UNCLASSIFIED

UNCLASSIFIED

 REPORT OF INVESTIGATION

IMPROPER HANDLING OF CLASSIFIED INFORMATION BY

JOHN M. DEUTCH

(1998-0028-IG)

February 18, 2000

L. Britt Snider Daniel S. Seikaly

Inspector General Assistant Inspector General

 for Investigations
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TABLE OF CONTENTS

Page

INTRODUCTION ............................................................................1

SUMMARY.........................................................................................2

BACKGROUND................................................................................4

PROCEDURES AND RESOURCES............................................4

QUESTIONS PRESENTED ...........................................................5

CHRONOLOGY OF SIGNIFICANT EVENTS .......................9

FINDINGS........................................................................................11

WHY WAS DEUTCH ISSUED GOVERNMENT COMPUTERS CONFIGURED

FOR UNCLASSIFIED USE AND WERE HIS COMPUTER SYSTEMS

APPROPRIATELY MARKED AS UNCLASSIFIED?......................................11

WHY WAS DEUTCH PERMITTED TO RETAIN GOVERNMENT COMPUTERS

AFTER RESIGNING AS DCI? .................................................................13

WHAT INFORMATION WAS FOUND ON DEUTCH’S MAGNETIC MEDIA?.17

WHAT VULNERABILITIES MAY HAVE ALLOWED THE HOSTILE

EXPLOITATION OF DEUTCH’S UNPROTECTED COMPUTER MEDIA?.......29

COULD IT BE DETERMINED IF CLASSIFIED INFORMATION ON DEUTCH’S

UNCLASSIFIED COMPUTER WAS COMPROMISED?.................................33

WHAT KNOWLEDGE DID DEUTCH HAVE CONCERNING VULNERABILITIES

ASSOCIATED WITH COMPUTERS?.........................................................33

HAD DEUTCH PREVIOUSLY BEEN FOUND TO HAVE MISHANDLED

CLASSIFIED INFORMATION? ................................................................39
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WHAT LAWS, REGULATIONS, AGREEMENTS, AND POLICIES HAVE

POTENTIAL APPLICATION?..................................................................41

HOW WAS A SIMILAR CASE HANDLED?................................................43

WHAT ACTIONS DID SENIOR AGENCY OFFICIALS TAKE IN HANDLING

THE DEUTCH CASE?.............................................................................44

SHOULD A CRIMES REPORT INITIALLY HAVE BEEN FILED ON DEUTCH IN

THIS CASE? ..........................................................................................55

SHOULD APPLICATION OF THE INDEPENDENT COUNSEL STATUTE HAVE

BEEN CONSIDERED? ............................................................................63

WERE SENIOR AGENCY OFFICIALS OBLIGATED TO NOTIFY THE

CONGRESSIONAL OVERSIGHT COMMITTEES OR THE INTELLIGENCE

OVERSIGHT BOARD OF THE PRESIDENT'S FOREIGN INTELLIGENCE

ADVISORY BOARD? WERE THESE ENTITIES NOTIFIED?.......................65

WHY WAS NO ADMINISTRATIVE SANCTION IMPOSED ON DEUTCH? ....68

WHAT WAS OIG’S INVOLVEMENT IN THIS CASE?.................................67

WHAT IS DEUTCH’S CURRENT STATUS WITH THE CIA?........................77

WHAT WAS THE DISPOSITION OF OIG’S CRIMES REPORT TO THE

DEPARTMENT OF JUSTICE?..................................................................78

CONCLUSIONS .............................................................................78

RECOMMENDATIONS...............................................................81
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OFFICE OF INSPECTOR GENERAL

INVESTIGATIONS STAFF

REPORT OF INVESTIGATION

IMPROPER HANDLING OF CLASSIFIED INFORMATION BY

JOHN M. DEUTCH

(1998-0028-IG)

February 18, 2000

This unclassified report has been prepared from the July 13,

1999 version of the classified Report of Investigation at the request

of the Senate Select Committee on Intelligence. Information in this

version is current as of the date of the original report. All classified

information contained in the original Report of Investigation has

been deleted.

INTRODUCTION

1. John M. Deutch held the position of Director of Central

Intelligence (DCI) from May 10, 1995 until December 14, 1996.

Several days after Deutch’s official departure as DCI, classified

material was discovered on Deutch’s government-owned computer,

located at his Bethesda, Maryland residence.

2. The computer had been designated for unclassified use

only and was connected to a modem. This computer had been used

to access [an Internet Service Provider (ISP)], the Internet,

[Deutch's bank], and the Department of Defense (DoD). This

report of investigation examines Deutch’s improper handling of

classified information during his tenure as DCI and how CIA

addressed this matter.
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3. Currently, Deutch is a professor at the Massachusetts

Institute of Technology. He also has two, no-fee contracts with the

CIA. The first is to provide consulting services to the current DCI

and his senior managers; this contract went into effect on December

16, 1996, has been renewed twice, and will expire in December

1999. The second contract is for Deutch’s appointment to serve on

the Commission to Assess the Organization of the Federal

Government to Combat the Proliferation of Weapons of Mass

Destruction (Proliferation Commission). Under the terms of the

second contract, this appointment will continue until the

termination of the Commission.

SUMMARY

4. The discovery of classified information on Deutch’s

unclassified computer on December 17, 1996 was immediately

brought to the attention of senior Agency managers. In January

1997, the Office of Personnel Security (OPS), Special Investigations

Branch (SIB), was asked to conduct a security investigation of this

matter.1 A technical exploitation team, consisting of personnel

expert in data recovery, retrieved the data from Deutch’s

unclassified magnetic media and computers. The results of the

inquiry were presented to CIA senior management in the spring

and summer of 1997.

5. The Office of General Counsel (OGC) had been informed

immediately of the discovery of classified information on Deutch's

computer. Although such a discovery could be expected to

generate a crimes report to the Department of Justice (DoJ), OGC

determined such a report was not necessary in this case. No other

 

1OPS was established in 1994 and was subsumed as part of the new Center for CIA Security in

1998. The mission of OPS was to collect and analyze data on individuals employed by or affiliated

with the Agency, for the purpose of determining initial and continued reliability and suitability for

access to national security information. SIB conducts investigations primarily related to suitability

and internal security concerns of the Agency. SIB often works with the OIG, handling initial

investigations, and refers cases to the OIG and/or the proper law enforcement authority once

criminal conduct is detected.
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actions, including notification of the Intelligence Oversight

Committees of the Congress2 or the Intelligence Oversight Board of

the President’s Foreign Intelligence Advisory Board, were taken

until the Office of Inspector General (OIG) opened a formal

investigation in March 1998. On March 19, 1998, OIG referred the

matter to DoJ. On April 14, 1999, the Attorney General declined

prosecution and suggested a review to determine Deutch’s

suitability for continued access to classified information.

6. Deutch continuously processed classified information on

government-owned desktop computers configured for unclassified

use during his tenure as DCI. These unclassified computers were

located in Deutch’s Bethesda, Maryland and Belmont,

Massachusetts residences,3 his offices in the Old Executive Office

Building (OEOB), and at CIA Headquarters. Deutch also used an

Agency-issued unclassified laptop computer to process classified

information. All were connected to or contained modems that

allowed external connectivity to computer networks such as the

Internet. Such computers are vulnerable to attacks by unauthorized

persons. CIA personnel retrieved [classified] information from

Deutch’s unclassified computers and magnetic media related to

covert action, Top Secret communications intelligence and the

National Reconnaissance Program budget.

7. The OIG investigation has established that Deutch was

aware of prohibitions relating to the use of unclassified computers

for processing classified information. He was further aware of

specific vulnerabilities related to the use of unclassified computers

that were connected to the Internet. Despite this knowledge,

Deutch processed a large volume of highly classified information

on these unclassified computers, taking no steps to restrict

 

2Congressional oversight is provided by the Senate Select Committee on Intelligence (SSCI) and the

House Permanent Select Committee on Intelligence (HPSCI). The two appropriations committees—

the Senate Appropriations Committee, Subcommittee on Defense (SAC) and the House

Appropriations Committee, National Security Subcommittee (HAC)—also bear oversight

responsibilities.

3Hereafter, the residences will be referred to as Maryland and Belmont.
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unauthorized access to the information and thereby placing

national security information at risk.

8. Furthermore, the OIG investigation noted anomalies in the

way senior CIA officials responded to this matter. These anomalies

include the failure to allow a formal interview of Deutch, and the

absence of an appropriate process to review Deutch’s suitability for

continued access to classified information.

BACKGROUND

9. In 1998, during the course of an unrelated investigation,

OIG became aware of additional circumstances surrounding an

earlier allegation that in 1996 Deutch had mishandled classified

information. According to the 1996 allegation, classified

information was found on a computer configured for unclassified

use at Deutch’s Maryland residence. This computer had been used

to connect to the Internet. Additionally, unsecured classified

magnetic media was found in Deutch’s study at the residence.

Further investigation uncovered additional classified information

on other Agency-owned unclassified computers issued to Deutch.

In 1998, OIG learned that senior Agency officials were apprised of

the results of the OPS investigation but did not take action to

properly resolve this matter. The Inspector General initiated an

independent investigation of Deutch’s alleged mishandling of

classified information and whether the matter was appropriately

dealt with by senior Agency officials.

PROCEDURES AND RESOURCES

10. OIG assigned a Supervisory Investigator, five Special

Investigators, a Research Assistant, and a Secretary to this

investigation. The team of investigators interviewed more than 45

persons thought to possess knowledge pertinent to the

investigation, including Deutch, DCI George Tenet, former CIA
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Executive Director Nora Slatkin, former CIA General Counsel

Michael O’Neil, and [the] former FBI General Counsel. The team

reviewed security files, memoranda for the record written

contemporaneously with the events under investigation, data

recovered from Deutch’s unclassified magnetic media,

Congressional testimony, and material related to cases involving

other individuals who mishandled classified information.

Pertinent information was also sought from the National Security

Agency (NSA), the DoD, and an Internet service provider (ISP). In

addition, the team reviewed applicable criminal statutes, Director

of Central Intelligence Directives, and Agency rules and

regulations.

QUESTIONS PRESENTED

11. This Report of Investigation addresses the following

questions:

♦ Why was Deutch issued government computers configured

for unclassified use and were his computer systems

appropriately marked as unclassified?

♦ Why was Deutch permitted to retain government

computers after resigning as DCI?

♦ What information was found on Deutch’s magnetic media?

♦ How was the classified material discovered?

♦ What steps were taken to gather the material?

♦ What steps were taken to recover information

residing on Deutch’s magnetic media?
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♦ What are some examples of the classified material

that was found?

♦ What vulnerabilities may have allowed the hostile

exploitation of Deutch’s unprotected computer media?

♦ What was the electronic vulnerability of Deutch’s

magnetic media?

♦ What was the physical vulnerability of Deutch’s

magnetic media?

♦ Could it be determined if classified information on

Deutch’s unclassified computer was compromised?

♦ What knowledge did Deutch have concerning

vulnerabilities associated with computers?

♦ What is Deutch’s recollection?

♦ What did Deutch learn at [an] operational briefing?

♦ What was Deutch’s Congressional testimony?

♦ What are the personal recollections of DCI staff

members?

♦ Had Deutch previously been found to have mishandled

classified information?

♦ What laws, regulations, agreements, and policies have

potential application?

♦ How was a similar case handled?
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♦ What actions did senior Agency officials take in handling

the Deutch case?

♦ What actions were taken by senior Agency officials

after learning of this matter?

♦ How were the Maryland Personal Computer

Memory Card International Association (PCMCIA)

cards handled?

♦ What was the course of the Special Investigations

Branch’s investigation of Deutch?

♦ Should a crimes report initially have been filed on Deutch

in this case?

♦ Should application of the Independent Counsel statute have

been considered?

♦ Were senior Agency officials obligated to notify the

Congressional oversight committees or the Intelligence

Oversight Board of the President's Foreign Intelligence

Advisory Board? Were these entities notified?

♦ Why was no administrative sanction imposed on Deutch?

♦ What was OIG’s involvement in this case?

♦ When did OIG first learn of this incident?

♦ Why did OIG wait until March 1998 to open an

investigation?

♦ What steps were taken by OIG after opening its

investigation?
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♦ What is Deutch’s current status with the CIA?

♦ What was the disposition of OIG’s crimes report to the

Department of Justice?
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CHRONOLOGY OF SIGNIFICANT EVENTS

1995

January 1 John Deutch establishes Internet access via an [ISP provider].

May 10 Deutch sworn in as DCI.

June 15 Earliest classified document later recovered by technical exploitation team.

August 1 Deutch receives [a] briefing on computer attacks.

1996

December 5 Deutch requests that he be able to retain computers after he leaves office.

December 13 Deutch signs a no-fee consulting contract permitting him to retain government

computers.

December 14 Deutch’s last day as DCI.

December 17 Classified information found on Deutch’s computer in Bethesda, Maryland. Slatkin

and O’Neil notified. Slatkin notifies Tenet within a day. O’Neil informs Deutch of

discovery.

December 23 Four PCMCIA cards retrieved from Deutch and given to O’Neil.

December 27 Hard drive from Deutch’s Maryland computer retrieved.

December 28 Chief/DCI Administration informs IG Hitz of discovery at Deutch’s residence.

December 30 Hard drives from residences given to O’Neil.

1997

January 6 OPS/SIB initiates investigation on Deutch. PDGC and the OPS Legal Advisor discuss

issue of a crimes report.

January 9 O’Neil releases to DDA Calder and C/SIB the hard drives from the residences and two

of six PCMCIA cards. O’Neil retains four PCMCIA cards from the Maryland residence.

January 9 Memo from ADCI to D/OPS directing Deutch to keep clearances through December

1997.

January 13 Technical exploitation team begins the recovery process.

January 22 Technical exploitation team documents that two hard drives contain classified

information and had Internet exposure after classified material placed on drives.
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January 30 O’Neil speaks with FBI General Counsel and was reportedly told that FBI was not

inclined to investigate.

February 3 O’Neil releases four remaining PCMCIA cards that are subsequently exploited.

February 21 C/SIB meets with OIG officials to discuss jurisdictional issues.

February 27 D/OPS tasked to review all material on hard drives and PCMCIA cards.

March 11 D/OPS completes review of 17,000 pages of recovered items.

July 8 D/OPS’s report to ADCI prepared for distribution. Included on distribution are Slatkin,

O’Neil, and Richard Calder.

July 21 Slatkin is replaced as Executive Director.

July 30 PDGC reaffirms with OGC attorney that original disks and hard drives need to be

destroyed to ensure protection of Deutch’s privacy.

August 11 PDGC appointed Acting General Counsel and O'Neil goes on extended annual leave.

August 12 Technical exploitation team confirms selected magnetic media were destroyed per

instruction of D/OPS.

September 8 Slatkin leaves CIA.

October 1 O’Neil retires from CIA.

November 24 DCI approves Deutch and other members of the Proliferation Commission for temporary

staff-like access to CIA information and facilities without polygraph.

1998

February 6 OIG is made aware of additional details of the SIB investigation and subsequently

opens a formal investigation.

March 19 IG forwards crimes report to DoJ.

May 8 IG letter to IOB concerning Deutch investigation.

June 2 DCI notifies oversight committees of investigation.

1999

April 14 Attorney General Reno declines prosecution and suggests a review of Deutch’s security

clearances.
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FINDINGS

WHY WAS DEUTCH ISSUED GOVERNMENT COMPUTERS CONFIGURED FOR

UNCLASSIFIED USE AND WERE HIS COMPUTER SYSTEMS APPROPRIATELY

MARKED AS UNCLASSIFIED?

12. The then-Chief of the Information Services Management

Staff (C/ISMS) for the DCI Area, recalled that prior to Deutch’s

confirmation as DCI, she was contacted by [Deutch's Executive

Assistant] regarding computer requirements for Deutch. C/ISMS,

who would subsequently interface with [the Executive Assistant]

on a routine basis, learned that Deutch worked exclusively on

Macintosh computers. An Information Security (Infosec) Officer

assigned to ISMS recalled C/ISMS stating that [the Executive

Assistant] instructed [her] to provide Internet service at the 7th

floor Headquarters suite, OEOB, and Deutch’s Maryland residence.

13. According to C/ISMS, Deutch’s requirements, as

imparted by [his Executive Assistant], were for Deutch to have not

only access to the Internet, including electronic messaging, but

access to CIA’s classified computer network from Deutch’s offices in

CIA Headquarters, OEOB, and his Maryland residence. In

addition, Deutch was to be issued an unclassified laptop with

Internet capability for use when traveling.

14. A computer specialist, who had provided computer

support to Deutch at the Office of the Secretary of Defense,

confirmed that, at Deutch’s request, he had been hired by CIA to

establish the same level of computer support Deutch had received

at the Pentagon. At CIA, the computer specialist provided regular

and close computer support to Deutch on an average of once a

week. The computer specialist recalled [that Deutch's Executive

Assistant] relayed that he and Deutch had discussed the issue of

installing the
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classified computer at Deutch’s Maryland residence, and Deutch

either did not believe he needed or was not comfortable having the

classified computer in his home.

15. [Deutch's Executive Assistant] also remembered

discussions about locating a classified computer at Deutch’s

Maryland residence. [The Executive Assistant], however, could

not recall with any certainty if the computer had in fact been

installed. [The Executive Assistant] said that a classified system

had been installed at his own residence. However, after using it

once, he found its operation to be difficult and time consuming, and

he had it removed from his residence. [The Executive Assistant's]

experience with the deployed classified system may have

influenced Deutch to decide he did not want one located at his

Maryland residence. If so, [the Executive Assistant] would have

informed the ISMS representative of Deutch’s decision.

16. C/ISMS recalled [the Executive Assistant] telling her he

was not sure Deutch required a classified computer system at

Deutch’s Maryland residence.

17. A Local Area Network (LAN) technician installed

classified and unclassified Macintosh computers in Deutch’s 7th

floor Headquarters office and in Deutch’s OEOB office. The

technician also installed a computer configured for unclassified use

at Deutch’s Maryland residence. The technician stated that Deutch

was also provided with an unclassified laptop that had an internal

hard drive with modem and Internet access. The computer

specialist installed an unclassified computer at Deutch’s Belmont

residence several months after Deutch was appointed DCI.

18. Personal Computer Memory Card International

Association (PCMCIA) cards are magnetic media capable of storing

large amounts of data. According to the computer specialist,

Deutch’s unclassified computers were equipped with PCMCIA card

readers. The computer specialist said this configuration afforded

Deutch the opportunity to write to the cards and back up
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information. One PCMCIA card would reside at all times in a

reader that was attached to the unclassified computer, and the other

PCMCIA card would be in Deutch’s possession. The computer

specialist stated that Deutch valued the ability to access, at several

locations, data on which he was working. C/ISMS stated that all

the unclassified computers and PCMCIA cards provided for

Deutch’s use contained a green label indicating the equipment was

for unclassified purposes. The LAN technician also stated that a

concern was to label all of Deutch’s automated data processing

equipment and magnetic media, including monitors and PCMCIA

cards, as either "unclassified" (green label) or "Top Secret" (purple

label). The technician stated that his purpose was to make it

perfectly clear to Deutch and anyone else using these systems, what

was for classified and unclassified use.

19. The OIG has in its possession eight PCMCIA cards that

had been used by Deutch. Seven of the eight cards were labeled

unclassified; the eighth was not labeled. Four of the cards were

from the Maryland residence. Three of the cards were from CIA

Headquarters and one was from the OEOB. In addition, OIG

received four Macintosh computers and one Macintosh laptop that

were used by Deutch. The laptop and two of the computers were

marked with green unclassified labels; the other two computers

were marked with purple classified labels. One of the classified

computers was determined to have come from Deutch’s 7th floor

Headquarters office; the other from his OEOB office.

WHY WAS DEUTCH PERMITTED TO RETAIN GOVERNMENT COMPUTERS

AFTER RESIGNING AS DCI?

20. In a Memorandum for the Record (MFR) dated December

30, 1996, [the] then Chief DCI Administration (C/DCI

Administration), noted that Deutch announced on December 5, 1996

that he would resign as DCI. That same day, according to C/DCI

Administration's MFR, Deutch summoned [him] to his office.
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Deutch told [him] “to look at a way in which he could keep his

government computers.”

21. The C/DCI Administration's MFR indicated that on

December 6, 1996, he spoke with [the then] Chief of the

Administrative Law Division4 (C/ALD) in OGC, to ask if Deutch

could retain his Agency-issued, unclassified computer after leaving

CIA. C/ALD reportedly said that he had concerns with

government-owned property that was to be utilized for personal use.

He advised that he would discuss the matter with the Principal

Deputy General Counsel (PDGC).

22. On December 9, 1996, C/DCI Administration asked ISMS

personnel to identify a system configuration which was identical to

Deutch’s. [He] hoped that Deutch would purchase a computer

instead of retaining a government-owned computer.

23. According to a December 19, 1996 MFR signed by

C/ALD and the PDGC, [C/ALD] discussed with [her] the request to

loan computers to Deutch.5 [She] mentioned the request to General

Counsel Michael O’Neil, and stated:

The only legal way to loan the computers to the DCI would be if

a contract was signed setting forth that John Deutch was a

consultant to the CIA, and that the computers were being loaned

to Mr. Deutch to be used solely for U.S. Government business.

24. Despite her reservations, the PDGC was told by O’Neil to

work with C/DCI Administration to formulate a contract for

Deutch to be an unpaid consultant. The contract would authorize

 

4This division has since been renamed the Administrative Law and Ethics Division.

5According to his July 14, 1998 OIG interview, C/ALD prepared the MFR and it was co-signed by

the PDGC and [him]. [He] stated that he took the only copy of it, sealed it in an envelope, and

retained it. He sensed that it was likely there would eventually be an Inspector General

investigation of the computer loan. [He] stated that this was the only time in his career that he has

resorted to preparing such an MFR. He stated that he did not tell O’Neil about the MFR nor provide

a copy to O’Neil since he judged that to be “unwise.” He did not provide a copy of it to the OGC

Registry. He said that he has kept it in his “hold box” since he wrote it.
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the provision of a laptop computer for three months and a desktop

computer for up to a year.

25. According to the MFR:

On or about 11 December, [the PDGC] was informed by [C/DCI

Administration] that the DCI wanted the computers loaned to

him because they had the DCI’s personal financial data on them

and he wanted access to that data. [C/DCI Administration]

learned this information in conversation with the DCI. [The

PDGC] informed [C/ALD] of this development, and they both

agreed that it was improper to loan the computers to the DCI if

the true purpose of the loan was to allow the DCI to have

continued access to his personal information. [The PDGC] and

[C/ALD] also expressed concern that the computers should not

have been used by the DCI to store personal financial records

since this would constitute improper use of a government

computer. [C/ALD] held further conversations with [C/DCI

Administration] at which time [C/ALD] suggested that the

DCI’s personal financial data be transferred to the DCI’s

personal computer rather than loaning Agency computers to the

DCI. [C/DCI Administration] stated that this proposal would

not work because the DCI did not own any personal computers.

It was then suggested that the DCI be encouraged to purchase a

personal computer and that the DCI personal financial records

be transferred to the computer.

26. On December 10, 1996, a no-fee contract was prepared

between John Deutch, Independent Contractor, and the CIA.

Deutch was to provide consulting services to the DCI and senior

managers, was to retain an Agency-issued laptop computer for

three months, and would retain an Agency-issued desktop

computer for official use for one year.

27. C/DCI Administration's MFR notes that on December 13,

1996, he spoke with O’Neil on the telephone. O’Neil directed that

the contract being prepared for Deutch be modified to authorize

Deutch two computers for a period of one year. The contract was

revised on December 13, 1996; the reference to the laptop was
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deleted but Deutch was to retain two Agency-issued desktop

computers and two STU-III secure telephones for one year.

28. According to the C/DCI Administration's MFR, on

December 12, 1996, [he] again met with Deutch to discuss matters

relating to Deutch’s departure. The computer issue was again

discussed:

I mentioned again that I had "strong reservations" about

Mr. Deutch maintaining the Government-owned computers and

restated that we would be happy to assist moving Mr. Deutch

to a personally-owned platform. Mr. Deutch slammed shut his

pen drawer on his desk and said thanks for everything without

addressing the issue.

29. According to the C/ALD and PDGC MFR, they met with

O’Neil on December 13, 1996 to discuss the loan of the computers to

Deutch. [They] expressed concern that the loan of the computers

would be improper if Deutch intended to use the computers for

personal purposes. O’Neil stated that he had discussed the matter

with Deutch, and Deutch knew he could not use the computers for

personal purposes. O’Neil also stated, according to the MFR, that

Deutch had his own personal computers and that Deutch would

transfer any personal data from the CIA computers to his own.

O’Neil said that the contract, which only called for the loan of two

computers, had to be re-drafted so that it would cover the loan of a

third computer. O’Neil advised that Deutch would not agree to an

arrangement in which he would simply use his own computers for

official work in place of a loaned CIA computer.6

30. The PDGC recalls standing in the receiving line at a

farewell function for Deutch and being told by Deutch’s wife, “I

can’t believe you expect us to go out and buy another computer.”

31. The MFR indicates that [the two OGC attorneys]

dropped their objections to the loan of the computers, based on

 

6The OIG investigation has not located any contract that includes a third computer.
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assurances from O’Neil that Deutch understood the computers

would only be used for official purposes, and he would transfer his

personal financial data to his own computer.

32. The contract was signed on December 13, 1996 by O’Neil

and Deutch. The effective date for the contract was

December 16, 1996. The contract states that Deutch “shall retain, for

Government use only, two (2) Agency-issued desktop computers and

two (2) STU-III’s for the period of one year.” Instead, Deutch was

issued three PCMCIA cards and two PCMCIA card readers and all

government-owned computers were returned to the Agency. On

June 23, 1997, he purchased the cards and readers from CIA for

$1,476.

WHAT INFORMATION WAS FOUND ON DEUTCH’S MAGNETIC MEDIA?

 ̈ How was the classified material discovered?

33. Each of the two, unclassified, Agency-owned computers

that were to be loaned to Deutch under the provisions of the

December 13, 1996 contract were already located at Deutch’s

Maryland and Belmont residences. To effect the loan of the

computers, C/DCI Administration, after consulting with Deutch

and his personal assistant, requested that an Infosec Officer perform

an inventory of the two government-owned Macintosh computers

and peripherals at the Deutch residences. In addition, the Infosec

Officer was to do a review to ensure no classified material had been

accidentally stored on these computers. While at the Deutch

residences, a contract engineer was to document the software

applications residing on the computers and, at Deutch’s request,

install several software applications. This software included

FileMaker Pro (e.g., a database) that was to be used with a calendar

function and Lotus Notes that would be used with an address book.

Deutch has no recollection of authorizing an inventory or a

personal visit to his residences and questions the appropriateness of

such a visit.
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34. On December 17, 1996, the contract network engineer and

the Infosec Officer, escorted by a member of the DCI security

protective staff, entered Deutch’s Maryland residence to conduct the

review of the unclassified Macintosh computer and its peripherals.

The Infosec Officer reviewed selected data on the computer and two

PCMCIA cards, labeled unclassified, located in each of two

PCMCIA card drives. Two other PCMCIA cards, one labeled

unclassified and the other not labeled, were located on Deutch’s

desk.

35. The Infosec Officer’s initial review located six files

containing what appeared to be sensitive or classified information.

Although the Infosec Officer believed that numerous other

classified or sensitive files were residing on the computer, he

concluded the system was now classified and halted his review.

The contract network engineer agreed the system should be

considered classified based on the information residing on the

computer.

36. In addition to these six files, the contract network

engineer and the Infosec Officer noted applications that allowed the

Macintosh computer external connectivity via a FAX modem. The

computer also had accessed the Internet via [an ISP], a DoD

unclassified e-mail system, and [Deutch's bank] via its proprietary

dial-up software.

 ̈ What steps were taken to gather the material?

37. The Infosec Officer telephoned C/DCI Administration

and informed him of the discovery of classified material. Although

normal information security practice would have been to

immediately confiscate the classified material and equipment,

C/DCI Administration advised the Infosec Officer to await further

instruction. [He] proceeded to contact then-CIA Executive Director

Nora Slatkin. She referred him to O’Neil for guidance. [He] stated

that he consulted with O’Neil, who “requested that we print off
UNCLASSIFIED

UNCLASSIFIED

19

copies of the documents for his review.” [He] contacted the Infosec

Officer and instructed him to copy the six classified/sensitive files

to a separate disk and return to Headquarters. The Infosec Officer

copied five of the six files.7

38. After returning to Headquarters, the contract network

engineer recalled being contacted by O’Neil. O’Neil advised that

he had spoken with Deutch, and Deutch could not understand how

classified information came to be found on the computer’s hard

drive. O’Neil wanted to know if any extraordinary measures were

used to retrieve the classified documents and was told the

documents were simply opened using Microsoft Word. O’Neil

asked the contract network engineer to wait while Deutch was

again contacted.

39. Shortly thereafter, the contract engineer stated that

Deutch telephoned him and said he could not understand how

classified information could have been found on the computer’s

hard drive as he had stored such information on the PCMCIA

cards. The contract engineer told Deutch that the classified

information had been found on the PCMCIA cards. The contract

engineer recalled suggesting that Deutch might want a new hard

drive and replacement PCMCIA cards to store unclassified files that

could be securely copied from Deutch’s existing PCMCIA cards.

According to the contract engineer, Deutch agreed but wanted to

review the PCMCIA card files first because they contained personal

information.

40. On December 23, 1996, Deutch provided the four

PCMCIA cards from his Maryland residence to the DCI Security

Staff. These four cards were delivered to O’Neil the same day.

41. On December 27, 1996, the contract network engineer

advised C/DCI Administration that two PCMCIA cards previously

used by Deutch had been located in an office at Headquarters. One

 

7The Infosec Officer did not copy the sixth document, a letter to DCI nominee Anthony Lake that

contained Deutch’s personal sentiments about senior Agency officials.
UNCLASSIFIED

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20

of the cards had an unclassified sticker and was labeled as

“Deutch’s Personal Disk.” The other did not have either a

classification sticker or a label. The files on the card with the

unclassified sticker had been erased; however, the contract network

engineer was able to recover data by the use of a commercially

available software utility. Although labeled “unclassified,” the

contract network engineer noted that the files contained words such

as “Secret,” “Top Secret Codeword,” “CIA,” and the name of an

Office of Development and Engineering facility. This discovery

caused C/DCI Administration, on the advice of [the] Associate

Deputy Director for Administration (ADDA),8 to contact O’Neil for

assistance in expeditiously retrieving Deutch’s Macintosh

computers from the Maryland and Belmont residences.

42. On the evening of December 27, 1996, the contract

network engineer visited Deutch’s Maryland residence, removed

Deutch’s hard drive, and delivered it to C/DCI Administration.

On December 30, 1996, DCI Security Staff delivered to C/DCI

Administration the hard drive from Deutch’s Belmont residence.

Both hard drives were then delivered to O’Neil.

43. On January 6, 1997, OPS/SIB, upon the approval of

Slatkin, initiated an internal investigation to determine the security

implications of the mishandling of classified information by

Deutch.

44. According to Slatkin, she, O’Neil, and Richard Calder,

Deputy Director for Administration had several discussions about

how to proceed with the investigation. She also discussed with

Acting DCI Tenet the issue of how to proceed. As a result, a select

group was created to address this matter. Its purpose was to (1)

take custody of the magnetic media that had been used by Deutch,

(2) review Deutch’s unclassified magnetic media for classified data,

(3) investigate whether and to what extent Deutch mishandled

classified information, and (4) determine whether classified

 

8The former ADDA retired in October 1997.
UNCLASSIFIED

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21

information on Deutch’s computers that had Internet connectivity

was compromised.

45. By January 13, 1997, all hardware and files that had been

used by Deutch, except four PCMCIA cards retrieved from Deutch’s

Maryland residence on December 23, 1996, were in SIB’s

possession. On February 3, 1997, O’Neil released the four PCMCIA

cards to Calder, who transferred them to the group on February 4,

1997. Then-Director of Personnel Security (D/OPS) headed the

group. Calder was the senior focal point for the group. In addition,

a technical exploitation team was formed to exploit the magnetic

media.

♦ What steps were taken to recover information residing

on Deutch’s magnetic media?

46. Five government-issued MacIntosh computer hard drives

and eight PCMCIA cards, used by Deutch and designated for

unclassified purposes, were examined by a technical exploitation

team within the group. Because each of the computers had

modems, the PCMCIA cards were considered equally vulnerable

when inserted into the card readers attached to the computers. The

group had concerns that the processing of classified information on

Deutch’s five computers that were designated for unclassified

information were vulnerable to hostile exploitation because of the

modems. The group sought to determine what data resided on the

magnetic media and whether CIA information had been

compromised.

47. The examination of Deutch’s magnetic media was

conducted during the period January 10 through March 11, 1997.

The technical exploitation team consisted of a Senior Scientist and

two Technical Staff Officers, whose regular employment

responsibilities concerned [data recovery]. The Infosec Officer who

participated in the December 17, 1996 security inspection at

Deutch’s Maryland residence also assisted in the exploitation effort.
UNCLASSIFIED

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22

48. This team performed the technical exploitation of

Deutch’s magnetic media, recovered full and partial documents

containing classified information, and printed the material for

subsequent review. Technical exploitation began with scanning for

viruses and making an exact copy of each piece of media used by

Deutch. Further exploitation was performed on the copies. The

original hard drives and PCMCIA cards were secured in safes. The

copies were restored, in a read-only mode, on computers used by

the team. Commercially available utility software was used to

locate, restore, and print recoverable text files that had been erased.

In an attempt to be exhaustive, the Senior Scientist wrote a software

program to organize text fragments that appeared to have been

part of word processing documents.

49. To accommodate concerns for Deutch’s privacy, D/OPS

was selected to singularly review all recovered data. He reviewed

in excess of 17,000 pages of recovered text to determine which

documents should be retained for possible future use in matters

relating to the unauthorized disclosure of classified information.

50. Three of the PCMCIA cards surrendered by Deutch

subsequent to the security inspection of December 17, 1996, were

found to have characteristics that affected exploitation efforts.

Specifically, the card labeled “John Backup” could not be fully

exploited as 67 percent of the data was unrecognizable due to

“reading” errors. The card labeled “Deutch’s Disk” was found to

have 1,083 “items” that were erased. The last folder activity for

this card occurred on “December 20, 1996 at 5:51 [p.m.].” The third

card, labeled “Deutch’s Backup Disk” and containing files

observed during the security inspection, was found to have been

reformatted.9 The card was last modified on “December 20, 1996,

[at] 5:19 p.m.”

51. Subsequent investigation by OIG revealed that Deutch

had paged the contract network engineer at 1000 hours on

 

9Formatting prepares magnetic media for the storing and retrieval of information. Reformatting

erases the tables that keep track of file locations but not the data itself, which may be recoverable.
UNCLASSIFIED

UNCLASSIFIED

23

Saturday, December 21, 1996. In an e-mail to C/DCI

Administration the following day, the contract network engineer

wrote:

. . . he [Deutch] was experiencing a problem deleting files from

one or [sic] his 170MB PCMCIA disks. As near as I [Contractor]

can tell the disk has become corrupted and while it appears to

allow him [Deutch] to copy files it did not allow him to delete

them. We tried several techniques to get around the problem

but none were successful. He [Deutch] indicated that he

[Deutch] would continue to copy files and not worry about

deleting any additional files. He [Deutch] asked what we were

going to do with the disks he returned and I told him that we

would in all probability degauss them and then physically

destroy them . . . .

52. The exploitation efforts resulted in eight pieces of

magnetic media yielding classified information. Of the eight

pieces, four computers and three PCMCIA cards had prominent

markings indicating that the equipment was for unclassified use.10 

Forty-two complete documents [were classified up to Top Secret

and a non-CIA controlled compartmented program] and 32 text or

document fragments classified up to [Top Secret and a non-CIA

controlled compartmented program] were recovered. Fourteen of

the recovered classified documents contained actual printed

classification markings (i.e., “SECRET,” “Top Secret/[a non-CIA

controlled compartmented program]”) as part of the document.

These documents were located on hard drives and/or PCMCIA

cards linked to Deutch’s residences, 7th floor CIA office, and laptop.

53. Indications of Internet, [an ISP],

11 an unclassified

Pentagon computer e-mail,12 and online banking usage were found

 

10OIG was unable to determine how the Belmont computer was marked because the chassis was

disposed of prior to the OIG investigation.

11In response to an authorization for disclosure signed by Deutch, [the ISP] provided business

records to OIG. These records reflect that Deutch, using the screen name [that was a variation of his

name,] maintained an account with [the ISP] since January 1, 1995.
UNCLASSIFIED

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24

on several of the storage devices. A virus was found to have

corrupted a file on the computer formerly located in Deutch’s 7th

floor CIA office. This computer was labeled “DCI’s Internet Station

Unclassified,” but yielded classified information during the

exploitation effort.

54. Recovered computer-generated activity logs reflect, in

certain instances, classified documents were created by “John

Deutch” during the period of June 1, 1995 and November 14, 1996.

Many of the same documents, in varying degrees of completion,

were found on different pieces of magnetic media. Additionally,

the team recovered journals (26 volumes) of daily activities

maintained by Deutch while he served at the DoD and CIA.

55. The following text box provides a summary of Deutch’s

magnetic media that resulted in the recovery of classified

information.

 

12The Department of Defense recovered and produced in excess of 80 unclassified electronic

message exchanges involving Deutch from May 1995 through January 1996. These messages reflect

Deutch’s electronic mail address as [variations of his name].
UNCLASSIFIED

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25

MEDIA/LOCATION MARKINGS CONNECTED TO INFORMATION RECOVERED

Quantum ProDrive Hard

Drive/Deutch’s Maryland

Residence

“Unclassified” on

MacIntosh Power PC

U.S. Robotics Fax Modem

Two PCMCIA Card Readers

Six complete classified documents and text

fragments including TS/Codeword.

Internet, [ISP], [Deutch's bank], and DoD

electronic mail usage.

Indicators of visits to high risk Internet sites13

Microtech PCMCIA

Card/Deutch’s Maryland

Residence

“Deutch’s Disk,”

“Unclassified,”

GS001414

PCMCIA Card Reader

Networked to U.S. Robotics

Fax Modem

Three complete classified documents and text

fragments including TS/Codeword.14

[Bank] online usage.

Card apparently reformatted on 12/20/96 at

5:51 p.m.

Microtech PCMCIA

Card/Deutch’s Maryland

Residence

“Deutch’s Backup

Disk,” “Unclassified,”

GS001490

PCMCIA Card Reader

Networked to U.S. Robotics

Fax Modem

31 complete classified documents and text

fragments, five observed during security

inspection.

[Bank] Online Usage. Card apparently

reformatted on 12/20/96 at 5:19 p.m.

Quantum ProDrive Hard

Drive/Deutch’s Belmont

Residence

“JMD” on Drive Shell U.S. Robotics Fax Modem

Two PCMCIA Card Readers

Six complete classified documents and text

fragments including TS/Codeword.

Internet usage.

Indicators of visits to high risk Internet sites

MacIntosh Power PC with

Hard Drive/Deutch’s 7th

Floor Office, Original

Headquarters Building

“Unclassified,”

“Property of O/DCI....”

“DCI’s Internet Station

Unclassified”

U.S. Robotics Fax Modem

Two PCMCIA Card Readers

One complete classified document and text

fragments including TS/Codeword.

Word macro concept virus.

Internet, DoD electronic mail usage.

MacIntosh Power PC with

Hard Drive/Deutch’s

OEOB Office

“Unclassified,”

“Property of DCI...”

U.S. Robotics Fax Modem

Two PCMCIA Card Readers

Text fragments including TS/Codeword.

DoD electronic mail usage.

MacIntosh Powerbook

Laptop

“Dr. Deutch Primary,”

“Unclassified,”

Global Village Internal Modem Two complete classified documents and text

fragments including TS/Codeword.

 

13Certain material viewed by the exploitation team was described as leaving the user's computer

particularly vulnerable to exploitation. The exploitation team did not recover this material and it

was never viewed by OIG.

14Journals containing classified material classified up to TS/SCI encompassing Deutch's DoD and

CIA activities were recovered from multiple PCMCIA cards. Deutch stated that he believed his

journals to be unclassified.
UNCLASSIFIED

UNCLASSIFIED

26

MEDIA/LOCATION MARKINGS CONNECTED TO INFORMATION RECOVERED

“Property of /DCI....”

Microtech PCMCIA

Card/ISMS Office

“Deutch’s Personal

Disk,” “Unclassified,”

N/A Text fragments including TS/Codeword.
UNCLASSIFIED

UNCLASSIFIED

27

 ̈ What are some examples of the classified material that

was found?

56. An October 7, 1996 memorandum from Deutch to the

President and the Vice President, found on the hard drive of the

Maryland residence computer, [contained information at the Top

Secret/Codeword level]. The last paragraph of the memorandum

notes [that the information is most sensitive and must not be

compromised]:

Accordingly, with [National Security Advisor] Tony’s [Lake]

advice, I have restricted distribution of this information to Chris

[Secretary of State Warren Christopher], Bill [Secretary of

Defense William Perry], Tony [Lake], Sandy [Deputy National

Security Advisor Sandy Berger], Leon Fuerth [the VP’s National

Security Advisor], and Louie Freeh with whom I remain in close

touch.

57. [The] former Chief of Staff to the DCI and Slatkin both

identified the memorandum as one Deutch composed on the

computer at his Maryland residence in their presence on October 5,

1996.

58. In a memorandum to the President that was found on a

PCMCIA card from the Maryland residence, Deutch described an

official trip. [The memorandum discussed information classified

at the Top Secret level.]

59. In a memorandum to the President, which was found on a

PCMCIA card from the Maryland residence, concerning a trip

Deutch [discusses information classified at the Top

Secret/Codeword level].

60. Deutch’s memorandum to the President found on a

PCMCIA card from the Maryland residence also [discusses a nonCIA controlled compartmented program].
UNCLASSIFIED

UNCLASSIFIED

28

61. An undated memorandum from Deutch to the President

that was found on a PCMCIA card from the Maryland residence

discusses a trip. [The memorandum discusses information

classified at the Secret level.]

62. Another Deutch memorandum to the President that was

found on a PCMCIA card from the Maryland residence [discusses

information classified at the Secret/Codeword level].

63. In a memorandum to the President that was found on a

PCMCIA card from the Maryland residence, Deutch [discusses

information classified at the Top Secret/Codeword level].

64. [In] a memorandum with no addressee or originator

listed, noted as revised on May 9, 1996 that was found on a

PCMCIA card from the Maryland residence, [Deutch discusses

information at the Secret level].

65. A document with no heading or date concerning a Deutch

trip was found on the hard drive of Deutch’s laptop computer

which was marked for unclassified use, describes [information

classified at the Secret/Codeword level].

66. A document without headings or dates, which was found

on the hard drive of the unclassified computer in Deutch’s 7th floor

office, [discusses information classified at the Secret/Codeword

level].

67. Deutch’s journal, which was found on a PCMCIA card

from the Maryland residence, also covered this topic but in more

detail.
UNCLASSIFIED

UNCLASSIFIED

29

68. A spread sheet document [contains] financial [data] from

fiscal year 1995 (FY95) through FY01 [which is classified at the

Secret/compartmented program level]. It was found on a PCMCIA

card from the Maryland residence.

WHAT VULNERABILITIES MAY HAVE ALLOWED THE HOSTILE

EXPLOITATION OF DEUTCH’S UNPROTECTED COMPUTER MEDIA?

69. The June 1994 User’s Guide for PC Security, prepared by

CIA’s Infosec Officer Services Division, defines unclassified media

as media that has never contained classified data. To maintain this

status, all media and supplies related to an unclassified computer

must be maintained separately from classified computer hardware,

media, and supplies. Classified media is defined as media that

contains or has contained classified data. It must be appropriately

safeguarded from unauthorized physical (i.e., actually handling the

computer) and electronic access (i.e., electronic insertion of

exploitation software) that would facilitate exploitation. Computer

media must be treated according to the highest classification of

data ever contained on the media.

70. The Guide addresses vulnerabilities relating to computers.

Word processors, other software applications, and underlying

operating systems create temporary files on internal and external

hard drives or their equivalents (i.e., PCMCIA cards). These

temporary files are automatically created to gain additional

memory for an application. When no longer needed for memory

purposes, the location of the files and the data saved on the media

is no longer tracked by the computer. However, the data continues

to exist and is available for future recovery or unwitting transfer to

other media.

71. Additionally, data contained in documents or files that

are deleted by the user in a standard fashion continue to reside on

magnetic media until appropriately overwritten. These deleted
UNCLASSIFIED

UNCLASSIFIED

30

files and documents can be recovered with commercially available

software utilities. Furthermore, computers reuse memory buffers,

disk cache, and other memory and media locations (i.e., slack and

free space) on storage devices without clearing all previously stored

information. This results in residual data being saved in storage

space allocated to new documents and files. Although this data

cannot be viewed with standard software applications, it remains

in memory and can be recovered.

72. As a result of these vulnerabilities, security guidelines

mandate procedures to prevent unauthorized physical and

electronic access to classified information. An elementary practice

is to separately process classified and unclassified information.

Hard drives, floppy disks, or their equivalents used in the

processing of classified information must be secured in approved

safes and areas approved for secure storage when not in use.

Individuals having access to media that has processed classified

information must possess the appropriate security clearance.

Computers that process classified information and are connected to

a dial-up telephone line must be protected with a cryptographic

device (e.g., STU-III) approved by NSA.

♦ What was the electronic vulnerability of Deutch’s

magnetic media?

73. Deutch used five government-owned Macintosh

computers, configured for unclassified purposes, to process

classified information. At least four of these computers were

connected to modems that were lacking cryptographic devices and

linked to the Internet, [an ISP], a DoD electronic mail server,

and/or [bank] computers. As a result, classified information

residing on Deutch’s computers was vulnerable to possible

electronic access and exploitation.

74. Deutch did receive e-mail on unclassified computers.

One such message from France, dated July 11, 1995, was
UNCLASSIFIED

UNCLASSIFIED

31

apparently from a former academic colleague who claimed to be a

Russian.

75. Deutch’s online identities used during his tenure as DCI

may have increased the risk of electronic attack. As a private

subscriber [to an ISP], Deutch used a variant of his name for online

identification purposes. He was also listed by true name in [the

ISP’s] publicly available online membership directory. This

directory reflected Deutch as a user of Macintosh computers, a

scientist, and as living in Bethesda, Maryland. Similarly, Deutch’s

online identity associated with CIA was:

johnd@odci[Office of DCI].gov[Government]

and with DoD, as:

deutch.johnd@odsdpo[Office of Deputy Secretary of Defense

Post Office].secdef[Secretary of Defense].osd.mil[Military].

After his confirmation as DCI, Deutch’s DoD user identity was

unobtainable from their global address database.

76. The technical exploitation team determined that high risk

Internet sites had placed “cookies”15 on the hard drives of the

computers from Deutch’s residences. According to DDA Calder,

SIB’s investigation demonstrated that the high risk material was

accessed when Deutch was not present. These web sites were

considered “risky” because of additional security concerns related

to possible technical penetration.

 ̈ What was the physical vulnerability of Deutch’s

magnetic media?

77. Deutch’s government-issued computer at his primary

residence in Maryland contained an internal hard drive and was

 

15A “cookie” is a method by which commercial web sites develop a profile of potential consumers

by inserting data on the user’s hard drive.
UNCLASSIFIED

UNCLASSIFIED

32

lacking password protection. The drive was not configured for

removal and secure storage when unattended even though

classified information resided on the drive. Additionally, at the

time of the December 17, 1996 security inspection, three of the four

unsecured PCMCIA cards yielded classified information: two in

PCMCIA readers and one on the desk in Deutch’s study. An empty

safe was also found with its drawer open.

78. Unlike his predecessors, Deutch declined a 24-hour

security presence in his residence, citing concerns for personal

privacy. Past practice for security staff, if present in a DCI’s

residence, was to assume responsibility for securing classified

information and magnetic media. To compensate for the lack of an

in-house presence, CIA security personnel and local police drove by

Deutch’s residence on a periodic basis. The two security chiefs

responsible for Deutch’s protective detail stated that Deutch was

responsible for securing classified information in his residence.

Deutch said that he thought his residence was secure. In hindsight,

he said that belief was not well founded. He said he relied,

perhaps excessively, on the CIA staff and security officials to help

him avoid mistakes that could result in the unauthorized disclosure

of classified information.

79. On May 16, 1995, Deutch approved the installation of a

residential alarm system to include an alarm on the study closet. A

one-drawer safe was placed in the alarmed closet. These upgrades

were completed by early June 1995.

80. According to the first Security Chief assigned to Deutch,

the alarm deactivation [was provided] code to a resident alien who

performed domestic work at the Maryland residence. The alien

[was permitted] independent access to the residence while the

Deutch's were away. CIA security database records do not reflect

any security clearances being issued to the alien. The resident alien

obtained U.S. citizenship during 1998.
UNCLASSIFIED

UNCLASSIFIED

33

COULD IT BE DETERMINED IF CLASSIFIED INFORMATION ON DEUTCH’S

UNCLASSIFIED COMPUTER WAS COMPROMISED?

81. According to the Senior Scientist who led the technical

exploitation team, there was "no clear evidence" that a compromise

had occurred to information residing on storage devices used by

Deutch. In a February 14, 1997 MFR, the Senior Scientist

concluded:

A complete, definitive analysis, should one be warranted,

would likely take many months or longer and still not surface

evidence of a data compromise.

82. On May 2, 1997, the Chief, SIB wrote in a memorandum

to the Director of OPS:

In consultation with technical experts, OPS investigators

determined the likelihood of compromise was actually greater

via a hostile entry operation into one of Mr. Deutch’s two

homes (Bethesda, Maryland and Boston, Massachusetts) to

“image” the contents of the affected hard drives . . . . Due to the

paucity of physical security, it is stipulated that such an entry

operation would not have posed a particularly difficult

challenge had a sophisticated operation been launched by

opposition forces . . . . The Agency computer experts advised

that, given physical access to the computers, a complete

“image” of the hard drives could be made in [a short amount of

time].

WHAT KNOWLEDGE DID DEUTCH HAVE CONCERNING VULNERABILITIES

ASSOCIATED WITH COMPUTERS?

♦ What is Deutch’s recollection?

83. During an interview with OIG, Deutch advised that, to

the best of his recollection, no CIA officials had discussed with him
UNCLASSIFIED

UNCLASSIFIED

34

the proper or improper use of classified and unclassified computers.

Around December 1997, approximately one year after he resigned

as DCI, he first became aware that computers were vulnerable to

electronic attack. Not until that time, Deutch commented, had he

appreciated the security risks associated with the use of a modem

or the Internet in facilitating an electronic attack.16

84. Although stating that he had not received any CIA

security briefings relating to the processing of information on

computers, Deutch acknowledged that classified information must

be properly secured when unattended. Specifically, he stated, “I

am completely conscious of the need to protect classified

information.”

85. In response to being advised that classified information

had been recovered from government computers configured for his

unclassified work, Deutch stated that he “fell into the habit of using

the [CIA] unclassified system [computers] in an inappropriate

fashion.” He specifically indicated his regret for improperly

processing classified information on the government-issued

Macintosh computers that were connected to modems. Deutch

acknowledged that he used these government-issued computers to

access [the ISP], [his bank], the Internet, and a DoD electronic mail

server.

86. Deutch indicated he had become accustomed to

exclusively using an unclassified Macintosh computer while

serving at DoD. He acknowledged that prior to becoming DCI, he

was aware of the security principle requiring the physical

separation of classified and unclassified computers and their

respective information. However, he said he believed that when a

file or document was deleted (i.e., dragged to the desktop trash

folder), the information no longer resided on the magnetic media

nor was it recoverable. Deutch maintained that it was his usual

 

16After reading the draft ROI, Deutch's refreshed recollection is that it was in December 1996, not

December 1997, that he first became aware that his computer priorities resulted in vulnerability to

electronic attack.
UNCLASSIFIED

UNCLASSIFIED

35

practice to create a document on his desktop computers, copy the

document to an external storage device (e.g., floppy disk), and drag

the initial document to the trash folder.

87. During his tenure as DCI, Deutch said that he

intentionally created the most sensitive of documents on computers

configured for unclassified use. Deutch stated that if these

documents were created on the classified CIA computer network,

CIA officials might access the system at night and inappropriately

review the information. Deutch said that he had not spent a

significant amount of time thinking about computer security issues.

88. Deutch advised that other individuals had used the

government computer located in the study of his Maryland

residence. Deutch’s wife used this computer to prepare reports

relating to official travel with her husband. Additionally, [another

family member] used this computer to access [a university] library.

Regarding the resident alien employed at the Maryland residence,

Deutch indicated that, to his knowledge, this individual never went

into the study. He further believed that the resident alien normally

worked while Mrs. Deutch was in the residence.

♦ What did Deutch learn at [an] operational briefing?

89. On August 1, 1995, Deutch and several senior CIA

officials receive[d] various operational briefings.

90. [During these briefings,] Deutch was specifically told

that data residing on a [commercial ISP network was vulnerable

to a computer attack.]

91. Deutch did not have a specific recollection relating to the

August 1, 1995 briefing. He could not recall making specific

comments to briefers concerning his use of [his ISP] and the need to

switch to another ISP.
UNCLASSIFIED

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36

♦ What was Deutch’s Congressional testimony?

92. On February 22, 1996, DCI Deutch testified before the

Senate Select Committee on Intelligence on the subject of worldwide

security threats to the United States during the post-Cold War era.

During his appearance, Deutch stated:

Mr. Chairman, I conclude with the growing challenge of the

security of our information systems. There are new threats that

come from changing technologies. One that is of particular

concern to me is the growing ease of penetration of our

interlocked computer and telecommunications systems, and the

intelligence community must be in the future alert to these

needs- -alert to these threats.

93. On June 25, 1996, DCI Deutch testified in front of the

Permanent Investigations Subcommittee of the Senate

Governmental Affairs Committee. The Committee was

investigating the vulnerability of government information systems

to computer attacks. Deutch’s testimony focused on information

warfare, which he defined as unauthorized foreign penetrations

and/or manipulation of telecommunications and computer

network systems.

94. In his prepared statement submitted to the Committee,

Deutch indicated:

. . . like many others in this room, [I] am concerned that this

connectivity and dependency [on information systems] make us

vulnerable to a variety of information warfare attacks . . . .

These information attacks, in whatever form, could . . . seriously

jeopardize our national or economic security . . . . I believe

steps need to be taken to address information system

vulnerabilities and efforts to exploit them. We must think

carefully about the kinds of attackers that might use

information warfare techniques, their targets, objectives, and

methods . . . . Hacker tools are readily available on the Internet,

and hackers themselves are a source of expertise for any nation
UNCLASSIFIED

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or foreign terrorist organization that is interested in developing

an information warfare capability . . . . We have evidence that a

number of countries around the world are developing the

doctrine, strategies, and tools to conduct information attacks.

♦ What are the personal recollections of DCI staff

members?

95. Deutch’s [Executive] Assistant served in that position

from February 1995 through July 1996 at DoD and CIA. [He]

considered Deutch to be an “expert” computer user. [The

Executive Assistant] was responsible for coordinating the

preparation of computers for Deutch’s use upon his confirmation as

DCI. During the transition, [the Executive Assistant] informed

Deutch that the processing of classified and unclassified

information required the use of separate computers to prevent the

improper transfer of data. [The Executive Assistant] stated that the

computer support staff at CIA went to great lengths to

appropriately label Deutch’s computers as either classified or

unclassified in order to prevent improper use.

96. [The Executive Assistant] advised that he never

informed Deutch that it was permissible to process classified

information on a computer configured for unclassified use. [The

Executive Assistant] stated that he was not aware that Deutch

processed classified information on computers configured for

unclassified use. When advised that classified material had been

recovered from multiple computers used by Deutch that had been

configured for unclassified purposes, [the Executive Assistant]

responded that he was at a loss to explain why this had occurred.

97. [The Executive Assistant] remembered the August 1,

1995 briefing. [The Executive Assistant] said that Deutch was very

concerned about information warfare and, specifically, computer

systems being attacked. [The Executive Assistant] recalled that

during his CIA tenure, Deutch and he became aware of efforts by

[others] to attack computer systems.
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98. The computer specialist who provided regular

information support to Deutch while he served at DoD, was hired

at Deutch’s request in June 1995 to provide computer support to the

DCI Area. After arriving at CIA, the computer specialist provided

direct computer support to Deutch about once per week. At times,

Deutch, himself, would directly contact the computer specialist for

assistance.

99. The computer specialist described Deutch as a “fairly

advanced” computer user who sought and used software that was

considered to be above average in complexity. Deutch was further

described as having “more than a passing interest in technology”

and asking complex computer-related questions. The computer

specialist found that Deutch “kept you on your toes” with questions

that required research [for] the answers. Deutch was also

described as having a heightened interest in the subject of

encryption for computers. The computer specialist recalled that all

computer equipment issued to Deutch was appropriately labeled

for classified or unclassified work.

100. The computer specialist remembered a conversation

with Deutch on the subject of computer operating systems creating

temporary documents and files. This conversation occurred while

the computer specialist restored information on Deutch’s computer

after it had failed (i.e., crashed). Deutch watched as documents

were recovered and asked how the data could be restored. Deutch

was also curious about the utility software that was used to recover

the documents. The computer specialist explained to Deutch that

data was regularly stored in temporary files and could be

recovered. Deutch appeared to be “impressed” with the recovery

process.

101. During another discussion, the computer specialist

recalled telling Deutch that classified information could not be

moved to or processed on an unclassified computer for security

reasons.
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102. The computer specialist considered Deutch to be a

knowledgeable Internet user who had initially utilized this

medium while a member of the scientific community at the

Massachusetts Institute of Technology. During September 1996 and

while Deutch was still serving as DCI, the unclassified CIA Internet

web page was altered by a group of Swedish hackers. During

discussions with the computer specialist concerning this incident,

Deutch acknowledged that the Internet afforded the opportunity for

the compromise of information.

103. C/ ISMS, who supervised computer support provided to

Deutch from the time of his arrival at CIA through October 1996,

considered Deutch to be a computer “super user.” Deutch only

sought assistance when computer equipment was in need of repair

or he desired additional software. The computer support

supervisor stated that all unclassified computers and PCMCIA

cards that were provided for Deutch’s use had green labels

indicating they were for unclassified purposes.

104. The LAN technician, who initially configured Deutch’s

computers at CIA, stated that he labeled all equipment to reflect

whether it was designated for classified or unclassified purposes.

The technician’s stated purpose was to make it clear to Deutch what

information could be processed on a particular computer given the

requirement that Deutch have access to both classified and

unclassified computers.

HAD DEUTCH PREVIOUSLY BEEN FOUND TO HAVE MISHANDLED

CLASSIFIED INFORMATION?

105. Beginning in 1977, when he was the Director of Energy

Research at the Department of Energy (DoE), Deutch had a series of

positions with U.S. Government agencies that required proper

handling and safeguarding of classified information to include

sensitive compartmented information and DoE restricted data.
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40

106. From 1982 to 1988, Deutch was a paid consultant to the

CIA’s National Intelligence Council. In 1984, he was also under

contract to the CIA’s Directorate of Intelligence, Office of Scientific

Weapons and Research, serving as a member of the DCI’s Nuclear

Intelligence Panel.

107. [CIA records reflect Deutch had problems before

becoming Director with regard to the handling of classified

information. Other specific information on security processing

and practices has been deleted due to its level of classification.]

Deutch served as DoD’s Undersecretary for Acquisitions and

Technology and Deputy Secretary of Defense prior to his

appointment as DCI.

108. On November 21, 1995, DCI Deutch signed a CIA

classified information non-disclosure agreement concerning a

sensitive operation. Several provisions pertain to the proper

handling of classified information and appear to be relevant to

Deutch’s practices:

I hereby acknowledge that I have received a security

indoctrination concerning the nature and protection of classified

information, . . . .

I have been advised that . . . negligent handling of classified

information by me could cause damage or irreparable injury to

the United States. . . .

I have been advised that any breach of this agreement may

result in the termination of any security clearances I hold;

removal from any position or special confidence and trust

requiring such clearances; or the termination of my

employment or other relationships with the Departments or

Agencies that granted my security clearance or clearances. . . .
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41

I agree that I shall return all classified materials which have, or

may come into my possession or for which I am responsible

because of such access . . . upon the conclusion of my

employment . . . .

I have read this Agreement carefully and my questions, if any,

have been answered.

OIG also obtained similar, non-disclosure agreements signed by

Deutch during his employment at DoD.

WHAT LAWS, REGULATIONS, AGREEMENTS, AND POLICIES HAVE

POTENTIAL APPLICATION?

109. Title 18 United States Code (U.S.C.) §793, “Gathering,

transmitting or losing defense information” specifies in paragraph

(f):

Whoever, being entrusted with or having lawful possession or

control of any document, writing, . . . or information, relating to

national defense . . . through gross negligence permits the same

to be removed from its proper place of custody . . . shall be

fined under this title or imprisoned not more than ten years, or

both.

110. Title 18 U.S.C. §798, "Disclosure of classified

information” specifies in part:

Whoever, knowingly and willfully . . . uses in any manner

prejudicial to the safety or interest of the United States . . . any

classified information . . . obtained by the processes of

communication intelligence from the communications of any

foreign government, knowing the same to have been obtained

by such processes . . . shall be fined under this title or

imprisoned not more than ten years, or both.

111. Title 18 U.S.C. §1924, “Unauthorized removal and

retention of classified documents or material” specifies:
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42

Whoever, being an officer, employee, contractor or consultant of

the United States, and, by virtue of his office, employment,

position or contract, becomes possessed of documents or

materials containing classified information of the United States,

knowingly removes such documents or materials without

authority and with the intent to retain such documents or

materials at an unauthorized location shall be fined not more

than $1,000, or imprisoned for not more than one year, or both.

112. The National Security Act of 1947, CIA Act of 1949, and

Executive Order (E.O.) 12333 establish the legal duty and

responsibility of the DCI, as head of the United States intelligence

community and primary advisor to the President and the National

Security Council on national foreign intelligence, to protect

intelligence sources and methods from unauthorized disclosure.

113. Director of Central Intelligence Directive (DCID) 1/16,

effective July 19, 1988, "Security Policy for Uniform Protection of

Intelligence Processed in Automated Information Systems and

Networks," reiterates the statutory authority and responsibilities

assigned to the DCI for the protection of intelligence sources and

methods in Section 102 of the National Security Act of 1947,

E.O.s 12333 and 12356, and National Security Decision Directive

145 and cites these authorities as the basis for the security of

classified intelligence, communicated or stored in automated

information systems and networks.

114. DCID 1/21, effective July 29, 1994, "Physical Security

Standards for Sensitive Compartmented Information Facilities

(SCIFs)," specifies in paragraph 2:

All [Sensitive Compartmented Information] must be stored

within accredited SCIFs. Accreditation is the formal affirmation

that the proposed facility meets physical security standards

imposed by the DCI in the physical security standards manual

that supplements this directive.

115. Headquarters Regulation (HR) 10-23, Storage of

Classified Information or Materials. Section C (1) specifies:
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43

Individual employees are responsible for securing classified

information or material in their possession in designated

equipment and areas when not being maintained under

immediate personal control in approved work areas.

116. HR 10-24, "Accountability and Handling of Collateral

Classified Material," prescribes the policies, procedures, and

responsibilities associated with the accountability and handling of

collateral classified material. The section concerning individual

employee responsibilities states:

Agency personnel are responsible for ensuring that all

classified material is handled in a secure manner and that

unauthorized persons are not afforded access to such material.

117. HR 10-25, "Accountability and Handling of Classified

Material Requiring Special Control," sets forth policy,

responsibilities, and procedures that govern the transmission,

control, and storage of Restricted Data, treaty organization

information, cryptographic materials, and Sensitive

Compartmented Information. The section states:

Individuals authorized access to special control materials are

responsible for observing the security requirements that govern

the transmission, control, and storage of said materials.

Further, they are responsible for ensuring that only persons

having appropriate clearances or access approvals are

permitted access to such materials or to the equipment and

facilities in which they are stored.

HOW WAS A SIMILAR CASE HANDLED?

118. In November 1996, a senior CIA official was determined

to have routinely authored CIA unique, classified documents on his

personal home computer and CIA-issued laptop computer

configured for unclassified use. Some of the documents were at the

Secret and Top Secret/Codeword level. In addition, the senior
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44

Agency official had used both computers to visit Internet sites. In

addition, the senior official’s family members had access to both

computers. However, there was no way to determine if the

computer hard drives had been compromised.

119. On December 12, 1996, [the] OPS Legal Advisor,

referred a crimes report to the Associate General Counsel (AGC) in

the CIA Office of General Counsel. On December 13, 1996, the

AGC forwarded to DoJ a crimes report on this incident. In June

1997, a Personnel Evaluation Board (PEB) decided to downgrade

the official from an SIS-06 to SIS-05, issue a two-year letter of

reprimand including caveats against monetary and non-monetary

awards and promotions, and suspend the official for 30 workdays

without pay. In addition, the PEB directed the Office of

Congressional Affairs to brief the appropriate Congressional

intelligence committees about this senior official’s breach of

security. On September 11, 1997, the House Permanent Select

Committee on Intelligence and the Senate Select Committee on

Intelligence were briefed on this incident by Executive Director

David Carey.

WHAT ACTIONS DID SENIOR AGENCY OFFICIALS TAKE IN HANDLING THE

DEUTCH CASE?

 ̈ What actions were taken by senior Agency officials after

learning of this matter?

120. After learning from O’Neil on December 17, 1996 that

classified information had been discovered at Deutch’s Maryland

residence, Slatkin brought the issue to the attention of Acting DCI

George Tenet within one day. She asserted there were multiple

discussions with Tenet over time and “everything” had his

concurrence. Slatkin explained that the issue was too sensitive for

her and Tenet had the responsibility for making the decisions

relating to the Deutch incident. Slatkin stated she was also

concerned that others may have perceived that she and O’Neil, due
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45

to their close association with Deutch, should recuse themselves

from the matter. Slatkin said that Tenet gave her the responsibility

for coordinating this matter. She relied on O’Neil for legal advice

and Calder for a technical review.

121. Calder recalled one or possibly two “late night

discussions” with Tenet concerning the Deutch incident. One

meeting was to provide Tenet “the lay of the land.” At the second

meeting, Tenet gave instructions for the investigation to proceed

unimpeded.

122. Tenet stated he first learned of the discovery of classified

information on the Maryland computer in December 1996 or

January 1997 from either the Chief, DCI Security Staff or from the

C/DCI Administration. Tenet recalled that Slatkin and O’Neil got

involved in deciding how to handle the issue. Tenet did not hear

about any disagreements concerning the handling of this matter

and believed that Slatkin and O’Neil did not want to place Tenet in

the position of adjudicating a matter involving Deutch.

123. O’Neil stated that he is uncertain how he first learned of

the discovery of classified information on Deutch’s Maryland

computer. However, according to C/DCI Administration, a

meeting was held on the afternoon of December 17, 1996 with

O’Neil. At that meeting, O’Neil stated Deutch was concerned about

retaining his personal information before returning the four

PCMCIA cards to CIA. C/DCI Administration offered a solution

by offering to provide Deutch with replacement PCMCIA cards on

which Deutch could transfer his personal information. O’Neil

passed this suggestion to Deutch, and Deutch agreed. Afterward,

the contract network engineer also talked to Deutch about copying

his personal information to the new PCMCIA cards. The contract

network engineer recalled Deutch wanting to review the files on

the original PCMCIA cards because they contained personal

information.17

 

17In his interview with OIG, Deutch confirmed he reviewed the original PCMCIA cards to delete

personal information.
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124. [The] PDGC learned of the matter on the day of its

discovery. Between that date, December 17, 1996, and the date SIB

began its investigation, the PDGC recalled there was an ongoing

dialogue involving O’Neil, Slatkin, and Calder. The PDGC stated

that O’Neil kept her abreast of developments.

125. The former ADDA believes that C/DCI Administration

initially apprised her of the discovery on December 26, 1996. Her

first concern related to properly securing the classified information

at the Deutch residence, which the C/DCI Administration said he

would handle. Several days later, [she] learned that the magnetic

media at the Maryland residence had been secured, although not as

expeditiously as she desired. [She] stated that the PCMCIA cards

that had been in Deutch’s possession were given to O’Neil.

126. The former ADDA stated that Calder, Slatkin, and

O’Neil held a series of meetings to discuss how to handle the

incident. She recalled other issues surfacing, such as the resident

alien employed as a maid at the Deutch residence; Deutch’s

personal financial records being maintained on government-owned

computers; “disks” Deutch carried in his shirt pocket; and other

government-issued unclassified computers at Deutch’s Belmont

residence, the OEOB, and Headquarters that may contain classified

information.

127. D/OPS was first briefed on the case by Calder, who

became [his] senior focal point with the former ADDA serving as a

back-up. D/OPS never discussed the case directly with either

Slatkin or O’Neil. He remembered that the specific permission of

Slatkin or O’Neil was needed to involve others in the case.

According to D/OPS, the former ADDA believed that Slatkin and

O’Neil had as their main concern the fear that sensitive and

personal information contained in Deutch’s journals would leak.

Slatkin stated it was standard operating procedure, when dealing

with sensitive investigations or operations, to review requests to

involve additional individuals. She claimed it was common
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47

practice for her to review such requests with the DCI. She does not

recall denying any request to involve others in this case.

128. According to C/SIB, D/OPS asked him to conduct a

security investigation to determine: (1) if classified information

found on Deutch’s government-issued unclassified computer had

been compromised, and (2) what conditions would allow a

compromise to occur. C/SIB said he was to determine the “who,

what, where, when, and why.” C/SIB expected “noteworthy”

information would be compared to the appropriate DCID security

standards and adjudication would be based on SIB’s findings. He

recalled advising the D/OPS that classified information on

unclassified media could involve a potential violation of federal

law.

129. The OPS Legal Advisor wrote in a January 7, 1997 MFR

that he attended a meeting the previous day with Calder, D/OPS,

C/SIB, and an SIB investigator to discuss the discovery of the

classified information on the computer at Deutch’s Maryland

residence. Among the issues discussed were:

Acknowledgment that because this case involves former DCI

Deutch, whatever actions are taken by OPS and other parties

will be scrutinized very closely. Therefore, it was stressed by

everyone at the meeting that the security investigation of this

case must follow the same pattern established in other cases

where employees have placed classified information on a

computer and possibly exposed that information to access by

unauthorized individuals.

130. Calder stated that the OPS Legal Advisor was strident

in his concern that Deutch be treated the same as any other Agency

employee and senior officials should scrupulously avoid showing

special treatment to Deutch. Calder agreed that the investigation

should resemble those conducted for similar violations by other

Agency personnel. He stated he was concerned that he insulate the

OPS/SIB personnel and the C/DCI Administration to ensure that

they did not “get ground up.”
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131. Calder stated that he initially assumed this matter

would arise again in the future, possibly with a Congressional

committee. Therefore, he insisted that the case be conducted in the

same manner as for any CIA employee.
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♦ How were the Maryland PCMCIA cards handled?

132. SIB sought to obtain and secure all the governmentissued computer equipment and magnetic media that had been

provided to Deutch, such as the computers and peripherals that

were at both Deutch residences. By early January 1997, all

government-issued computer equipment and magnetic media used

by Deutch had been turned over to SIB with the exception of the

four PCMCIA cards that had been observed by the inspection team

on December 17, 1996.

133. O’Neil recalled that a DCI Security officer brought him

the four PCMCIA cards from the Maryland residence. O’Neil

stated he put the PCMCIA cards in his safe and never opened the

envelope that contained them. He said he gave the PCMCIA cards

to Calder without argument when asked.

134. Calder recalled that O’Neil told him that Deutch wanted

the PCMCIA cards destroyed. Calder advocated the position that

the cards should not be tampered with and must be maintained in

the event of a future leak investigation. According to Calder,

O’Neil and Deutch came to realize the PCMCIA cards could not be

summarily destroyed. Calder stated that he went to O’Neil on

three or four occasions in an attempt to obtain the four PCMCIA

cards, and it took two to three weeks to reach a satisfactory

arrangement for O’Neil to surrender them.

135. The PDGC also recalled, “We had to hammer O’Neil to

give the [PCMCIA] cards to Security.” The PDGC believes Slatkin,

whose “loyalty to Deutch was incredible,” and Deutch pressured

O’Neil not to allow others to have access to the personal

information on the cards. The PDGC stated that she, Calder, the

OPS Legal Advisor, and C/SIB “pushed the other way” and

advocated that O’Neil turn the cards over to Security. C/SIB

confirmed the difficulty obtaining the four PCMCIA cards in

O’Neil’s possession.
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136. The former ADDA recalled advising Slatkin that the

investigation was dragging on, and that unidentified individuals

believed that this was being done purposely in order to “cover up”

the event. The former ADDA told Slatkin that O’Neil’s

withholding of the four cards supported the “cover up” perception.

137. According to Slatkin, after the former ADDA told

Slatkin about the problem with the four remaining disks, she

requested a meeting with Tenet, O'Neil, and Calder. Tenet

reportedly told O’Neil to surrender the PCMCIA cards to Calder.

Calder stated that O’Neil claimed that, although Calder had

discussed his need for the cards, Calder had never specifically

asked O’Neil to turn them over. C/SIB states that Calder, in his

presence, "specifically ask[ed]" O'Neil to release the PCMCIA cards.

Slatkin said she would have reacted earlier if she had known of

Calder’s concern.

138. According to O'Neil, he, Tenet, Slatkin, and Calder had

conversations over a period of several weeks on the exploitation of

the PCMCIA cards and protecting Deutch's privacy. After Tenet

decided on the process for handling the cards, they were delivered

to Calder. O'Neil said he never refused to turn over the cards for

exploitation.

139. O’Neil surrendered the four PCMCIA cards to Calder on

February 3, 1997. Calder provided the cards to C/SIB on February

4, 1997.

♦ What was the course of the Special Investigations

Branch’s investigation of Deutch?

140. Calder stated that, in his view, Slatkin and O’Neil did

not want Deutch’s name “to be besmirched” and O’Neil assumed

the role of an “interlocutor.” He also said that Slatkin and O’Neil

were particularly sensitive that a possible vendetta would be

orchestrated by security personnel as a response to interference by

O’Neil and Slatkin in a previous, unrelated, joint investigation
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involving the DoD.18 Calder characterized his encounters with

Slatkin regarding the Deutch investigation as “always difficult

discussions” and that it was continually necessary to “push

forward” and achieve “a negotiated peace.” Slatkin, however,

stated that she had no involvement in the DoD-CIA investigation

except to determine why the Acting Director and she had not been

informed of the notification to DoD.

141. The OPS Legal Advisor believes Slatkin "constrained the

investigative apparatus.” He cited, as an example, Slatkin

advocating allowing Deutch to go into the files to determine if the

information was personal or belonged to the CIA. The OPS Legal

Advisor stated that the policy has always been that an individual

who places personal information on a government computer loses

the expectation of privacy and the material reverts to the control of

the government authorities. The OPS Legal Advisor stated that

Calder, D/OPS, and the former ADDA tried to keep the

investigation on track. Slatkin denied interfering with the

investigation. She stated that she did not make any unilateral

decisions about the course of the investigation. All requests made

by Deutch were relayed to O'Neil, Calder, and Tenet.

142. In the early stages of SIB’s investigation, Calder recalled

telling Tenet there was no indication of a compromise and the

investigation was proceeding. Calder said that the investigators

showed him some of the classified material. It included Top

Secret/[Codeword] information; collection methods and imagery;

and possibly information identifying CIA operations officers.

 

18Based on a series of intelligence leaks in the Washington Times, CIA’s Special Investigations

Branch determined the leaks were related to the distribution of intelligence reports at the Pentagon.

In a routine procedure, CIA sent a letter to DoD and the Defense Intelligence Agency (DIA) to

coordinate an investigation. According to Calder, the DIA nominee for Director of that organization

contacted Slatkin and demanded an explanation of the CIA’s actions. Subsequently, O’Neil

requested that DDA Calder rescind the CIA letter. Calder states that O’Neil commented the actions

of CIA security officials appeared to be “vindictive and malicious.”
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143. Calder stated that after a complete package of Deutch’s

material was recovered from the magnetic media, the question

arose as to the proper person to review the material. Because the

material contained personal information, Calder recalled that

Deutch wanted to review the material himself or have O’Neil do

the review. Ultimately, Slatkin selected D/OPS for the task.

144. As part of the SIB investigation, C/SIB interviewed staff

from DCI Security and the DCI Information Services Management

Staff; he also planned to interview [Deutch's Executive Assistant]

and Deutch.19 On March 24, 1997, Calder informed C/SIB that

C/SIB would not be the one to interview Deutch. (Calder later

explained to OIG investigators that a concern existed to have

somebody who was politically sensitive question Deutch, should

such an interview prove necessary.) At Calder’s request, SIB

composed questions to ask Deutch and, on May 15, 1997,

forwarded them to D/OPS for review. However, C/SIB also

informed Calder that SIB would not continue their efforts because

certain interviewees (i.e., Deutch) were not accessible to SIB.

Calder agreed.

145. The OPS Legal Advisor stated that, normally, a case

similar to Deutch’s would not only be referred to SIB for

investigation, but a contemporaneous damage assessment would

also be conducted. If the subject was a former employee, typically

the subject would be banned from holding a security clearance and

future CIA employment.

146. After D/OPS reviewed the 17,000 pages of recovered

documents, he prepared a report of his findings and attached a

copy of C/SIB’s separate, signed report. He recalled receiving a

“panicky” call from the former ADDA relaying that Slatkin

wanted the report immediately.

 

19C/SIB noted that he did not review Deutch’s official security file. OIG reviewed the file.
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147. Calder was familiar with D/OPS's report and stated

that it was the lone document that he retained following the

conclusion of the investigation. He recalled sending the report to

Slatkin and receiving it back with marginal comments, possibly

asking if the PCMCIA cards had been destroyed. Slatkin recalled

that the draft report was hand-carried to her by Calder. After she

read the report, she made written editorial comments requesting

clarification and returned the draft report to either Calder or

D/OPS. She received the final report, reviewed it, and personally

handed it to Tenet. Tenet does not remember ever seeing D/OPS's

report, nor does he recall any of the details of the report. He said it

is possible that someone told him about the report or showed it to

him.

148. A signed copy of the D/OPS report dated July 8, 1997,

was recovered from the DDA’s Registry. It did not have any notes

on the text or attached to the document. No copy was ever

recovered from the DCI’s Executive Registry, the Executive

Director’s Office, Calder’s personal safe, or anywhere in OGC.

149. There was considerable discussion of what should be

done with the magnetic media after its material was catalogued.

O'Neil said that Tenet's decision was to retain permanently the

PCMCIA cards and a copy of all the classified documents. Calder,

however, said there was some disagreement among the parties and

the ultimate decision was to destroy the material, including the

magnetic media. At the end of the investigation, Calder

remembered asking D/OPS what happened to the PCMCIA cards

and being told the disks were about to be destroyed or had been

destroyed. Nevertheless, Calder said he was not certain the cards

were destroyed.

150. After D/OPS sent his report to Calder, the OPS Legal

Advisor received an e-mail from the C/ALD stating that the PDGC

had spoken to Calder about the SIB investigation of Deutch. Calder

reportedly said Deutch would be given a code of conduct briefing

in conjunction with Deutch’s security briefing as a member of the
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Proliferation Commission.20 On August 3, 1997, the OPS Legal

Advisor sent the C/ALD an e-mail response expressing concern

that no one at DoD or the White House had, so far, been notified

about a possible compromise of information. He also raised the

issue of Deutch retaining his security clearance. The OPS Legal

Advisor wrote:

I remain unpersuaded, however, that the CIA has done

everything it can in this case to protect CIA and DOD equities.

The investigation has been one in name only . . . . I’m certainly

not persuaded that giving this man a security clearance is in the

best interest of the U.S. Government or the President . . . . I

mean, geez, when was the last time a subject of an investigation

was not interviewed because he objected to talking to security

officers and the EXDIR, a personal friend, used her position to

short circuit an investigation? Let’s be honest with each other,

this so-called investigation has been handled in a manner that

was more designed not to upset friendships than to protect the

interests of the U.S.G.

151. C/SIB had also relayed his concerns about the possible

exposure of DoD classified material of ongoing military operations.

In his chronology, C/SIB wrote that on March 14, 1997, Calder

decided appropriate senior level DoD officials should be briefed on

a potential compromise. Calder planned to brief Slatkin of this

decision. C/SIB indicated he again reminded Calder of the need

for DoD notification on March 24, 1997. The OIG investigation did

not locate any information that such notification occurred until OIG

notified DoD on June 17, 1998.

152. As of May 1998, when OIG began its investigation, there

was no information in Deutch’s official Agency security file

concerning the SIB investigation or its findings nor was there any

evidence of a security adjudication.

 

20There is no record of Deutch receiving a code of conduct briefing. The Center for CIA Security

provided an SCI briefing to the Commission members on two occasions. Deutch was present for the

second one-hour presentation on November 17, 1998.
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55

SHOULD A CRIMES REPORT INITIALLY HAVE BEEN FILED ON DEUTCH IN

THIS CASE?

153. Title 28 U.S.C. §535, “Investigation of crimes involving

Government officers and employees,” requires that

any information, allegation or complaint received in a

department or agency of the executive branch of the

government relating to violations of Title 18 [U.S. Code]

involving Government officers and employees shall be

expeditiously reported to the Attorney General.

154. Section 1.7(a) of E.O. 12333, United States Intelligence

Activities, requires senior officials of the intelligence community to

“report to the Attorney General possible violations of federal

criminal laws by employees and [violations] of specified criminal

laws by any other person . . . .” This responsibility is to be carried

out “as provided in procedures agreed upon by the Attorney

General and the head of the department or agency concerned . . . .”

155. Pursuant to Part 1.7(a) of E.O. 12333, the DCI and the

Attorney General agreed on crimes reporting procedures for CIA

on March 2, 1982. These procedures, which are included as Annex

D to HR 7-1, were in effect from that time until August 2, 1995,

when they were superseded by new procedures.21 The new

procedures are contained in a document, “Memorandum of

Understanding: Reporting of Information Concerning Federal

Crimes,” signed by DCI Deutch.

156. According to the Memorandum of Understanding

(MOU),

[w]hen the General Counsel has received allegations,

complaints, or information (hereinafter allegations) that an

 

21Although HR 7-1 Annex D was superseded by the MOU on August 2, 1995, the current version of

HR 7-1 Annex D is dated December 23, 1987 and does not reflect the changes caused by the

subsequent MOU.
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56

employee22 of the Agency may have violated, may be violating,

or may violate a federal criminal statute, that General Counsel

should within a reasonable period of time determine whether

there is a reasonable basis23 to believe that a federal crime has

been, is being, or will be committed and that it is a crime which,

under this memorandum, must be reported.24

157. In [the] MFR of the OPS Legal Advisor of January 7,

1997, he wrote that another issue discussed was:

The need to determine whether a crimes report will be required

after an assessment of the information stored on the drives and

the PCMCIA cards. [18 U.S.C. §§1924 and 793(f) were briefly

discussed.] The General Counsel will make any determination

in that regard.

158. The OPS Legal Advisor stated that he understood that

Deutch had placed classified information on unclassified CIA

computers that were connected to the Internet, and the classified

information only “came out of Deutch’s head” when he composed

documents on the computer. The OPS Legal Advisor said he did

not know or have any information that Deutch had removed

documents from controlled areas containing classified

information.25

159. The OPS Legal Advisor remembered discussing the

issue of the possible criminality of Deutch’s actions with the PDGC.

His position was more conservative than the PDGC's. She raised

the point that, as DCI, Deutch had the legal authority to declassify

material under his control. This led to her contention that Deutch

 

22According to paragraph II B. 1. of the MOU, an “employee” is defined as “a staff employee,

contract employee, asset, or other person or entity providing service to or acting on behalf of any

agency within the intelligence community.”

23According to paragraph II E. of the MOU, “'Reasonable basis' exists when there are facts and

circumstances, either personally known or of which knowledge is acquired from a source believed

to be reasonably trustworthy, that would cause a person of reasonable caution to believe that a

crime has been, is being, or will be committed.”

24Records of the Office of General Counsel indicate there were an average of 200 written crimes

reports submitted to DoJ each year for the period 1995-1998.

25Title 18 U.S.C. §§793(f) and 1924 both prohibit the improper removal of "documents."
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57

could not be prosecuted for a security violation. She reportedly

cited an instance when then-DCI William Casey inadvertently

divulged classified information in an interview with the media.

160. The OPS Legal Advisor provided handwritten notes

from January 6, 1997 about a discussion of a possible crimes report

with the PDGC:

Talked to [the PDGC]. She already knew about the Deutch leak.

Discussed the 793(f) issue. She concluded years ago that the

DCI who has authority to declassify cannot realistically be

punished under the statute. I expressed my disbelief in that

analysis. Hypo - does that put the DCI beyond espionage

statutes? No she says that would be a natl. security call . . . .

Returned briefly to information in play. Discussed how there

may have been [non-CIA controlled compartmented program

material] on the computer. Doesn’t this push 793(f) back into

play?

161. In his OIG interview, the OPS Legal Advisor said that

DoD material and Top Secret/[the non-CIA controlled

compartmented program] material would not qualify for

information a DCI had the authority to declassify. He realized that

a referral to the FBI would “technically not” be the same as making

a crimes report to DoJ. He stated there was a tendency to discuss

some cases with the FBI in order to get their procedural advice.

162. The OPS Legal Advisor had a discussion with an FBI

agent then assigned to the Counterespionage Group,

Counterintelligence Center (CIC), regarding the possible

applicability of Title 18 U.S.C. §§793(f) and 1924 in the matter

regarding Deutch. The OPS Legal Advisor recalled this FBI Agent

believing that there had to be a physical removal of documents to

constitute a violation of the statutes.

163. A two-page handwritten note of January 24, 1997,

composed by the OPS Legal Advisor, reported his discussion
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58

with the FBI Agent regarding the case. The note indicated that the

FBI Agent at CIC suggested that it was better to have O’Neil call

the then-FBI General Counsel to discuss the case.

164. The OPS Legal Advisor provided an MFR reporting a

January 28, 1997 meeting with the PDGC and O’Neil to discuss the

Deutch case. At that time, O’Neil indicated he anticipated calling

the FBI General Counsel to tell him CIA intended to conduct an

investigation of this matter unless the FBI General Counsel wanted

the FBI to assert investigative authority.

165. According to O’Neil, neither he nor anyone else

suggested a crimes report be filed on the Deutch matter. O’Neil

said a crimes report can be made at several points during an

investigation. He pointed out that, in a number of cases, CIA

conducts its own investigation. Matters could also be referred to

DoJ to conduct an investigation.

166. O’Neil is not certain whether he talked to the FBI agent

at CIC about the Deutch matter. O’Neil has a vague recollection he

called the FBI General Counsel and asked him how CIA should

proceed. O’Neil described the case to the FBI General Counsel,

who said that the CIA should continue its own process of looking at

the matter. O’Neil believes he wrote an MFR documenting his

conversation and may have given the MFR to his secretary to keep

in a personal folder used for sensitive matters.26

167. The FBI Agent at CIC recalled that he was told Deutch

had classified information on a computer disk at his home in

Maryland shortly after the matter was discovered. The FBI Agent

was asked if the matter was an “811” violation.27 The FBI Agent

concluded there was no reason to believe that the information had

been compromised to a foreign power and, therefore, the FBI did

 

26A check of O’Neil’s “sensitive personal file” was conducted by his secretary’s successor in OGC.

There was no evidence of any document regarding contact between O’Neil and the FBI General

Counsel concerning a possible crimes report on Deutch.

27“811” is Section 811 of the Counterintelligence and Security Enhancement Act of 1994.
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59

not need to get involved. The FBI Agent recalled telling someone

at CIA, whose identity he does not remember, that since Deutch

was involved, O’Neil may want to contact the FBI General Counsel,

O’Neil’s counterpart at FBI. The FBI Agent said that he established

early on in his tenure at CIA that merely telling him something did

not constitute official notification of the FBI much less DoJ. He was

aware that OGC had crimes reporting responsibilities, and he

expected them to fulfill those responsibilities.

168. The FBI General Counsel recalled a single telephone call

from O’Neil after Deutch left CIA, between February and April

1997. At that time, O’Neil told the FBI General Counsel an issue

had arisen about classified information existing on some computer

disks at Deutch’s home. The FBI General Counsel recalled they

discussed CIA reporting requirements to the FBI under “811.” [He]

believes he would have told O’Neil that not enough was known

about the matter at the time. If an “811” problem surfaced after

CIA had looked into the matter, CIA should refer the problem to

the FBI through official CIA channels.

169. The FBI General Counsel stated that he did not consider

O’Neil’s call as a submission of a crimes report because, from what

he remembers being told, there was no evidence of a crime. He

said that he and O’Neil spoke on the telephone several times a

week, but O’Neil never made a crimes report to him. [He] said that

if he thought O’Neil was giving him a crimes report, he would

have told him to do it through the proper channel.

170. Calder said that if a referral should have been made to

DoJ and was not, he believes the omission was not intentional.

However, Calder stated the responsibility for a crimes report was

O’Neil’s. Calder added that "I have never issued a crimes report

and would always raise such an issue with OGC for their action."

Calder said the FBI General Counsel had informed O’Neil that DoJ

would not pursue a Deutch investigation regarding misuse of the

computer.
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60

171. The PDGC had supervisory responsibility of the

Litigation Division which had the crimes reporting account in OGC

at that time.28 The PDGC stated she did not have a lot of hands-on

experience with the mechanics of coordinating crimes reports and

had never authored a crimes report. She first learned of the

discovery of classified information, including Top Secret/[a nonCIA controlled compartmented program] material, on a computer

in Deutch’s Maryland residence on the day of its discovery in

December 1996. She remembered hearing about information

regarding a covert action with [two countries] but does not recall

hearing there was [codeword] or [a different codeword]

information on the computer. She did not learn that the computer

at his Belmont residence also contained classified information.

172. The PDGC was not aware that Deutch was deleting files

from the Maryland computer in the days immediately following

the discovery of the classified information. She remembered

speaking with Calder about the necessity of protecting the magnetic

media. Her reason for wanting to retain the magnetic media was

not for evidence of a crime but to have a record should there be a

need to conduct a leak investigation in the future.

173. When considering the need for a crimes report, the

PDGC said she did not examine the “Memorandum of

Understanding: Reporting of Information Concerning Federal

Crimes.” She did not consult with any attorneys from the Internal

Security Section of DoJ or with the United States Attorneys Office.

She does not remember reviewing Title 18 U.S.C. §793(f),

“Gathering, transmitting or losing defense information.” She

spoke with O’Neil’s Executive Assistant29 regarding the provisions

 

28The PDGC has served in the CIA since 1982. [She] was appointed PDGC, the second highest

position in the Office of General Counsel, in the summer of 1995 and served in that capacity until

March 1, 1999. While serving as PDGC, [she] also served as Acting General Counsel from the

August 11, 1997 until November 10, 1997.

29The then-Executive Assistant to the GC states he was aware of the inquiry regarding the

classified information found on Deutch’s computer and that it was being worked by others in OGC.
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61

of Title 18 and with the OPS Legal Advisor. She did not agree with

the OPS Legal Advisor's assertion that, because the classified

information “was [only] in his [Deutch’s] head,” Deutch did not

remove classified information from the Agency. The PDGC was

aware that, on occasion, Deutch carried the PCMCIA cards “back

and forth” with him. She did not know if the cards contained

classified information. The PDGC saw no distinction between

classified information on a document as opposed to being on

magnetic media. She explained that she was more concerned at

this time with protecting and recovering the magnetic media than

considering a crimes report.

174. The PDGC reviewed the statutes she thought would be

relevant and did not see all the elements present for a violation.

She believed that Deutch, as DCI, was the authority for the rules

concerning the handling of classified information. Because Deutch

issued DCIDs on classified material, she believed he could waive

the rules for himself. The PDGC recognized that the DCI cannot

declassify Top Secret/[the non-CIA controlled compartmented

program] material, but said such material may be handled under

the DCID rules. The PDGC stated that given the fact that this

matter involved a former DCI, if she had believed a crimes report

was necessary, she would have shown the draft to O'Neil and he

would have had the final say as to whether a crimes report was

warranted.

175. The PDGC focused on Title 18 U.S.C. §1924,

“Unauthorized Removal and Retention of Classified Documents or

Material. ” She understood that Deutch was authorized to remove

classified information and take it home since he had a safe at his

residence. She stated that she did not see “intent”30 by Deutch. She

reasoned that “intent” was a necessary element, “otherwise

everyone [inadvertently] carrying classified information out of a

 

The Executive Assistant does not remember assisting the PDGC in this matter, but concludes that, if

the PDGC states that he assisted her, he has no reason to doubt her recollection.

30The statute contains the pertinent phrase “and with the intent to retain such documents or

materials at an unauthorized location.”
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62

CIA building would be the subject of a crimes report.” According

to the PDGC, Deutch had permission to take the classified material

home, and Deutch’s use of the PCMCIA cards was permissible

within his residence. In the PDGC's view, the security violation

occurred when he “did not do it right” by connecting the Internet to

his computer and “leaving the card in the slot.” She did not

distinguish between Deutch as DCI and his actual status as an

Independent Contractor when the classified information was

discovered. However, she would have looked at the issue

differently if she understood that the only acceptable means of

safeguarding the computer would have been to remove and secure

the computer’s hard drive.

176. The PDGC did not remember when she made the legal

decision that a crimes report was not required. She remembered

speaking with C/SIB in March 1997 about his concern that a crimes

report should be filed.

177. The PDGC said that D/OPS's report was not made

available to her. Although someone in OGC would usually read

OPS reports, the PDGC speculated that the D/OPS would not have

shown the report to her without receiving authorization. She never

thought to request a copy of the D/OPS's report to determine if his

findings were consistent with her decision not to file a crimes

report. Later, after she became Acting General Counsel, the issue of

her reviewing the report never arose, and she would have expected

OPS to raise the report with her only if the facts had changed

significantly from what she learned initially.

178. In comparing the Deutch case to a similar case involving

a senior Agency official, the PDGC asserted that the other official

did not have a safe in his residence and was not authorized to take

home classified information. She viewed this dissimilarity as a

major distinction. Nor did he have the authority to waive the rules

on the handling of classified information. The PDGC did not
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63

remember if OGC made a crimes report on that case of

mishandling classified information.31

179. George Tenet, who was Acting DCI at the time of the

OPS/SIB investigation, said no one ever raised the issue of

reporting this incident to DoJ, and it did not occur to him to do so.

Tenet said no one ever came forward with a legal judgment that

what had occurred was a crime. In Tenet’s opinion, based upon

what he knew at that time, there was no intent on Deutch’s part to

compromise classified information. Therefore, Tenet did not

believe a crime was committed. Tenet was aware of the incident

involving [another] senior Agency official but was not aware a

crimes report had been filed on it.

SHOULD APPLICATION OF THE INDEPENDENT COUNSEL STATUTE HAVE

BEEN CONSIDERED?

180. The fundamental purpose of the Independent Counsel

statute is to ensure that serious allegations of unlawful conduct by

certain federal executive officials are subject to review by counsel

independent of any incumbent administration.

181. Title 28 U.S.C. §592, “Preliminary investigation and

application for appointment of an independent counsel” cites Title

28 U.S.C. §591, “Applicability of provisions of this chapter,” as the

basis for those positions who are “covered persons” under the

Independent Counsel statute.

182. Title 28 U.S.C. §591 (a), “Preliminary investigation with

respect to certain covered persons” specifies:

The Attorney General shall conduct a preliminary investigation

in accordance with Section 592 whenever the Attorney General

receives information sufficient to constitute grounds to

 

31A crimes report was made by letter to DoJ on December 13, 1996. It is signed by the AGC in the

Litigation Division, who was the OGC focal point for crimes reports at that time.
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64

investigate whether any person described in subsection (b) may

have violated any Federal criminal law other than a violation

classified as a Class B or C misdemeanor or an infraction.32

183. Title 28 U.S.C. §591 (b), “Persons to whom subsection (a)

applies” lists:

 . . . the Director of Central Intelligence [and] the Deputy

Director of Central Intelligence . . . . 33

184. Title 28 U.S.C. §591 (d) (1), “Examination of information

to determine need for preliminary investigation,” “factors to be

considered” specifies:

In determining . . . whether grounds to investigate exist, the

Attorney General shall consider only—(A) the specificity of the

information received; and (B) the credibility of the source of the

information.

185. The Deputy Chief, Public Integrity Section, Criminal

Division, DoJ, is responsible for the preliminary review of matters

referred to DoJ under the provisions of the Independent Counsel

statute. [She] explained that the provisions of the Independent

Counsel statute require DoJ to review an allegation regarding a

“covered person” to determine the need for preliminary

investigation based only on the two factors listed above.

186. The Deputy Chief of the Public Integrity Section

explained that after the CIA IG referral in March 1998, the Public

Integrity Section reviewed the matter and described it in a

memorandum to the Attorney General. The memorandum stated

that the allegations of illegal behavior regarding former DCI

Deutch were received more than one year after Deutch left office.

 

32Title 18 U.S.C. §793(f) and Title 18 U.S.C. §798 are felonies; Title 18 U.S.C. §1924 is a Class A

misdemeanor.

33Title 28 U.S.C §591(b)(7) limits applicability of the statute to the term of office of the "covered

person" and the one-year period after the individual leaves the office or position. This means that

Deutch’s potential exposure to the provisions of the Independent Counsel statute expired following

the one-year anniversary of his resignation, December 14, 1997.
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65

Accordingly, under the provisions of the Independent Counsel

statute, Deutch was no longer a “covered person.” The Deputy

Chief of the Public Integrity Section added that the allegation

should have been promptly referred to DoJ by CIA personnel.

187. The OPS Legal Advisor stated that he never considered

the need to refer this matter to an Independent Counsel based on

Deutch’s status as a “covered person.” Nor was he aware of any

other discussions on this matter.

188. The PDGC stated that the issue of Deutch being a

“covered person” under the Independent Counsel legislation did

not arise. She said that “she never gave a thought” to the

applicability of the Independent Counsel statute, and she does not

know what positions within the Agency are specified as “covered

persons.”

189. O’Neil stated that there was no recommendation to refer

the Deutch matter to DoJ under the provisions of the Independent

Counsel statute.

WERE SENIOR AGENCY OFFICIALS OBLIGATED TO NOTIFY THE

CONGRESSIONAL OVERSIGHT COMMITTEES OR THE INTELLIGENCE

OVERSIGHT BOARD OF THE PRESIDENT'S FOREIGN INTELLIGENCE

ADVISORY BOARD? WERE THESE ENTITIES NOTIFIED?

190. Pursuant to the National Security Act of 1947, as

amended, the President and the DCI bear statutory responsibility

for keeping the two Congressional intelligence committees fully and

currently informed of all intelligence activities.

191. Agency Regulation (AR) 7-2, “Reporting of Intelligence

Activities to Congress,” provides interpretation of the statutes so

the Agency, with the assistance of the Office of Congressional

Affairs and the Office of General Counsel, can assist the DCI in

meeting the obligation to keep the intelligence committees fully and
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66

currently informed. Under the section, “Obligation to Keep

Congressional Intelligence Committees Fully and Currently

Informed,” one of the three categories requiring reporting are:

Particular intelligence activities or categories of activities as to

which either of the Congressional intelligence committees has

expressed a continuing interest (for example, potentially

serious violations of U.S. criminal law by Agency employees,

sources, or contacts);

192. E.O. 12863, issued September 13, 1993, President’s

Foreign Intelligence Advisory Board, specifies:

The heads of departments and agencies of the Intelligence

Community, to the extent permitted by law, shall provide the

Intelligence Oversight Board (IOB)34 with all information that

the IOB deems necessary to carry out its responsibilities.

Inspectors General and General Counsel of the Intelligence

Community, to the extent permitted by law, shall report to the

IOB, at least on a quarterly basis and from time to time as

necessary or appropriate, concerning intelligence activities that

they have reason to believe may be unlawful or contrary to

Executive order or Presidential directive.

193. According to the Director of the CIA’s Office of

Congressional Affairs (OCA), OCA is responsible for notifications

to Congress and should be informed of any formal Agency

investigations. OCA receives notifications from a variety of

Agency components. During Slatkin’s tenure, all formal written

Congressional notifications were to be routed through her office.

The Director of OCA was unaware of SIB’s investigation into the

discovery of classified information on Deutch’s government-issued

unclassified computer.

194. At the January 6, 1997 meeting to discuss the planned

investigation of the finding of classified information on Deutch’s

 

34The Intelligence Oversight Board is a standing committee of the President’s Foreign Intelligence

Advisory Board.
UNCLASSIFIED

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67

unclassified CIA computer, the OPS Legal Advisor stated that the

Congressional oversight committees may eventually inquire about

this matter. He recalled that Calder wanted the investigation

performed “by the book” in case there would be a need to account

for SIB actions.

195. Calder assumed this matter would again arise in the

future, possibly through a leak, with a Congressional committee.

He recalled a discussion about doing briefings and was left with

the impression that there was a briefing of the “Group of Four”

Congressional oversight committees.35

196. C/SIB maintained a chronology of the investigation

consistent with Calder’s instructions. He also advised Calder, the

former ADDA, the PDGC, and the D/OPS on at least two occasions

that Congress, along with DoD, should be informed about the

material found on Deutch’s unclassified computer. After receiving

a copy of the D/OPS's report on the investigation, C/SIB realized

the report did not contain a recommendation that Congress be

notified.

197. The PDGC stated she did not remember any discussion

concerning notifying the Congressional oversight committees or the

IOB. O’Neil said that “the question of informing the IOB or the

Congressional oversight committees did not come up.”

198. Slatkin stated she could not recall any discussion or

recommendation regarding the need to notify the Congressional

committees about the Deutch matter. In her interview with OIG,

she stated that, “surely, yes, the Committees should have been

notified—but at what point?”

 

35The Group of Four refers to the Senate Select Committee on Intelligence, the House Permanent

Select Committee on Intelligence, and the two appropriations committees—the Senate

Appropriations Committee, Subcommittee on Defense and the House Appropriations Committee,

National Security Subcommittee.
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68

199. The IOB was officially notified of OIG’s investigation on

May 8, 1998. After being informed of the OIG investigation, the

Director of Congressional Affairs prepared talking points, which

DCI Tenet presented to the SSCI and HPSCI in early June 1998.

WHY WAS NO ADMINISTRATIVE SANCTION IMPOSED ON DEUTCH?

200. Deutch was aware that an inquiry was conducted after

classified information was discovered on his government-issued

computers configured for unclassified use. He said that he never

tried to influence the outcome of the investigation. Nor was he told

the outcome, although he had requested that someone apprise him

of the results.

201. Calder said that, despite the pressure that accompanied

the investigation of a DCI, he and OPS did “the right thing. ”

Calder said that since Deutch was no longer a CIA employee, there

was no punishment that could be administered to him. The issue

was what position the Agency should take if Deutch needed access

to classified information in the future. Calder was aware that

Deutch’s computers had been replaced with totally unclassified

magnetic media. Calder said that while Deutch was on several

governmental committees, he did not believe that Deutch had a

need for classified information in those positions. Calder said the

remedy was to counsel Deutch in a discrete manner that would not

offend his ego so he would understand the gravity of what had

happened. Calder was aware that Slatkin had spoken with Deutch

about the issue, and, from those conversations, Deutch would have

recognized that his actions were wrong. Calder stated it was his

responsibility to counsel Deutch and he planned to do so when

Deutch received a briefing regarding future access. However,

Calder said he never had the opportunity to meet with Deutch

under the conditions he desired.

202. The former ADDA stated that she was “worn down” by

Slatkin and O’Neil, and perceived that the D/OPS and Calder were
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69

similarly affected. Additionally, Calder was “frustrated” because

Slatkin would not resolve issues presented to her but, instead,

provided more tasking. The former ADDA said that she, the

D/OPS, and Calder had reached a point where they could not go

any further in that there was no additional merit in further

evaluating the collected data. Slatkin had “emotional attachments”

and O’Neil was not considered to be objective. According to the

former ADDA, Slatkin’s and O’Neil’s oversight of the investigation

was colored by a distrust of OPS and an interest to protect Deutch’s

privacy. The former ADDA said that she and SIB investigators

perceived Slatkin’s and O’Neil’s behavior as “stonewalling.” The

former ADDA and SIB investigators also viewed Slatkin’s requests

for repeated clarifications, while typical of her management style,

as a form of “pressure” to wear down the others until they were

ultimately in agreement with her and O’Neil.

203. The PDGC said that there was not a “crisp end” to the

case; “it ran out of steam” when many of the principals left the

Agency. The PDGC thought a decision was made that the Director

of the Center for CIA Security or the D/OPS would brief either

Deutch or the whole Proliferation Commission regarding

safeguarding classified information, but she does not know if this

action was taken. O'Neil stated that after the process for producing

the review was approved by the ADCI, who had been kept

informed all long, he had little to do with the investigation. O’Neil

also stated, he did not interfere with the OPS investigation, he left

the Agency in July 1997,36 and he does not know how the

investigation was concluded. Slatkin said that she gave the

information to Tenet and assumed that the investigation would

have proceeded after she departed the Agency. The D/OPS said

that, as far as he knows, no decision was ever made on what to do

concerning Deutch’s actions.

204. Tenet did not recall how the matter was resolved. He

believes Calder, the D/OPS, Slatkin, and O’Neil had detailed

 

36Although O'Neil states he left the Agency in July 1997, he was present for duty until August 11,

1997 when he was replaced by the PDGC as Acting General Counsel.
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70

discussions on the matter. Tenet was aware of concerns for

Deutch’s privacy. According to Tenet no one ever raised the issue

of reporting the incident to the Department of Justice, or whether

Deutch's clearance should be affected.
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WHAT WAS OIG’S INVOLVEMENT IN THIS CASE?

 ̈ When did OIG first learn of this incident?

205. The former C/DCI Administration spoke with then-IG

Frederick Hitz on December 18, 199637 regarding what was found

at Deutch’s residence. The former C/DCI Administration

described conversations he had with O’Neil and Slatkin about the

matter, and O’Neil’s assertion that the former C/DCI

Administration was responsible for allowing Deutch to improperly

process classified information. Hitz instructed the former C/DCI

Administration to provide the IG with copies of any

documentation,38 encouraged the former C/DCI Administration to

brief Tenet as soon as possible, and suggested that the former

C/DCI Administration stay in contact with the IG.

206. According to the former C/DCI Administration's MFR

of December 30, 1996, the IG Counsel contacted him on December

19, 1996. Reportedly, the IG Counsel urged the former C/DCI

Administration to prepare an MFR and provide related

documentation to the IG.

207. On December 20, 1996, Hitz called the former C/DCI

Administration to inform him that he had met with Tenet, who was

reportedly not aware of the Deutch matter. Hitz indicated that he

and Tenet both supported the process that was being pursued on

the acquisition of relevant information and the classified magnetic

media. Hitz encouraged the former C/DCI Administration to

ensure that his documentation was forwarded to Hitz’s staff for the

former C/DCI Administration's protection.

 

37Hitz served as CIA IG from October 12, 1990 until April 30, 1998, when he retired.

38The former C/DCI Administration provided a copy of his MFR to Hitz, Calder, and C/SIB.
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208. Hitz remembers that in mid-December 1996, the former

C/DCI Administration met with him regarding classified

information discovered on one or two Agency-owned computers at

Deutch’s residences in Maryland and Belmont. Hitz recalled the

former C/DCI Administration seeking advice on what action to

take. Hitz’s impression was that C/DCI Administration was

concerned that the former C/DCI Administration's supervisors

would not act appropriately. Hitz understood that the classified

information found on Deutch’s computer included sensitive trip

reports. The computer was connected to the Internet, and there was

[a] threat of the information being vulnerable to electronic

compromise.

209. Hitz believes that he discussed the former C/DCI

Administration's information with IG Counsel and the then-Deputy

IG for Investigations and obtained their advice. This advice

included instructing the former C/DCI Administration to secure

the hard drive and other classified information that was recovered

from Deutch’s computers. Hitz remembered passing that

instruction to the former C/DCI Administration. Hitz recalled that

after meeting with IG Counsel and then-Deputy IG for

Investigations, “we knew we were going to get into it and be

helpful with it.”

210. Hitz stated that he cannot remember what follow-up

instruction he may have provided to IG Counsel and then-Deputy

IG for Investigations. Hitz thinks he ultimately read the former

C/DCI Administration's MFR and “did not like the smell of it” [the

nature of the allegation] and “if half of what the former C/DCI

Administration said was true - we would get in it.” Hitz

emphasized that the determination of whether to get involved

would be made in concert with IG Counsel and the then-Deputy IG

for Investigations. Hitz stated he never discussed the SIB

investigation with Deutch, Slatkin, O’Neil, Calder, the PDGC, or

D/OPS.
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211. IG Counsel said that he does not remember any

discussions that Hitz may have had with him and the then-Deputy

IG for Investigations stemming from information received from the

former C/DCI Administration. The IG Counsel stated that he does

not remember calling the former C/DCI Administration or having

any discussion of an allegation regarding Deutch, nor does he

remember seeing an MFR by the former C/DCI Administration.39

212. The then-Deputy IG for Investigations said there were

contacts between the former C/DCI Administration and Hitz over

this issue, and Hitz would tell the then-Deputy IG for

Investigations about the conversations afterwards. The thenDeputy IG for Investigations stated he “may have detected an

inference from Hitz that classified information was on the

computer.” However, the then-Deputy IG for Investigations did

not remember any discussion with Hitz regarding the need to

protect the computer’s hard drive. The then-Deputy IG for

Investigations was not in contact with the former C/DCI

Administration.

 ̈ Why did OIG wait until March 1998 to open an

investigation?

213. Hitz observed that the investigation had started with the

former C/DCI Administration's “security people” finding the data,

and the investigation stayed in a security channel. Hitz believed

that it was appropriate for that to continue as long as OPS would be

allowed to do their job.

214. C/SIB’s chronology noted a call from the then-Deputy

IG for Investigations on January 7, 1997 asking that SIB look at a

particular issue, normally the purview of the OIG (improper

personal use of a government computer) to put some preliminary

perspective to the issue and keep him apprised.

 

39A review of Hitz’s files, which he left when he retired, failed to locate [the] MFR of the former

C/DCI Administration or any notes or correspondence connected with this investigation.
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215. The then-Deputy IG for Investigations stated that he

must have learned from Hitz that C/SIB was involved with an

investigation related to Deutch and that knowledge prompted the

then-Deputy IG for Investigations to call C/SIB on January 7, 1997.

The then-Deputy IG for Investigations said that, if he had been

informed that the matter under investigation by C/SIB was a

“serious issue,” he would remember it. The then-Deputy IG for

Investigations categorized the issue under investigation by SIB as

one of “propriety and property management.” He does not recall

knowing that the computers involved were intended for

unclassified use.

216. The OPS Legal Advisor stated he learned from Calder

that on January 5, 1997, Hitz was briefed on the incident involving

Deutch. Reportedly, Calder stated that Hitz believed that the

incident was a security issue and not one for the IG. After learning

of Deutch’s possible appointment to the Office of Science and

Technology Policy, on May 16, 1997, [the OPS Legal Advisor]

wrote in an MFR that he met briefly with Hitz to discuss Deutch’s

possible appointment and

Fred [Hitz] said he would speak to the DCI about this matter,

and sensitize him to the problems associated with [Deutch’s]

needing a clearance at another U.S.G. agency. Fred asked to be

kept informed.40

217. According to C/SIB, he contacted OIG to define OIG

interests before the D/OPS began his review of the recovered

documents. C/SIB met with the then-Deputy IG for Investigations,

the IG Counsel, and the then-Deputy Associate IG for

Investigations. C/SIB advised them that any difficulties he

encountered to date were within his ability to resolve. In his

chronology, C/SIB writes:

C/SIB met with [the then-Deputy IG for Investigations, the

Deputy Associate IG for Investigations and the IG Counsel] re

 

40Hitz corroborates the OPS Legal Advisor's account of this meeting.
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“reporting threshold” to OIG for USG Computer Misuse, both

in this case in particular, and in other cases, in general. This

meeting was imperative in order for C/SIB to know before the

“security” review [being conducted by [the] D/OPS] what

would vice would not be OIG reportable. Upon discussion, it

was determined that the OIG would avail great latitude to SIB

re such reporting, noting that only in instances wherein the use

of the computer was obviously criminal in nature, a conflict of

interests [sic] existed, an outside business was being conducted,

or a private billing reimbursement for “personal entertainment”

was in evidence, would the OIG require a report be submitted

by SIB. (C/SIB so advised D/OPS). No particulars41 were

discussed relative to SIB’s ongoing investigation, nor were any

requested.

218. The then-Deputy IG for Investigations remembers the

February 21, 1997 meeting with C/SIB in the presence of the

Deputy Associate IG for Investigations, and possibly the IG

Counsel. Up to that point, OIG had lost track of the allegation

against Deutch. The then-Deputy IG for Investigations stated he

told C/SIB about OIG’s jurisdictional interests in terms of the

computer. The then-Deputy IG for Investigations said it is possible

that C/SIB made some comment about encountering some

difficulty in the investigation but was working through the

problem and appeared self-confident about his capability to

investigate the matter. The then-Deputy IG for Investigations

sensed that C/SIB was being “squeezed by unspecified OPS

officials.”

219. The then-Deputy IG for Investigations remembered

C/SIB agreeing that he should re-contact OIG if he encountered any

matter of IG interest, such as evidence of misuse of an official

computer, during his investigation. According to the then-Deputy

IG for Investigations, “there was no zest” on the part of OIG to take

it over while OPS was working the issue. The then-Deputy IG for

 

41C/SIB later explains his use of the word “particulars” meant that he did not disclose what

evidence had been discovered in his investigation. He states that it does not necessarily mean that

Deutch’s name and/or title was not discussed.
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Investigations does not recall knowing at the time that the OPS/SIB

investigation involved classified information.

220. On February 6, 1998, the Deputy Associate IG for

Investigations met with C/SIB on an unrelated investigation.

C/SIB incorrectly assumed the Deputy Associate IG for

Investigations was investigating Deutch’s mishandling of classified

information on a computer at his residence. According to the

Deputy Associate IG for Investigations, C/SIB disclosed that he was

unable to fully pursue his investigation because of a problem with

Slatkin and O’Neil. C/SIB was frustrated because there had been

no interview of Deutch, a customary part of an SIB investigation.

221. During this meeting, the Deputy Associate IG for

Investigations reviewed a number of documents that included an

unsigned report prepared by the D/OPS. This report detailed the

D/OPS review of data discovered on the Deutch’s magnetic media.

The Deputy Associate IG for Investigations, subsequently met with

the then-Deputy IG for Investigations, and told him what he had

learned from C/SIB.

222. In his OIG interview, the then-Deputy IG for

Investigations explained that OIG opened an investigation because

SIB’s investigation was impeded or “shutdown,” and a crimes

report was never sent to DoJ.

223. Hitz explained that a security violation of this nature

would not normally be a matter investigated by OIG.42 He stated

that as the IG, he would have been inclined to assert investigative

authority only when he believed that the normal management

response was inappropriate or not helpful. He recognized that

 

42On February 5, 1997, Hitz sent a memorandum to the Director of Personnel Security, Subject:

"Crimes Reporting and Other Referrals by Office of Personnel Security to the Office of Inspector

General." The memorandum eliminated the requirement for OPS to routinely notify OIG of certain

specific investigative matters in which it is engaged. Included as one of the nine categories of

investigative issues identified in the memorandum was the following: "Mishandling of classified

information that is or could be a possible violation of 18 U.S.C. 1924, 'Unauthorized removal and

retention of classified documents or material.'"
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Deutch appointees Slatkin and O’Neil were involved in the review

process. Hitz stated that it was the responsibility of OIG “to

support the institution.”

♦ What steps were taken by OIG after opening its

investigation?

224. IG Counsel remembered advising the Deputy Associate

IG for Investigations that the allegation had to be referred to DoJ as

a possible crimes report. The IG Counsel also remembers a

discussion about the relevance of the Independent Counsel statute

since Deutch was a “covered person.”

225. On March 19, 1998, OIG referred the allegations to DoJ.

The crimes report letter noted that at the time of the alleged

violations, Deutch was a “covered person” under the Independent

Counsel statute. DoJ advised they would review the allegations for

applicability to the Independent Counsel statute and further OIG

investigation was not authorized until completion of DoJ’s review.

In May 1998, DoJ informed OIG that the Independent Counsel

statute would not apply because DoJ was not notified of the alleged

violations until more than one year after Deutch left his position.

As such, Deutch’s status as a “covered person” had expired.

226. On May 8, 1998, OIG informed the Chairman of the

Intelligence Oversight Board by letter of the criminal investigation

of Deutch pursuant to E.O. 12863.

227. On June 2 and 3, 1998, the House Permanent Select

Committee on Intelligence and the Senate Select Committee on

Intelligence were notified by DCI Tenet that the OIG was

conducting an investigation of former DCI Deutch and the manner

in which the matter was originally handled by CIA officials.

WHAT IS DEUTCH’S CURRENT STATUS WITH THE CIA?
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228. Deutch’s no-fee, December 1996 consulting contract was

renewed in January 1998 and December 1998. The latest renewal

covers the period December 16, 1998 until December 15, 1999. This

contract provides Deutch with staff-like access to the Agency, its

computer system, and a Top Secret clearance. Deutch’s contract for

the Proliferation Commission will expire when the commission

finishes its work. That contract does not contain any information

regarding access to classified information.

WHAT WAS THE DISPOSITION OF OIG’S CRIMES REPORT TO THE

DEPARTMENT OF JUSTICE?

229. On April 14, 1999, Attorney General Janet Reno sent a

letter to DCI Tenet [declining prosecution.] [The letter stated in

part:]

The results of that [OIG] investigation have been reviewed

for prosecutive merit and that prosecution has been declined.

As I understand that Mr. Deutch currently holds a Top Secret

security clearance, I suggest that the appropriate security

officials at the Central Intelligence Agency review the results of

this investigation to determine Mr. Deutch’s continued

suitability for access to national security information.

CONCLUSIONS

230. Former DCI John Deutch was specifically informed that

he was not authorized to process classified information on

government computers configured for unclassified use.

231. Throughout his tenure as DCI, Deutch intentionally

processed on those computers large volumes of highly classified

information to include Top Secret Codeword material.

232. Because Deutch’s computers configured for unclassified

use had connections to the Internet, all classified information on
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those computers was at risk of compromise. Whether any of the

information was stolen or compromised remains unknown.

233. On August 1, 1995, Deutch was made aware that

computers with Internet connectivity were vulnerable to attack.

Despite this knowledge, Deutch continued his practice of processing

highly classified material on unclassified computers connected to

the Internet.

234. Information developed during this investigation

supports the conclusion that Deutch knew classified information

remained on the hard drives of his computers even after he saved

text to external storage devices and deleted the information.

235. Deutch misused U.S. Government computers by making

extensive personal use of them. Further, he took no steps to restrict

unauthorized persons from using government computers located at

his residences.

236. The normal process for determining Deutch's continued

suitability for access to classified information, to include placing the

results of the SIB investigation in Deutch's security file, was not

followed in this case, and no alternative process was utilized. The

standards that the Agency applies to other employees' and

contractors' ability to access classified information were not applied

in this case.

237. Because there was a reasonable basis to believe that

Deutch’s mishandling of classified information violated the

standards prescribed by the applicable crimes reporting statute,

Executive Order and Memorandum of Understanding, OGC

officials Michael O’Neil and the PDGC should have submitted a

crimes report to the Department of Justice.

238. The actions of former Executive Director Nora Slatkin

and former General Counsel Michael O'Neil had the effect of

delaying a prompt and thorough investigation of this matter.
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239. DDA Richard Calder should have ensured the

completion of a more thorough investigation, in particular, by

arranging for an interview of Deutch and a subsequent

documentation of that interview in accordance with established

Agency procedures. Calder should also have ensured that the

matter was brought to a conclusion rather than permitting it to

languish unresolved.

240. Former Inspector General Frederick Hitz should have

involved himself more forcefully to ascertain whether the Deutch

matter raised issues for the Office of the Inspector General as well

as to ensure the timely and definitive resolution of the matter.

241. DCI George Tenet should have involved himself more

forcefully to ensure a proper resolution of this matter.

242. The application of the Independent Counsel statute was

not adequately considered by CIA officials and, given the failure to

report to DoJ on a timely basis, this in effect avoided the potential

application of the statute.

243. The Congressional oversight committees and the

Intelligence Oversight Board should have been promptly notified of

Deutch’s improper handling of classified information.

Daniel S. Seikaly
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RECOMMENDATIONS

1. John Deutch’s continued suitability for access to classified

information should be reviewed immediately.

2. The accountability of current and former Agency officials,

including Deutch, for their actions and performance in connection

with this matter should be determined by an appropriate panel.

3. All appropriate Agency and Intelligence Community

components should be informed in writing of the sensitive

information Deutch stored in his unclassified computers so that

responsible authorities can take any actions that would minimize

damage from possible compromise of those materials.

CONCUR:

L. Britt Snider Date

Inspector General