[Senate Report 108-52]
[From the U.S. Government Publishing Office]



108th Congress 
 1st Session                     SENATE                          Report
                                                                 108-52
_______________________________________________________________________
 
                         COMMITTEE ACTIVITIES

                               __________

                             SPECIAL REPORT

                                 of the

                    SELECT COMMITTEE ON INTELLIGENCE

                          UNITED STATES SENATE

                  JANUARY 3, 2001 to NOVEMBER 22, 2002




                  May 21, 2003.--Ordered to be printed








                            C O N T E N T S

                              ----------                              
                                                                   Page
 I. Introduction......................................................1
II. Legislation.......................................................2
        A. Intelligence Budget
        B. S. 1428, Intelligence Authorization Act for FY 2002
        C. S. 2506, Intelligence Authorization Act for FY 2003
III.Oversight Activities..............................................6

        A. Hearings..............................................     6
             1. Joint Inquiry Into the Events of September 11, 
                2001
             2. S. 1448--A bill to enhance intelligence and 
                intelligence-related activities of the US. 
                Government in the prevention of terrorism
             3. S. 2586 and S. 2659--Bills to Amend the Foreign 
                Intelligence Surveillance Act
             4. Counterterrorism
             5. Counterintelligence
             6. Counterproliferation
             7. Iraq WMD
             8. Counternarcotics: Colombia
             9. Counternarcotics: Review of Peruvian Shootdown of 
                a Civilian Aircraft on April 20, 2001
            10. National Security Threats to the United States
            11. Covert Action Quarterly Review
            12. Arms Control: The Moscow Treaty
        B. Community Issues......................................    14
             1. Oversight of Intelligence Community Inspectors 
                General
             2. Strategic and Performance Planning for the 
                Intelligence Community
             3. National Commission for the Review of Research 
                and Development Programs of the U.S. Intelligence 
                Community
             4. Intelligence Community Financial Management
             5. Specifying National Foreign Intelligence Budget 
                Amounts for Counterterrorism, 
                Counterproliferation, Counternarcotics, and 
                Counterintelligence
        C. Investigations and Inquiries..........................    17
             1. USS Cole
             2. Captain Michael ``Scott'' Speicher
             3. Robert Hanssen
        D. Audits................................................    19
             1. CIA's Directorate of Operations
             2. Foreign Materiel Program
             3. Counterterrorism
IV. Confirmations....................................................21
        A. John L. Helgerson, Inspector General for CIA
        B. Scott W. Muller, General Counsel of the CIA
 V. Support to the Senate............................................22
VI. Appendix.........................................................22
        1. Number of Meetings
        2. Bills and Resolutions Originated by the Committee
        3. Bills Referred to the Committee
        4. Publications







108th Congress                                                   Report
                                 SENATE
 1st Session                                                     108-52
======================================================================


                          COMMITTEE ACTIVITIES

                                _______
                                

                  May 21, 2003.--Ordered to be printed

                                _______
                                

    Mr. Roberts, from the Committee on Intelligence, submitted the 
                               following

                             SPECIAL REPORT

                            I. Introduction

    The tragic events of September 11, 2001, underscore the 
importance of the Intelligence Community as our early warning 
system against security threats to the United States. In 2002, 
both the Senate Select Committee on Intelligence (SSCI) and the 
House Permanent Select Committee on Intelligence (HPSCI) 
conducted historic joint inquiry into the Intelligence 
Community's performance in dealing with the terrorist threat to 
our country.
    In addition to addressing the U.S. Intelligence Community's 
counterterrorism capabilities, the Intelligence Authorization 
Acts for Fiscal Years 2002 and 2003 reflect the Committee's 
attention to five priority areas to enhance the role of 
intelligence in our national security strategy: (1) 
revitalization of the National Security Agency (NSA); (2) 
correcting deficiencies in human intelligence; (3) addressing 
the imbalance between intelligence collection and analysis; (4) 
rebuilding a robust research and development program for the 
Intelligence Community; and (5) modernizing the capabilities of 
Measurements and Signatures Intelligence to fulfill key 
intelligence requirements. The intelligence budgets, as marked 
up by the SSCI, reflected an emphasis on these priority areas.
    The 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 107th 
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, the Defense 
Intelligence Agency, the National Security Agency, the National 
Imagery and Mapping Agency, the National Reconnaissance Office, 
the intelligence capabilities of the military services, as well 
as the intelligence-related components of the Department of 
State, the Federal Bureau ofInvestigation, the Department of 
the Treasury, the Department of Energy and the United States Coast 
Guard. 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 
Community 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; to 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.
    During the 107th Congress, the Committee held a total of 
117 on-the-record meetings, briefings, and hearings, as well as 
over 300 off-the-record briefings. There were 14 hearings held 
on the Intelligence Community's budget, including the 
Conference sessions with the House. Two nomination hearings 
were held.
    Additionally, the Committee held a total of 22 hearings 
with the House Permanent Select Committee on Intelligence 
concerning the Joint Inquiry into the Events of September 11, 
2001.

                            II. Legislation


                         A. INTELLIGENCE BUDGET

    During the 107th Congress, the Committee conducted annual 
reviews of the fiscal year 2002 and fiscal year 2003 budget 
requests for the National Foreign Intelligence Program, the 
Joint Military Intelligence Program and Tactical Intelligence 
and Related Activities. 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.
    For fiscal year 2003, the Administration proposed 
significant resource increases for the overall national 
intelligence effort. This increase built upon substantial 
supplemental appropriations approved for the Intelligence 
Community for fiscal year 2002 in the wake of the terrorist 
attacks of September 11, 2001. The increased amounts approved 
for the National Foreign Intelligence Program are consistent 
with the need to strengthen the Intelligence Community in 
executing its roles in the ongoing war against terrorism and 
the protection of the American homeland. Additionally, 
requested resources will aid the Intelligence Community's 
ongoing effort to pursue those intelligence subjects of 
greatest concern to our nation.
    In the budget review for fiscal years 2002 and 2003, the 
Committee sought to highlight five areas for priority attention 
in the near term if intelligence is to fulfill its role in our 
national security strategy. They are: (1) revitalizing the 
National Security Agency; (2) correcting deficiencies in human 
intelligence; (3) addressing the imbalance between intelligence 
collection and analysis; (4) rebuilding a robust research and 
development program; and (5) modernizing the capabilities of 
Measurements and Signatures Intelligence to fulfill key 
intelligence requirements.
    Despite significant increased resource levels, the 
Committee identified other shortfalls in the National Foreign 
Intelligence Program budget that did not, or could not, receive 
adequate attention during the Administration's budget process. 
These shortfalls include:
           A looming crisis in our ability to collect 
        information from key platforms as a result of 
        unexpected failures;
           Insufficient funds to complete a major 
        acquisition program; and
           Inadequate funding to ensure that 
        information collected by the next generation of space-
        based sensors will be processed, exploited, and 
        disseminated appropriately to intelligence analysts.
These shortfalls are not the only ones facing the Intelligence 
Community. As the war against terrorism continues, a series of 
intelligence challenges will likely arise which will tax the 
resources and overall capabilities of the people and programs 
comprising the National Foreign Intelligence Program.
    Beyond any specific measures proposed in the 
Administration's budget for fiscal years 2002 and 2003, the 
Administration must continue to devote attention to the five 
priority areas identified by the Committee, as well as a host 
of resource-related issues that must be addressed if the near-
term increases in intelligence capabilities are to translate 
into sustained, long-term intelligence successes 
againstprotracted and complex threats to our nation.. The Committee 
looks forward to working with the Administration in the days ahead in 
this overall effort.

         B. S. 1428, INTELLIGENCE AUTHORIZATION ACT FOR FY 2002

    On September 14, 2001, the Committee reported out S. 1428, 
the Intelligence Authorization Act for Fiscal Year 2002. In 
addition to providing the annual authorization for 
appropriations for intelligence activities, the bill, inter 
alia:
          Amended the National Security Act of 1947 to require 
        that notifications to Congress of intelligence 
        activities and failures be made in writing and to 
        require that the Director of Central Intelligence 
        establish standards and procedures applicable to such 
        reports;
          Required the Director of Central Intelligence to 
        prepare a comprehensive report describing the 
        mechanisms for ensuring that Congress is appropriately 
        served in its policy-making role as a consumer of 
        intelligence;
          Amended current law regarding interdiction of 
        aircraft used in illicit drug trafficking to require 
        the President to make an annual certification to 
        Congress concerning the existence of a drug threat in 
        the country at issue and the existence in that country 
        of appropriate procedures to protect against innocent 
        loss of life;
          Altered the process of handling complaints brought to 
        the Inspectors General of the Intelligence Community so 
        that all complaints are forwarded to the Director of 
        Central Intelligence, or other agency head, and to the 
        congressional intelligence committees; and
          Required the Attorney General, in consultation with 
        the Director of Central Intelligence, to conduct a 
        comprehensive review of current laws, regulations and 
        protections against unauthorized disclosure of 
        classified information and to submit a report to 
        Congress.
    The Senate passed S. 1428 by voice vote.
    On the Floor, the Senate took up the intelligence 
authorization bill passed by the House of Representatives, 
struck all of the House bill after the enacting clause and 
inserted a substituted text, consisting of the text of S. 1428 
and amendments. In conference, members of the House Permanent 
Select Committee on Intelligence (HPSCI) and the Senate Select 
Committee on Intelligence (SSCI) met to seek agreement on the 
authorization of appropriations for fiscal year 2003 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 28. 2001, as P.L. 107-108. The provisions 
of S. 1428 described above remained in the final conference 
report. In addition, the conference report:
          Codified the inclusion of the Coast Guard as an 
        element of the Intelligence Community;
          Required a report on the implementation of the 
        recommendations of the National Commission on 
        Terrorism;
          Required Presidential approval and submission to 
        Congress of the National Counterintelligence Strategy 
        and each National Threat Identification and 
        Prioritization Assessment produced under Presidential 
        Decision Directive 75; and
          Required that the Director of Central Intelligence 
        rescind existing guidelines regarding recruitment of 
        assets with human rights concerns.

         C. S. 2506, INTELLIGENCE AUTHORIZATION ACT FOR FY 2003

    On May 9, 2002, the Committee reported out S. 2506, the 
Intelligence Authorization Act for Fiscal Year 2003. In 
addition to providing the annual authorization for 
appropriations for intelligence activities, the bill, inter 
alia:
          Established in law the National Counterintelligence 
        Executive (NCIX) to serve as the substantive leader of 
        national-level counterintelligence policy. The NCIX had 
        been established previously under Presidential Decision 
        Directive 75;
          Established the National Commission for the Review of 
        the Research and Development Programs of the U.S. 
        Intelligence Community. The Commission, to be composed 
        of government officials and private sector experts, is 
        to review the current state of research and development 
        within the Intelligence Community and determine whether 
        current activities are aligned with the fields that are 
        of the greatest importance to future intelligence 
        efforts;
          Required the creation of a Terrorist Identification 
        Classification System. The Director of Central 
        Intelligence was directed to establish and maintain a 
        list of known or suspected terrorists and to ensure 
        that pertinent information on the list is shared with 
        other agencies of the Federal, State and local 
        governments. The DCI is to prescribe appropriate 
        standards for including names on, and removing names 
        from, the list:
          Required that the National Foreign Intelligence 
        Program budget submission include cross-agency budget 
        aggregates for total Intelligence Community 
        expenditures in counterterrorism, counterproliferation, 
        counternarcotics and counterintelligence; and
          Required the Director of Central Intelligence to 
        establish the National Virtual Translation Center and 
        the Foreign Terrorist Asset Tracking Center.
    The Senate passed S. 2506 by voice vote.
    On the floor, the Senate took up the intelligence 
authorization bill passed by the House of Representatives, 
struck all of the House bill after the enacting clause and 
inserted a substituted text, consisting of the text of S. 2506 
and amendments. In conference, members of the HPSCI and the 
SSCI met to seek agreement on the authorization of 
appropriations for fiscal year 2003 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 November 27, 
2002, as P.L. 107-306. The provisions of S. 2506 described 
above remained in the final conference report. In addition, the 
conference report:
    Established the National Commission on Terrorist Attacks 
upon the United States to examine and report upon the facts and 
causes relating to the terrorist attacks of September 11, 2001. 
The Commission is to investigate and report its findings and 
recommendations on the circumstances surrounding the attacks 
and the extent of the nation's preparedness for, and immediate 
response to, the attacks. The Commission is required to build 
upon the work of the Joint Inquiry of the SSCI and HPSCI, 
rather than duplicating it, by review the Joint Inquiry's 
accomplishments and directing its intelligence-related inquiry 
at areas that need additional review.
    Required the Secretary of the Treasury to submit a 
semiannual report concerning operations against terrorist 
financial networks, such as total number of asset seizures, 
applications for asset seizures and physical searches, as well 
as the extent to which information from these activities has 
been shared with other government agencies.
    Directed the delay of implementation of a compensation 
reform plan at the Central Intelligence Agency (CIA) until 
February 1, 2004, or the completion of a pilot project, and 
expressed the sense of Congress that evaluation training for 
CIA managers and employees should be provided.
    Amended the Freedom of Information Act so that foreign 
governments and their representatives cannot make requests for 
information from the agencies in the Intelligence Community.

                       III. Oversight Activities


                              a. hearings


1. Joint inquiry into the events of September 11, 2001

    Shortly after the September 11, 2001, terrorist attacks on 
New York City and Washington, D.C., the Senate Select Committee 
on Intelligence and the House Permanent Select Committee on 
Intelligence initiated a joint inquiry into the performance of 
the agencies of the Intelligence Community leading up to the 
attacks. This inquiry represents the first time in U.S. history 
that two standing committees of the Senate and House of 
Representatives have cooperated in such an undertaking.
    The two committees hired a separate professional staff and 
assigned it responsibility for: (1) collecting information in 
the possession of the Intelligence Community prior to September 
11 related to the attacks; (2) identifying the nature of any 
specific or systemic problems that may have impeded the 
Community's ability to prevent those attacks or undercut its 
preparedness for such terrorist threats; and (3) making 
recommendations to the two Committees about how to improve the 
U.S. Intelligence Community's ability to predict and prevent 
terrorist attacks in the future.
    In the months that followed, between March and December 
2002, the Joint Inquiry Staff reviewed approximately 500,000 
pages of relevant documents,conducted almost 300 interviews and 
participated in briefings and discussions involving about 600 
individuals. The Joint Inquiry focused primarily on the Intelligence 
Community, but also acquired relevant information from other federal 
agencies, state and local authorities, foreign governments, and private 
sector individuals and organizations. Based on this investigative 
effort, the Senate and House Committees held 22 joint hearings. Nine of 
these were public hearings and 13 were held in closed session because 
of the highly classified nature of much of the information presented in 
documents and testimony.
    In December 2002, the Senate and House Committees, voting 
separately, unanimously approved the Joint Inquiry's classified 
450-page Final Report and made public the unclassified Findings 
and Recommendations contained in the Report. Including 
appendices, the Final Report totals about 900 pages. The 
Committees currently are working with the Intelligence 
Community in an effort to declassify and make public as much of 
the Final Report as possible, consistent with the interests of 
national security. In addition, a number of Senators and 
Members of Congress prepared their own ``Additional Views'' to 
this report, adding additional analysis totaling more than 100 
pages.
    Among the findings of the Joint Inquiry was the conclusion 
that the U.S. Intelligence Community had substantial 
information in its possession before September 11, 2001, that 
was relevant to the terrorist attacks. The Community failed to 
focus upon this information, however, and failed to appreciate 
its collective significance in terms of providing warning of 
the danger of a domestic terrorist attack of the type that 
occurred on September 11. The Joint Inquiry also identified a 
number of systemic weaknesses that contributed to the 
Community's inability to detect and prevent the attacks, and to 
cope successfully with the problem of modern international 
terrorism in general. These weaknesses included a lack of 
coordinated Community-level leadership, poor allocation of 
resources, an insufficient focus on the potential for a 
domestic attack, the absence of a comprehensive 
counterterrorist strategy, inadequate analytic focus and 
quality, a reluctance to develop and implement new technical 
capabilities aggressively, and inadequate sharing of relevant 
counterterrorism information.
    To help correct these deficiencies, the Joint Inquiry 
promulgated nineteen recommendations for reform. Among the more 
significant of these recommendations was the Joint Inquiry's 
endorsement of the creation of a new office of the ``Director 
of National Intelligence'' to lead the Intelligence Community. 
This would be an office separate from that of Director of the 
CIA and would have considerably greater budgetary and 
management powers over Intelligence
    Community components than enjoyed today by the Director of 
Central Intelligence. The Joint Inquiry also recommended that 
Congress promptly consider whether all entirely new 
intelligence agency should be created to perform the domestic 
intelligence functions of the U.S. Government currently handled 
by the Federal Bureau of Investigation. (The full text of the 
Joint Inquiry's findings and recommendations may be found at 
http://www.intell igence.senate.gov/pubs107.htm.)

2. S. 1448, a bill to enhance intelligence and intelligence-related 
        activities of the United States Government in the prevention of 
        terrorism

    S. 1448, a bill to enhance intelligence and intelligence-
related activities of the United States Government in the 
prevention of terrorism, was introduced by Senator Bob Graham, 
along with Senators Feinstein, Bayh, Nelson of Florida and 
Rockefeller on September 21, 2001. The bill was referred to the 
Committee, and the Committee held a public hearing on September 
24, 2001. The Committee heard from witnesses representing the 
Department of Justice and the Central Intelligence Agency, as 
well as public interest groups.
    S. 1448 contained a number of provisions intended to 
support the fight against international terrorism. The bill, 
inter alia:
          Placed the overall strategy and setting of priorities 
        for foreign intelligence collection pursuant to the 
        Foreign Intelligence Surveillance Act (FISA) under the 
        authority of the Director of Central Intelligence;
          Provided that intelligence officers are permitted to 
        establish and maintain intelligence relationships with 
        any person for purposes of acquiring terrorism 
        information;
          Permitted the Federal Bureau of Investigation to 
        collect non-content information without obtaining a 
        FISA order;
          Extended renewal periods for FISA orders;
          Directed that foreign intelligence obtained during 
        the course of a criminal investigation must be provided 
        to the Director of Central Intelligence; and
          Required proposals for the establishment of the 
        Foreign Terrorist Asset Tracking Center and the 
        National Virtual Translation Center.
    The hearing also addressed legislative proposals submitted 
to Congress by the Attorney General shortly after the attacks 
of September 11. 2001. The Attorney General recommended:
          Lengthening the period of a FISA order, and providing 
        for ``roving'' wiretap authority under FISA;
          Amending FISA so that the official applying for a 
        FISA order must certify that foreign intelligence is 
        ``a'' purpose of the FISA application rather than a 
        primary purpose, as interpreted by the courts;
          Permitting the use of information obtained through 
        foreign government wiretaps in United States courts if 
        the United States was not involved with the wiretap;
          Amending Rule 6(e) of the Federal Rules of Criminal 
        Procedure, pertaining to grand juries, as well as Title 
        III, pertaining to criminal wiretaps, so that foreign 
        intelligence obtained from a grand jury or Title III 
        could be shared with other federal agencies; and
          Amending the law regarding National Security letters 
        so that they can be obtained by a Special Agent in 
        Charge of an FBI field office rather than a 
        headquarters official.
    Many of the provisions in S. 1448 and the Attorney 
General's proposals were enacted by the USA PATRIOT Act, P.L. 
107-56 and in the Intelligence Authorization Acts for Fiscal 
Years 2002 and 2003.
    A transcript of the hearing was published in S. Hrg. 107-
449, a Government Printing Office publication.

3. S. 2586 and S. 2659 (proposed amendments to the Foreign Intelligence 
        Surveillance Act)

    S. 2586, a bill to amend the definition of ``foreign 
power'' under the Foreign Intelligence Surveillance Act of 1978 
(FISA) relating to international terrorism, was introduced by 
Senators Kyl and Schumer on June 5, 2002. S. 2659, a bill to 
amend FISA to modify the standard of proof for issuance of 
orders regarding non-United States persons from probable cause 
to reasonable suspicion, was introduced by Senator DeWine on 
June 20, 2002. The Committee held a public hearing on both 
bills on July 31, 2002. The Committee heard testimony from 
representatives of the Department of Justice, the Federal 
Bureau of Investigation and the Central Intelligence Agency, as 
well as from academic and public interest witnesses.
    S. 2586 would amend the definition of ``foreign power'' 
under FISA. One of the showings necessary to obtain a FISA 
order is that the target is a foreign power or an agent of a 
foreign power. Currently, one definition of ``foreign power'' 
is ``a group engaged in international terrorism or activities 
in preparation therefor.'' S. 2586 would amend that definition 
to read ``any person, other than a United States person, or 
group that is engaged in international terrorism or activities 
in preparation therefor.'' The amendment is aimed at the so-
called ``lone wolf'' terrorist. The definition of ``foreign 
power'' would be changed so that for a non-U.S. person, a FISA 
order could be obtained upon the showing that the individual is 
engaged in international terrorism, without requiring a nexus 
to any group of foreign terrorists. S. 2659 would amend the 
probable cause standard under FISA. Currently, for a FISA order 
to be approved, the FISA Court must find probable cause that 
the target is a foreign power or an agent of a foreign power 
and that the location of the electronic surveillance or 
physical search is being used, or is about to be used, by a 
foreign power. S. 2659 would amend the standard so that for a 
non-U.S. person, the necessary showing is reasonable suspicion 
that the target is a foreign power or agent of a foreign power, 
and that the location is being used, or is about to be used, by 
a foreign power.
    Full Senate action is still pending on both bills.

4. Counterterrorism

    Terrorism is, and will likely remain for some time, the 
most critical and immediate national security threat facing our 
nation. Intelligence is the first, and perhaps best, defense 
against terrorism, and the Committee has focused much of its 
effort during the 107th Congress on this issue.
    The Committee held a series of hearings throughout the 
spring and summer of 2001, the clear message of which was that 
there was a very serious terrorist threat to the United States, 
and that a large-scale attack was probable, possibly within our 
borders. As a result, the attacks of September 11 were 
surprising to Members of the Committee only in the scope of 
devastation and their audacious success; the fact that 
terrorists struck within the United States was not a surprise.
    In those pre-September 11 hearings, as well as numerous 
staff briefings, the Committee's belief that the terrorist 
threat was growing was accompanied by concern that our 
Intelligence Community was not well-positioned to meet that 
threat. In particular, there appeared to be a critical lack of 
interagency coordination and cooperation on this vital subject. 
Witnesses appeared before the Committee and its staff stating 
that the relationship between the elements of the Intelligence 
Community, particularly between the Federal Bureau of 
Investigation and the Central Intelligence Agency was good, and 
getting better, but the Committee was not convinced.
    With the attacks on September 11, and the developing ``war 
on terrorism,'' the Committee stepped up the frequency and 
intensity of its scrutiny of this issue. A centerpiece of this 
effort was the establishment of regular ``War on Terrorism 
Update'' hearings, usually held every other week, in which 
representatives of the Intelligence Community provided in-depth 
descriptions of the efforts, and progress, in the intelligence 
response to the attacks.
    In addition to these regular formal briefings, Committee 
staff continued to receive briefings on a wide variety of 
subjects related to the resources, structure and legislative 
framework governing the Intelligence Community's intelligence 
efforts.
    Most importantly, the Committee, in concert with the HPSCI, 
undertook a joint investigation into the attacks of September 
11. The resulting Senate Select Committee on Intelligence and 
House Permanent Select Committee on Intelligence Joint Inquiry 
into the Terrorist Attacks of September 11, 2001 (Joint 
Inquiry) conducted numerous hearings; its staff conducted 
hundreds of interviews and gathered millions of pages of 
relevant documentation. On December 20, 2002, the staff of the 
Joint Inquiry completed a report, which was unanimously adopted 
by both this Committee and its House counterpart.

5. Counterintelligence

    The Committee continued to monitor closely 
counterintelligence issues in the 107th Congress. The SSCI held 
a number of closed hearings on the Robert Hanssen espionage 
case and received numerous staff briefings on the Hanssen case 
and other espionage cases, as well as a wide array of other 
counterintelligence-related issues. The counterintelligence 
issues reviewed by the Committee included: the systemic 
security issues at the Federal Bureau of Investigation as cited 
in the March 2002 report of the Commission for the Review of 
Federal Bureau of Investigation Security Programs (the Webster 
Commission); the effectiveness and accountability of the Office 
of the National Counterintelligence Executive (NCIX); and the 
effectiveness and efficiency of the counterintelligence 
function at the Department of Energy's Office of 
Counterintelligence and the National Nuclear Security 
Administration's Office of Defense Nuclear Counterintelligence.

6. Counterproliferation

    The proliferation of nuclear, biological, and chemical 
weapons, and their means of delivery, remains a central threat 
to U.S. national security and a key issue both to our ongoing 
war on terrorism and potential military action against Iraq. 
The Committee took significant interest in this issue in an 
effort to monitor the scope and trend of proliferation; to 
encourage better cooperation among the Intelligence Community 
to support counter-proliferation efforts; to make more informed 
decisions on national security policy debates; and to assess 
how best to assist the Intelligence Community in its support to 
counter-proliferation.
    The Committee held a number of hearings on proliferation 
topics, including hearings on global proliferation trends, the 
Moscow Treaty, and Iraqi Weapons of Mass Destruction (WMD). In 
addition, the Committee received numerous briefings and 
reviewed many Intelligence Community products addressing 
proliferation of WMD and advanced conventional munitions. Due 
to the potential for WMD use by terrorists, these hearings and 
briefings generated much valuable information and dialogue.

7. Iraqi WMD hearings

    In 2002, we saw United States and United Nations debates on 
the Iraq issue. At the Committee's request, the National 
Intelligence Council produced a National Intelligence Estimate 
on proscribed Iraqi WMD and missile programs, as well as an 
unclassified paper. In early October, the Committee held two 
hearings on this issue.
    United States and United Nations debates on the Iraq 
problems culminated in the October 11, 2002, passage by 
Congress of the Authorization for Use of Military Force Against 
Iraq Resolution of 2002 and the United Nations Security 
Council's unanimous adoption of resolution number 1441 on 
November 8. Resolution 1441 gives Baghdad ``a final opportunity 
to comply with its disarmament obligations.'' Baghdad 
acquiesced to this pressure and allowed inspectors back into 
the country. Under the auspices of Security CouncilResolutions, 
the United Nations Monitoring, Verification, and Inspection Commission 
(UNMOVIC) restarted inspections in late 2002.

8. Counternarcotics: Colombia

    Counternarcotics issues remain of concern to the Committee, 
especially in light of evidence showing the nexus between drug 
trafficking and terrorism. In addition to parts of southeast 
and southwest Asia, Latin America, specifically, Colombia, 
continues to be a major drug producing region. The Committee 
held a closed hearing on March 7, 2001, to hear information 
about Colombia, with a particular emphasis on Plan Colombia. 
The hearing centered on current intelligence analysis and 
assessments of the political and military situations in 
Colombia, with significant insight into the illegal armed 
groups, drug production, and drug trafficking activity in the 
country. The hearing also addressed the potential for regional 
spillover, as well as human rights issues in relation to the 
Government of Colombia.

9. Counternarcotics: Review of the Peruvian shootdown of a civilian 
        aircraft on April 20, 2001

    On the morning of April 20, 2001, a Peruvian Air Force A-37 
fighter engaged in counter-drug operations over northeastern 
Peru fired on and disabled a suspected drug trafficking 
aircraft. The single engine float plane actually was owned and 
operated by the Association of Baptists for World Evangelism 
and was carrying missionaries returning to their homes in 
Iquitos, Peru. Two of the missionaries were killed by the 
gunfire and a third was wounded. The damaged float plane made 
an emergency landing on the Amazon River about 80 miles from 
Iquitos, Peru. The missionary's plane had been tracked by a 
Cessna Citation owned by the U.S. military and operated by the 
U.S. Central Intelligence Agency (CIA) as part of a bi-national 
drug interdiction program.
    The Committee held one closed hearing and a closed briefing 
concerning the Peru shootdown. On April 24, 2001, the Committee 
heard testimony from George Tenet, Director of Central 
Intelligence, and other senior CIA officials. On May 10, 2001, 
Committee members and staff met to view the videotape and 
transcript of the shootdown and were briefed by CIA officials. 
On July 26, 2001, the Committee staff received an on-the-record 
briefing from Assistant Secretary of State Rand Beers, who 
summarized the results of the joint American-Peruvian 
investigation of the shootdown.
    Committee staff conducted interviews with executives and 
personnel from: the CIA, the Department of State, the 
Department of Defense, the Customs Service, the Drug 
Enforcement Administration, the Office of National Drug Control 
Policy, the Peruvian Air Force, Peru's aeronautical agency and 
the Association of Baptists for World Evangelism. Individuals 
interviewed included: the American crew of the Citation tracker 
aircraft, two of the surviving missionaries, and ground 
personnel in Peru. The Peruvian authorities did not permit 
Committee staff to interview the host nation rider, the 
interceptor pilots, the Peruvian Officer in Charge on the day 
of the shootdown, or the Commanding General of the Peruvian Air 
Force Sixth Territorial Air Region who authorized the 
shootdown. The Peruvians denied the interview request because 
of pending judicial proceedings against the Peruvian pilots and 
the host nation rider. The Peruvians had made all of the 
officers available to the joint Peruvian/American investigation 
team. In order to complete their interviews and the review of 
relevant evidence, Committee staff traveled to the headquarters 
of both the U.S. Southern Command and the Joint Interagency 
Task Force East, the Peruvian cities of Lima, Pulcallpa, and 
Iquitos and the Association of Baptists for World Evangelism 
Headquarters in Harrisburg. Pennsylvania. Committee staff 
reviewed substantial material provided by the CIA and smaller, 
but significant, amounts of material provided by the Department 
of State, the Department of Defense and the Office of National 
Drug Control Policy.
    The Committee issued a final report in October 2001. The 
report included eleven major conclusions and four 
recommendations. The Committee recommended that the requirement 
for a Presidential Determination prior to providing U.S. 
assistance to a foreign government engaged in a program of 
interdicting drug trafficking planes should be changed to an 
annual Presidential Certification process with more thorough 
reporting requirements. This recommendation was implemented 
through legislation included in the Intelligence Authorization 
Act for Fiscal Year 2002. The Committee's recommendation that 
responsibility for air interdiction programs of this nature be 
transferred to an agency other than the CIA has been 
implemented with regard to the air interdiction program in 
Colombia. The State Department has been charged with operating 
that program. Since the Administration has not made a decision 
on the future of the program, other specifics to the air 
interdiction program in Peru are still pending.

10. National security threats to the United States

    It has become a Committee practice to begin each new 
session of the Congress with an open hearing to review the 
Intelligence Community's assessment of the current and 
projected national security threats to the United States. 
Thesehearings cover a wide range of issues and are held in open and 
closed session. Tile hearings inform the Committee and the American 
public about the threats facing the country.
    On February 7, 2001, the SSCI held an open hearing on the 
current and projected national security threats to the United 
States. Testifying before the Committee were Director of 
Central Intelligence George J. Tenet, Thomas Fingar, Acting 
Assistant Secretary of State for Intelligence and Research, and 
Vice Admiral Thomas R. Wilson, Director of the Defense 
Intelligence Agency. On February 6, 2002, the SSCI held a 
similar hearing. Testifying before the Committee were Director 
of Central Intelligence George J. Tenet, Carl W. Ford, Jr., 
Assistant Secretary of State for Intelligence and Research, 
Vice Admiral Thomas R. Wilson, Director of the Defense 
Intelligence Agency and Dale L. Watson, Executive Assistant 
Director, Counterterrorism and Counterintelligence, of the 
Federal Bureau of Investigation. After each of these public 
hearings, Committee Members met in closed session to receive a 
classified briefing on threats to U.S. interests from 
Intelligence Community representatives.
    The transcript of the Committee's February 7, 2001, 
hearing, ``Current and Projected National Security Threats to 
the United States'' [S. Hrg. 107-2], and the Committee's 
February 6, 2002 hearing ``Current and Projected National 
Security Threats to the United States'' [S. Hrg. 107-597], 
which includes the responses to a large number of questions-
for-the-record (QFRs) covering a broad spectrum of national 
security issues, were printed and made available to the public.

11. Covert action quarterly review

    Throughout the 107th Congress, the Committee continued to 
conduct rigorous oversight of covert action programs. In 
accordance with Committee rules, these reviews occurred on a 
quarterly basis. The Committee reviewed these programs to 
ensure their means and objectives were consistent with United 
States foreign policy goals, and were conducted in accordance 
with all applicable American laws. The Committee pursues its 
oversight responsibilities for covert action with the 
understanding that these programs can be a significant factor 
in accomplishing foreign policy objectives, but with the 
knowledge that to be successful such programs must be congruous 
with the ideals and principles of our nation.

12. Arms control: The Moscow Treaty

    The Senate Foreign Relations Committee has formal 
responsibility for reviewing all treaties, including arms 
control agreements, before they are acted upon by the full 
Senate. In the case of arms control agreements, the Senate 
Select Committee on Intelligence supports this process by 
providing the Committee on Foreign Relations and the Senate its 
assessment of the monitoring issues and counterintelligence 
issues; if any, raised by such treaties.
    Our assessment of the monitoring issues associated with the 
Moscow Treaty represents a continuation of the Committee's work 
over two decades overseeing the progress of negotiations to 
reduce strategic offensive nuclear arms. During the 1990s, the 
Committee routinely reviewed the progress of the START 
negotiations and addressed START monitoring capabilities in its 
annual intelligence authorization legislation. Committee 
members and staff have met routinely with U.S. negotiators and 
have expressed their views, both formally and informally, on 
verification issues to the negotiators and to other senior 
level officials.
    In preparation for a Senate vote on consent to ratification 
of the Moscow Treaty, Committee staff held numerous staff 
briefings, reviewed numerous documents, including the recent 
National Intelligence Estimate entitled ``Monitoring the Moscow 
Treaty on Strategic Offensive Reductions'' (June 2002), and 
asked formal questions-for-the-record. Staff members of the 
Committee on Foreign Relations and the Committee on Armed 
Services were invited to participate in these briefings.
    On September 10, 2002, the Committee held a closed hearing 
on U.S. monitoring capabilities and the risks and implications 
of violations by the other party to the Moscow Treaty. At this 
hearing, the Committee received testimony from Robert Walpole, 
the National Intelligence Officer for Strategic and Nuclear 
Issues at the Central Intelligence Agency. The Committee also 
received numerous responses to questions-for-the-record that 
were submitted to the Executive branch prior to and following 
the hearing, and the results of these inquiries have informed 
the Committee's judgments.
    The key feature of the Moscow Treaty relates to the central 
limit on warheads (Article 1), whereby each Party commits to 
reduce and limit its strategic nuclear warheads so that by 
December 31, 2012, its aggregate number of such warheads does 
not exceed 1700-2200. In addition, each party determines for 
itselfthe composition and structure of its strategic offensive 
arms, and thus each party's achievement of the 1700-2200 level by 
December 31, 2012, is to be reached through its own reduction plans.
    The Committee has been assured that the Intelligence 
Community possesses sufficient assets and capabilities to 
monitor the Moscow Treaty and that the combination of national 
technical means (NTM), analytical expertise, and information 
gained from START Treaty provisions will enable it to estimate 
with a high degree of certainty the number of Russian nuclear 
warheads deployed on December 31, 2012. Nonetheless, the 
Committee shares the Community's concern that more resources 
will be required if, over the duration of the Treaty, strategic 
arms control monitoring is to remain a core NTM task.

                          B. COMMUNITY ISSUES

1. Oversight of Intelligence Community Inspectors General

    During the 107th Congress, the Committee continued to 
monitor the activities of the Inspectors General (IGs) of the 
Intelligence Community. This oversight included: review of over 
180 IG products, including audit reports, inspection reports, 
reports of investigation, and semi-annual reports of IG 
activities; visits to IG offices for updates on plans and 
procedures; and attendance at several IG conferences. In 
addition to planning hearings focused on issues reviewed by the 
Intelligence Community IGs, the Committee arranged briefings 
with Community program and IG personnel to follow up on the 
status of IG recommendations. Examples of these briefings 
include employee grievances, management of operational 
activities, contracting procedures, employee recruitment and 
security processing, effective use of resources on new 
technology, covert action programs, and financial management 
practices.
    During the 107th Congress, the Committee continued its work 
to ensure the effectiveness and independence of the 
administrative Inspectors General at the National 
Reconnaissance Office, the National Security Agency, the 
National Imagery and Mapping Agency, and the Defense 
Intelligence Agency. The Committee reinforces the importance of 
the IG function through its regular interaction with the agency 
directors, the IGs, and their staffs. The administrative IGs 
also submit annual reports to the Committee detailing their 
requests for fiscal and personnel resources and the plan for 
their use. These reports describe the programs and activities 
scheduled for review during the fiscal year; comment on the 
office's ability to hire and retain qualified personnel; 
describe concerns relating to the independence and 
effectiveness of the IG's office; and give an overall 
assessment of the agency's response to the IG's recommendations 
during the previous year. These annual reports serve as a basis 
for Committee oversight throughout the year.

2. Strategic and performance planning for the Intelligence Community

    During the 107th Congress, the Committee continued to 
monitor the ability of the Intelligence Community to set 
priorities and goals consistent with the Administration's 
defined objectives, and to assess its own performance in 
achieving such goals. In Senate Report 107-63, accompanying the 
Fiscal Year 2002 Intelligence Authorization Bill, the 
Committee, consistent with the 1993 Government Performance and 
Results Act, directed the Director of Central Intelligence to 
produce a comprehensive Intelligence Community strategic plan 
and performance plan, and complementary strategic and 
performance plans for the intelligence agencies within the 
National Foreign Intelligence Program. The Committee further 
directed that the Intelligence Community's strategic plan be 
updated every four years and that the performance plans be 
updated annually. The purpose of the plans is to provide the 
Intelligence Community with vehicles to articulate program 
goals, measure program performance, improve program efficiency, 
and aid in resource planning.
    In Senate Report 107-149, accompanying the Intelligence 
Authorization Bill for Fiscal Year 2003, the Committee reviewed 
the progress of the Intelligence Community in producing its 
first set of strategic and performance plans. The Committee 
further requested that the Director of Central Intelligence 
include output measures in future performance plans to aid in 
determining the value of Intelligence Community capabilities in 
achieving its stated strategic goals. Additionally, the 
Committee requested information to examine how the individual 
intelligence agencies utilized their performance plans in 
preparing future budget submissions. The Committee took note of 
the decision of the Director of Central Intelligence in the 
summer of 2002 to produce a new version of an Intelligence 
Community strategic plan, independent of any Committee-imposed 
deadline, along with his guidance to the intelligence agencies 
emphasizing the importance of performance-based output measures 
in future plans.

3. National Commission for the Review of Research and Development 
        Programs of the United States Intelligence Community

    Title X of the Intelligence Authorization Act for Fiscal 
Year 2003 established an independent review of the research and 
development programs of the Intelligence Community. The 
decision to create the Commission followed the concerns of the 
Senate and House Committees that a need existed to review the 
full range of research and development programs under the 
purview of the Intelligence Community; evaluate such programs 
against the scientific and technical fields judged to be of 
most importance for future intelligence needs: and articulate 
appropriate program and resource priorities.
    The Commission is to comprise twelve members: two from the 
Senate, two from the House of Representatives, six from the 
private sector, the Deputy Director of Central Intelligence for 
Community Management, and a senior intelligence official of the 
Office of the Secretary of Defense.
    The committees tasked the Commission to assess the current 
status of research and development programs within the 
Intelligence Community, and to assess whether current programs 
should be modified; to evaluate the appropriateness of the 
current allocation of resources for research and development 
programs within the individual intelligence agencies; and to 
evaluate the relationship between the research and development 
programs of the Intelligence Community and those being carried 
out by other agencies of the federal government and the private 
sector. The Commission's final report is due to the 
Intelligence Committees by September 1, 2003. The committees 
also tasked the Director of Central Intelligence and the 
Secretary of Defense to provide their assessment of the report 
to the Intelligence Committees.

4. Intelligence Community financial management

    The Committee has taken an increasingly active role in 
ensuring the Intelligence Community's compliance with federal 
financial accounting standards. Although not all of the 
Intelligence Community agencies are specifically named in the 
Chief Financial Officers Act of 1990, the Committee believes 
that each of the agencies should comply with the Act as a way 
to strengthen internal controls and improve financial 
management.
    In Senate Report 107-63, to accompany the Intelligence 
Authorization Bill for Fiscal Year 2002, the Committee took 
note of the significant shortcomings revealed by an independent 
audit of the Fiscal Year 2000 financial statements of the 
National Reconnaissance Office. The findings of the independent 
audit were explored further in a Committee hearing in the 
summer of 2001.
    Concerned that similar shortcomings may exist within other 
National Foreign Intelligence Program agencies which have not 
received the same level of financial management oversight, the 
Committee directed the Director of Central Intelligence to have 
the appropriate statutory Inspector General carry out an audit 
of the form and content of the Fiscal Year 2001 financial 
statements of the Defense Intelligence Agency (DIA), the 
National Security Agency (NSA), the Central Intelligence Agency 
(CIA), and the National Imagery and Mapping Agency (NIMA). The 
responses revealed that none of the agencies were able to 
produce auditable financial statements. Specific weaknesses 
were identified for the agencies to rectify, including the 
improper preparation of selected required statements and 
inaccurate reporting of property, plant, and equipment. Also, 
the Committee learned that modernization of the financial 
management systems for the NSA, DIA, and NIMA would likely be 
delayed due to the decision of the Defense Department to 
undertake a new Department-wide financial management 
modernization program.
    The Committee's Audit and Investigations staff made follow-
up visits to each agency to assess their ability to correct 
identified problems. In Senate Report 107-149, to accompany the 
Intelligence Authorization Bill for Fiscal Year 2003, the 
Committee requested that it be kept informed of the impact of 
such a modernization program on the financial accounting 
systems of the stated agencies and steps being taken to make 
current systems compliant with federal accounting standards.
    Additionally, in Senate Report 107-63, the Committee 
directed that the CIA and all National Foreign Intelligence 
Program agencies within the Defense Department aggregation 
receive a complete audit of their financial statements by March 
1, 2005. To facilitate adequate oversight of the Intelligence 
Community's financial management systems and practices, the 
Committee requested, in Senate Report 107-149, that the Deputy 
Director of Central Intelligence for Community Management 
report by February 1, 2003, on how the Community Management 
Staff is structured to monitor Intelligence Community 
compliance with statutory requirements and related guidance 
from the Office of Management and Budget.

5. Specifying National Foreign Intelligence budget amounts for 
        counterterrorism, counterproliferation, counternarcotics, and 
        counterintelligence

    Section 311 of P.L. 107-306, the Intelligence Authorization 
Act for Fiscal Year 2003; amended Title V of the National 
Security Act of 1947 (50 U.S.C. 413 et seq.) to require that 
budget justification materials submitted to Congress in support 
of the President's annual budget specify the aggregate amounts 
requested as part of the National Foreign Intelligence Program 
for counterterrorism, counterproliferation, counternarcotics, 
and counterintelligence. Such action was a result of the 
Committee's belief that a rational budget process must make 
clear the level of resources devoted to such key national 
priorities across the government. In the past, however, the 
Committee has found it difficult to discern the amount of 
funding and, by association, the level of commitment, that the 
Intelligence Community has devoted to each discipline. The 
amendment to the National Security Act of 1947 also complements 
Section 1051 of the 1998 National Defense Authorization Act, 
which requires the Administration to provide ``cross cut'' 
information on Executive branch funding to combat terrorism, to 
include intelligence funding.

                    C. INVESTIGATIONS AND INQUIRIES

    The Committee's Audit and Investigations 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 107th 
Congress, the staff of three to four full-time auditors led or 
provided significant support to the Committee's investigations 
and its review of a number of administrative and operational 
issues relating to the agencies of the Intelligence Community. 
In addition, the Audit and Investigations Staff completed three 
indepth reviews of specific intelligence programs or issues. 
The staff's efforts included the following projects.

1. USS ``Cole''

    On October 12, 2000, terrorists attacked the United States 
Navy destroyer USS Cole while it was refueling in the harbor at 
Aden, Yemen. The attack killed 17 American sailors and wounded 
39 others. The Committee immediately began an inquiry into the 
relevant intelligence collection, reporting, analysis, and 
warning within the Intelligence Community prior to the attack. 
The Committee's efforts included a review of the Intelligence 
Community's overall effectiveness in those areas.
    The Committee conducted its inquiry through hearings, 
member briefings, and staff interviews. The final, classified 
report, which the Committee completed on October 4, 2002, 
included several findings and recommendations to the Director 
of Central Intelligence. Specifically, the Committee found that 
the CIA and the NSA aggressively collected and promptly 
disseminated raw intelligence pertaining to potential terrorist 
threats. The inquiry also revealed that Intelligence Community 
analysts in Washington, D.C., did not always enhance their 
terrorism products with historical information and the task was 
left to field operators and analysts with limited resources. 
The process was hampered further by limitations on intelligence 
sharing between agencies. In addition, the Committee concluded 
that the degree of specificity required by the analysts and 
managers responsible for issuing Intelligence Community warning 
products was overly stringent and exceeded the existing 
published guidelines.
    The principal shortcomings identified in the Committee's 
report were the lack of historical context for terrorist threat 
products and the failure to abide by established guidelines for 
producing and disseminating warning reports. To address these 
problems, the report recommends that the Director of Central 
Intelligence increase analytic depth on the terrorist target, 
revise the procedures and standards for issuing formal 
Intelligence Community warning products and create a training 
program to ensure that terrorism analysts and consumers of 
warning items understand the standards for issuing a warning 
product and the significance of those publications.

2. Captain Michael ``Scott'' Speicher

    During the 107th Congress, the Committee continued its 
involvement in the case of U.S. Navy Captain Michael ``Scott'' 
Speicher, who was shot down over Iraq on January 17, 1991, the 
first night of Operation Desert Storm. He was declared Killed 
In Action (KIA) in May 1991; the Navy changed his status to 
Missing In Action (MIA) in January 2001; and the Navy recently 
designated him Missing/Captured.
    Captain Speicher's case first came to the Committee's 
attention during the 105th Congress. Since that time, the 
Committee has held numerous hearings,Member briefings, and 
staff-led meetings to determine the facts surrounding Captain 
Speicher's shootdown, the Intelligence Community's input into the 
Navy's status detemination process and any available intelligence about 
his fate. Based on the information learned during these oversight 
efforts and the unprecedented change in Captain Speicher's status in 
January 2001, five Senators requested that the Committee conduct a 
formal investigation of Captain Speicher's case and the Intelligence 
Community's support in determining his fate. The Senators also 
disagreed with the conclusion of an October 2000 joint review by the 
Inspectors General of the Department of Defense and the Central 
Intelligence Agency that the Intelligence Community generally had 
performed well in regard to the Speicher case.
    The Committee investigated the matter and published a 
lengthy classified report on the Speicher case on October 4, 
2002. The Committee's investigation found that, due to a lack 
of tasking, in the first years after Operation Desert Storm the 
Intelligence Community was only minimally involved in locating 
Captain Speicher's crash site in Iraq or determining what 
happened to him. The Defense Intelligence Agency's Special 
Office for POW/MIA Affairs (now the Defense Missing Personnel/
Prisoner of War Office) was responsible for tracking POW/MIA 
events during Operation Desert Storm. At specific moments over 
the four month period following Captain Speicher's shootdown, 
the Office had the opportunity to play a critical role in 
accounting for Captain Speicher, but it failed to do so. 
Specifically, the Office possessed conflicting information 
that, if investigated, might have led to the discovery of 
Captain Speicher's crash site much earlier than actually 
occurred. Personnel in the Office also failed to act when they 
learned--two days before the U.S. Navy changed Captain 
Speicher's status from MIA to KIA--that the remains they had 
associated with Captain Speicher were not his.
    In addition, the U.S. Navy did not appear to take advantage 
of the available intelligence about Captain Speicher's fate 
during its status determination hearings. Since that time, the 
Department of Defense created the Defense Missing Personnel/
Prisoner of War Office and the Intelligence Community 
established mechanisms to improve intelligence collection and 
analysis on prisoner of war and missing personnel issues. While 
the Committee's investigation report acknowledges that these 
entities are likely to improve Intelligence Community input 
into future missing personnel cases and status determinations, 
the report concludes that further improvements are needed to 
the communication and coordination mechanisms among the 
relevant organizations.
    The report includes a recommendation to implement more 
formal mechanisms for information exchanges among the 
Intelligence Community elements dedicated to prisoner of war 
and missing persons issues and the policymakers who require 
intelligence to make status determinations. Based on its 
investigation, the Committee also recommended that the 
Secretary of Defense and Director of Central Intelligence 
clarify the roles and responsibilities of the various 
organizations that address prisoner of war and missing 
personnel matters.

3. Robert Hanssen

    The Committee continued during the 107th Congress its 
oversight of the espionage activities and investigation of 
former FBI Special Agent Robert Hanssen. Given that Hanssen 
spent his long FBI career focused on counterintelligence, the 
Committee is concerned about the serious damage he inflicted on 
U.S. national security by taking advantage of his access to 
sensitive intelligence investigations and programs. The FBI 
arrested Hanssen for espionage on February 18, 2001, and the 
Committee approved a formal investigation of this case on March 
7, 2001. Hanssen was sentenced to life without parole in May 
2002.
    The Committee's investigation has focused on the extent and 
severity of the damage to U.S. national security resulting from 
Hanssen's espionage and the shortcomings in FBI security 
programs that may have allowed Hanssen to escape detection for 
more than 21 years. As part of the investigation, the Committee 
held hearings in 2001 about Hanssen's activities and the status 
of the FBI investigation. Committee staff also received 
briefings and interviewed numerous officials from the FBI and 
other Intelligence Community agencies. The Committee's 
investigation is ongoing.

                               D. AUDITS

1. CIA's Directorate of Operations

    Early in the 107th Congress, the Audit and Investigations 
Staff completed a review of the CIA's Directorate of 
Operations' (DO) strategic plan. While agreeing that the CIA 
needed to improve its clandestine collection capabilities, 
Committee members and staff were unsatisfied with the CIA's 
limited ability to justify and provide documentation to support 
the particular goals it was pursuing. As a result, the staff 
undertook its audit of the DO strategic plan to gain more 
precise dataabout the program and provide information to 
Committee members for their budget authorization decisions.
    The audit revealed a need for improved financial planning 
within the CIA. The audit report recommended that the CIA 
utilize and improve budget models developed by the Office of 
the Chief Financial Officer to obtain an accurate estimate of 
the cost of the DO strategic plan and designate funds for the 
program based on those results. Prior to the terrorist attacks 
of September 11, 2001, the CIA had provided detailed responses 
outlining its progress in implementing the Committee's 
recommendations. In response to the terrorist attacks, the CIA 
developed a new program to thwart terrorist activity worldwide, 
incorporating aspects of the DO's previous strategic plan and 
the Committee's recommendations for improvement.

2. Foreign Materiel Program

    Following up on concerns raised during the Committee's 
oversight activities, the Audit and Investigations Staff 
reviewed the Intelligence Community's foreign materiel 
acquisition and exploitation programs, contained primarily 
within the Department of Defense (DoD). The project stemmed 
from specific problems in two exploitation projects and a 
concern that these issues were indicative of systemic 
weaknesses. In addition to interviews at the appropriate 
agencies, review of documents, and visits to operational 
elements, the staff selected a sample of eight acquisition and/
or exploitation projects and obtained specific information 
about these efforts in order to evaluate how the process and 
structure described by the agencies operated in practice.
    In general, the staff found that the Foreign Materiel 
Program is effective and well-administered. The perceived 
problems that were the impetus for the review did not appear to 
be systemic weaknesses. Instead, they seem to be isolated 
incidents that are being addressed through changes in the 
acquisition and exploitation processes. During the review, 
however, the staff identified two funding issues that led to 
continuing attention during the Committee's oversight 
activities.

3. Counterterrorism

    In response to a request from four Members of this 
Committee and two Members of the House Judiciary Committee, the 
Audit and Investigations Staff examined the counterterrorism 
programs and activities of the Intelligence Community. Together 
with the General Accounting Office's review of counterterrorism 
budgets within the remainder of the federal government, this 
effort sought to provide an overview of the entire U.S. 
Government budget to combat terrorism. Both reviews used the 
Office of Management and Budget's (OMB) Annual Report to 
Congress on Combating Terrorism as the starting point for their 
analysis of counterterrorism spending from fiscal year 1998 
through fiscal year 2002. In addition to the information in the 
OMB report, the Committee's staff collected budget data from 
individual Intelligence Community agencies and programs.
    Of note, the classified annex to the 2002 OMB report does 
not include budget data for the Federal Bureau of Investigation 
and the information for the National Imagery and Mapping Agency 
(NIMA) is significantly lower than the figures the agency 
provided to the Committee. The methodologies employed by the 
Intelligence Community agencies for estimating the portion of 
their budget devoted to counterterrorism also varied across 
agencies and was likely to change from year to year. As such, 
it is very difficult to provide an accurate estimate of the 
Intelligence Community or U.S. Government budget for 
counterterrorism during the time period studied.
    The staff found that the Intelligence Community's dispersed 
budget formulation process and various interagency working 
groups for counterterrorism appear to be relatively effective 
in coordinating activities and avoiding duplication of effort. 
Improvements are possible, however, especially in the areas of 
planning and budget analysis. The audit report recommends that 
the Intelligence Community make better use of the strategic 
planning documents that currently exist or are under 
development. Similarly, the report recommends that the OMB 
enhance the Annual Report to Congress on Combating Terrorism, 
specifically the classified annex, so that the agencies and 
Congress will be more likely to utilize the report and its 
content as a management tool.

                           IV. Confirmations


  A. JOHN L. HELGERSON, INSPECTOR GENERAL OF THE CENTRAL INTELLIGENCE 
                                 AGENCY

    On April 17, 2002, the Committee held a public hearing on 
the nomination of John L. Helgerson to be Inspector General of 
the Central Intelligence Agency. Mr. Helgerson was nominated by 
the President to the position on Feburary 27, 2002. Mr. 
Helgerson has had a thirty-year career in the Central 
Intelligence Agency, andhis prior positions have included 
Chairman, National Intelligence Council, Deputy Director of the 
National Imagery and Mapping Agency, and Deputy Inspector General of 
the CIA. The Inspector General of the CIA is an independent, statutory 
IG responsible for conducting audits, inspections and investigations to 
assure that the CIA's programs are run in an efficient and effective 
manner.
    Mr. Helgerson's nomination was considered favorably by the 
Committee on April 25, 2002. The Senate considered and approved 
his nomination on April 26, 2002, by voice vote.

 B. SCOTT W. MULLER, GENERAL COUNSEL OF THE CENTRAL INTELLIGENCE AGENCY

    On October 9, 2002, the Committee held a public hearing on 
the nomination of Scott W. Muller to be the General Counsel of 
the Central Intelligence Agency. Mr. Muller was nominated by 
the President on September 4, 2002. Mr. Muller, a partner at 
the law firm of Davis Polk & Wardwell, has 24 years of 
experience as a litigator. Mr. Muller has also served as 
Assistant United States Attorney in the Southern District of 
New York.
    The position of General Counsel of the CIA was made subject 
to Senate confirmation by the Intelligence Authorization Act 
for Fiscal Year 1997. The General Counsel is the chief legal 
officer of the CIA and is responsible for the sound management 
of the legal affairs of the CIA. The General Counsel also 
provides legal advice to the Director of Central Intelligence 
in his roles as head of the CIA, head of the Intelligence 
Community, and principal intelligence adviser to the President.
    Mr. Muller's nomination was considered favorably by the 
Committee on October 16, 2002. The Senate considered and 
approved his nomination on October 17, 2002, 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 briefings on 
intelligence issues of common concern.

                              VI. Appendix


                   A. SUMMARY OF COMMITTEE ACTIVITIES

1. Number of meetings

    During the 107th Congress, the Committee held a total of 
117 on-the-record meetings, briefings, and hearings, and over 
300 off-the record briefings. There were fourteen hearings held 
on the Intelligence Community budget, including the conference 
sessions with the House. Two nomination hearings were held.
    Additionally, the Committee held a total of 22 hearings 
with the House Permanent Select Committee on Intelligence 
concerning the Joint Inquiry into the Events of September 11, 
2001.

2. Bills and resolutions originated by the Committee

    S. Res. 47--An original resolution authorizing expenditures 
by the Select Committee on Intelligence.
    S. 1428--Intelligence Authorization Bill for Fiscal Year 
2002.
    S. 2506--Intelligence Authorization Bill for Fiscal Year 
2003.

3. Bills referred to the Committee

    S. 1448--Intelligence to Prevent Terrorism Act of 2001.
    S. 2586--To exclude United States Persons from the 
definition of ``foreign power'' under the Foreign Intelligence 
Surveillance Act of 1978, relating to international terrorism.
    S. 2645--Intelligence Community Leadership Act of 2002.
    S. 2659--To amend the Foreign Intelligence Surveillance Act 
of 1978 to modify the standard of proof for issuance of orders 
regarding non-United States persons from probable cause to 
reasonable suspicion.

4. Publications

    Joint Hearing Before the Select Committee on Intelligence 
and the Judiciary Committee on the Wen Ho Lee Matter.
    S. Hrg. 107-2 Current and Projected National Security 
Threats to the United States (February 7, 2001).
    Report 107-51 Special Report of the Select Committee on 
Intelligence for the period January 6, 1999 to December 15, 
2000.
    S. Rept. 107-63 Report to accompany S. 1428, FY 02 
Intelligence Authorization Bill.
    S. Rept. 107-149 Report to accompany S. 2506, FY 03 
Intelligence Authorization Bill.
    S. Rept. 107-64 Report on a Review of United States 
Assistance to Peruvian Counter-Drug Air Interdiction Efforts, 
and the Shootdown of a Civilian Aircraft on April 20, 2001.
    S. Hrg. 107-449 S. 1448, The Intelligence to Prevent 
Terrorism Act of 2001 and Other Legislative Proposals in the 
wake of the September 11, 2001 attacks.
    S. Hrg. 107-597 Current and Projected National Security 
Threats to the United States.
    S. Hrg. 107-596 Hearing on the Nomination of John L. 
Helgerson to be Inspector General, Central Intelligence Agency.

                                
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