Intelligence Community's input to the U.S. 
Government's decision to list LCDR Speicher's status as KIA.
    The Committee held a closed briefing on September 15, 1999, 
and a closed hearing on October 28, 1999, to examine the case. 
The Committee received testimony from Vice Admiral Thomas 
Wilson, Director of the DIA, Brigadier General Roderick Isler, 
Associate DCI for Military Support and Admiral Mike Ratliff, 
Director of Naval Intelligence. The purpose of the hearing was 
to: (1) review the Intelligence Community's analytical input 
concerning Speicher's status as a Prisoner of War, Missing, or 
Killed in Action, (2) determine how the Intelligence Community 
is organized to carry out the DCI's statutoryresponsibility for 
analytical support on POW/MIA matters and, (3) consider recommendations 
for handling analysis of POW matters in the future. The Committee 
concluded that information existed suggesting that LCDR Speicher may 
have survived his aircraft being shot down. If so, he may at one time 
have been--and conceivably could still be--a prisoner of war.
    The Committee's interest prompted the establishment of a 
Secretary of Defense ``Tiger Team,'' which included members of 
the DIA and the Office of the Secretary of Defense (OSD), to 
reassess the Speicher case. Although scheduled to produce a 
joint report on March 13, 2000, DIA and OSD were unable to 
agree on findings, and no report was published. The Committee 
held an additional closed hearing on April 4, 2000. The 
Committee received testimony from Vice Admiral Wilson; Jerry M. 
Hultin, Under Secretary of the Navy; and Mr. Paul Lowell, 
Director of Naval Intelligence. The purpose of the hearing was 
to (1) review the Intelligence Community's all-source 
analytical input to the Secretary of the Navy and the DoD Tiger 
Team concerning Speicher's status, (2) review the Intelligence 
Community's responsiveness to the Secretary of the Navy's 
intelligence needs regarding the Speicher case, and (3) 
determine how the Intelligence Community might be better 
organized to carry out the DCI's statutory responsibility for 
analytical support on POW/MIA matters.
    At this hearing, Members learned that no comprehensive 
analytic review of all-source intelligence had been produced on 
the fate of LCDR Speicher since his plane was shot down in 
1991. As a result, the Committee directed a comprehensive 
analytical assessment of the intelligence related to the fate 
of LCDR Speicher. The Committee held another closed briefing on 
July 25, 2000, to update Members on efforts to obtain the 
fullest possible accounting of LCDR Speicher's fate. The 
Committee, by that point was deeply concerned that the Navy's 
conclusion that LCDR Speicher was killed in action during the 
Gulf War did not reflect the information provided by the 
Intelligence Community. In addition, the Committee directed 
that the Inspectors General of the Department of Defense and 
the Central Intelligence Agency jointly examine the 
intelligence support to the Speicher case and address (1) the 
Intelligence Community's organization and assignment of 
responsibility, (2) dissemination of reporting, and (3) 
objectivity, accuracy, and completeness in handling POW/MIA 
issues.
    Largely as the result of the collection and analytic 
efforts directed by the Committee, the Navy on January 10, 2001 
changed LCDR Speicher's status from ``Killed in Action'' to 
``Missing in Action.'' On the same day, the State Department 
delivered a demarche and diplomatic note to the Iraqi Interests 
Section in Washington demanding an accounting of any 
information regarding Commander Speicher's fate.

19. Nazi War Crimes

    The Committee met on September 16, 1999 to review the 
status of declassification efforts by the Intelligence 
Community to comply with the Nazi War Crimes Disclosure Act of 
1998. The purpose of the law is to ensure that information 
contained in classified World War II documents will be made 
available to the public through declassification. Senators 
Shelby, DeWine, Hatch, and Kyl co-sponsored this Act.
    The Committee heard from members of the Intelligence 
Community, the Chairman of the Nazi War Criminal Records 
Interagency Working Group, and officials from the Office of the 
Secretary of Defense.
    The testimony indicated that declassification efforts are 
proceeding well; records are being stored in the National 
Archives; and there are no fiscal or organizational impediments 
to sustaining this effort. The Working Group was given a two 
year extension as part of the Japanese Imperial Government War 
Crimes Act.

20. Encryption

    The Committee is concerned by the impact of widespread 
encryption on the NSA's ability to collect signals intelligence 
on threats to U.S. interests, and on the ability of the FBI and 
other law enforcement agencies to conduct their 
counterterrorist, counterintelligence, and law enforcement 
missions. Encryption is the process of disguising a message in 
such a way as to hide its content. Historically, encryption has 
been used primarily by governments and militaries to protect 
their diplomatic communities, military plans, and other 
secrets. However, in the last two decades the growing use of 
computers, computer networks, the Internet cellular telephones 
and other telecommunications technologies has increased the 
demand for encryption products to protect privacy and 
confidentiality.
    Modern encryption products use complex mathematical 
algorithms to encode messages. The strength of an encryption 
product normally is judged according to the number of ``bits'' 
in the key--the higher the number of bits, thestronger the 
encryption. Until recently, the export of encryption products had been 
tightly regulated due to concerns over how the availability and use of 
strong encryption products overseas would affect the NSA's capability 
to collect signals intelligence (SIGINT).
    During the 106th Congress, the Committee reviewed numerous 
bills and proposals regarding encryption policy, and received 
classified briefings regarding how the Intelligence Community 
seeks to adjust to the use of modern encryption products.
    On September 22, 1999, the Committee held a closed hearing 
to hear the recommendations contained in the Committee's TAG 
review of U.S. encryption policy. The TAG members were asked to 
address (1) the seriousness of the technical challenge to 
foreign intelligence collection posed by commercial encryption 
products, (2) alternative technical responses to the 
proliferation of encryption products, (3) the viability of the 
foreign encryption products market, (4) federal policy or 
statutory prescriptions that will protect national security 
interests, and (5) technical or policy alternatives that will 
assist law enforcement to gain access to encrypted information 
in accordance with legal and constitutional safeguards.
    The Committee will maintain its oversight of U.S. 
encryption policy and will continue to support the Intelligence 
Community's plans to address encryption technology.

21. Comprehensive Test Ban Treaty (CTBT)

    In October 1999, the Committee held a closed hearing with 
senior representatives of the Intelligence Community in support 
of the Senate's deliberations on whether to give its consent to 
ratification of the Comprehensive Test Ban Treaty. The hearing 
focused on the ability of the United States to monitor foreign 
nuclear testing in the context of the treaty and the relative 
contributions of national and international monitoring and 
inspection capabilities. Later in the month, the Senate voted 
against U.S. ratification of the Comprehensive Nuclear Test Ban 
Treaty.
    The Committee also held staff briefings on possible Russian 
nuclear test activities and the other aspects of foreign 
nuclear weapons programs affecting U.S. national security.

22. The Foreign Intelligence Surveillance Act (FISA) and the technology 
        challenge

    In 1998, the Committee audit staff conducted a six-month, 
comprehensive review of the implementation and administration 
of the Foreign Intelligence Surveillance Act of 1978. While the 
audit staff found that the FISA legal review and approval 
procedures receive senior management attention and are 
appropriately rigorous, effective, and consistent with the law, 
the staff also found that certain agencies were not prepared to 
counter emerging technologies which challenge traditional 
techniques of intelligence gathering under the FISA.
    The challenges the Intelligence Community faces in 
conducting electronic surveillance in today's communications 
environment remain a particular concern to the Committee. As 
the FISA has been the means by which some of our nation's most 
important intelligence has been obtained for more than two 
decades, it is imperative for the intelligence oversight 
committees to understand the impact the dramatic changes in 
communication and information technology have had on FISA 
collection efforts. Equally important is the need to ensure 
that the FISA statute itself keeps pace with rapidly changing 
technology, so that counterintelligence and terrorist targets 
cannot evade detection and prosecution by simply changing the 
way they communicate, and at the same time, to ensure that the 
privacy rights of American citizens are not placed at risk.
    In March 2000, the Committee conducted a hearing to review 
the role and viability of the FISA in today's collection 
environment and the impact of modern technology. Senior 
Intelligence Community officials have told the Committee that 
the Act of 1978 presently provides the flexibility to permit 
collection against emerging technologies.
    The Committee also is encouraged by recent Intelligence 
Community efforts both to confront technological changes and 
exploit opportunities presented by rapidly changing 
communications technologies. However, the Committee recognizes 
that any degradation in the Intelligence Community's capability 
to exploit emerging communications technologies will adversely 
affect our nation's ability to collect critical intelligence 
information. Monitoring of the Intelligence Community's 
research and development efforts to ensure that collection 
capabilities keep pace with communications technologies will 
continue to be a high priority for the Committee's oversight of 
the FISA.

23. Pan Am 103

    On December 21, 1988, Pan Am Flight 103 exploded in the air 
over Lockerbie, Scotland. The explosion and crash killed 270 
people, including 189 Americans, and was quickly determined to 
have been the work of terrorists. On May 3, 2000, more than 11 
years after the bombing, the trial under Scottish law of two 
Libyan nationals, Abdel Basset Ali al-Megrahi and Lamen Khalifa 
Fhima, began in Camp Zeist, The Netherlands. [The Scottish 
Court convicted Fhima and acquitted al-Megrahi for the bombing 
in February 2001.]
    This Committee monitored the proceedings in The Netherlands 
as part of its oversight responsibilities. The United States 
Government and, in particular, the Director of Central 
Intelligence pledged full support to the Scottish prosecutors 
in their efforts to obtain a conviction of the two Libyan 
nationals. The Committee supports that commitment. The families 
of the American citizens who died in that explosion have a 
right to expect that the United States Government will go to 
extraordinary lengths to bring the perpetrators to justice. 
Those who may plan to engage in terrorist acts against United 
States citizens or interests in the future must know that the 
United States will pursue justice no matter how long it takes.
    In a briefing to the Committee on March 3, 2000 Members 
were briefed on the CIA's role in providing information in its 
possession to support the prosecution, which is unprecedented 
in a case heard before a foreign tribunal. In addition to the 
briefing for Members, the Committee staff received periodic 
briefings on the progress of the case, particularly with 
respect to the potential risks to intelligence sources and 
methods caused by the introduction of CIA documents as evidence 
and the testimony of CIA officers as witnesses.

24. Intelligence needs of Unified Commands

    For the first time since the formation of the Senate Select 
Committee on Intelligence, the Committee conducted a briefing 
for Members with the senior intelligence officers of the 
Unified Combatant Commands and the Specified Commands. The 
Committee held the briefing to assess the levels of support 
provided by the Intelligence Community to the commands.
    The conclusion of the Cold War and the spread of 
technologies related to weapons of mass destruction have 
complicated the plans and intelligence requirements within the 
commands. Preventing strategic surprise remains an important 
mission, but terrorism, counternarcotics, peacekeeping and 
humanitarian support require increased emphasis to meet the 
diverse mission requirements of the commands.
    By consensus, the commands have been satisfied with the 
level of support provided by the Intelligence Community. There 
is agreement, however, that the imbalance between collection 
and processing, exploitation and dissemination continues to 
grow. While strongly supporting new collection platforms, the 
commands would like to see greater emphasis placed on 
processing, exploitation, and dissemination capabilities.

25. National Imagery and Mapping Agency (NIMA) and tasking, processing, 
        exploitation, and dissemination (TPED) modernization

    The Committee long has been concerned that intelligence 
collection continues to outstrip analysis, and is troubled that 
funding for the latter remains woefully inadequate. This 
funding shortfall challenges the Intelligence Community's 
ability to manage the tasking, processing, exploitation, and 
dissemination of intelligence collected by satellites, 
airplanes, unmanned aerial vehicles, and other platforms and 
sensors. The issue of Tasking, Processing, Exploitation, and 
Dissemination Modernization is at the heart of how the 
Intelligence Community collects raw intelligence data, and then 
in a timely manner, turns it into a product that is 
understandable and usable to a wide variety of consumers, from 
the President of the United States to the military commander in 
the field.
    In June 1999, the NIMA issued a congressionally-mandated 
report describing the challenges and projected shortfalls in 
the areas of TPED related to intelligence to be collected by 
the Future Imagery Architecture (FIA) satellite program and 
other intelligence collection systems. The funding shortfall 
figures in the NIMA report were updated in the summer of 1999.
    The Committee concluded that Phase One of the 
Administration's three phase TPED modernization plan was 
woefully underfunded in the proposed fiscal year 2001 budget 
and over the Future Years Defense Plan (FYDP), i.e., fiscal 
years 2001-2005. The Committee was troubled by the 
Administration's unwillingness to recognize the significant 
disparity between its proposed funding plan and the TPED 
modernization funding plan, which is based on a rigorous 
technical evaluation that has yet to be challenged as being 
either flawed orinflated. The Committee was concerned that the 
dramatic underfunding of Phase One TPED modernization in fiscal year 
2001 was setting up a budgetary crunch wherein a disproportionate 
amount of funds would be required in subsequent years of the FYDP.
    The Committee held a closed hearing on March 2, 2000, to 
hear testimony on the objectives and plans of the NIMA to meet 
the needs of the national and military intelligence customers 
today and in the future. One area of particular concern to the 
Committee was the modernization effort underway concerning 
imagery and geospatial TPED. Arthur Money, Assistant Secretary 
of Defense (Command, Control, Communications, and Intelligence) 
and Lieutenant General James King, Director of the NIMA, 
testified before the Committee on the Administration's plan to 
address the TPED shortfalls in Fiscal Year 2001 and over the 
balance of the FYDP time frame. Dr. Anita Jones testified on 
the findings contained in a just-completed report of the 
Defense Science Board Task Force, which she co-chaired, 
reviewing the NIMA's roles and missions and TPED modernization 
strategy.
    The Committee recommended a number of funding changes 
within the NIMA budget both in the National Foreign 
Intelligence Program and the Joint Military Intelligence 
Program to bolster Phase One TPED modernization efforts in 
fiscal year 2001.

26. Unauthorized disclosure of classified information

    On June 14, 2000, the Committee held a hearing to review 
recent significant instances of the public release of 
classified information, to determine how the release of 
classified information has affected intelligence collection, to 
discuss how these cases are investigated and prosecuted, and to 
consider ways to halt such ``leaks'' of classified information. 
The witnesses at this hearing included Attorney General Janet 
Reno, DCI George Tenet and FBI Director Louis Freeh.
    Over the past five years, information regarding a number of 
sensitive intelligence collection programs and assets has 
appeared in the press. These leaks include information that 
endangers human intelligence sources, information about our 
nation's satellite collection systems, and various signals 
intelligence information on terrorist, proliferation, and other 
targets.
    The public release of such material can result in the loss 
of access to intelligence, the enhancement of denial and 
deception techniques, an increased reluctance of current and 
potential assets to work for the United States, and the arrest, 
imprisonment, and execution of foreign human assets.
    The Bremmer Commission Report, titled ``Countering the 
Changing Threat of International Terrorism'' stated that 
``[l]eaks of intelligence and law enforcement information 
reduce its value, endanger sources, alienate friendly nations 
and inhibit their cooperation, and jeopardize the U.S. 
Government's ability to obtain further information.''
    In most leaks cases, the identity of the person who 
released the classified information is unknown. In many 
instances, the classified information was widely distributed, 
with literally hundreds of people having access to the 
intelligence report. This limits the ability of law enforcement 
officials to identify a possible source.
    Currently, there is no general criminal penalty for the 
unauthorized disclosure of classified information. There are 
statutes prohibiting the unauthorized disclosure of certain 
types of information, such as diplomatic codes, nuclear 
information, communications intelligence, or ``national 
defense'' information. Many leaks of classified information do 
not easily fit within existing statutory definitions, for 
example, certain intelligence information from human sources 
and some information relating to covert action. Some legal 
scholars have argued that existing statutes only apply to 
classic espionage situations and are not meant to be applied to 
``leaks.''
    The Committee sought to address this issue in the fiscal 
year 2001 intelligence authorization bill. Section 304 of the 
Intelligence Authorization Act for Fiscal Year 2001 would 
prohibit any current or former officer, employee, or contractor 
with access to ``classified information'' from knowingly and 
willfully disclosing it to unauthorized personnel. ``Classified 
information'' was defined within this section as:

        ``* * * information or material designated and clearly 
        marked or represented, or that the person knows or has 
        reason to believe has been determined by appropriate 
        authorities, pursuant to the provisions of a statute or 
        Executive Order, as requiring protection against 
        unauthorized disclosure for reasons of national 
        security.''

    After the Committee had received approval from and support 
for this provision from the Administration, President Clinton 
vetoed the Intelligence Authorization Act for Fiscal Year 2001 
based upon the inclusion of this provision.
    Following the veto, on November 13, 2000, the House 
reintroduced and passed the conference report in the House as a 
new bill, H.R. 5630. H.R. 5630 did not include the provision 
regarding ``leaks'' of classified information that led to the 
President's veto. The Senate considered and passed H.R. 5630 on 
December 6, 2000, with an amendment by Senator Allard to strike 
section 501, relating to contracting authority by the National 
Reconnaissance Office. The House considered and passed the bill 
on December 11, 2000 without amendment. The President signed 
the bill on December 27, 2000 as P.L. 106-567.
    The Committee will continue its oversight of efforts to 
prevent and investigate unauthorized disclosures of classified 
information, and may seek to reintroduce legislation in the 
107th Congress to address the insufficient statutory 
prohibitions against leaks of classified information.

                     B. INVESTIGATION AND INQUIRIES

1. The People's Republic of China investigations

    In the 105th Congress, the Committee unanimously approved 
Terms of Reference for investigations into ``Impacts to U.S. 
National Security of Advanced Satellite Technology Exports to 
the People's Republic of China (PRC)'' and ``The PRC's Efforts 
to Influence U.S. Policy.''
    These investigations were prompted by (1) press reports of 
possible export control law violations by Loral Space and 
Communications Ltd. and Hughes Electronics Corporation, in the 
course of launching U.S. satellites on Chinese rockets that may 
have harmed U.S. national security by providing expertise to 
the PRC's military ballistic missile programs, and (2) a report 
that Johnny Chung, a Democratic Party fund-raiser, being 
investigated for improprieties during the 1996 presidential 
campaign, told Department of Justice investigators that an 
executive with a PRC aerospace company gave him $300,000 to 
donate to President Clinton's 1996 re-election campaign. The 
latter report came against a backdrop of earlier reporting and 
prior congressional investigations of a PRC Government plan to 
influence the American political process.
    Subsequent investigations and press reporting identified 
additional problems in the course of U.S. satellite launches in 
the PRC, which were first authorized under a policy dating to 
the Reagan Administration, designed to address the shortage of 
space launch capabilities following the Challenger disaster. 
These problems included Hughes' transfer to the PRC of a 
failure analysis of the 1995 launch of the Hughes Apstar 2 
satellite, and the absence of U.S. Government monitors at 
Chinese launches of three Hughes satellites in 1995-1996. Other 
press reports raised concerns that the PRC may have developed 
technology applicable to Multiple Independently Retargetable 
Vehicles (MIRVs) through its development, to U.S. 
specifications, of a multiple-satellite ``Smart Dispenser'' to 
place Motorola ``Iridium'' communication satellites in orbit.
    In the course of its investigations, which concluded in May 
1999, the Committee conducted ten hearings and dozens of staff 
briefings and interviews. Witnesses included the Director of 
Central Intelligence George Tenet, Attorney General Janet Reno, 
FBI Director Louis Freeh, and expert witnesses from the CIA, 
the Defense Department's Defense Technology Security 
Administration (DTSA), the Department of State, the National 
Air Intelligence Center (NAIC), the NSA, the DIA, and the 
General Accounting Office (GAO). Committee staff also reviewed 
tens of thousands of documents provided by Executive 
departments and agencies and U.S. satellite manufacturers, and 
produced analyses for the Committee's use based on those 
documents.
    In a Committee Report approved on May 5, 1999, by a vote of 
16 to one, the Committee found, with respect to satellite and 
missile technology transfers, that:

    The technical information transferred during satellite 
launch campaigns enables the PRC to improve its present and 
future space launch vehicles and ICBMS. Because such analyses 
and methodologies are also applicable to the development of 
other missile systems, the Committee believes that, where 
practicable, the PRC will use the transferred information to 
improve its short range ballistic missiles (SRBMs), 
intermediate range ballistic missiles (IRBMs), and related 
technology. These missiles could threaten U.S. forces stationed 
in Japan and Korea, as well as allies in the region.

           *       *       *       *       *       *       *

    The Committee's conclusions with respect to technology 
transfer are based on the evidence of technology transfers to 
the PRC's space launch industry * * * the substantial 
similarities between space launch vehicles and ballistic 
missile technology (the CIA has described space launch vehicles 
as ballistic missiles in disguise), the integration of the 
PRC's space launch and ballistic missile industries, the PRC's 
intention to modernize and upgrade its ballistic missile force, 
evidence that U.S. know-how was incorporated into the PRC space 
launch program, and the Committee's assumption that any 
improvements in the PRC's space launch vehicles would be 
incorporated wherever practicable in the PRC's military 
ballistic missile program.

           *       *       *       *       *       *       *

    In the past, the PRC has proliferated SRBMs, IPBMs, and 
their related technology to potential U.S. adversaries such as 
Iran and to countries such as Pakistan where the presence of 
advanced weapons increases regional instability. U.S. national 
security interests already may have been harmed if the PRC used 
the transferred information to improve these proliferated 
missile systems. Or U.S. national security may be harmed in the 
future if the PRC proliferates missile systems or components 
that have been improved as a result of the technology transfer.
    The Committee further finds that improvements to the PRC's 
space launch capability increases the PRC's ability to use 
space for military reconnaissance, communications, and 
meteorology. The PRC's enhanced ability to use space in turn 
may pose challenges to U.S. national security interests and 
capabilities.
    The perfection of a flight-worthy PRC Smart Dispenser is an 
example of the pulling effect leading to improved space launch 
services inherent in U.S. use of such services. The PRC had 
indigenous capability to develop a Smart Dispenser prior to 
Motorola's request for proposals for the Iridium project. 
Undertaking this project resulted in a flight-worthy dispenser. 
Analysts differ as to the military significance of this 
development.
    The Committee found that decisions in 1992 and 1996 
transferring licensing jurisdiction over commercial satellites 
from the State Department to the Commerce Department emphasized 
commercial interests over national security and other concerns. 
The 1992 decision shifted jurisdiction over the export of 
commercial satellites without militarily significant 
characteristics from the State Department to the Commerce 
Department. This action reduced the ability of the State and 
Defense Departments to block such exports on national security 
grounds. * * * In 1996, jurisdiction over the export of all 
remaining commercial satellites was transferred to Commerce.
    The 1996 decision had the additional consequence of 
completing the process of removing commercial satellites from 
categories of goods that would not be exported when the U.S. 
government imposed Missile Technology Control Regime (MTCR) 
Category II sanctions. This step, at least in part, reflected 
industry pressure since 1992 to bring about such a policy 
change.

           *       *       *       *       *       *       *

    The transfer of the export of commercial satellites to 
Commerce Department jurisdiction affected U.S. national 
security. Some believe the national security was enhanced by 
having the PRC use U.S. satellites and by maintaining strong 
international demand for our satellites. On the other hand, 
some believe this step diminished the impact of U.S. sanctions 
against the PRC for its proliferation practices, thus weakening 
the non-proliferation regime generally.
    The Committee identified a failure by successive 
Administrations to provide adequate funds, staff, and training 
to DTSA officials responsible for monitoring U.S.-PRC satellite 
cooperation. As a result of confusion engendered by the 1992 
decision, Defense Department monitors were not present during 
three satellite launch campaigns in 1993-96. Existing documents 
show that no monitors were present in 1997 at the fourth 
technical interchange meeting of the Chinastar 1 campaign. 
Records suggest, but do not confirm, the absence of monitors at 
other meetings. The Committee believes these unmonitored 
meetings provided the PRC opportunities to collect technical 
information. The Committee would be surprised if the PRC did 
not take advantage of such opportunities to obtain technology. 
The Committee recommends substantial changes in the launch 
monitor program.
    From 1988 through today, the Intelligence Community has 
generated and disseminated to U.S. policymakers extensive 
intelligence reporting on issues relevant to export policy 
decisions. Such reporting covers the PRC's interest in 
obtaining advanced U.S. technologies, the integration of the 
PRC's civilian and military launch vehicle programs, PRC 
military modernization, and PRC missile proliferation.
          The Committee found that intelligence reporting 
        dating from at least the 1980s indicated that the PRC 
        Government has had a strategic, coordinated effort to 
        collect technological products and information from the 
        U.S. Government and private companies. According to 
        intelligence reporting, the PRC Government had devoted 
        significant resources and effort at collecting all 
        types of technology from American sources, whether of 
        military or commercial value or both. Although 
        intelligence reports detailing widespread and organized 
        PRC efforts to collect technical knowledge were 
        available to officials involved with the satellite 
        export program, weaknesses in procedures and 
        insufficient resources to support the monitoring effort 
        detracted from the overall program.
          The Committee concludes that U.S. Government 
        officials failed to take seriously enough the 
        counterintelligence threat during satellite launch 
        campaigns. As a result, monitors were inadequately 
        trained and rewarded and of insufficient number. An 
        inadequate effort was made to ensure that employees of 
        U.S. satellite manufacturers were trained and prepared 
        to deal with PRC efforts to obtain U.S. know-how.

    With respect to PRC efforts to influence U.S. policy, the 
Committee focused on the following question: ``Is there 
intelligence information \2\ that substantiates the allegation 
that the PRC government undertook a covert program to influence 
the political process in the United States through political 
donations, and other means, during the 1996 election cycle?''
---------------------------------------------------------------------------
    \2\ For purposes of the Committee report, ``Intelligence 
information'' includes foreign intelligence (FI) and foreign 
counterintelligence (FCI) as defined in Section 3 of the National 
Security Act and in Executive Order 12333. It does not include 
information obtained by law enforcement investigations (unless it was 
also provided as FI or FCI to law enforcement agencies by intelligence 
agencies). However, it does include information obtained in a law 
enforcement investigation which was in turn provided by law enforcement 
agencies to intelligence agencies as FI or FCI. It does not include 
information collected by intelligence agencies pursuant to the 
authority of Section 105A of the National Security Act, unless such 
information also is FI or FCI. It does not include information 
collected by other congressional committees investigating PRC political 
influence as such, but it could include this information if it were 
also FI or FCI. Finally, it does not, insofar as is known, include 
information protected by Rule 6e, Federal Rules of Criminal Procedure 
(FRCP).
---------------------------------------------------------------------------
    The answer to that question, the Committee concluded, was:

          Yes. * * * [Whereas] [h]istorically, the PRC 
        government has focused entirely on influencing the U.S. 
        President and other Executive branch officials * * * 
        after the Taiwanese President, Lee Tung-hui, was 
        granted a visa to the United States in 1995, PRC 
        officials decided that it was necessary to reassess 
        their relationship with Congress. In response to 
        President Lee's visit, the PRC conceived of a plan \3\ 
        to influence the U.S. political process favorably 
        toward that country. The plan was an official PRC plan, 
        and funds were made available for its implementation. 
        The existence of this plan is substantiated by the body 
        of evidence reviewed by the Committee, including 
        intelligence reports.
---------------------------------------------------------------------------
    \3\ The term ``China Plan'' was used in discussions between 
Congress and the executive branch to refer to the collective body of 
information describing these efforts by the PRC.
---------------------------------------------------------------------------
          While the primary focus of the PRC plan was the U.S. 
        Congress, the Committee discovered no direct evidence 
        or information of an actual attempt to influence a 
        particular member of Congress. However, the PRC plan to 
        influence the U.S. political process applied to various 
        political office holders or candidates at the local, 
        state, and federal level.
          There is intelligence information indicating PRC 
        officials provided funds to U.S. political campaigns. 
        However, the intelligence information is inconclusive 
        as to whether the contributions were part of the 
        overall China Plan.
          During a criminal investigation into violations of 
        the Federal Election Campaign Act (FECA), Johnny Chung, 
        a U.S. citizen and a subject of that investigation, 
        stated that in August 1996 he had been given $300,000 
        by a senior PRC official to assist in the election of 
        President Clinton. While this statement is contrary to 
        his previous statements, the FBI can trace only about 
        $20,000 of the $300,000 to the Democratic National 
        Committee, via a contribution by Chung. Most of the 
        remaining funds went for his personal use, including 
        mortgage payments. There is also reporting regarding 
        contributions from other sources made to a Republican 
        candidate for state office and a Republican state 
        office holder. There is no intelligence information 
        indicating that contributions had any influence on U.S. 
        policy or the U.S. political process or that any 
        recipients knew the contributions were from a foreign 
        source.
          The intermediary between Johnny Chung and the senior 
        PRC official was Ms. Liu Chao-ying, daughter of General 
        Liu Hua-qing, formerly the highest ranking military 
        officer in the PRC * * *

2. PRC Nuclear Espionage, Department of Energy Security and 
        Counterintelligence Matters, and the Wen Ho Lee Case

    The Committee has jurisdiction over counterintelligence 
matters government-wide, including the Department of Energy 
(DOE) Office of Counterintelligence. From March 1999 through 
September 2000, the SSCI held 16 hearings on the Kindred Spirit 
investigation into the loss of W-88 nuclear warhead information 
to the PRC, the Intelligence Community damage assessment of PRC 
nuclear espionage, security and counterintelligence problems at 
the Department of Energy, DOE reorganization, the conduct of 
the investigation and prosecution of Wen Ho Lee for downloading 
and retaining classified nuclear weapons information, the 
resulting plea agreement between Lee and the U.S. Government, 
and other related matters. Witnesses included Attorney General 
Janet Reno, Energy Secretary Bill Richardson, FBI Director 
Louis Freeh, DCI George Tenet, former Energy Secretaries James 
Watkins, John Herrington, and Federico Pena, and the directors 
of the Los Alamos, Lawrence Livermore, and Sandia national 
laboratories. Committee members also met with National Security 
Advisor Sandy Berger to discuss the Administration's response 
to PRC nuclear espionage.
    Committee Members and staff traveled to Los Alamos National 
Laboratory, meeting with dozens of lab officials ranging from 
the lab director and senior staff to scientists and computer 
personnel. Staff also conducted extensive interviews with the 
Albuquerque FBI field office and the Assistant U.S. Attorney 
for New Mexico, and traveled to Lawrence Livermore and Sandia 
national labs to interview lab and local FBI field office 
personnel.
    Committee staff interviewed five former Secretaries of 
Energy and two former Deputy Secretaries of Energy, and held 
dozens of interviews, briefings, and meetings with current and 
retired senior CIA, FBI, DOE, and NSC officials, including the 
National Intelligence Officer for Strategic Programs, the CIA's 
Deputy Director for Operations, the FBI Assistant Director/
National Security Division, the Director of Energy 
Intelligence, the former CIA Deputy Director for Intelligence, 
and the former National Intelligence Officer for Special 
Activities.
    Committee staff compiled a detailed, all-source chronology 
of DOE counterintelligence and security problems, PRC espionage 
against the national laboratories, and the related DOE and FBI 
investigations.
    Although the Committee has jurisdiction only over the 
counterintelligence and intelligence functions of the 
Department of Energy, the Senate-passed version of the 
Intelligence Authorization Act for Fiscal Year 2000 contained 
provisions (Title IX) providing for a wide-ranging 
reorganization of the Department to address numerous security, 
counterintelligence, and management shortcomings identified by 
the SSCI, the House Select Committee on U.S. National Security 
and Military/Commercial Concerns with the Peoples' Republic of 
China (the ``Cox Committee''), and the President's Foreign 
Intelligence Advisory Board (the ``Rudman Report''). Title IX 
was dropped by the Conference Committee after a similar 
reorganization plan was enacted as part of the National Defense 
Authorization Act for Fiscal Year 2000. As described elsewhere 
in this report the Committee also adopted legislation amending 
the Foreign Intelligence Surveillance Act and other 
counterintelligence statutes to address issues that arose in 
the course of the Kindred Spirit and other investigations.
    Meanwhile, the Committee has continued its oversight over 
the Department of Energy's Counterintelligence and Intelligence 
programs. The Committee continues to monitor closely the 
Department's implementation of Presidential Decision Directive-
61 (PDD) enhancing counterintelligence capabilities at DOE, the 
DOE counterintelligence implementation plan, and the provisions 
of the National Defense Authorization Act for Fiscal Year 2000 
to ensure that the Department follows through on these and 
other long-overdue reforms.

3. Deutch Mishandling of Classified Material

    On December 17, 1996, officials of the Central Intelligence 
Agency (CIA) discovered classified information on the 
unclassified home computer of former Director of Central 
Intelligence (DCI) John M. Deutch. The resulting CIA security 
investigation, which began in January 1997, revealed that Mr. 
Deutch routinely had placed highly classified information on 
unclassified computers with Internet access.
    Key steps in the 1997 security investigation of Mr. 
Deutch's actions were not taken, and the CIA Inspector General 
(IG) did not begin its own investigation until February 1998 
after becoming aware that the security investigation was 
incomplete. On July 13, 1999, the CIA IG issued its report of 
investigation, which was later released in unclassified form at 
the Committee's request.
    The SSCI initiated its own inquiry into the Deutch matter 
in February 2000 after becoming aware that the CIA had not 
actively pursued the recommendations contained in the CIA IG's 
report of investigation. Using the CIA IG report asfoundation, 
the Committee sought to resolve remaining unanswered questions through 
more than 60 interviews with current and former Intelligence Community 
and law enforcement officials and a review of thousands of pages of 
documents. The Committee held five hearings on this topic and invited 
the following witnesses: CIA IG Britt Snider, Mr. Deutch, former CIA 
General Counsel Michael O'Neil, former CIA Executive Director Nora 
Slatkin, Executive Director David Carey, and DCI George Tenet. O'Neil 
exercised his Fifth Amendment right not to testify before the 
Committee. In addition, former Senator Warren Rudman, Chairman of the 
President's Foreign Intelligence Advisory Board, briefed the SSCI on 
the findings of the Board's report on the Deutch matter.
    The Committee confirmed that Mr. Deutch's unclassified 
computers contained summaries of sensitive U.S. policy 
discussions, references to numerous classified intelligence 
relationships with foreign entities, highly classified 
memoranda to the President and documents imported from 
classified systems. As the DCI, Mr. Deutch was entrusted with 
protecting our nation's most sensitive secrets pursuant to the 
National Security Act of 1947, which charges the DCI to protect 
the sources and methods by which the Intelligence Community 
conducts its mission. It is this Committee's view that he 
failed in this responsibility. Mr. Deutch, whose conduct should 
have served as the highest example, instead displayed a 
reckless disregard for the most basic security practices 
required of thousands of government employees throughout the 
CIA and other agencies of the Intelligence Community.
    The Committee believes further that in their response to 
Mr. Deutch's actions, Director Tenet, Executive Director 
Slatkin, General Counsel O'Neil, and other senior CIA officials 
failed to notify the Committee in a timely manner regarding the 
Deutch matter, as they are required by law to do. The 
committees were not notified of the security breach by Mr. 
Deutch until more than 18 months after its discovery.
    The Committee determined that there were gaps in existing 
law that required legislative action. Current law required the 
Inspector General to notify the Committees ``immediately'' if 
the Director or Acting Director, but not the former Director, 
is the subject of an Inspector General inquiry. In the 
Intelligence Authorization Act for Fiscal Year 2001, the 
Committee initiated a change in the Central Intelligence Agency 
Act of 1949 to broaden the notification requirement. The new 
notification requirements include former DCls, all current and 
former officials appointed by the President and confirmed by 
the Senate, the Executive Director, and the Deputy Directors 
for Operations, Intelligence, Administration, and Science and 
Technology. In addition, the Inspector General must notify the 
committees whenever one of the designated officials is the 
subject of a criminal referral to the Department of Justice.
    The CIA IG's July 1999 report contained three 
recommendations: review Mr. Deutch's continued access to 
classified information; establish a panel to determine the 
accountability of current and former CIA officials with regard 
to the Deutch matter; and advise appropriate CIA and 
Intelligence Community components of the sensitive information 
Mr. Deutch stored in his unclassified computers. DCI Tenet 
responded to the IG report by indefinitely suspending Mr. 
Deutch's security clearances and instructing Executive Director 
Carey to form an accountability board and to notify 
Intelligence Community components regarding their equities.
    The Executive Director established an Agency Accountability 
Board in September 1999, but its first meetings were in 
November 1999 and subsequent sessions were not held until 
January 2000. Ultimately, the Deputy Director of Central 
Intelligence decided that the final product of the 
accountability board was inadequate. At his request, the 
President's Foreign Intelligence Advisory Board conducted an 
independent inquiry and its conclusions were provided to the 
President and the Deputy Director.
    During a Committee hearing in February 2000, DCI Tenet 
admitted that the CIA had not initiated a damage assessment on 
the possible compromise of the Deutch material. Executive 
Director Carey advised Committee staff that the failure to 
pursue a damage assessment in August 1999 resulted from a 
miscommunication. This mistake was discovered in late 1999, but 
was not corrected until after the Committee wrote the DCI in 
February 2000 requesting a damage assessment be initiated. A 
formal Intelligence Community-wide damage assessment is still 
ongoing at this time.

4. USS Cole

    The USS Cole was attacked in Aden, Yemen on October 12, 
2000. Seventeen sailors were killed and 39 were wounded. The 
Committee immediately began efforts to determine whether 
intelligence information, analysis, and warning had been 
available that might have prevented that attack. The SSCI staff 
is conducting a comprehensive review of all available 
intelligence informationleading up to the attack on the Cole. 
An initial review indicates that the collection and dissemination of 
terrorism-related information was timely and effective. A review is 
ongoing to determine if enhancements to the analysis and warning 
processes could make the intelligence information more effective in 
supporting commanders in the field.

                          c. community issues

1. Activities of the CIA in Chile

    Section 311 of P. L. 106-120, the Intelligence 
Authorization Act for Fiscal Year 2000, directed the DCI to 
submit a report to the Congress describing the activities of 
the Intelligence Community in Chile around the time of the 1973 
assassination of President Salvador Allende and the subsequent 
accession to power of General Augusto Pinochet. The report also 
was to focus on human rights violations committed by the 
Pinochet regime. The DCI submitted a classified version of the 
report to the Committee on September 7, 2000, and an 
unclassified version on September 18, 2000. The report provides 
insight into the implementation of the U.S. policy of seeking 
to block Allende from coming to power. It is an important 
historical record not only of the role of the Intelligence 
Community in this effort, but also of the policy making 
mechanisms used to approve that role. In the report the CIA 
acknowledges earlier Presidentially-authorized covert actions 
designed to block Allende from coming to power, including 
support for coup plotters in 1970, but makes it clear that 
there was no comparable involvement in the 1973 coup.

2. Oversight of Intelligence Community Inspectors General

    During the 106th Congress, the Committee continued to 
monitor the activities of the Inspectors General (IGs) of the 
Intelligence Community. This oversight included: review of over 
150 IG products, to include audit reports, inspection reports, 
reports of investigation, and semi-annual reports of IG 
activities; numerous visits to IG offices for updates on plans 
and procedures; and attendance at several IG conferences. In 
addition to a number of Committee hearings on issues reviewed 
by the Intelligence Community IGs, staff conducted a number of 
briefings with Community program and IG personnel in order to 
follow up on the status of IG recommendations. Examples include 
employee grievances, management of operational activities, 
contracting procedures, employee recruitment and security 
processing, CIA's Working Capital Fund, and effective use of 
resources on new technology.
    The Committee also adopted report language regarding the 
administrative Inspectors General at the NRO, the NSA, the 
NIMA, and the DIA. The Committee directed the Directors of 
these agencies to take the appropriate steps to create a 
separate budget line item and personnel authorization for their 
respective administrative IG offices, and to ensure that the IG 
has all the authorities required to hire and retain staff that 
collectively possess the variety and depth of knowledge, 
skills, and experience needed to accomplish, efficiently and 
effectively, the Office of Inspector General's mission. The 
Committee requested that the Directors provide a written 
response on the status of these initiatives.
    The Committee also took steps to improve its oversight of 
the Inspectors General from the NRO, NIMA, NSA, and DIA by 
requesting an annual report that details their request for 
fiscal and personnel resources, and the plan for their use. 
This report will include the programs and activities scheduled 
for review during the fiscal year, comments on the office's 
ability to hire and retain qualified personnel, any concerns 
relating to the independence and effectiveness of the IG's 
office, and an overall assessment of the Agency's response to 
the IG's recommendations during the previous year.

3. Classified Information Procedures Act (CIPA)

    The 1980 Classified Information Procedures Act (18 U.S.C. 
App.) has proven to be a very successful mechanism for enabling 
prosecutions that involve national security information to 
proceed in a manner that is both fair to the defendant and 
protective of the sensitive national security intelligence 
information. Before CIPA, the United States Government 
occasionally had to make the difficult decision of either 
dismissing a criminal case or proceeding in the face of the 
risk that classified information might be made public. Neither 
alternative was in the best interests of the intelligence or 
law enforcement agencies--nor, more importantly, in the 
interests of the American people. The CIPA provides pre-trial 
procedures for the court to resolve in camera and ex parte 
these issues in a manner that protects both the national 
security and the defendant's right to a fair trial. The 
government has the option of an immediate appeal of any adverse 
rulings and, if the issues cannot be resolved in a manner that 
protects national security, may then make informed decisions on 
whether to proceed or to dismiss some or all of the charges.
    In a criminal case in which classified information is at 
issue--for example, espionage and terrorism prosecutions--there 
are specific agencies in which the information originated and 
whose equities are most directly implicated by the decisions 
made by the U.S. Government in the case. The head of that 
agency is responsible for protecting the information and, 
accordingly, will have a strong interest in the key decisions 
made by the prosecutors as the case develops. Although all 
litigation decisions must rest ultimately with the Department 
of Justice, it is the head of the affected agency, in most 
cases the Director of Central Intelligence, who will be able to 
provide the perspective in the decision-making process on the 
risks associated with public release of classified information 
at trial. The DCI's expertise will assist the prosecutors in 
their goal of not doing more harm to the national security 
during the case than was caused by the defendant's alleged 
criminal conduct.
    Accordingly, Section 607 of the Intelligence Authorization 
Act for Fiscal Year 2001 (Public Law 106-567) amends CIPA to 
codify existing practice followed by many Department of Justice 
prosecutors. Section 607 requires the Assistant Attorney 
General for the Criminal Division and the United States 
Attorney, or their designees, to provide regular briefings to 
the head of the agency that originated the classified 
information at issue in the case. These briefings will begin as 
soon as practicable and appropriate, consistent with rules 
governing grand jury secrecy, and will continue thereafter, as 
needed, to keep the agency head fully and currently informed. 
The purpose of the briefings is to make sure that the agency 
head understands the parameters and benefits of the CIPA 
procedures. In addition, the agency head will have an 
opportunity at various stages of the case to make his or her 
views known to the prosecutors concerning whether the case is 
proceeding in such a way that sources and methods are receiving 
adequate protection.

4. POW/MIA analytic capability in the Intelligence Community

    The Committee has expressed serious concern about the 
Administration's accounting for Navy Lieutenant Commander 
``Scott'' Speicher, who was shot down over Iraq on the first 
night of the Gulf War. A subset of these concerns relates to 
the lack of an adequate analytical capability within the 
Intelligence Community for Prisoners of War/Missing in Action 
(POW/MIA) issues.
    The January 1993 Report of the Senate Select Committee on 
POW/MIA Affairs concluded that the Defense Intelligence 
Agency's POW/MIA Office had historically over-classified, 
poorly coordinated, and failed to adequately follow-up on 
reports. The report found a ``mindset to debunk [POW] live-
sighting reports.''
    As described elsewhere in this report, the Senate Select 
Committee on Intelligence conducted an inquiry into the 
Intelligence Community's input to support the U.S. Government's 
decision to list LCDR Speicher's status as killed in action. 
During the later part of the 105th Congress, at the request of 
the SSCI, the Director of Central Intelligence produced a 
chronology of the Speicher case. This chronology of events 
enabled informed judgements about questions of policy, process, 
and facts. Furthermore, the chronology highlighted to the 
Committee that a POW/MIA analytic shortfall existed within the 
Intelligence Community. The Committee judged that the shortfall 
stemmed, at least in part, from the Secretary of Defense's 1993 
decision effectively to eliminate the Intelligence Community's 
only POW/MIA analytic capability.
    The impact of this organizational change was first 
addressed by the Committee in a 1997 staff inquiry into the 
Intelligence Community's input that formed the basis for the 
1996 Presidential determination regarding Vietnam's accounting 
for American POW/MlAs. As a result, the 1998 Defense 
Authorization Act directed the Director of Central Intelligence 
to take responsibility for all POW/MIA intelligence-related 
analytic matters. The shortfall in POW/MIA analytic capability 
surfaced again in February 2000, when the Committee received a 
joint CIA and Department of Defense Inspectors General review 
of the 1998 National Intelligence Estimate on POW/MIA matters. 
This report highlighted significant deficiencies in POW/MIA 
analysis specifically related to intelligence.
    As a result, the Committee, in Section 307 of the 
Intelligence Authorization Act for Fiscal Year 2001 (P.L. 106-
567), directed that the Director of Central Intelligence 
establish and maintain an analytic capability within the 
Intelligence Community with responsibility for supporting 
activities related to prisoners of war and missing persons.

5. Counterdrug Intelligence Plan

    On February 12, 2000, the President issued the General 
Counterdrug Intelligence Plan and established the Counterdrug 
Intelligence Executive Secretariat. The Plan fulfilled 
requirements contained in the Treasury and GeneralGovernment 
Appropriations Act of 1998 (P.L. 105-61) and the Conference Report 
accompanying the Intelligence Authorization Act for Fiscal Year 1998 
(P.L. 105-107). These two provisions required the Director of the 
Office of National Drug Control Policy to submit ``a plan to improve 
coordination and eliminate unnecessary duplication among the 
counterdrug intelligence centers and counterdrug activities of the 
Federal Government,'' and specifically to report on efforts to 
structure the National Drug Intelligence Center in order to 
``effectively coordinate and consolidate strategic drug intelligence.''
    The Senate version of the Intelligence Authorization Act 
Fiscal Year 2001 included a provision (Section 308) to waive 
two existing prohibitions and authorize executive branch 
agencies to contribute appropriated funds for the purpose of 
supporting the Counterdrug Intelligence Executive Secretariat. 
This provision was dropped by the conference committee after 
similar language was signed into law as part of a supplemental 
appropriations act. The Committee's report language, however, 
requires the executive branch to report annually on the 
activities of the Counterdrug Intelligence Executive 
Secretariat.
    The Committee has placed, and continues to place, high 
priority on counterdrug intelligence programs. These programs 
provide essential support to the nation's efforts to attack the 
supply of illicit drugs and thereby reduce drug abuse in the 
U.S. and its devastating societal consequences. Intelligence is 
critical to effective source country programs, interdiction 
actions, and law enforcement investigations.

6. Judicial Review Commission on Foreign Asset Control

    Title VIII of the Intelligence Authorization Act for Fiscal 
Year 2000 comprised the Foreign Narcotics Kingpin Designation 
Act. Using the authorities of the International Emergency 
Economic Powers Act as previously applied to Colombian drug 
traffickers as a model, this legislation established a regime 
for identifying, designating, and sanctioning international 
drug trafficking organizations and their leadership. The Act 
requires the President to designate individuals as significant 
foreign narcotics traffickers. These individuals are then 
subject to sanctions, including the blocking of assets in the 
United States. The Act also provides for the blocking of assets 
of foreign persons who materially assist or support the 
traffickers, or who are determined to be acting on behalf of 
the traffickers.
    Section 810 of Title VIII created a commission to review 
judicial, regulatory, and administrative authorities used to 
block assets of foreign persons and to provide the Congress 
with an evaluation of remedies available to any U.S. person 
affected by the blocking of assets of foreign persons. The 
fundamental question that the Commission was asked to address 
was whether provisions in the Act provide constitutionally 
adequate remedies to U.S. persons to challenge agency 
designations and blocking actions. The Judicial Review 
Commission submitted its final report to Congress on January 
23, 2001. The report set forth detailed legal analysis and 
fact-finding activities of the Commission in support of the 
findings and recommendations that had been submitted to the 
Committee on an interim basis on December 4, 2000. Among the 
recommendations contained in the report was an endorsement of 
the position of the Committee, and the Senate, that judicial 
review should be permitted for decisions under the Kingpin Act. 
In addition, the report made a number of recommendations 
regarding the administration and enforcement of sanctions 
programs by the Office of Foreign Asset Control.

7. National Commission for the Review of the National Reconnaissance 
        Office

    During the conference on the Intelligence Authorization Act 
for Fiscal Year 2000, the Senate and House Committees agreed to 
initiate an independent review of the National Reconnaissance 
Office. The review would consider how the NRO can provide the 
most capable and cost efficient satellite collection systems 
possible to ensure that national policy makers and military 
leaders continue to receive timely intelligence information. In 
particular, Intelligence Committee Members wanted to evaluate 
the impact on satellite collection capabilities of dramatic 
changes in technology, coupled with significant shifts in the 
global threat environment over the past decade. These factors 
could seriously affect the ability of NRO satellites to 
continue to provide timely intelligence information.
    The Commission was comprised of eleven members: two from 
the Senate, two from the House of Representatives, six from the 
private sector, and the Deputy Director of Central Intelligence 
for Community Management. The Director of the NRO was an ex-
officio member.
    The Committees tasked the Commission to review the NRO's 
roles and missions, organizational structure, and contractor 
relationships; the technical skills of the NRO employees; the 
use of commercial imagery; launch and supporting services; and 
acquisition authorities. The Commission also was asked to 
review the NRO's relationship with other agencies and 
Government departments. TheCommission's final report, with 
recommendations, was delivered to the Intelligence and Armed Services 
Committees of the Senate and House of Representatives. The Committee is 
reviewing these recommendations. The Committees also tasked the 
Director of Central Intelligence and Secretary of Defense to provide an 
assessment of the report to the Intelligence Committees.

                               D. AUDITS

    The Committee's audit staff was created in 1988 to provide 
``a credible independent arm for Committee review of covert 
action programs and other specific Intelligence Community 
functions and issues.'' During the 106th Congress, the staff of 
three full-time auditors led, or provided significant support 
to, the Committee's review of a number of administrative and 
operational issues relating to the agencies of the Intelligence 
Community. In addition, the audit staff completed three in-
depth reviews of specific intelligence programs or issues. 
These reviews included the following:

1. Review of the National Imagery and Mapping Agency (NIMA)

    The audit examined NIMA's charter and legal authorities, 
financial management system, personnel and facilities, 
procedures for acquisition and property management, Office of 
Inspector General, and information security practices. The 
audit staff was encouraged by NIMA's progress in each of these 
areas. The Agency has used its status as a new organization to 
create innovative programs, particularly in the areas of 
contracting and personnel management. The resulting audit 
report contained recommendations aimed at streamlining the 
NIMA's administrative processes, strengthening its position 
within the Intelligence Community, and resolving open issues 
remaining from the creation of the NIMA in 1996.

2. Covert action

    The staff examined a covert action program, including the 
program's operations, financial obligations and expenses, and 
future plans. The audit found a well-managed program, and the 
resulting report made a recommendation to the Committee 
regarding the appropriate funding level for the program.
    To enhance the Committee's understanding of this 
intelligence target, the audit also included a review of the 
Intelligence Community's collection and analytic capabilities 
against a particular country. The staff found weaknesses 
similar to those identified for other targets and, as such, 
made a recommendation for systemic review by the Assistant 
Director of Central Intelligence for Analysis and Production.

3. Other

    The audit staff has recently begun a review of the 
strategic plan of the Central Intelligence Agency's Directorate 
of Operations.
    The audit staff conducted over 30 interviews and reviewed 
voluminous documentation related to the Committee's inquiry 
into former Director of Central Intelligence John Deutch's 
mishandling of classified information, and drafted and 
coordinated the Deutch report for the Committee's approval. The 
Deutch report was provided to the DCI and Department of 
Justice.
    In addition to these major projects, the audit staff 
completed portions of the Committee staff's investigations of 
satellite and missile technology transfers to the People's 
Republic of China, and counterintelligence and security issues 
at the Department of Energy's National Laboratories. The team 
also worked to ensure the Intelligence Community's Inspectors 
General have the necessary independence, funding, management 
structure, and professional staff to adequately monitor the 
activities of their respective agencies.

                  E. TECHNICAL ADVISORY GROUP REPORTS

    In 1997, the Committee established a Technical Advisory 
Group (TAG) to inform and advise Members of the threats and 
opportunities presented by the extraordinary technological 
advances of recent years. The TAG members have extensive 
expertise in computer hardware and software, 
telecommunications, aviation, satellites, imagery, physics, 
chemical engineering, and other technical fields, as well as, 
in many cases, extensive Intelligence Community experience. 
They are drawn from both government and industry, and volunteer 
their time and effort to identify problems, solutions, and 
opportunities posed by advances in technology.
    In the 106th Congress, the Committee continued to draw upon 
the TAG's world-class expertise, and to incorporate the TAG's 
findings as appropriate intothe Committee's budgetary and 
legislative recommendations. The Committee is grateful to the TAG 
members for their contribution to our nation's security.

1. Signals intelligence--Rebuilding the NSA

    The NSA has responsibility for collecting signals 
intelligence (SIGINT) from electronic signals worldwide. As the 
central repository of the government's SIGINT expertise, the 
NSA is a critical national asset. The NSA historically has led 
the way in development and use of cutting edge technology that 
has kept the United States a step ahead of those whose 
interests are hostile to our own. Unfortunately, in recent 
years, we have failed to invest in the infrastructure and 
organizational changes required to keep pace with revolutionary 
developments in the global telecommunications system.
    In 1998, the TAG completed a study of the NSA based on a 
thorough review of current and planned operations as well as 
research and development programs.
    The conclusions of the TAG's 1998 report were extremely 
disturbing. While the current information revolution presents 
both opportunities for and threats to its mission, the NSA's 
ability to adapt to this changing environment was found to be 
in serious doubt due to the sustained budget decline of the 
past decade. As resources have been reduced, the NSA 
systematically has sacrificed infrastructure modernization in 
order to meet day-to-day intelligence requirements. 
Consequently, the organization begins the 21st Century lacking 
the technological infrastructure and human resources needed 
even to maintain the status quo, much less meet emerging 
challenges. To address these problems, the TAG recommended new 
business practices coupled with additional resources to finance 
this recovery.
    A follow-up TAG review completed in Spring 2000 sounded a 
note of optimism, noting that the NSA Director, in November 
1999, had initiated an aggressive and ambitious modernization 
effort designed to transform the NSA and sustain it as a 
national asset. This transformation--which gained additional 
impetus from the NSA computer outage in January 2000--includes 
organizational and business strategies that promise to 
transform the way the NSA conducts its missions. The Committee 
was encouraged by these actions, and expects that the Director 
of Central Intelligence and the Secretary of Defense will 
support the Director of the NSA in making the difficult 
decisions necessary for the NSA to restore its predominance. 
The Committee determined that to return the NSA to 
organizational and technological excellence, NSA managers, as 
well as Intelligence Community leaders and the Congressional 
oversight committees, must be prepared to accept a level of 
risk as some resources are shifted from short-term collection 
to long-term infrastructure modernization. Failure to do so 
will irreversibly undermine the NSA and its ability to perform 
in a transformed global information technology arena.
    Rebuilding the NSA is the Committee's top priority. To 
provide the additional resources necessary, the Committee has 
had to make tough choices. Inadequate NFIP spending has left 
little flexibility to meet the challenges faced by the NSA, but 
the Committee concluded that the crisis demanded immediate 
attention and warranted shifting resources in order to stave 
off a steady and inevitable degradation of the NSA's unique and 
invaluable capabilities. In its budget recommendations for 
Fiscal Years 2000 and 2001, the Committee has made a down 
payment on this investment.
    At the same time, the Committee knows that money alone will 
not solve the NSA's problems. Organizational change also is 
essential. The Director of the NSA has authority over 
approximately thirty percent of the total SIGINT budget within 
the NFIP. Other agencies and organizations within the NFIP and 
the Department of Defense expend funds for cryptologic 
activities outside the authorities of the Director of the NSA. 
If the Director of the NSA is to have functional responsibility 
for rebuilding the nation's cryptologic program, the Director 
must have greater authority in the planning, programming, 
budgeting, and execution of the entire SIGINT budget. To build 
a comprehensive, efficient U.S. Cryptologic System, the NSA 
Director must have the requisite authorities to manage his 
program. The Committee is determined to work with the Director 
to improve his ability to provide centralized direction across 
the SIGINT infrastructure as he implements his modernization 
strategy.

2. Human intelligence--Bringing technology in from the cold

    In 1998, the Committee asked the TAG to review the status 
of the Intelligence Community's human intelligence (HUMINT) 
capabilities. The TAG concluded that while human intelligence 
collection will play an increasingly important role in 
defending U.S. national security interests, the CIA Directorate 
of Operations (DO) lagged in integrating the technical 
knowledge and trainingneeded to become a more technologically 
oriented, technology-savvy, and technology-responsive organization. The 
HUMINT TAG recommended that:
          The Intelligence Community develop a comprehensive 
        plan that recognizes and adapts to the rapidly changing 
        and technically sophisticated world that now confronts 
        the HUMINT collector;
          The DO continue development of a strategic vision and 
        implementation plan that focuses on missions rather 
        than functions and emphasizes elements that integrate 
        science and technology into its mission solutions; and
          Additional funding be provided to move toward a set 
        of highly advanced capabilities and techniques that 
        will enable the DO to practice high-technology, 
        clandestine, intelligence collection in the first half 
        of this decade.
    In response to the TAG's 1998 recommendations and related 
Committee guidance, the CIA made key changes in an effort to 
take advantage of opportunities provided by technological 
innovation. In 2000, the Committee asked the TAG to assess the 
progress that the Intelligence Community had made in 
undertaking the substantial changes recommended in 1998, and 
incorporated the TAG's findings in its budgetary and other 
actions on the Fiscal Year 2001 Intelligence Authorization Act. 
The Committee will closely monitor the DO's efforts to make 
better use of technological innovations.

3. Measurement and signature intelligence (MASINT)--Funding and 
        organizing to realize potential

    In 1999, the TAG reviewed the Intelligence Community's 
capabilities to collect MASINT, in particular whether MASINT 
was meeting its potential in the areas of management, funding, 
technology development, operations, and integration with other 
intelligence disciplines.
    The TAG found that MASINT can significantly strengthen 
collection against many emerging threats, and potentially 
become the Intelligence Community's most valuable source of 
technical intelligence in the 21st Century. The need for an 
improved MASINT capability is driven by global advances in 
technology and in our adversaries' ability to conduct denial 
and deception against traditional intelligence collection 
methods. The MASINT panel concluded that MASINT technologies 
can--if aggressively developed and integrated with other 
intelligence disciplines--add to and complement the value of 
current collection capabilities, but that realizing this 
potential requires changes in the current approach to MASINT 
technology development.
    The Committee has allocated a significant amount of 
additional funds over the last two years to bolster MASINT 
capability. The Committee also directed the Director of Central 
Intelligence, in coordination with the Secretary of Defense, to 
conduct a study of the utility and feasibility of various 
options for improving the management and organization of 
MASINT, including (1) the option of establishing a centralized 
tasking, processing, exploitation, and dissemination facility 
for measurement and signature intelligence, (2) options for 
recapitalizing and reconfiguring the current systems for 
measurement and signature intelligence, and (3) the operation 
and maintenance costs of the various options.

4. Imagery intelligence (IMINT)--Keeping the customers satisfied

    In 1999, the Committee asked the Technical Advisory Group 
to review three key areas in Intelligence Community management 
of IMINT. The Committee asked the TAG to focus on the Future 
Imagery Architecture program, the imagery requirements process, 
and the broad functions of tasking, processing, exploitation, 
and dissemination of imagery intelligence products.
    In April 1999, the TAG briefed Committee members on its 
findings and recommendations. The report highlighted the 
tensions between varying imagery requirements from the 
tactical, theater, strategic, and national level intelligence 
customers, and the difficulty in satisfying these often 
conflicting taskmasters. One option to address these 
proliferating demands is to develop dedicated imagery systems 
designed to meet the limited requirements of a particular 
customer, which may be more cost-effective than designing 
large-scale systems to meet unlimited requirements. The TAG 
found that the Intelligence Community has not analyzed these 
issues with adequate rigor.
    The TAG report to the Committee also emphasized the 
significant gap between imagery collection requirements and the 
ability of the Intelligence Community to process, exploit, and 
disseminate imagery products. Although some actions had been 
taken by the Intelligence Community to close the gap, there are 
still many serious problems. This issue is addressed at length 
in the section ofthis report dealing with tasking, processing, 
exploitation, and dissemination of intelligence.

                           IV. Confirmations


A. James M. Simon, Jr., Assistant Director of Central Intelligence for 
                             Administration

    On February 4, 1999, the Committee held public hearings on 
the nomination of James M. Simon, Jr. to be the Assistant 
Director of Central Intelligence for Administration. Mr. Simon, 
a career CIA officer was nominated by the President to the 
position on January 6, 1999. (The Senate-confirmable position 
of Assistant Director for Administration was one of several 
positions created by the Intelligence Authorization Act for 
Fiscal Year 1997 in response to the 1996 Brown Commission, 
which made recommendations regarding the effectiveness and 
efficiency of the Intelligence Community.) In addition to his 
administrative responsibilities at the CIA, the Assistant 
Director for Administration serves as the deputy to the Deputy 
Director of Central Intelligence for Community Management.
    Mr. Simon's nomination was considered favorably by the 
Committee on February 26, 1999. The Senate considered and 
approved his nomination on March 2, 1999 by voice vote. A full 
transcript of the nomination hearing was published in S. Hrg. 
106-394, a Government Printing Office publication.

     B. John E. McLaughlin, Deputy Director of Central Intelligence

    On July 27, 2000, the Committee held a closed hearing on 
the nomination of John E. McLaughlin to be the Deputy Director 
of Central Intelligence (DDCI). McLaughlin, an expert in 
European, Russian, and Eurasian affairs, was nominated by the 
President on July 13, 2000. The Deputy Director of Central 
Intelligence is required by the National Security Act of 1947 
to assist the Director in carrying out his functions and to 
serve in his place in his absence.
    Mr. McLaughlin's nomination was considered favorably by the 
Committee on July 27, 2000, by a vote of 15-0. The Senate 
approved his nomination on October 18, 2000 by voice vote.

                        V. Support to the Senate

    The Committee undertook a number of activities to support 
the Senate's deliberations. In addition to its unclassified 
reports, the Committee has sought to support Senate 
deliberations by inviting the participation of Members outside 
the Committee in briefings and hearings on issues of shared 
jurisdiction or interest. The Committee has prepared, and made 
available for the Senate, compendia of intelligence information 
regarding topics relevant to current legislation. Members 
outside the Committee have frequently sought and received 
intelligence briefings by members of the Committee staff. 
Members have also requested and received assistance in 
resolving issues with the actions of an element of the 
Intelligence Community. Finally, the Committee routinely 
invites staff from other Committees to staff-level briefings on 
intelligence issues of common concern.

                              VI. Appendix


                   A. Summary of Committee Activities

1. Number of meetings

    During the 106th Congress, the Committee held a total of 99 
on-the-record meetings and hearings. There were fifty-seven 
(57) oversight hearings and eight (8) business meetings. Twelve 
(12) hearings were held on the budget, including the Conference 
sessions with the House. Two (2) nomination hearings were held.
    Additionally, the Committee held seventeen (17) on-the-
record briefings and over two hundred fifty (250) off-the-
record briefings.

2. Bills and resolutions originated by the Committee

    S. Res. 139--An original resolution authorizing 
expenditures by the Select Committee on Intelligence.
    S. 1009--Intelligence Authorization Act for Fiscal Year 
2000.
    S. 2507--Intelligence Authorization Act for Fiscal Year 
2001.

3. Bills referred to the Committee

    S. 1902--Japanese Imperial Army Disclosure Act.
    S. 2089--Counterintelligence Reform Act of 2000.

4. Publications

    Senate Report 106-3--Committee Activities, Special Report 
of the Select Committee on Intelligence, January 7, 1997-
October 21, 1998 (February 3, 1999).
    Senate Report 106-48--Report to accompany S. 1009, FY 00 
Intelligence Authorization Bill (May 11, 1999).
    Senate Print 1067-25--Report on Impacts to U.S. National 
Security of Advanced Satellite Technology Exports to the 
People's Republic of China (PRC), and Report on the PRC's 
Efforts to Influence U.S. Policy (May 1999).
    Senate Hearing 105-1056--Nomination of Joan A. Dempsey to 
be Deputy Director of Central Intelligence for Community 
Management (May 21, 22, 1998).
    Senate Hearing 106-394--Nomination of James M. Simon, Jr., 
to be Assistant Director of Central Intelligence for 
Administration (February 4 and 26, 1999).
    Senate Hearing 105-1054--Nomination of L. Britt Snider to 
be Inspector General, Central Intelligence Agency (July 8 and 
14, 1998).
    Senate Hearing 105-1057--Investigation of Impacts to U.S. 
National Security From Advanced Satellite Technology Exports to 
China and Chinese Efforts to Influence U.S. Policy (June 10 and 
July 15, 1998).
    Senate Report 106-279--Report to Accompany S. 2507, FY 01 
Intelligence Authorization Bill (May 4, 2000).
    Senate Hearing 106-452--Joint Hearing Before the Committee 
on Energy and Natural Resources, the Committee on Armed 
Services, the Committee on Governmental Affairs, and the Select 
Committee on Intelligence on The President's Foreign 
Intelligence Advisory Board Report on DOE (June 22, 1999).
    Senate Hearing 106-580--Current and Projected National 
Security Threats to the United States (February 2, 2000).
    Senate Hearing 106-592--Department of Energy 
Counterintelligence, Intelligence and Nuclear Security 
Reorganization (June 9, 1999).
    Senate Report 106-352--Report to Accompany S. 2089, The 
Counterintelligence Reform Act of 2000 (July 20, 2000).
    Report 106-969--Conference Report to Accompany H.R. 4392, 
FY 01 Intelligence Authorization Bill (October 11, 2000).

                                
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