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Do You Wanna Know a Secret?

One Court Case Lifts the Veil On the High Cost of Classification

By Scott Armstrong

Sunday, February 16 1997; Page C01
The Washington Post
[republished with permission of the author]

The vast systems for protecting secrecy throughout the U.S. national security agencies are among the government's most expensive and ineffective purchases. If treated as weapon systems, many would be considered red-hot scandals. If viewed as models for governmental operations, they would be reinvented.

The U.S. government's secrecy system is not just "broken," says former CIA general counsel Jeffrey H. Smith. "It is masking the hemorrhaging of billions of dollars a year in contractor inefficiencies."

Yet year after year, elaborate secrecy regimes roll on and on. Top officials find these arrangements attractive and convenient. After all, secrets can patch over colossal mistakes, disguise the failings of whole bureaucracies, keep errors in judgment out of view and cover up fraud, waste and abuse.

Secrecy also makes it especially hard to determine the truth about allegations of fraud made in court. A case in point is a civil lawsuit in federal court in Oakland that involves the country's largest defense firm. Two employees allege the company misbilled the government for hundreds of millions of dollars. The government is citing secrecy, among other reasons, for its unwillingness to produce information the employees contend is central to their effort to help the government recover what they believe is misspent money.

What secrecy regimes do best is chop up the federal government into self-contained pockets of activity that are officially deemed no one else's business. The Pentagon's secrets are kept from the CIA, the State Department's from the National Security Council, the Navy's from the Air Force, and so on. The compartments of what the secrecy community calls "special access programs" are for all practical purposes independent fiefdoms. Government officials who operate our systems of spy technology and state-of-the-art defenses can avoid congressional oversight, keep the press and public out, and be assured that the only audits will come from individuals selected and personally "cleared" into the program.

The cost of these systems has grown exponentially over the past two decades. Recent reports by the Information Security Oversight Office place the total costs of the security classification system for fiscal year 1995 at $5.6 billion. But these estimates only take into account the costs of physical safeguarding of secret information and background checks for people obtaining security clearances. The true costs of the secrecy systems are at least 10 times larger, according to those who manage them for the defense and intelligence agencies. Secrecy prevents government officials from talking to each other, preventing budgeting efficiencies. It requires employees to wait for security clearances, raising labor costs. Outside personnel security experts estimate that the extra costs of labor in highly compartmentalized operations are four to seven times higher than they would otherwise be.

U.S. v. Lockheed, the civil case in San Francisco, shows the lengths to which the government will go to protect its own secrecy programs -- even at the potential cost of hundreds of millions of dollars.

The case began in 1988, after two employees at the Lockheed Missile and Space Division plant in Sunnyvale, Calif., gave up on trying to persuade Lockheed and government supervisors to correct what they felt was a practice of deliberate overcharging by Lockheed on government contracts since 1979.

The employees, Margaret Newsham and Martin Bloem, hired Guy T. Saperstein, a prominent California plaintiffs' attorney. They sued Lockheed under the federal False Claims Act, which allows citizens to sue on the government's behalf. These kinds of lawsuits are commonly called whistleblower cases. If the whistleblower's allegations are confirmed, they typically receive 15 percent of any money recovered, with the balance going to the government. (In 1992, Saperstein asked me, in my capacity as executive director of Taxpayers Against Fraud, for suggestions on how to get the government to release highly classified information. I provided him with names of experts who might assist him.)

The suit alleges that Lockheed improperly billed the wrong accounts for the time of those waiting for security clearances, as well as billing for employees who were unproductive. The alleged total is $500 million. If the plaintiffs prevail in court, the triple-damages provision of the False Claims Act could require the Lockheed Martin Corporation (Lockheed merged with Martin Marietta in 1995) to reimburse the government for as much as $1.5 billion.

Lockheed Martin spokesman Charles P. Manor says that no misbillings ever took place and the firm "would prevail by motion or verdict" if the case is allowed to come to trial.

The Justice Department, which had declined to take over prosecution of the case, but still representing the various government agencies involved, refused to cooperate with the plaintiffs. Vincent Terlep, the government's attorney, arranged for Lockheed's outside counsel to get a security clearance immediately to review all documents, but did not arrange for similar access for the other side. Terlep repeatedly threatened in court to invoke the state secrets privilege until Judge James Ware told him to provide access the documents, or actually file a claim for such a privilege.

Stuart Schiffer, who is overseeing the case as the chief of the Justice Department's commercial litigation branch, says that Terlep did nothing inappropriate.

That the technical information about the spy satellites produced at Lockheed's plants is highly sensitive and needs to remain classified has never been in dispute. But the information needed for the case deals with Lockheed's practices of assigning and billing the costs of personnel. Government program operators agree that virtually all of the details needed to judge the case and most of the documents necessary to prove or disprove Lockheed's defenses could be segregated from the classified information by someone with the appropriate security clearances.

The employees' lawyers proposed a compromise: appointment of Maynard Anderson, a recently retired deputy undersecretary of defense who was working as a consultant on defense industry matters and had retained the necessary security clearances. Anderson could analyze the documents and suggest ways to untangle totally mundane information about Lockheed Martin's billing practices from the morass of classified information about the nation's spy satellites and stealth technologies.

After meeting with Anderson, most representatives of the dozen-plus agencies in the defense and intelligence community agreed that he could review government documents and propose declassification of material so that the civil case could proceed.

But, according to various sources at several agencies, the Justice Department lawyers balked. They were concerned the arrangement would undercut the executive branch's unilateral authority to determine what should be secret. Schiffer is frank about this.

"We do not believe that it is appropriate for a federal court judge to appoint someone who will report back to him on their view of what is and is not properly classified," Schiffer says. "This would turn into a battle of the experts over government secrets. Then the judge will feel free to decide whether or not he wishes to follow the expert's recommendations. That has never happened before. We believe classification is for the executive branch to determine alone."

In practice, this means that the government agencies can use the secrecy system to keep their soiled laundry out of public view.

The Justice Department's lawyers did show some flexibility. They drew up an agreement allowing Anderson access to the documents. Everyone agreed that Anderson would not be able to discuss the substance of classified information with anyone outside of the government. But the Justice Department added a killer condition: If Anderson found that non-secret material was being withheld improperly as secret, he could not tell the judge or even the defense and intelligence officials responsible.

Anderson replied that his security clearances legally require him to report improper use of classification procedures. Moreover, Anderson said he did not see how he could refuse to answer a judge's questions about whether or not the information withheld would meet the standard of damage to the national security if it were released. "I wouldn't like to be in contempt for failing to answer the judge's question," Anderson says. He rejected the government's condition and was not given access to the documents.

Impatient about the impasse, Judge Ware then gave the government a deadline to either release the information or file a formal "states secrets" declaration that the information could not be disclosed.

Last February, the government's lawyers prepared such a declaration. At the last minute, they took it to officials at the CIA and the Pentagon, warning that the government faced an unprecedented challenge to its national security authority. According to two high-ranking CIA officials familiar with the case, the Justice Department lawyers expressed fear that the judge was about to appoint Anderson to unilaterally decide on what was being released and that the plaintiffs were seeking to make public the most sensitive details of U.S. satellite technology.

The whistleblowers' proposal, in fact, called only for the production of nonsensitive information, and for Anderson to propose, not order, declassification.

On Feb. 28, 1996, the day the judge's deadline was to expire, CIA director John Deutch and Deputy Secretary of Defense John White (acting on behalf of his boss, William Perry) signed declarations saying that the release of virtually any information related to U.S. v. Lockheed would do "exceptionally grave damage to the national security." Deutch has said that he shares the Justice Department's fear that the proposal could give a federal judge an independent expert capable of testifying that the government was improperly withholding documents, according to a high ranking CIA official.

"We were forced to accept Justice's assurances that the sky would fall if Deutch didn't act at that very moment," said one high-ranking CIA official. "We had no alternative but to accept Justice's litigation strategy, which was frankly, brinkmanship."

A Justice Department spokesman says that the final decision to reject the Anderson proposal was made by the national security agencies, not by the department, adding that the judge did not reject the government's assertion of the state secrets privilege. Spokesmen for Deutch and Perry say that their case for secrecy is laid out in detail in affidavits, which are themselves secret.

Barring the plaintiffs' experts from getting access to the classified material has the effect of allowing the defendant, Lockheed, to decide alone what the government will review for potential release to the plaintiffs.

What makes the stance of the Justice Department, the CIA and the Pentagon so unfortunate is that it thwarted a growing consensus in the government that secrecy reform was not only possible but desirable.

Jeffrey Smith, then the general counsel of the CIA, thought the idea of using an expert like Anderson to untangle the secrecy questions around U.S. v. Lockheed had great merit. Smith had served as chairman of the CIA-Pentagon Joint Security Commission, a high-level panel created in 1993 precisely to streamline the secrecy system. In that capacity he had advocated such arrangements to protect national security while increasing the efficiency and pursuing allegations of misconduct by government contractors.

Former deputy attorney general Philip B. Heymann is also supportive of the use of former officials like Anderson, citing the need "to protect the integrity of the contracting process and to recover the taxpayers' money without compromising national security."

"Secrecy is the people's business," says Sen. Charles Grassley (R-Iowa). "And a billion dollars of their money is at stake. To allege that a judge is unwilling or unable to protect America's secrets is an affront. The constitution doesn't protect bureaucratic turf battles."

Such sentiments leave some government officials unmoved.

"For those of us defending the government from the range of legal assaults, openness is like AIDS," says one government lawyer. "One brief exposure can lead to the collapse of the entire immune system. Take away national security secrecy and the government is just one more litigant, winning some and losing some. Now we can always play the trump card -- state secrets -- and close down the game."

© Copyright 1997 The Washington Post Company

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