Cited under fair use for non-profit educational use.


     Published in Washington, D.C.. . . . . . . . Vol. 13, No. 36 --
            Sept. 29, 1997 . . . . . . . .

                        Snoops, Sex and Videotape
                           By Timothy W. Maier
     Intelligence sources say Clinton ordered bugging of his summit
     guests and that information obtained on international deals was
    provided through cutouts to enrich corporate friends of the DNC.
   I t comes as no surprise to national-security specialists -- except
    in the magnitude of the operation -- that the FBI and other U.S.
     intelligence agencies conducted a sweeping electronic-espionage
       mission in the fall of 1993 during a summit meeting of the
     Asia-Pacific Economic Cooperation, or APEC, meeting in Seattle
                      hosted by President Clinton.
     . . . . It also may come as no surprise to anyone who has been
     following the fund-raising scandals that information from this
     covert national-security operation -- first reported by Insight
   last week -- subsequently may have been leaked to politicos at the
        White House. They, in turn, are suspected of passing such
   classified data to Democratic National Committee, or DNC, officials
        and outside attorneys working for the Democratic Party --
     information of great importance to high-stakes private business
                       deals with Asian countries.
   . . . . But what does come as a surprise is an apparent failure by
     federal law-enforcement and intelligence authorities to pursue
     allegations of kickbacks to FBI agents involved in the sweeping
   intelligence operation and separate allegations involving underage
   boys provided as prostitutes to visiting dignitaries attending the
        weeklong November conference of 15 Asia-Pacific nations.
    . . . . One reason for the alleged coverup -- and that may be the
    only term appropriate, according to high officials in and out of
     government who claim direct and indirect knowledge of the APEC
       bugging -- is that those said to have engaged in kickbacks
   involving thousands of dollars include FBI agents through suppliers
         with whom they worked to procure electronic audio- and
                      video-surveillance equipment.
    . . . . As for the allegations of juvenile prostitution, sources
        who spoke to Insight on the condition they not be further
   identified say the reason these "crimes" were not pursued is that a
        probe would have exposed the Top Secret national-security
      . . . . Put on the record, it is a different story. Official
   spokesmen for federal authorities variously decline comment or say
       they have no knowledge of any such enterprise. Seattle FBI
      spokes-man Ray Lauer says, "I am not aware of the operation."
   Secret Service spokesman James Mackin says, "We cannot provide you
   with any information." National Security Council, or NSC, spokesman
    P.J. Crowley says, "The White House declines comment." And other
          White House and DNC spokesmen say they know nothing.
      . . . . Julie Miller, a spokesman at FBI headquarters, says:
    "Unfortunately, we can't comment on this. I know that's not what
    you are looking for, but we can't comment. I'm sorry." When asked
    whether she denies such a surveillance operation occurred, Miller
             says: "No, I can't deny it. We can't comment."
    . . . . Robert Bucknam, the chief of staff for FBI Director Louis
   Freeh, refused to come to the phone when Insight called repeatedly.
   Ultimately, Bill Carter, a senior FBI spokesman, said that while he
    could not confirm or deny the existence of any national-security
   operation, he is very concerned about the allegations of crimes not
           being pursued involving prostitution and kickbacks.
     . . . . "To be honest, I don't know what you're talking about,"
     said Carter. However, after several minutes of conversation, he
   said without hesitation that if any allegations of wrongdoing were
    forwarded to him he personally would see that it is "forwarded to
     the appropriate office.... We certainly would look into it." He
    added that "we take it very seriously" and said that while it is
   the policy of the FBI neither to confirm nor deny the existence of
       any national-security operation, he would respond with any
            available information. At press time, he had not.
    . . . . Told of the reactions of these spokesmen, Insight sources
   were appalled and amused. Those claiming direct knowledge say this
        is why they came to Insight, and that only action by the
    appropriate congressional committees and a federal grand jury can
    get to the bottom of allegations involving official crimes and a
                 national-security operation gone awry.
      . . . . It was allegations of White House leaks of classified
     information to the DNC and/or its political operatives that led
   Insight to the allegations of kickbacks to FBI agents in the field
      and, in turn, to the information concerning alleged juvenile
    . . . . Beyond the fact that such crimes may have been committed,
      some of those in government posts contacted by this magazine
   repeatedly raised the same hue and cry about how such a large-scale
    operation as the Seattle APEC espionage caper could have remained
           secret for so long with so many agencies involved.
    . . . . The reason for the long silence, according to sources who
         claim direct knowledge (and provided Insight with hard
    documentation on aspects of the operation) is that the assignment
      was presented as being for the good of the country. National
    security was at stake. Some claiming direct involvement say they
     are outraged and are willing to come forward and tell what they
     know under oath before a grand jury or congressional committee.
    Others, fearful of reprisal and career damage, will not step into
    the limelight but are deeply troubled by what they did -- or what
                            they did not do.
   . . . . Here then, told for the first time, is the story likely to
   provide an outline for any federal investigation. Undoubtedly there
   will be recriminations and finger-pointing, and where it leads has
   yet to be determined. But to start, federal investigators will have
    to secure copies of reported audio- and video-surveillance tapes
     secured by the FBI while monitoring downtown Seattle hotels in
   which visiting dignitaries stayed during the conclave. These tapes
    were collected in "real time" by surreptitious devices placed in
   private rooms of APEC officials. In one series of tapes, they show
   underage boys engaging in sexcapades with men in several rooms over
                            a period of days.
   . . . . Despite the protestations by FBI agents who uncovered this
   exploitation, supervisors in the Seattle field office of the FBI --
       as well as supervisors and managers at FBI headquarters in
   Washington -- refused to mount a criminal investigation or support
   local prosecution. Instead, according to one source, the FBI agents
    "were told to forget about it" because arresting the men involved
   with the children "would jeopardize the national-security mission."
       . . . . Frustrations were then compounded when intelligence
       officials learned about alleged political dissemination of
       classified information obtained covertly from the economic
   conference. According to sources with direct knowledge, and others
     who were told by senior U.S. officials, the espionage data were
     turned over to attorneys working closely with the DNC. Outraged
   intelligence professionals had nowhere to go because this had been
       a covert spy operation that in the eyes of Washington never
    . . . . Intelligence sources describe the espionage operation as
    collecting raw economic data on Asian businesses through the FBI;
    the Customs Service; Naval Intelligence; the Air Force Office of
    Special Investigations; the National Security Agency, or NSA; and
                                the NSC.
   . . . . Some federal agents routinely accepted thousands of dollars
      in kickbacks from technical-equipment contractors during this
   operation that began about four months prior to the five-day summit
    in November. The FBI agents justified the kickbacks as a means to
    offset hundreds of hours of overtime that never were compensated.
    In one case, an agent received a check for $16,000, according to
   sources familiar with the scheme. Seattle FBI agents had been under
   attack from prior cases in which a grand jury investigated similar
   allegations but did not indict. According to a source close to that
      probe, it had the effect of forcing everyone "to keep cleaner
    books." As another intelligence source says, "I got rid of all my
   . . . . The FBI agents themselves were part of a clique called the
      "Footprinter's Club," which began as a social gathering among
   members of other federal agencies but grew into a means by which to
      share information. "They would learn how to do things off the
     books," a high official tells Insight, "but that's not the real
   crime here. These are good guys. They are doing what they are told
   needs to be done. They're not the bad guys. They were taking a few
    thousand dollars compared to the billions in contracts that were
   awarded. This Seattle operation is about keeping the people at the
                       top in power politically."
    . . . . Such "honest graft" and other shenanigans angered some of
    the players involved in the espionage mission. They say they were
   astonished that the Clinton administration used the result of their
     spying for political purposes. In fact, these sources claim the
     classified information was not leaked but deliberately provided
     through a complex chain of agencies and operatives for the sole
    purpose of retaining political power. Much of the information was
   real-time data that went directly to the NSA via satellites, while
     other confidential information was taken by FBI couriers to the
      NSA. In total, 10,000 to 15,000 conversations were recorded.
       . . . . Some of that information was sifted by 20 to 30 NSA
    officials to and with coordination by a senior-level NSA manager
       who turned over this data to a senior NSC official and two
   mid-level NSC staffers. It was this screened information that then
    was provided to two West Coast law firms that had worked off the
     books for the DNC. The DNC was able to use that information to
       create business and financial opportunities and as part of
                        fund-raising operations.
   . . . . The Clinton administration, in particular the late commerce
     secretary Ron Brown, allegedly used the information to arrange
      more-favorable credits and banking deals for Asian countries,
    according to intelligence sources. For example, the FBI-led APEC
      intelligence mission gleaned from the bugging operation that
    Vietnam desired at least two 737 freighter aircraft and passenger
   jets to promote tourism. An American entrepreneur had located used
   jets, but that deal was queered by the Clinton administration when
   it dangled a better one by offering lower interest payments for new
    planes. This, in turn, ingratiated the Clinton administration to
       the beneficiary countries and both they and the contractors
   allegedly were given reason to support the DNC. Says a source close
   to the Vietnam deal, "The Chinese got the benefits, the contracts,
    and this information was not coming from Chinese intelligence. It
                       was American intelligence."
      . . . . Could such claims be true? Where is the line between
    conjecture and fact? In this odd and spooky world of intelligence
   gathering, sometimes it is difficult to tell. Based on a survey of
   players and documents, Insight has been able to confirm some -- but
      not all -- aspects of the suspected DNC "leaks" and business
      ventures previously reported. One reason is that most of the
   intelligence agents involved in the spy operation had no idea where
   the end product went. They all were told it was a national-security
     mission and that the surveillance was to protect the 15 or more
    leaders of nations attending the conference. Never mind that the
        targets were rarely the leaders of the nations, but their
   assistants and staffers, referred to as "secondary people," because
       that's who cut the deals. If the bugs were found, there was
    plausible denial: Any country could be responsible for the bugs;
     and the Secret Service was known to have cameras and videotape
   surrounding the conference for the protection of the president and
                           other participants.
     . . . . The operation was huge -- more than 300 locations were
      bugged, including a chartered boat Clinton and other national
    leaders used to visit Blake Island for a salmon feast and Indian
    dance at Tillicum Village. According to intelligence sources, the
     federal government privately contracted at least three security
     companies to provide additional equipment. Nearly $250,000 was
   spent on technical equipment alone, according to classified records
   reviewed by Insight. Such equipment is a rarity in Washington state
      because of severe criminal penalties imposed on those taping
    conversations without a two-party consent or court order. Most of
   the audio equipment was purchased from a New York City specialist.
    "Normally, no one touches that stuff, but it was for the FBI, so
     everyone figured it was okay," says an intelligence source with
                            direct knowledge.
   . . . . The government paid for the sophisticated snooping devices
    through a series of agencies, including Customs, the FBI Finance
      Division in Fort Worth, the Justice Department, the Navy, the
    Treasury Department and through sham invoices and purchase orders
   supplied by hotels to purchase "special" cameras under a ruse that
   hotel security needed to be brought up to federal standards. Other
    payments came from personal accounts set up by FBI agents. "There
    was a lot of creative billing done," says an intelligence source
                       familiar with the schemes.
   . . . . Payments often were made in cash, leaving few paper trails
    to follow. However, based on ledgers and other classified records
     reviewed by this magazine, individual cash payments ranged from
     $800 to $17,000. Treasury wrote some checks, but that was rare.
    Sources tell Insight that most of the cash transactions were made
   during the lunch hours. "They'd go out for lunch and come back with
              thousands of dollars. It was quite a lunch."
   . . . . In each case the FBI received "top-of-the-line" equipment.
    Prices for microphones could be as little as $100 to thousands of
    dollars for specialty directional mikes that fit in a salt shaker
     or zoom in on target locations. The sensitive listening devices
    sometimes were so tiny they could be placed inside someone's ear
    with a plastic tube resembling a hearing aid. Other devices were
        put into flowerpots, lamps, rental cars and hotel suites
    --including one on the top floor of the Hilton where there was a
      problem with a camera. Much of the equipment was wireless and
    handheld. The monitoring stations usually were inside the Secret
      Service perimeter where cameras and equipment already were in
    place. "The Secret Service was not part of the operation but was
   probably aware of it," says an intelligence source. In some cases,
     monitoring stations were at naval facilities -- and much of the
   information was real-time data bouncing from satellite to satellite
     to the NSA. After the convention the FBI retrieved many of the
     bugs, and recently some of the same equipment was spotted at a
                 Seattle Drug Enforcement Agency office.
     . . . . Now, nearly four years after the operation, there is a
      growing resentment among those who participated, as well as a
     common thread of distrust. As one intelligence source puts it,
     "These were good guys, doing what they thought was right in the
                       name of national security."
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