```

[Senate Hearing 107-366]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 107-366
 
 IMPROVING OUR ABILITY TO FIGHT CYBERCRIME: OVERSIGHT OF THE NATIONAL 
                    INFRASTRUCTURE PROTECTION CENTER
=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON TECHNOLOGY, TERRORISM,
                       AND GOVERNMENT INFORMATION

                                 of the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 25, 2001
                               __________

                          Serial No. J-107-22
                               __________

         Printed for the use of the Committee on the Judiciary

                        U.S. GOVERNMENT PRINTING OFFICE
                                WASHINGTON : 2002
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512-1800  
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001

                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts     ORRIN G. HATCH, Utah
JOSEPH R. BIDEN, Jr., Delaware       STROM THURMOND, South Carolina
HERBERT KOHL, Wisconsin              CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California         ARLEN SPECTER, Pennsylvania
RUSSELL D. FEINGOLD, Wisconsin       JON KYL, Arizona
CHARLES E. SCHUMER, New York         MIKE DeWINE, Ohio
RICHARD J. DURBIN, Illinois          JEFF SESSIONS, Alabama
MARIA CANTWELL, Washington           SAM BROWNBACK, Kansas
JOHN EDWARDS, North Carolina         MITCH McCONNELL, Kentucky
       Bruce A. Cohen, Majority Chief Counsel and Staff Director
                  Sharon Prost, Minority Chief Counsel
                Makan Delrahim, Minority Staff Director
                                 ------                                

   Subcommittee on Technology, Terrorism, and Government Information

               DIANNE FEINSTEIN, California, Chairperson
JOSEPH R. BIDEN, Jr., Delaware       JON KYL, Arizona
HERBERT KOHL, Wisconsin              MIKE DeWINE, Ohio
MARIA CANTWELL, Washington           JEFF SESSIONS, Alabama
JOHN EDWARDS, North Carolina         MITCH McCONNELL, Kentucky
                 David Hantman, Majority Chief Counsel
               Stephen Higgins, Republican Chief Counsel

                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Feinstein, Hon. Dianne, a U.S. Senator from the State of 
  California.....................................................     1
Grassley, Hon. Charles E., a U.S. Senator from the State of Iowa.    74
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......    68
Kyl, Hon. Jon, a U.S. Senator from the State of Arizona..........     3

                               WITNESSES

Cleland, Hon. Max, a U.S. Senator from the State of Georgia......    53
Dacey, Robert F., Director, Information Security Issues, General 
  Accounting Office, Washington, D.C.............................    13
Dick, Ronald L., Director, National Infrastructure Protection 
  Center, Federal Bureau of Investigation, Washington, D.C.......     5
Gent, Michehl R., President and Chief Executive Officer, North 
  American Electric Reliability Council, Washington, D.C.........    60
Klaus, Chris, Founder and Chief Technology Officer, Internet 
  Security Systems, Atlanta, Georgia.............................    54
McDonald, Sallie, Assistant Commissioner, Office of Information 
  Assurance and Critical Infrastructure Protection, General 
  Services Administration, Washington, D.C.......................    20
Savage, James, Jr., Deputy Special Agent in Charge, Financial 
  Crimes Division, United States Secret Service, Washington, D.C.    24

                       SUBMISSIONS FOR THE RECORD

North American Electric Reliability Council, Eugene F. Gorzelink, 
  Director, Washington, D.C......................................    75
Securify, Inc., Taher Elgamal, Chairman, President and CEO, 
  Mountain View, CA..............................................    78

 
 IMPROVING OUR ABILITY TO FIGHT CYBERCRIME: OVERSIGHT OF THE NATIONAL 
                    INFRASTRUCTURE PROTECTION CENTER

                              ----------                              

                        WEDNESDAY, JULY 25, 2001

                               U.S. Senate,
        Subcommittee on Technology, Terrorism, and 
                            Government Information,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:07 p.m., in 
room SD-628, Dirksen Senate Office Building, Hon, Dianne 
Feinstein, Chairman of the Subcommittee, presiding.
    Present: Senators Feinstein and Kyl.

OPENING STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR FROM 
                    THE STATE OF CALIFORNIA

    Chairperson Feinstein. I would like to begin this hearing. 
Senator Kyl, who is the ranking member, is detained and 
hopefully will be here by about 2:30. At 2:15, we are scheduled 
to have a vote on the floor. So in order not to interrupt your 
testimony, what I would like to do right now is just quickly 
make my opening remarks and then go down and we will vote, and 
then come back and take our first panel.
    Senator Kyl has joined us. I am delighted. He was the 
Chairman of this Subcommittee for a substantial period of time, 
and I found I really enjoyed worked with him and so we are 
really co-chairs rather than Chairman and ranking member.
    This hearing will be on a GAO report, General Accounting 
Office report, on the National Infrastructure Protection 
Center, or NIPC--that is a wonderful Washington acronym--as it 
is called for short. NIPC is the leading Government body that 
combats cyber crime and cyber terrorism. So this Subcommittee 
hearing will actually cover all three parts of the 
Subcommittee's name--Technology, Terrorism, and Government 
Information.
    NIPC, which was founded only a few years ago, has a broad 
mission to prevent, to warn against, to analyze, and to respond 
to cyber attacks. However, many experts, both within and 
without Government and the private sector, have suggested that 
NIPC has not fulfilled its mission. Critics have argued that it 
has done a poor job at analyzing and warning against cyber 
threats and attacks. For example, some have said that NIPC's 
efforts to provide warnings about the May 2000 I Love You virus 
and the February 2000 distributed denial of service attacks on 
major Internet sites were slow and inadequate.
    Second, while NIPC was intended to be an interagency 
organization, critics have contended that the FBI has dominated 
the NIPC and has done a poor job coordinating with other 
Federal agencies in fighting cyber crime. I am not saying I 
necessarily believe these things. I am saying what the critics 
have said.
    Third, critics have suggested that NIPC has not done a good 
at ensuring information-sharing between it and private sector 
and Government entities. For example, NIPC has established a 
two-way information-sharing partnership with only one private 
organization, and that is the Information Sharing and Analysis 
Center, or ISAC, for the electric power industry.
    So that is why Senator Kyl, Senator Grassley and I asked 
GAO to take a look at NIPC's operations and report back its 
findings and recommendations. Their report, which is right 
here, generally confirms problems identified by the critics of 
NIPC.
    First, the report finds that, while NIPC has issued many 
analyses of individual incidents, it hasn't done a good job at 
developing strategic analysis of threat and vulnerability data. 
This is because of NIPC's failure to adopt a methodology to 
analyze strategic cyber threats, lack of adequate staff 
expertise, and an absence of sufficient industry-specific data 
on vulnerabilities. The result has been confusion about NIPC's 
role and responsibilities.
    The report also finds that the NIPC has not done enough to 
establish information-sharing and cooperative relationships 
with the private sector and other Government agencies.
    Now, the report points out a number of things that it 
thinks NIPC should do, and I very much welcome the witnesses' 
comments on these: create procedures to ensure more 
information-sharing with ISACs; make more progress in 
developing a data base of the most important components of the 
Nation's critical infrastructures, the Key Asset Initiative; 
develop better relationships with the Defense Department and 
law enforcement and civilian agencies.
    The report also concludes that NIPC has generally done good 
investigative field work. However, it points out they still 
need additional resources and new procedures to ensure that 
information flows more efficiently from the field to NIPC.
    So I am very pleased that the NIPC has taken the GAO's 
investigation very seriously, and I am also very pleased that 
it shows every intention of improving its operation. In fact, 
the NIPC made several improvements during the GAO audit itself. 
One example: until recently, NIPC had not done much to recruit 
companies to its InfraGard program, a voluntary information-
sharing network for private companies. However, in just the 
last 6 months, NIPC has tripled the number of InfraGard 
members.
    So I look forward to hearing the testimony from witnesses. 
I think both Senator Kyl and I think this is a really important 
vulnerability in our entire national infrastructure, and we 
would like to do whatever we can to see that it is improved.
    So now I will turn for his opening comments to my co-
chairman, Senator Kyl.

  STATEMENT OF HON. JON KYL, A U.S. SENATOR FROM THE STATE OF 
                            ARIZONA

    Senator Kyl. Well, thank you, Senator Feinstein. It is nice 
of you to refer to me in that fashion.
    I now realize what a challenge Senator Feinstein had when I 
was the Chairman and she would follow me after I had laid out 
the whole subject of the hearing, which she has just done very 
nicely, I might add. So I will put my statement in the record 
and just add a couple of comments clearly to note the fact that 
this hearing does give us an opportunity to focus on what 
Congress can do to assist the NIPC in carrying out its mission.
    The Attorney General recently called computer security one 
of the Nation's top problems, and announced that the 
administration is creating nine special units to prosecute 
hacking and copyright violations--just one of the problems we 
face. He cited a report by PricewaterhouseCoopers that 
businesses spent $300 billion combatting hackers and computer 
viruses last year. Think about that, just businesses, $300 
billion in unproductive spending, just defensive against 
hacking and viruses last year. It is obviously a huge problem.
    I think the American public is only aware of a minuscule 
number of the viruses that have attacked just even in the 
recent past. The Michelangelo virus, the Melissa virus, and the 
I Love You virus were, I think, fairly well known, but there 
are others.
    Just this past Thursday, a newly discovered virus called 
Lion worm has been discovered by researchers. It is a self-
spreading program that attacks a common software used by 
machines that drive the Internet. It will gather encrypted 
passwords that can be used to gain root access to systems. This 
access gives the hacker complete control of the system and the 
information on it. It is a frightening thought to imagine the 
damage that could be done if someone gained control of systems 
that serve our communications, financial, transportation, 
electrical, or defense systems in our country.
    The cyber war being waged against America's infrastructure 
if not limited to hackers seeking the thrill of the game of 
disrupting computer systems. It is being waged as well by 
criminal groups, by foreign intelligence services, insider 
threats from disgruntled employees, and even politically 
motivated groups.
    It is important to remember that although the Federal 
Government plays an important role in protecting this country's 
critical infrastructure, it can't do it alone; it has got to 
have the cooperation of the private sector. The private sector, 
remember, controls about 95 percent of the infrastructure on 
which the country depends.
    It is crucial that Congress assist the private sector and 
Government agencies in fostering an environment in which 
information is shared quickly and fully between the two. One of 
the things I am going to be interested in is whether people in 
the private sector believe that we need to do more in certain 
areas, for example, in the area of the Freedom of Information 
Act to ensure that the private sector can give Government 
sensitive and important information in a timely way without the 
possibility that that information would then later be made 
public in a way that is detrimental to the industry or business 
involved.
    So I look forward to hearing from all of our witnesses, 
both Government and private sector, on how we can assist them. 
I am very pleased that Senator Feinstein has given us the 
opportunity to review the progress that NIPC has made since its 
inception, especially with respect to the criticisms and 
compliments both contained in the GAO report.
    So thank you, Senator Feinstein, and I thank the witnesses.
    [The prepared statement of Senator Kyl follows:]

  Statement of Hon. Jon Kyl, a U.S. Senator from the State of Arizona

    Then you Senator Feinstein.
    Thank you for convening this very important hearing on the National 
Infrastructure Protection Center. This Subcommittee originally 
scheduled a hearing to correspond with the release of the General 
Accounting Office's report on May 22nd of this year. 
Unfortunately, series of votes on the Senate floor on that day required 
that last minute cancellation of the hearing. I stated that the hearing 
would be rescheduled and I am pleased that Senator Feinstein, who 
chairs this Subcommittee, has decided to hold this hearing. We both 
believe that this is a vitally important issue to the welfare and 
safety of our nation.
    In 1998, the President issued Presidential Decision Directive (PPD) 
63 that established the National Infrastructure Protection Center 
(NIPC) to protect the nation's critical computer-dependent 
infrastructures from computer-based attacks and disruptions. The NIPC 
was given the job of providing an analysis of threats, vulnerability, 
and attacks; issue warnings on threats and attacks; coordinate the 
government's response to cyber incidents; provide law enforcement 
support; and promote ties with the private sector to facilitate the 
sharing of information. This hearing provides the opportunity to 
examine how effectively the NIPC in accomplishing its mission.
    The Bush Administration has already emphasized the importance of 
cyber security and the protection of America's critical infrastructure. 
The President and his staff are working on a comprehensive plan that is 
scheduled to be released later this year on the nation's critical 
infrastructure.
    Attorney General Ashcroft recently called computer security one of 
the nation's top problems and announced that the Administration is 
creating nine special units to prosecute hacking and copyright 
violations. General Ashcroft cited a report conducted by 
PriceWaterhouseCoopers that businesses spent $300 billion combating 
hackers and computer viruses last year. Clearly, it's a huge problem, 
and getting bigger every day.
    The American public is aware of only a minuscule number of viruses 
that have struck in the recent past: Michelangelo, Melissa, and the 
ILOVEYOU viruses. Just this past Thursday, a newly discovered virus 
called ``Lion'' worm has been discovered by researchers. This is a 
self-spreading program that attacks a common software used by machines 
that drive the internet. This program will gather encrypted passwords 
that can be used to gain ``root'' access to systems. This access gives 
the hacker complete control of the system and the information on it. It 
is a frightening thought to imagine the damage that could be done if 
someone gained control of systems that serve our communication, 
financial, transportation, electrical, or defense systems.
    The cyber war being waged against American's infrastructure is not 
limited to hackers seeking the challenge or thrill of disrupting 
computer systems. The assault is being waged by criminal groups, 
foreign intelligence services, insider threats from disgruntled 
employees, and politically motivated groups.
    It is important to remember that, although the Federal government 
plays an important role in protecting this country's critical 
infrastructure, it cannot be accomplished without the assistance of the 
private sector. The private sector controls approximately 95% of the 
infrastructure upon which our country depends.
    It is crucial that the Congress assist the private sector and 
government agencies in fostering an environment in which information is 
shared quickly and fully between the two.
    I look forward to hearing from both our government and private 
sector witnesses on how we can assist them. I am glad that Senator 
Feinstein has given us the opportunity to review the progress the NIPC 
has made since its inception and more and more importantly, what 
changes have occurred as a result of the criticisms in the GAO report.
    Once again, I thank the Senator from California.

    Chairperson Feinstein. Thank you very much, Senator Kyl.
    Since the vote hasn't been announced, let's begin this 
panel and then we can go, say, 15 minutes after you hear the 
long buzzer. Then, if that is agreeable, we will go down and 
vote and come right back.
    The first panel is comprised of Mr. Ron Dick, who is the 
Director of the National Infrastructure Protection Center; Mr. 
Robert Dacey, who is the Director of Information Security 
Issues of the GAO, the General Accounting Office; Ms. Sallie 
McDonald, Assistant Commissioner, Office of Information 
Assurance and Critical Infrastructure Protection at the General 
Services Administration; and Mr. James Savage, Jr., Deputy 
Special Agent-in-Charge of the Financial Crimes Division of the 
Secret Service.
    Welcome, witnesses, and, Mr. Dick, if we could begin with 
you. Once again, I am going to put a 5-minute limit on 
witnesses so that, because it is just the two of us, we can 
have a little more dialog between us.
    So, Mr. Dick, please begin.

STATEMENT OF RONALD L. DICK, DIRECTOR, NATIONAL INFRASTRUCTURE 
PROTECTION CENTER, FEDERAL BUREAU OF INVESTIGATION, WASHINGTON, 
                              D.C.

    Mr. Dick. Well, thank you very much, Madam Chairman, 
Ranking Member Kyl. Thank you for inviting me here today to 
testify about the GAO review of the National Infrastructure 
Protection Center.
    Our work here is vitally important, and holding this 
hearing once again demonstrates your personal commitment to 
improving the security of our infrastructures and the 
committee's leadership on this issue in Congress.
    The NIPC was created in 1998 to deal with the very complex 
problem of critical infrastructure protection. We started 3 
years ago with no dedicated staff. As one of my colleagues put 
it, we had to build the plane as we flew it. But we have come 
far in just a few years.
    As you rightly pointed out, our InfraGard initiative is now 
over 1,600 members, with an increase since January of over 
1,000 members. I had the honor here recently on behalf of 
InfraGard to receive the 2001 World Safe Internet Safety Award 
from the Safe America Foundation in May of 2000.
    We are actively exchanging information with private sector 
companies, information sharing and analysis centers, and 
members of InfraGard. Companies have found that there is value 
in exchanging information with the NIPC, that we can safeguard 
their information and provide useful information in return.
    Our watch center functions around the clock with 
connectivity to FedCIRC; Sallie McDonald, one of the panelists 
here, is an integral partner with the NIPC. The National 
Security Incident Response Center at NSA, the Joint Task Force 
for Computer Operations at the Department of Defense, the anti-
virus community, and the backbone providers are all partners of 
ours, and I am going to describe a particular incident that 
occurred here recently where all of those things came together 
for a successful resolution.
    The watch has issued over 98 warnings since our inception. 
These warning products help systems administrators protect 
their computer systems before things happen. We issued warnings 
on, for example, the Leaves worm in June of this year, e-mail 
script vulnerabilities, acts of hacktivism, the Brown Orifice 
warning, and PGP vulnerability. All of these warnings went out 
prior to any widespread attacks.
    Let me cite one advisory that shows, as I said, what the 
Center is really all about. Our advisory on e-commerce 
vulnerabilities combined information derived from law 
enforcement, intelligence, and open sources. It was coordinated 
with our Federal partners and with three of the ISACs. It had 
the desired result.
    The Financial Services ISAC estimated that our warning and 
press conference on e-commerce vulnerabilities helped thwart 
1,600 attempted intrusions on the first day following the 
warning. Alan Paller, who heads the Systems Administrators and 
Network Security Institute, which represents over 100,000 
information security professionals, congratulated us for our 
extraordinary contribution to Internet security in sharing 
information on Russian and Ukrainian extortions. He said, ``It 
was extraordinary because it detailed the level of the threat 
and at the same time provided forensic information that allows 
the community to test and fix their systems.''
    Our analytical products are reaching the right audiences. 
For example, an official with a major bank information security 
office told us that our ``vulnerability alerts publication is a 
valuable service. We incorporate these with other alerts and 
distribute [them] throughout the...enterprise.''
    As you mentioned, our investigations are continuing 
successfully. We currently have over 1,200 of them, both 
domestically and internationally.
    On issues of national concern, we have established four 
strategic directions for our capabilities growth through 2005, 
those being prediction, prevention, detection and mitigation. 
None of these are new concepts, but the NIPC will renew its 
focus on each of them in order to strengthen our strategic 
analysis capabilities.
    The recent events involving the Leaves and IDA Code Red 
worms are good examples of the NIPC's success and progress 
since the GAO study. We are working well with the National 
Security Council and our partner agencies to disseminate 
information and coordinate strategic efforts in a timely and 
effective manner on these incidents.
    Our technical programs are also making great strides. The 
NIPC's work with private companies has been well received, in 
that SANS awarded us the 2000 Security Technology Leadership 
Award for members of our Special Technologies Applications 
Unit.
    The NIPC is deepening its relationships between itself and 
other Federal agencies. For example, we have reached and 
finalized a formal agreement just this week with the Federal 
Aviation Administration. NIPC's Interagency Coordination Cell 
is fostering cooperation among investigative agencies. Several 
task forces have already begun based upon this work within this 
cell.
    We are currently negotiating agreements with various other 
ISACs which will further improve the information-sharing 
process. As mentioned, our training program has trained over 
4,000 Federal, State, local and foreign law enforcement 
personnel in computer and network investigations.
    The NIPC is the sector lead for the emergency law 
enforcement services sector. On March 2, 2001, we delivered the 
sector plan to the White House. The ELES plan provides a 
toolbox to assist some 18,000 police and sheriffs departments 
in protecting their data and communications systems from 
attack.
    It was the first plan to be completed and was very 
favorably received at the Partnership for Critical 
Infrastructure Security meeting and was given as a model for 
other sectors. Since the local police and sheriffs departments 
are usually among the first responders to an incident, the 
protection of their data and communications systems is vital to 
public safety and national security. In short, I think we have 
a robust program now.
    As proud as I am of the NIPC's accomplishments, we must 
look to the future. I am focused on implementing a strategic 
planning effort that will produce measurable results as we face 
challenges ahead. Infrastructure protection is an issue that is 
bigger than one agency and any one private sector entity. We 
must develop meaningful partnerships between the public and 
private sectors, as well as internationally, to protection our 
Nation.
    The NIPC will be striving to take an ever greater 
leadership role in this effort, and we will be doing this in 
close partnership with the Subcommittee's work in this area, as 
well as the administration's revisions to the national plan.
    Again, I thank you.
    [The prepared statement of Mr. Dick follows:]

    Statement of Ronald L. Dick, Director, National Infrastructure 
           Protection Center, Federal Bureau of Investigation

    Madame Chairperson, Ranking Member Kyl, and members of the 
subcommittee, thank you for inviting me here today to testify about the 
recommendations outlined in the General Accounting Office (GAO) report 
titled ``CRITICAL INFRASTRUCTURE PROTECTION: Significant Challenges in 
Developing National Capabilities.'' Holding this hearing once again 
demonstrates your personal commitment to improving the security of our 
critical infrastructures and this subcommittee's leadership on this 
issue in Congress. Our work here is vitally important because the 
stakes involved are enormous. One recent study observed ``12,085 
attacks on over 5,000 distinct Internet hosts belonging to more than 
2,000 distinct organizations during a three-week period.'' \1\ My 
testimony today will address what has been accomplished and what still 
needs to be done to implement the GAO report's recommendations. Our 
assessment of the overall report is contained in our testimony of May 
22, 2001 before this subcommittee.
---------------------------------------------------------------------------
    \1\ David Moore, Geoffrey M. Voelker and Stefan Savage, ``Inferring 
Internet Denial-of-Service Activity,'' May 2001.
---------------------------------------------------------------------------
    At the outset, let me say how pleased I am here today with GSA's 
Assistant Commissioner Sallie McDonald of FedCIRC and Deputy Special 
Agent in Charge of the Financial Crimes Division Jim Savage of the U.S. 
Secret Service. Assistant Commissioner McDonald's statement explains in 
detail the close working relationship that GSA's FedCIRC has with the 
NIPC, so I won't dwell on that here.
    The GAO's recommendations fell into several broad categories, 
including: enhancing capacity for strategic analysis; monitoring field 
implementation of NIPC performance measures; completing the Emergency 
Law Enforcement Services Sector Plan; improving cooperative 
relationships between the NIPC and its federal partners; and furthering 
information sharing between the NIPC, the Information Sharing and 
Analysis Centers (ISACs) and the public.
    Nevertheless, the Center has made great strides in achieving its 
mission under Presidential Decision Directive (PDD)63 over the past 
three years. In his prepared statement for the May 22, 2001 hearing, 
GAO's Director of Information Security, Mr. Robert F. Dacey, stated:

        First, the NIPC has provided valuable coordination and 
        technical support to FBI field offices, which have established 
        special squads and teams and one regional task force in its 
        field offices to address the growing number of computer crime 
        cases. The NIPC has supported these investigative efforts by 
        (1) coordinating investigations among FBI field offices, 
        thereby bringing a national perspective to individual cases, 
        (2) providing technical support in the form of analyses, expert 
        assistance for interviews, and tools for analyzing and 
        mitigating computer-based attacks, and (3) providing 
        administrative support to NIPC field agents. For example, the 
        NIPC produced over 250 written technical reports during 1999 
        and 2000, developed analytical tools to assist in investigating 
        and mitigating computer-based attacks, and managed the 
        procurement and installation of hardware and software tools for 
        the NIPC field squads and teams.

    Over the past three years, NIPC has provided training for almost 
4,000 participants. The NIPC's training program complements training 
offered by the FBI's Training Division as well as training offered by 
the Department of Defense and the National Cybercrime Training 
Partnership. Trained investigators are essential to our successfully 
combating computer intrusions.
               Enhancing Capacity for Strategic Analysis
    The GAO report recommended that the NIPC develop a comprehensive, 
written plan for strategic analysis. While we have numerous documents 
reflecting strategic and tactical planning, I agree that more work 
needs to be done. As the GAO report noted, our progress in this area 
has been impeded by the personnel shortfalls and management 
discontinuities within the interagency Analysis and Warning Section. I 
am pleased to report progress in this area with the arrival in April of 
a Central Intelligence Agency (CIA) senior officer, detailed for a 
sustained period as the Section Chief, and the recent selection of an 
National Security Agency (NSA) officer as the Chief of the Analysis and 
Information Sharing Unit within that section.
    We have established four strategic directions for our capability 
growth through 2005: prediction, prevention, detection, and mitigation. 
None of these are new concepts but NIPC will renew its focus on each of 
them in order to strengthen our strategic analysis capabilities. NIPC 
will work to further strengthen its longstanding efforts on the early 
detection and mitigation of cyber attacks. These strategic directions 
will be significantly advanced by our intensified cooperation with 
federal agencies and the private sector. As the recent LEAVES and CODE 
RED worm incidents demonstrate, our working relations with key federal 
agencies, like FedCIRC, NSA, CIA, and the Joint Task Force Computer 
Network Operations (JTF-CNO), and private sector groups such as SANS, 
the anti-virus community, and the major Internet service providers and 
backbone companies have never been closer. Our most ambitious strategic 
directions, prediction and prevention, are intended to forestall 
attacks before they occur. We are seeking ways to forecast or predict 
hostile capabilities in much the same way that the military forecasts 
weapons threats. The goal here is to forecast these threats with 
sufficient warning to prevent them. A key to success in these areas 
will be strengthened cooperation with intelligence collectors and the 
application of sophisticated new analytic tools to better learn from 
day-to-day trends. The strategy of prevention is reminiscent of 
traditional community policing programs but with our infrastructure 
partners and key system vendors.
    As we work on these four strategic directions: attack prediction, 
prevention, detection, and mitigation, we will have many opportunities 
to stretch our capabilities. With respect to all of these, the NIPC is 
committed to continuous improvement through a sustained process of 
documenting ``lessons learned'' from significant cyber events. We have 
already begun one such lessons learned study in connection with the 
recent LEAVES worm event. The NIPC also remains committed to achieving 
all of its objectives while upholding the fundamental rights of our 
citizenry, including the fundamental right to privacy.
    The NIPC is excited by each of these strategic directions. I will 
lead a senior planning offsite later this summer and I expect to have 
the documented strategic plan completed by December. We are conducting 
this planning in a climate of intensified cyber attacks in by a growing 
number of automated tools that make effective hacking literally child's 
play. For instance, hackers are preying on the growing number of 
American home computer users for whom computers and cable modems are 
merely appliances rather than hobbies. These millions of home computers 
often lack the latest security updates, intrusion detection 
capabilities, and anti-virus signatures.
    The GAO also recommended that the NIPC ensure that its Special 
Technologies and Applications Unit have the computer and communications 
resources necessary to analyze investigative data. The NIPC has already 
begun to address this issue by through the continued implementation of 
the NIPC's ``data warehousing and data mining'' project. This will 
allow the NIPC to retrieve incident data originating from multiple 
sources. Data warehousing includes the ability to conduct real-time 
allsource analysis and report generation. This initiative is ongoing 
and will require multiple year funding to reach maximum potential.
        Monitoring Implementation of Field Perforrnance Measures
    The GAO recommended that the NIPC monitor implementation of new 
performance measures to ensure that they result in FBI Field Offices 
fully reporting information on computer crime complaints to the NIPC. 
The NIPC continues to monitor the open investigations of all the field 
offices and field performance in monthly statistical reports. Along 
with this, the FBI field offices report information on potential 
computer crimes by documenting and uploading reports of these incidents 
to the FBI's automated case support system. These records are 
searchable and available to NIPC Headquarters personnel who correlate 
the incidents with other pending investigations. The placement of the 
NIPC at the FBI endows the Center with both the authorities and the 
ability to combine law enforcement information flowing into the NIPC 
from the FBI Field Offices with other information streams derived from 
open, confidential, and classified sources. This capability is unique 
in the federal government. The NIPC views monitoring field office 
reporting as an ongoing action.
       Completion of the Emergency Law Enforcement Services Plan
    This task is completed. The NIPC serves as sector liaison for 
Emergency Law Enforcement Services (ELES) sector at the request of the 
FBI. The NIPC completed the ELES Sector Plan in February, 2001. The 
ELES Sector Plan was the first completed sector report under PDD-63 and 
was delivered to the White House on March 2, 2001. At the Partnership 
for Critical Infrastructure Security in Washington, D.C., in March, 
2001, the ELES Plan was held up as a model for the other sectors. The 
NIPC also sponsored the formation of the Emergency Law Enforcement 
Services Sector forum, which meets quarterly to discuss issues relevant 
to sector security planning. The Forum contains federal, state, and 
local representatives. The next meeting of the forum is scheduled for 
September, 2001.
    The Plan was the result of two years' work in which the NIPC 
surveyed law enforcement agencies concerning the vulnerabilities of 
their infrastructure. Following the receipt of the survey results, the 
NIPC and the ELES Forum produced the ELES Sector Plan. The NIPC also 
produced a companion ``Guide for State and Local Law Enforcement 
Agencies'' that provides guidance and a ``toolkit'' that law 
enforcement agencies can use when implementing the activities suggested 
in the Plan.
    The importance of the ELES Sector Plan and the Guide cannot be 
overstated. These documents will aid some 18,000 police departments 
located in towns and neighborhoods to better protect themselves from 
attack. Since the local police are usually among the first responders 
to any incident threatening public safety, their protection is vital to 
our national security.
       Enhancing Cooperative Relationships Among Federal Agencies
    The GAO recommended that the NIPC formalize relationships between 
itself, other federal entities, and private sector ISACs, so a clear 
understanding of what is expected from the respective organizations 
exists. The NIPC has established effective information sharing and 
cooperative investigative relationships across the U.S. Government. A 
formal Memoranda of Agreement was just completed with the Department of 
Transportation's Federal Aviation Administration (FAA) which will 
govern how information is shared between FAA and NIPC and how that 
information will be communicated. This MOA formalizes a long-standing 
informal process of information sharing between NIPC and FAA. Informal 
arrangements have already been established with the Federal 
Communications Commission, Department of Transportation's (DOT) 
National Response Center, DOT Office of Pipeline Safety, Department of 
Energy's Office of Emergency Management, and others, which allow the 
NIPC to receive detailed sector-specific incident reports in a timely 
manner. Formal MOAs should soon be completed with several other 
agencies, including the National Coordinating Center for 
Telecommunications and the Federal Emergency Management Agency's 
National Fire Administration.
    The NIPC has developed into a truly interagency center and this in 
itself fosters cooperative relationships among agencies. It currently 
consists of detailees from the following U.S. government agencies: FBI, 
Army, Office of the Secretary of Defense (Navy Rear Admiral), Air Force 
Office of Special Investigations, Defense Criminal Investigative 
Service, National Security Agency, General Services Administration, 
United States Postal Service, Department of Transportation/Federal 
Aviation Administration, Central Intelligence Agency, Department of 
Commerce/Critical Infrastructure Assurance Office, and a representative 
from the Department of Energy. Canada, the United Kingdom, and 
Australia also each have a detailee in the Center.
    The NIPC functions in a task force like way, coordinating 
investigations in a multitude of jurisdictions, both domestically and 
internationally. This is essential due to the transnational nature of 
cyber intrusions. As NIPC coordinates a myriad of investigative efforts 
within the FBI, it is not unlike the way the air traffic control system 
manages the stream of aircraft traffic across the United States and 
around the world.
    To instill further cooperation and establish an essential 
deconfliction process among the investigative agencies, the NIPC 
asserted a leadership role by forming an Interagency Coordination Cell 
(IACC) at the Center. The IACC meets on a monthly basis and includes 
representation from U.S. Secret Service, NASA, U.S. Postal Service, 
Department of Defense Criminal Investigative Organizations (AFOSI, 
DCIS, NCIS, USACIDC), U.S. Customs, Departments of Energy, State and 
Education, Social Security Administration, Treasury Inspector General 
for Tax Administration and the CIA. The cell works to deconflict 
investigative and operational matters among agencies and assists 
agencies in combining resources on matters of common interest. The NIPC 
anticipates that this cell will expand to include all investigative 
agencies and inspectors general in the federal government having cyber 
critical infrastructure responsibilities. As we noted on May 22, 2001, 
the IACC has led to the formation of several task forces and prevented 
intrusions and compromises of U.S. Government' systems.
    Senior leadership positions in the NIPC are held by personnel from 
several agencies. The position of NIPC Director is reserved for a 
senior FBI executive. The Deputy Director of the NIPC is a two-star 
Navy Rear Admiral and the Executive Director is detailed from the Air 
Force Office of Special Investigations. The Section and Unit Chiefs in 
the Computer Investigation and Operations Section and the Training, 
Outreach, and Strategy Section are from the FBI. The Assistant Section 
Chief for Training, Outreach and Strategy is detailed from the Defense 
Criminal Investigative Service. The Section Chief of the Analysis and 
Warning Section is from the CIA and his deputy is a senior FBI agent. 
The head of the NIPC Watch and Warning Unit is reserved for a uniformed 
service officer, and the head of the Analysis and Information Sharing 
Unit is reserved for a National Security Agency manager.
    While the Center has representatives from several U.S. Government 
agencies, staffing continues to be a challenge. Non-FBI personnel are 
provided to the Center on a non-reimbursable basis. Agencies have 
responded to the NIPC's requests for detailees by saying that they are 
constrained from sending personnel due to lack of funds. It is vitally 
important that agencies be provided with sufficient funds for the 
assignment of detailees to the NIPC to support its strategic analysis 
mission.
    As part of its emphasis on cooperation, the GAO recommended that 
the NIPC ensure that its Key Asset Initiative is integrated with the 
DoD and Critical Infrastructure Assurance Office (CIAO) programs. The 
objective of the Key Asset Initiative is to develop and maintain a 
database of information concerning ``key assets'' within each FBI Field 
Office's jurisdiction as part of a broader effort to protect the 
critical infrastructures against both physical and cyber threats. This 
initiative benefits national security planning efforts by providing a 
better understanding of the location, importance, and contact 
information for critical infrastructure assets across the United 
States. The NIPC has worked with the DoD and the CIAO on its Key Asset 
Initiative by involving them in the training of agents that work on the 
Initiative and by meeting with them regarding their programs. The NIPC 
and the Department of Defense are working toward a Memorandum of 
Understanding that will assist in defining cooperative efforts.
    The NIPC has taken other initiatives as well in fulfilling its role 
to lead the critical infrastructure protection effort. This is 
evidenced by its coordinating actions as Chair of the Incident Response 
SubGroup of the Information Infrastructure Protection and Assurance 
Group established by NSPD-1. The NIPC also routinely disseminates 
information through its participation in task forces and working;'' 
groups that meet regularly. NIPC senior leadership participates in 
weekly senior level meetings to exchange strategic level information 
with the Assistant Secretary of Defense for Command, Control, 
Communication and Intelligence. Further collaboration is demonstrated 
through the NIPC's designation as chair of one of the subcommittees 
that is drafting version two of the National Plan.
    The NIPC also maintains an active dialogue with the international 
community, to include its participation in the Trilateral Seminar of 
the International Cooperation for Information Assurance in Sweden and 
the G-8 Lyon Group (High Tech Crime Subgroup). NIPC has briefed 
visitors from a number of countries, including: Japan, Singapore, the 
United Kingdom, Germany, France, Norway, Canada, Denmark, Sweden, 
Israel, and other nations over the past year. In addition, NIPC 
personnel have accepted invitations to meet with government authorities 
in Sweden, Germany, Australia, the United Kingdom, and Denmark in 
recent months to discuss infrastructure protection issues with their 
counterparts. Finally, the NIPC Watch Center is connected to the Watch 
Centers of several of our close allies.
    The NIPC sends out advisories on an ad hoc basis which are 
infrastructure warnings to address cyber or infrastructure events with 
possible significant impact. These are distributed to partners in 
private and public sectors. A number of recent advisories sent out by 
the NIPC (see for example Advisory 01-014, titled ``New Scanning 
Activity (with W32-LEAVES.worm) Exploiting SubSeven Victims '') serve 
to demonstrate the continued collaboration between the NIPC and its 
partner FedCIRC. The NIPC serves as a member of FedCIRC's Senior 
Advisory Council and has daily contact with that entity as well as a 
number of others including NSA and DoD's Joint Task Force Computer 
Network Operations (JTF-CNO). On issues of national concern, the recent 
incident involving the LEAVES and IDA CODE RED Worms are good examples 
of the NIPC's success in working with the National Security Council and 
our partner agencies to disseminate information and coordinate 
strategic efforts in a timely and effective manner.
    In addition to its public web-based warning messages, the NIPC 
sends out tailored products to the federal government, the Information 
Sharing and Analysis Centers (ISACs), and InfraGard partners. Depending 
on the audience, these products may be classified or unclassified. The 
Monthly Highlights are sent out to policy/decision makers, and 
Cybernotes (which lists current exploited software vulnerabilities and 
other malicious code) is sent to system and network administrators. The 
NIPC Daily Report contains timely items of interest and significant 
cyber/infrastructure activity relevant to the infrastructure protection 
community and is sent to some of our federal partners as well as secure 
InfraGard members.
    In response to PDD-63 provisions that all executive departments and 
agencies shall share with the NIPC information about threats and 
attacks on their systems, the NIPC-FAA MOU can serve as a forerunner 
for agreements to promote information sharing with the other 70 plus 
executive branch agencies. The NIPC has developed a model agreement can 
be modified to suit individual agency requirements. The execution of 
these agreements will confirm the obligations and clarify information 
sharing and warning procedures between the federal agencies and the 
NIPC. These model agreements will be communicated to federal executive 
branch agencies to open a dialogue on formalizing their relationship 
with the NIPC. These agreements will also address the GAO's 
recommendation that relationships between the NIPC and other federal 
entities be formalized so that a clear understanding of what is 
expected from the respective organizations exists. The NIPC anticipates 
that this will be an ongoing effort to create, monitor, and maintain 
these information sharing relationships.
                     Improving Information Sharing
    The GAO report recommends that NIPC develop a plan to foster two-
way exchange of information between the NIPC and the ISACs. The NIPC 
actively exchanges information with private sector companies, the 
ISACs, members of the InfraGard Initiative, and the public as part of 
the NIPC's outreach and information sharing activities. Through NIPC's 
aggressive outreach efforts, we receive reports from many ISAC member 
companies. The NIPC has proven that it can properly safeguard their 
information and provide useful information in return. This reporting is 
partially responsible for the issuance of more warning products each 
year.
    As noted in the GAO report, over the past two years the NIPC and 
the North American Electric Reliability Council (NERC)-the ISAC for the 
electric power sectorhave established an indications, analysis and 
warning program (IAW) program, which makes possible the timely exchange 
of information valued by both the NIPC and the electric power sector. 
This relationship is possible because of a commitment both on the part 
of NERC and the NIPC to build cooperative relations. The close NERC-
NIPC relationship is no accident but the result of two interrelated 
sets of actions. First, as Eugene Gorzelnik, Director of Communications 
for the NERC, stated in his prepared statement at the May 22, 2001 
hearing:

        [T]he NERC Board of Trustees in the late 1980s resolved that 
        each electric utility should develop a close working 
        relationship with its local Federal Bureau of Investigation 
        (FBI) office, if it did not already have such a relationship. 
        The Board also said the NERC staff should establish and 
        maintain a working relationship with the FBI at the national 
        level.

    Second, the NIPC and NERC worked for over two years on building the 
successful partnership that now exists. It did not just happen. It took 
dedicated individuals in both organizations to make it happen. It is 
this success and dedication to achieving results that the NIPC is 
working to emulate with the other ISACs.
    The NIPC also continues to meet regularly with ISACs from other 
sectors, particularly the financial services (FS-ISAC) and 
telecommunications (NCC-ISAC) ISACs, to establish more formal 
information sharing arrangements, drawing largely on the model 
developed with the electric power sector. In the past, information 
exchanges with these ISACs have consisted of a one-way flow of NIPC 
warning messages and products being provided to the ISACs. However, in 
recent months the NIPC has received greater participation from sector 
companies as they become increasingly aware that reporting to the NIPC 
enhances the value and timeliness of NIPC warning products disseminated 
to their sector. Productive discussions held this spring with the FS-
ISAC, in particular, should significantly advance a two-way information 
exchange with the financial services industry. The NIPC is currently 
working with the FS-ISAC and the NCC-ISAC to develop and test secure 
communication mechanisms, which will facilitate the sharing of high-
threshold, near real-time incident information. In the meanwhile we are 
working with these ISACs to share information. In March 2001, we were 
commended by the FS-ISAC for our advisory on e-commerce vulnerabilities 
(NIPC Advisory 01-003). According to the FS-ISAC, that advisory, 
coupled with the NIPC press conference on March 8, 2001, stopped over 
1600 attempted exploitations by hackers the day immediately following 
the press conference.
    ISACs have been established for the critical infrastructure sectors 
of banking and finance, information and telecommunications, electric 
power, and emergency law enforcement services. They have not yet been 
established for the remaining sectors enumerated in PDD-63. A model 
NIPC-ISAC agreement has been prepared to promote the sharing of 
information with these existing ISACs and ISACs yet to be formed. 
Agreements are being negotiated between the NIPC and the 
Telecommunications ISAC, as well as the NIPC and the United States Fire 
Administration (emergency fire services ISAC). The execution of these 
agreements should pave the way for NIPC agreements with other ISACs. 
The NIPC welcomes the participation of the sector lead agencies and the 
sector coordinators to improving the information sharing process with 
the ISACs. These efforts are ongoing.
    The NIPC also shares information via its InfraGard Initiative. All 
56 FBI field offices now have InfraGard chapters. Just in the last six 
months the InfraGard Initiative has added over 1000 new members to 
increase the overall membership to over 1600. It is the most extensive 
government-private sector partnership for infrastructure protection in 
the world, and is a service we provide to InfraGard members free of 
charge. InfraGard expands direct contacts with the private sector 
infrastructure owners and operators and shares information about cyber 
intrusions and vulnerabilities through the formation of local InfraGard 
chapters within the jurisdiction of each of the 56 FBI Field Offices 
and several of its Resident Agencies (subdivisions of the larger field 
offices).
    A key element of the InfraGard initiative is the confidentiality of 
reporting by members. The reporting entities edit out the identifying 
information about themselves on the notices that are sent to other 
members of the InfraGard network. This process is called sanitization 
and it protects the information provided by the victim of a cyber 
attack. Much of the information provided by the private sector is 
proprietary and is treated as such. InfraGard provides its membership 
the capability to write an encrypted sanitized report for dissemination 
to other members. This measure helps to build a trusted relationship 
with the private sector and at the same time encourages other private 
sector companies to report cyber attack to law enforcement.
    InfraGard held its first national congress from June 12-14, 2001. 
This conclave provided an excellent forum for NIPC senior managers and 
InfraGard members to exchange ideas. InfraGard's success is directly 
related to private industry's involvement in protecting its critical 
systems, since private industry owns almost all of the infrastructures. 
The dedicated work of the NIPC and the InfraGard members is paying off. 
InfraGard has already prevented cyber attacks by discretely alerting 
InfraGard members to compromises on their systems. On May 3, 2001, the 
InfraGard initiative received the 2001 WorldSafe Internet Safety Award 
from the Safe America Foundation for its efforts.
                              Conclusion:
    I remain encouraged by the progress the NIPC has made in its first 
three years. Our multiagency partnership has developed unique national 
capabilities that have never before been achieved. We will continually 
improve in the coming years in order to master the perpetually evolving 
challenges involved with infrastructure protection and information 
assurance. The GAO recommendations are all being addressed and I plan 
to keep the subcommittee updated on our progress. Thank you for 
inviting me here today and I welcome any questions you have.

    Chairperson Feinstein. Thanks very much, Mr. Dick. Thank 
you for keeping within the time limit. I appreciate it.
    We will go to Mr. Dacey, of the GAO, who did the report.
    Mr. Dacey?

 STATEMENT OF ROBERT F. DACEY, DIRECTOR, INFORMATION SECURITY 
      ISSUES, GENERAL ACCOUNTING OFFICE, WASHINGTON, D.C.

    Mr. Dacey. Madam Chairwoman and Senator Kyl, I am pleased 
to be here today to discuss our review of the National 
Infrastructure Protection Center and its progress in developing 
the capabilities outlined in Presidential Decision Directive 
63. As you requested, I will briefly summarize my written 
statement. Our testimony highlights key findings in our report 
on the NIPC which you released in May of this year.
    PDD-63, issued in May 1998, outlined our Government's 
strategy to protection our Nation's critical infrastructures 
from hostile attacks, especially computer-based attacks, and 
specifically assigned the NIPC, within the FBI, responsibility 
for providing comprehensive analysis and issuing timely 
warnings on threats, vulnerabilities, and attacks, facilitating 
and coordinating our Government's response to cyber incidents, 
and promoting outreach and information-sharing.
    While NIPC efforts have laid a foundation for developing 
these capabilities, significant challenges remained at the 
close of our review. For example, the NIPC has issued numerous 
analyses to support investigations of individual incidents, but 
has developed only limited capabilities for broader strategic 
analysis of threat and vulnerability data.
    Three factors have contributed to these limitations. First, 
there is no generally accepted methodology for strategic 
analysis of cyber-based threats. According to officials in the 
intelligence and national security communities, developing such 
a methodology would require an intense interagency effort and 
dedication of resources.
    Second, the NIPC has sustained prolonged leadership 
vacancies and does not have adequate staff expertise, in part 
because Federal agencies have not provided the originally 
anticipated number of detailees.
    Third, the NIPC did not have industry-specific data on 
critical infrastructures, which under PDD-63 were to be 
provided for each of the industry sectors by industry 
representatives and the designated Federal lead agencies.
    The NIPC has established a rudimentary capability to 
identify attack that appear imminent and alert Government and 
the private sector. However, the NIPC's ability to issue 
warnings promptly has been impeded by several factors: first, 
the lack of a comprehensive national framework for promptly 
obtaining and analyzing information indicating that attack may 
be imminent or underway; two, a shortage of skilled staff; 
three, the need to ensure that NIPC does not raise undue alarm 
for insignificant incidents; and, four, the need to ensure that 
sensitive information is protected.
    However, I want to emphasize a more fundamental impediment. 
Specifically, the entities involved in the Government critical 
infrastructure protection efforts did not share a common 
interpretation of NIPC's roles and responsibilities. Further, 
the relationships between the NIPC, the FBI, and the National 
Coordinator for Security Infrastructure Protection and 
Counterterrorism are unclear regarding who has direct authority 
for setting NIPC priorities and procedures and providing NIPC 
oversight.
    The NIPC has had greater success in providing technical 
support and coordination with the NIPC squads and teams in the 
various FBI field offices. In addition, the NIPC has developed 
and implemented procedures for establishing crisis action teams 
to respond to potentially serious computer-based incidents.
    In the area of establishing information-sharing 
partnerships, progress has varied. NIPC's InfraGard program for 
sharing information on computer-based threats and incidents 
with private sector companies has steadily gained enrollment, 
as we have previously discussed here. Also, the NIPC has 
provided training to Government entities and has advised 
foreign governments that are establishing centers similar to 
the NIPC.
    However, at the close of our review in February, a two-way 
information-sharing partnership with the NIPC had been 
established with only one of the four industry information-
sharing and analysis centers that had been established at that 
time. Similarly, the NIPC and FBI had made only limited 
progress in developing a data base of the most important 
components of the Nation's critical infrastructures, referred 
to as the Key Asset Initiative. In addition, the NIPC and other 
Government entities, such as the Department of Defense and the 
Secret Service, had not developed fully productive information-
sharing and cooperative relationships.
    The NIPC is aware of the challenges it faces and has taken 
some steps to address them. In addition, the administration is 
reviewing its critical infrastructure protection strategy, 
including the way that the Federal Government is organized to 
manage this effort. Our report includes a variety of 
recommendations that are pertinent to these efforts.
    Madam Chairwoman and Senator Kyl, this concludes my 
statement. Thank you.
    Chairperson Feinstein. Since you didn't use up all your 5 
minutes, could you just speak on your recommendations, 
specifically two of them, that the Attorney General direct the 
FBI Director to direct the NIPC Director to ensure to develop a 
comprehensive written plan for establishing analysis and 
warning capabilities as well as to do several other things. 
These recommendations are at the bottom of page 15 of the 
Executive Summary and the top of page 14--quickly, what 
progress has been made?
    Mr. Dacey. Madam Chairwoman, we did not do any follow-up 
work beyond the work that we had done in terms of February, but 
at that point in time the recommendations really kind of 
paralleled the kind of issues that we saw in February. I don't 
know if Mr. Dick would care to elaborate on the actions more 
fully to address those specific recommendations.
    Chairperson Feinstein. Fine. I will ask him, then, at a 
later time.
    [The prepared statement of Mr. Dacey follows:]

  Statement of Robert F. Dacey, Director, Information Security Issues

    Madam Chairwoman and Members of the Subcommittee:
    I am pleased to be here today to discuss our review of the National 
Infrastructure Protection Center (NIPC). As you know, the NIPC is an 
important element of our government's strategy to protect our national 
infrastructures from hostile attacks, especially computer-based 
attacks. This strategy was outlined in Presidential Decision Directive 
(PDD) 63, which was issued in May 1998.
    My statement summarizes the key findings in our report on the NIPC, 
which you released in May.\1\ That report is the result of an 
evaluation we performed at the request of you, Madam Chairwoman; 
Senator Kyl; and Senator Grassley. As you requested, the report 
describes the NIPC's progress in developing national capabilities for 
analyzing cyber threats and vulnerability data and issuing warnings, 
enhancing its capabilities for responding to cyber attacks, and 
establishing information-sharing relationships with government and 
private-sector entities.
---------------------------------------------------------------------------
    \1\ Critical Infrastructure Protection: Significant Challenges in 
Developing National Capabilities (GAO-O1-323, April 25, 2001).
---------------------------------------------------------------------------
    Overall, we found that progress in developing the analysis, 
warning, and informationsharing capabilities called for in PDD 63 has 
been mixed. The NIPC has initiated a variety of critical infrastructure 
protection efforts that have laid a foundation for future 
governmentwide efforts. In addition, it has provided valuable support 
and coordination related to investigating and otherwise responding to 
attacks on computers. However, at the close of our review in February 
2001, the analytical and information-sharing capabilities that PDD 63 
asserts are needed to protect the nation's critical infrastructures had 
not yet been achieved, and the NIPC had developed only limited warning 
capabilities. Developing such capabilities is a formidable task that 
experts say will take an intense interagency effort. An underlying 
contributor to the slow progress is that the NIPC's roles and 
responsibilities had not been fully defined and were not consistently 
interpreted by other entities involved in the government's broader 
critical infrastructure protection strategy. Further, these entities 
had not provided the information and support, including detailees, to 
the NIPC that was envisioned by PDD 63.
    The NIPC is aware of the challenges it faces and has taken some 
steps to address them. In addition, the administration is reviewing the 
federal critical infrastructure protection strategy, including the way 
the federal government is organized to manage this effort. Our report 
includes a variety of recommendations that are pertinent to these 
efforts, including addressing the need to more fully define the role 
and responsibilities of the NIPC, develop plans for establishing 
analysis and warning capabilities, and formalize information-sharing 
relationships with private-sector and federal entities.
    The remainder of my statement will describe the NIPC's role in the 
government's broader critical infrastructure protection efforts, as 
outlined in PDD 63, and its progress, as of the close of our review, in 
three broad areas: developing analysis and warning capabilities, 
developing response capabilities, and establishing information-sharing 
relationships.
                               background
    Since the early 1990s, the explosion in computer interconnectivity, 
most notably growth in the use of the Internet, has revolutionized the 
wayorganizations conduct business, making communications faster and 
access to data easier. However, this widespread interconnectivity has 
increased the risks to computer systems and, more importantly, to the 
critical operations and infrastructures that these systems support, 
such as telecommunications, power distribution, national defense, and 
essential government services.
    Malicious attacks, in particular, are a growing concern. The 
National Security Agency has determined that foreign governments 
already have or are developing computer attack capabilities, and that 
potential adversaries are developing a body of knowledge about U.S. 
systems and methods to attack them. In addition, reported incidents 
have increased dramatically in recent years. Accordingly, there is a 
growing risk that terrorists or hostile foreign states could severely 
damage or disrupt national defense or vital public operations through 
computer-based attacks on the nation's critical infrastructures. Since 
1997, in reports to the Congress, we have designated information 
security a governmentwide high-risk area. Our most recent report in 
this regard, issued in January,\2\ noted that, while efforts to address 
the problem have gained momentum, federal assets and operations 
continue to be highly vulnerable to computer-based attacks.
---------------------------------------------------------------------------
    \2\ High-Risk Series: Information Management and Technology (GAO/
HR-97-9, February 1, 1997); High-Risk Series: An Update (GAO/HR-99-1, 
January, 1999); High-Risks Series: An Update (GAO-01-263, January 
2001).
---------------------------------------------------------------------------
    To develop a strategy to reduce such risks, in 1996, the President 
established a Commission on Critical Infrastructure Protection. In 
October 1997, the commission issued its report,\3\ stating that a 
comprehensive effort was needed, including ``a system of surveillance, 
assessment, early warning, and response mechanisms to mitigate the 
potential for cyber threats.'' The report said that the Federal Bureau 
of Investigation (FBI) had already begun to develop warning and threat 
analysis capabilities and urged it to continue in these efforts. In 
addition, the report noted that the FBI could serve as the preliminary 
national warning center for infrastructure attacks and provide law 
enforcement, intelligence, and other information needed to ensure the 
highest quality analysis possible.
---------------------------------------------------------------------------
    \3\ Critical Foundations: Protecting America's Infrastructures, the 
Report of the President's Commission on Critical Infrastructure 
Protection, October 1997.
---------------------------------------------------------------------------
    In May 1998, PDD 63 was issued in response to the commission's 
report. The directive called for a range of actions intended to improve 
federal agency security programs, establish a partnership between the 
government and the private sector, and improve the nation's ability to 
detect and respond to serious computer-based attacks. The directive 
established a National Coordinator for Security, Infrastructure 
Protection, and Counter-Terrorism under the Assistant to the President 
for National Security Affairs. Further, the directive designated lead 
agencies to work with private-sector entities in each of eight industry 
sectors and five special functions. For example, the Department of the 
Treasury is responsible for working with the banking and finance 
sector, and the Department of Energy is responsible for working with 
the electric power industry.
    PDD 63 also authorized the FBI to expand its NIPC, which had been 
originally established in February 1998. The directive specifically 
assigned the NIPC, within the FBI, responsibility for providing 
comprehensive analyses on threats, vulnerabilities, and attacks; 
issuing timely warnings on threats and attacks; facilitating and 
coordinating the government's response to cyber incidents; providing 
law enforcement investigation and response; monitoring reconstitution 
of minimum required capabilities after an infrastructure attack; and 
promoting outreach and information sharing.
   multiple factors have limited development of analysis and warning 
                              capabilities
    PDD 63 assigns the NIPC responsibility for developing analytical 
capabilities to provide comprehensive information on changes in threat 
conditions and newly identified system vulnerabilities as well as 
timely warnings of potential and actual attacks. This responsibility 
requires obtaining and analyzing intelligence, law enforcement, and 
other information to identify patterns that may signal that an attack 
is underway or imminent.
    Since its establishment in 1998, the NIPC has issued a variety of 
analytical products, most of which have been tactical analyses 
pertaining to individual incidents. These analyses have included (1) 
situation reports related to law enforcement investigations, including 
denial-of-service attacks that affected numerous Internet-based 
entities, such as eBay and Yahoo and (2) analytical support of a 
counterintelligence investigation. In addition, the NIPC has issued a 
variety of publications, most of which were compilations of information 
previously reported by others with some NIPC analysis.
    Strategic analysis to determine the potential broader implications 
of individual incidents has been limited. Such analysis looks beyond 
one specific incident to consider a broader set of incidents or 
implications that may indicate a potential threat of national 
importance. Identifying such threats assists in proactively managing 
risk, including evaluating the risks associated with possible future 
incidents and effectively mitigating the impact of such incidents.
    Three factors have hindered the NIPC's ability to develop strategic 
analytical capabilities.

     First, there is no generally accepted methodology for 
analyzing strategic cyberbased threats. For example, there is no 
standard terminology, no standard set of factors to consider, and no 
established thresholds for determining the sophistication of attack 
techniques. According to officials in the intelligence and national 
security community, developing such a methodology would require an 
intense interagency effort and dedication of resources.
     Second, the NIPC has sustained prolonged leadership 
vacancies and does not have adequate staff expertise, in part because 
other federal agencies have not provided the originally anticipated 
number of detailees. For example, as of the close of our review in 
February, the position of Chief of the Analysis and Warning Section, 
which was to be filled by the Central Intelligence Agency, had been 
vacant for about half of the NIPC's 3-year existence. In addition, the 
NIPC had been operating with only 13 of the 24 analysts that NIPC 
officials estimate are needed to develop analytical capabilities.
     Third, the NIPC did not have industry-specific data on 
factors such as critical system components, known vulnerabilities, and 
interdependencies. Under PDD 63, such information is to be developed 
for each of eight industry segments by industry representatives and the 
designated federal lead agencies. However, at the close of our work in 
February, only three industry assessments had been partially completed, 
and none had been provided to the NIPC.
    To provide a warning capability, the NIPC established a Watch and 
Warning Unit that monitors the Internet and other media 24 hours a day 
to identify reports of computer-based attacks. As of February, the unit 
had issued 81 warnings and related products since 1998, many of which 
were posted on the NIPC's Internet web site. While some warnings were 
issued in time to avert damage, most of the warnings, especially those 
related to viruses, pertained to attacks underway. The NIPC's ability 
to issue warnings promptly is impeded because of (1) a lack of a 
comprehensive governmentwide or nationwide framework for promptly 
obtaining and analyzing information on imminent attacks, (2) a shortage 
of skilled staff, (3) the need to ensure that the NIPC does not raise 
undue alarm for insignificant incidents, and (4) the need to ensure 
that sensitive information is protected, especially when such 
information pertains to law enforcement investigations underway.
    However, I want to emphasize a more fundamental impediment. 
Specifically, evaluating the NIPC's progress in developing analysis and 
warning capabilities is difficult because the federal government's 
strategy and related plans for protecting the nations critical 
infrastructures from computer-based attacks, including the NIPC's role, 
are still evolving. The entities involved in the government's critical 
infrastructure protection efforts have not shared a common 
interpretation of the NIPC's roles and responsibilities. Further, the 
relationships between the NIPC, the FBI, and the National Coordinator 
for Security, Infrastructure Protection, and Counter-Terrorism at the 
National Security Council have been unclear regarding who has direct 
authority for setting NIPC priorities and procedures and providing NIPC 
oversight. In addition, the NIPC's own plans for further developing its 
analytical and warning capabilities were fragmented and incomplete. As 
a result, there were no specific priorities, milestones, or program 
performance measures to guide NIPC actions or provide a basis for 
evaluating its progress.
    The administration is currently reviewing the federal strategy for 
critical infrastructure protection that was originally outlined in PDD 
63, including provisions related to developing analytical and warning 
capabilities that are currently assigned to the NIPC. On May 9, the 
White House issued a statement saying that it was working with federal 
agencies and private industry to prepare a new version of a ``national 
plan for cyberspace security and critical infrastructure protection'' 
and reviewing how the government is organized to deal with information 
security issues.
    In our report, we recommend that, as the administration proceeds, 
the Assistant to the President for National Security Affairs, in 
coordination with pertinent executive agencies,
     establish a capability for strategic analysis of computer-
based threats, including developing related methodology, acquiring 
staff expertise, and obtaining infrastructure data;
     require development of a comprehensive data collection and 
analysis framework and ensure that national watch and warning 
operations for computer-based attacks are supported by sufficient staff 
and resources; and
     clearly define the role of the NIPC in relation to other 
government and private-sector entities.
 nipc coordination and technical support have benefited investigative 
                       and response capabilities
    PDD 63 directed the NIPC to provide the principal means of 
facilitating and coordinating the federal government's response to 
computer-based incidents. In response the NIPC undertook efforts in two 
major areas: providing coordination and technical support to FBI 
investigations and establishing crisis management capabilities.
    First, the NIPC provided valuable coordination and technical 
support to FBI field offices, which established special squads and 
teams and one regional task force in its field offices to address the 
growing number of computer crime cases. The NIPC supported these 
investigative efforts by (1) coordinating investigations among FBI 
field offices, thereby bringing a national perspective to individual 
cases, (2) providing technical support in the form of analyses, expert 
assistance for interviews, and tools for analyzing and mitigating 
computer-based attacks, and (3) providing administrative support to 
NIPC field agents. For example, the NIPC produced over 250 written 
technical reports during 1999 and 2000, developed analytical tools to 
assist in investigating and mitigating computer-based attacks, and 
managed the procurement and installation of hardware and software tools 
for the NIPC field squads and teams.
    While these efforts benefited investigative efforts, FBI and NIPC 
officials told us that increased computer capacity and data 
transmission capabilities would improve their ability to promptly 
analyze the extremely large amounts of data that are associated with 
some cases. In addition, FBI field offices were not yet providing the 
NIPC with the comprehensive information that NIPC officials say is 
needed to facilitate prompt identification and response to cyber 
incidents. According to field office officials, some information on 
unusual or suspicious computerbased activity had not been reported 
because it did not merit opening a case and was deemed to be 
insignificant. To address this problem, the NIPC established new 
performance measures related to reporting.
    Second, the NIPC developed crisis management capabilities to 
support a multiagency response to the most serious incidents from the 
FBI's Washington, D.C., Strategic Information Operations Center. From 
1998 through early 2001, seven crisis action teams had been activated 
to address potentially serious incidents and events, such as the 
Melissa virus in 1999 and the days surrounding the transition to the 
year 2000, and related procedures have been formalized. In addition, 
the NIPC coordinated development of an emergency law enforcement plan 
to guide the response of federal, state, and local entities.
    To help ensure an adequate response to the growing number of 
computer crimes, we recommend in our report that the Attorney General, 
the FBI Director, and the NIPC Director take steps to (1) ensure that 
the NIPC has access to needed computer and communications resources and 
(2) monitor implementation of new performance measures to ensure that 
field offices fully report information on potential computer crimes to 
the NIPC.
  progress in establishing information-sharing relationships has been 
                                 mixed
    Information sharing and coordination among private-sector and 
government organizations are essential for thoroughly understanding 
cyber threats and quickly identifying and mitigating attacks. However, 
as we testified in July 2000 \4\ establishing the trusted relationships 
and information-sharing protocols necessary to support such 
coordination can be difficult.
---------------------------------------------------------------------------
    \4\ Critical Infrastructure Protection: Challenges to Building a 
Comprehensive Strategy for Information Sharing and Cooperation (GAO/T-
AIMD-00-268, July 26, 2000). Testimony before the subcommittee on 
Government Management, Information and Technology, Committee on 
Government Reform, House of Representatives.
---------------------------------------------------------------------------
    NIPC success in this area has been mixed. For example, the 
InfraGard Program, which provides the FBI and the NIPC with a means of 
securely sharing information with individual companies, had grown to 
about 500 member organizations as of January 2001 and was viewed by the 
NIPC as an important element in building trust relationships with the 
private sector. NIPC officials recently told us that InfraGard 
membership has continued to increase. However, of the four information 
sharing and analysis centers that had been established as focal points 
for infrastructure sectors, a two-way, informationsharing partnership 
with the NIPC had developed with only one-the electric power industry. 
The NIPC's dealings with two of the other three centers primarily 
consisted of providing information to the centers without receiving any 
in return, and no procedures had been developed for more interactive 
information sharing. The NIPC's information-sharing relationship with 
the fourth center was not covered by our review because the center was 
not established until mid-January 2001, shortly before the close of our 
work.
    Similarly, the NIPC and the FBI have made only limited progress in 
developing a database of the most important components of the nation's 
critical infrastructures-an effort referred to as the Key Asset 
Initiative. While FBI field offices had identified over 5,000 key 
assets, at the time of our review, the entities that own or control the 
assets generally had not been involved in identifying them. As a 
result, the key assets recorded may not be the ones that infrastructure 
owners consider to be the most important. Further, the Key Asset 
Initiative was not being coordinated with other similar federal efforts 
at the Departments of Defense and Commerce.
    In addition, the NIPC and other government entities had not 
developed fully productive information-sharing and cooperative 
relationships. For example, federal agencies have not routinely 
reported incident information to the NIPC, at least in part because 
guidance provided by the federal Chief Information Officers Council, 
which is chaired by the Office of Management and Budget, directs 
agencies to report such information to the General Services 
Administration's Federal Computer Incident Response Capability. 
Further, NIPC and Defense officials agreed that their information-
sharing procedures needed improvement, noting that protocols for 
reciprocal exchanges of information had not been established. In 
addition, the expertise of the U.S. Secret Service regarding computer 
crime had not been integrated into NIPC efforts.
    The NIPC has been more successful in providing training on 
investigating computer crime to government entities, which is an effort 
that it considers an important component of its outreach efforts. From 
1998 through 2000, the NIPC trained about 300 individuals from federal, 
state, local, and international entities other than the FBI. In 
addition, the NIPC has advised several foreign governments that are 
establishing centers similar to the NIPC.
    To improve information sharing, we recommend in our report that the 
Assistant to the President for National Security Affairs

     direct federal agencies and encourage the private sector 
to better define the types of information necessary and appropriate to 
exchange in order to combat computer-based attacks and to develop 
procedures for performing such exchanges,
     initiate development of a strategy for identifying assets 
of national significance that includes coordinating efforts already 
underway, and
     resolve discrepancies in requirements regarding computer 
incident reporting by federal agencies.

    In our report, we also recommend that the Attorney General task the 
FBI Director to

     formalize information-sharing relationships between the 
NIPC and other federal entities and industry sectors and
     ensure that the Key Asset Initiative is integrated with 
other similar federal activities.

    In conclusion, it is important that the government ensure that our 
nation has the capability to deal with the growing threat of computer-
based attacks in order to mitigate the risk of serious disruptions and 
damage to our critical infrastructures. The analysis, warning, 
response, and information-sharing responsibilities that PDD 63 assigned 
to the NIPC are important elements of this capability. However, as our 
report shows, developing the needed capabilities will require 
overcoming many challenges. Meeting these challenges will not be easy 
and will require clear central direction and dedication of expertise 
and resources from multiple federal agencies, as well as private sector 
support.
    Madame Chairwoman, this concludes my statement. I would be pleased 
to answer any questions that you or other members of the Subcommittee 
may have at this time.
                      contact and acknowledgments
    If you should have any questions about this testimony, please 
contact me at (202) 512-3317. I can also be reached by e-mail at 
[email protected].

    Chairperson Feinstein. Ms. McDonald, welcome.

STATEMENT OF SALLIE McDONALD, ASSISTANT COMMISSIONER, OFFICE OF 
 INFORMATION ASSURANCE AND CRITICAL INFRASTRUCTURE PROTECTION, 
       GENERAL SERVICES ADMINISTRATION, WASHINGTON, D.C.

    Ms. McDonald. Thank you. Good afternoon, Madam Chairwoman 
and Ranking Member Kyl. I wish to thank you for the opportunity 
to offer testimony with regard to the National Infrastructure 
Protection Center.
    The Federal Computer Incident Response Center, or FedCIRC, 
is a component of GSA's Federal Technology Service. It is the 
central coordination entity for dealing with computer security-
related incidents affecting computer systems within the Federal 
civilian agencies of the U.S. Government.
    FedCIRC and NIPC are both crucial to effective cyber 
defense, but serve differing roles to the Federal community. 
FedCIRC's role is to provide incident response and handling 
reports from agencies. When an agency reports an incident, 
FedCIRC works with the agency to identify the type of incident, 
contain any damage to the agency's system, and provide guidance 
to the agency on recovering from the incident.
    The NIPC, on the other hand, collects incident reports and 
is responsible for providing threat assessments, vulnerability 
studies, warnings----
    Chairperson Feinstein. Ms. McDonald, I am going to 
interrupt you because we have 4 minutes left in this vote.
    Ms. McDonald. OK.
    Chairperson Feinstein. I hope people will wait. We will 
come back right away, if you don't mind, and excuse us for a 
couple of minutes.
    [The Subcommittee stood in recess from 2:33 p.m. to 2:50 
p.m.]
    Chairperson Feinstein. We will resume.
    Ms. McDonald, again, we are sorry to interrupt your 
testimony, but please continue. We may interrupt you once again 
because Senator Cleland is coming and wanted to introduce one 
of the witnesses on the next panel and he is limited in time, 
so we might interrupt you once again.
    Ms. McDonald. No problem.
    Chairperson Feinstein. Thank you.
    Ms. McDonald. As I was saying, the NIPC's responsibility is 
to collect incident reports and provide threat assessments, 
vulnerability studies, warnings, and coordinate the Federal 
Government's investigative response to attacks.
    Upon receiving an incident report from a Federal agency, 
FedCIRC evaluates and categorizes the incident with respect to 
its impact and severity. If criminal activity is indicated, 
FedCIRC informs the reporting agency of the requirement to 
immediately contact their inspector general or the NIPC. Should 
the incident appear to have originated from a foreign country, 
FedCIRC categorizes it as having potential national security 
implications and immediately contacts both the National 
Security Agency and the NIPC. The reporting agency is 
subsequently notified of such action by FedCIRC.
    There is an ongoing discussion between the NIPC and FedCIRC 
to improve information-sharing and analytical efforts, and to 
educate agencies of the value of rapid involvement of the NIPC 
when incidents occur. Effective incident analysis is the 
product of multiple-source data collection efforts, 
collaboration to quantify related information, and 
determination of the potential for proliferation and damage.
    Over the past few years, a virtual network of partners has 
evolved. This virtual network includes FedCIRC, the NIPC, the 
National Security Agency, the Department of Defense, industry, 
academia, and individual incident response components within 
Federal agencies.
    Though their missions vary in scope and responsibility, 
this virtual network enables the Federal Government to 
capitalize on the individual technical strengths, each 
organization's strategic positioning within the national 
infrastructure, and their access to a variety of information 
resources.
    Bridging the disparate boundaries has been a formidable 
challenge, and although there is still work to be done in this 
area, the commitment of the leadership in each organization is 
on the right path to build the framework for the fluid and 
cooperative exchange of information.
    Critical infrastructure protection efforts, and more 
specifically those for cyber defense, are a relatively new 
requirement in Government and in the private sector. Only 
recently have these efforts been singled out as a priority for 
Federal agencies.
    As Government direction for reporting the occurrence of 
incidents has been promulgated, attempts by agencies to develop 
related policies and procedures has sometimes been divergent 
because of differing individual interpretations and 
misunderstanding. FedCIRC and the NIPC are working diligently 
to jointly assess problem areas, more clearly define agency 
responsibilities for reporting incidents, and working with 
agencies to ensure that they have the proper processes and 
procedures in place to respond to and prevent attacks on their 
information systems.
    Madam Chairperson, the information presented today 
highlights the high degree of cooperation that exists among 
Government agencies and the critical and effective relationship 
that exists between FedCIRC and the NIPC. Though all contribute 
individually to critical infrastructure protection, our 
strength in protecting information systems governmentwide lies 
in collaboration and coordination efforts. I trust that you 
will derive from my remarks an understanding of the cyber 
threat and response issues, and also an appreciation of the 
joint commitment to infrastructure protection of the FedCIRC 
and the NIPC.
    Thank you very much.
    [The prepared statement of Ms. McDonald 
follows:]

    Statement of Sallie McDonald, Assistant Commissioner, Office of 
      Information Assurance and Critical Infrastructure Protection

    Good afternoon Madam Chairwoman and members of the Subcommittee. I 
am Sallie McDonald, the Assistant Commissioner for the GSA, FTS, Office 
of Information Assurance and Critical Infrastructure Protection. I wish 
to thank you for the opportunity to offer testimony with regard to the 
National Infrastructure Protection Center (NIPC).
    The Federal Computer Incident Response Center or FedCIRC, is a 
component of GSA's Federal Technology Service. As designated by the 
Government Information Security Reform Act, it is the central 
coordination entity for dealing with computer security related 
incidents affecting computer systems within the Federal civilian 
agencies and Departments of the United States Government.
    FedCIRC was established as a pilot by NIST in 1996 under the Office 
of Management and Budget (OMB) policy authority as the primary means 
for civilian Federal agencies to share information on externally 
generated security incidents and common vulnerabilities. This was 
recognized as an important activity given the shared risk environment 
that results from a rise in interconnected systems across government 
and with connection to the Internet which increases public access. 
FedCIRC became operational in 1998 and was transferred to GSA. 
FedCIRC's role was then and is today, one of assisting agencies and 
sharing information under the overall security policy framework 
established by OMB. FedCIRC is not intended to substitute for adequate 
agency security practices or compete with the role of law enforcement 
or national security authorities in addressing more serious types of 
attacks.
    GSA reports at least quarterly to OMB on matters such as the number 
and nature of security incidents reported by the agencies, whether the 
incidents are the result of exploits of vulnerabilities for which known 
repairs are readily available, and whether FedCIRC has any specific 
recommendations for changes to OMB security policy or the National 
Institute of Standards and Technology (KIST) security guidance.
    By definition, a ``computer security incident'' encompasses any 
violation of an established or implied security policy or statute. 
Incidents include but are not necessarily limited to activities such as 
attempts to gain unauthorized access to government systems or data, 
disruption of service, unauthorized use of computing resources and 
changes to system hardware or software without consent of the owner.
    FedCIRC and the NIPC are both crucial to effective cyber defense 
but serve differing roles to the Federal community. FedCIRC's role is 
to provide incident response and handling support to agencies. When an 
agency reports an incident, FedCIRC works with the agency to identify 
the type of incident, contain any damage to the agency's system, and 
provide guidance to the agency on recovering from the incident. The 
NIPC, on the other hand, collects incident reports and is responsible 
for providing threat assessments, vulnerability studies, warnings, and 
the coordination of the Federal government's investigative response to 
attacks.
    Upon receiving an incident report from a Federal agency, FedCIRC 
evaluates and categorizes the incident with respect to its impact and 
severity. If criminal activity is indicated, FedCIRC informs the 
reporting agency of the requirement to immediately contact their 
Inspector General or the NIPC. Should the incident appear to have 
originated from a foreign country, FedCIRC categorizes it as having 
potential national security implications and immediately contacts both 
the NSIRC and the NIPC. The reporting agency is subsequently notified 
of such action by FedCIRC. There is ongoing discussion between the NIPC 
and FedCIRC to improve information sharing and analytic efforts and to 
educate agencies of the value of rapid involvement of the NIPC when 
incidents occur. When the escalation of an incident has the potential 
for widespread proliferation or damage, FedCIRC and the NIPC routinely 
pool their information and skills. FedCIRC is frequently requested by 
the NIPC to collaborate with multiple sources and the affected agency 
or agencies to gather more detailed information specific to a given 
incident. Cyber-incidents involving a pending or potential 
investigation are jointly handled in a manner that preserves sensitive 
cyber-evidence without adverse impact to the affected agency's mission 
functions or violation of constitutional law and applicable privacy 
statutes.
    Effective incident analysis is a product of multiple source data 
collection efforts, collaboration to quantify related information, and 
determination of the potential for proliferation and damage. Over the 
past few years, a virtual network of partners has evolved. This virtual 
network includes FedCIRC, the NIPC, the National Security Agency's 
(NSA) National Security Incident Response Center (NSIRC), the 
Department of Defense's (DOD) Joint Taskforce for Computer Network 
Operations (JTF-CNO), industry, academia, and individual incident 
response components within Federal agencies. Though their missions vary 
in scope and responsibility, this virtual network enables the Federal 
government to capitalize on the individual technical strengths, each 
organization's strategic positioning within the national infrastructure 
and their access to a variety of information resources. Bridging the 
disparate boundaries has been a formidable challenge and although there 
is still work to be done in this area the commitment of the leadership 
in each organization is on the right path to build the framework for 
the fluid and cooperative exchange of information. The NIPC, NSIRC, 
JTF-CNO and FedCIRC are involved in a constant sharing of sensitive 
cyber-threat and incident data, correlating it with counter-terrorism 
and intelligence reports to develop strategic defenses, threat 
predictions and timely alerts. These efforts depend, not on any one 
participant, but on the unique and valuable contributions of each 
organization. The NIPC, because of its relationships with industry, is 
able to solicit additional participation when the government deals with 
complex analysis issues. This broader spectrum brings together some of 
the nation's best talent to work on known and developing threats to the 
cyber infrastructure.
    An excellent example of this collaboration is the Government's 
response to a very recent threat to the cyber infrastructure, know as 
the ``Leaves Worm''. This exercise clearly demonstrated how these 
collaborative relationships work and how each participant's 
contributions assist in assessing the damage potential. In June, the 
SANS Institute, a private sector organization, informed the NIPC of 
suspicious activities taking place in a large number of systems across 
the Internet. Widespread scanning was taking place to identify systems 
previously compromised by a relatively old trojan called ``SubSeven.'' 
Since SubSeven is for all intents and purposes a remote control 
program, once identified, the perpetrator could gain full control of 
the infected system. It was through the SubSeven trojan that the Leaves 
Worm was being deposited on large numbers of systems around the globe 
but it was being accomplished without direct intervention by the 
perpetrator. Clearly we had a new worm of unknown potential and a new 
delivery method not previously seen. The hacker community, typically 
vocal in Internet chat rooms about new attacks or malicious code, 
showed no evidence of any knowledge of the Leaves Worm. The NIPC, DOJ, 
NSA, FedCIRC, CIA, Department of State, DoD, NCS, NSC, academia, 
industry software vendors, anti-virus engineers and security 
professionals quickly activated a collaborative communication network 
to share details as they analyzed captured code from publicly available 
web sites that were being used to propagate the worm. It was primarily 
due to the NIPC's relationship with industry that the volumes of 
information collected could be rapidly decoded, analyzed and reverse 
engineered to provide the anti-virus vendors with critical information 
to develop detection methods for their respective products. This 
episode serves as an excellent example of the progress various 
government and private organizations have made in coming together to 
work toward the common goal of protecting the nation's critical 
infrastructure.
    The NIPC's responsibilities and relationships with various elements 
in the private sector, its activities as a member of the intelligence 
community and its lead role for counterterrorism contribute 
significantly to the FedCIRC's analytical ability by providing global 
threat information. Of significant value is the NIPC's ability to reach 
beyond governmental boundaries and draw on technical skills and 
information available from components in industry then share those 
resources with other members of the incident response community. The 
NIPC staff regularly communicates information to FedCIRC, which in many 
cases, provides deeper insight into developing situations and often can 
make the difference between thwarting an attack or tolerating the 
ensuing damage. Knowing the extent or pattern of incidents as they may 
impact the private sector, for example, may influence the development 
of an alert or advisory notice issued to government agencies.
    Critical Infrastructure Protection efforts and, more specifically, 
those for cyber-defense are a relatively new requirement in government 
and in the private sector. Only recently have these efforts been 
singled out as a priority for Federal agencies. As government direction 
for reporting the occurrence of incidents has been promulgated, 
attempts by agencies to develop related policies and procedures have 
sometimes been divergent because of differing individual interpretation 
and misunderstanding. FedCIRC and the NIPC are working diligently to 
jointly assess problem areas, more clearly define agency 
responsibilities for reporting incidents, and working with agencies to 
ensure they have the proper processes and procedures in place to 
respond to and prevent attacks on their information systems.
    The NIPC and FedCIRC routinely exchange information. This exchange 
is built upon a trust relationship and formalized with the detailing of 
FedCIRC staff personnel to the NIPC's Watch and Warning Unit. In 
addition alerts and advisories are frequently generated by the NIPC, 
NSIRC, or FedCIRC as a collaborative effort and represent a consensus 
when distributed to our constituents.
    As a further example, to simplify the incident reporting process, 
the NIPC, NSA and FedCIRC have begun efforts to create a single uniform 
report process that will be used across government. The process will 
employ common data elements that can be easily shared and integrated 
into the respective organization's database for shared or unique 
analysis efforts.
    Effective cyber defenses ideally prevent an incident from taking 
place. Any other approach is simply reactive. FedCIRC, the NIPC, the 
NSIRC, the Department of Defense and industry components realize that 
the best response is a preemptive and proactive approach. In order to 
implement such an approach, all resources must be focused on the common 
goal of securing the nation's critical infrastructures and the 
strengths of each organization must be relied upon in order to achieve 
the most effective results. FedCIRC, the NIPC, DOD, the NSIRC and 
others comprise a virtual team, each offering significant skills and 
contributions to the common defense.
                                Summary
    Madam Chairwoman, the information presented today highlights the 
high degree of cooperation among government agencies and the critical 
and effective relationship that exists between FedCIRC and the NIPC. 
Though all contribute individually to critical infrastructure 
protection, our strength in protecting information systems government-
wide lies in collaboration and coordination efforts. I trust that you 
will derive from my remarks an understanding of the cyber-threat and 
response issues and also an appreciation for the joint commitment to 
infrastructure protection of FedCIRC and the NIPC. We appreciate your 
leadership and that of the Committee for helping us achieve our goals 
and allowing us to share information that we feel is crucial to the 
defense of our technology resources.

    Chairperson Feinstein. Thanks very much, Ms. McDonald.
    Mr. Savage, of the Secret Service.

  STATEMENT OF JAMES A. SAVAGE, JR., DEPUTY SPECIAL AGENT IN 
    CHARGE, FINANCIAL CRIMES DIVISION, UNITED STATES SECRET 
                   SERVICE, WASHINGTON, D.C.

    Mr. Savage. Madam Chairman, Ranking Member Kyl, thank you 
for the opportunity to address the Subcommittee regarding the 
efforts of the Secret Service as they relate to the protection 
of our Nation's critical infrastructures. I have prepared a 
comprehensive statement which will be submitted for the record, 
and with the Subcommittee's permission I will summarize it at 
this time.
    I am particularly pleased to be here with my colleagues and 
partners in fighting cyber crime from the FBI, GSA, and the 
private sector. The Secret Service contributes to the 
protection of our Nation's critical infrastructures through its 
fight against cyber crime as part of our core mission to 
protect the integrity of this Nation's financial payment 
systems and the telecommunications backbone.
    Since our inception in 1865 with an initial mandate to 
suppress the counterfeiting of currency, modes and methods of 
payment have evolved and so has our mission. Computers and 
other chip devices are now the facilitators of criminal 
activity or the target of such. In this era of change, one 
constant that remains is our close working relationship with 
the banking and finance sector. We believe that protection of 
the banking and financial infrastructures is our core 
competency area.
    Madam Chairman, there is no shortage of information, 
testimony, or anecdotal evidence regarding the nature and 
variety of cyber-based threats to our banking and financial 
infrastructures. There is, however, a scarcity of information 
regarding successful models to combat this crime in today's 
high-tech environment. That is where the Secret Service can 
make a significant contribution to today's and future 
discussions of successful law enforcement efforts to combat 
cyber crime.
    The Secret Service has developed a highly effective formula 
for combatting high-tech crime, as demonstrated by our New York 
Electronic Crimes Task Force. This task force, hosted by the 
Secret Service, includes 50 different law enforcement agencies, 
over 100 private sector corporations and six different 
universities. The notion of these companies, these competitors, 
and 100 others sitting down at the same table to share 
information, knowledge and resources with both each other and 
with law enforcement is why we believe we have found a truly 
unique, innovative and effective formula for combatting cyber 
crime. The task force provides a collaborative crime-fighting 
environment which reflects our recognition that in today's 
high-tech electronic crime environment, out-of-the-box problems 
demand out-of-the-box solutions.
    How effective has this task force been? Since 1995, the New 
York Task Force has charged over 800 individuals with 
electronic crimes valued at more than $425 million. It has 
trained over 10,000 law enforcement personnel, prosecutors, and 
private industry representatives in the criminal abuses of 
technology and how to prevent them.
    Based on the enormous success of this task force, the 
Secret Service hopes to replicate the model and concepts 
developed by our New York field office in additional venues 
around the country in the very near future. The Secret Service 
believes there is value in sharing information from our 
investigations and the lessons we learn along the way with both 
those in the private sector and academia who are devoting 
substantial resources to protecting their networks and 
researching new solutions. Law enforcement must move from a 
reactive posture to a proactive or preventive posture by 
helping its customers to help themselves.
    The hallmark qualities of discretion and trust which we 
employ in the execution of our protective duties are also 
present in our investigative mission, where we enjoy quiet 
successes with our private sector partners. We have jointly 
resolved many significant cases with the help of our private 
sector counterparts, such as network intrusions and compromises 
of critical information systems.
    The Secret Service recognizes that its role in 
investigating computer-based attacks against the financial 
sector can be significant in the larger plan for the protection 
of our Nation's critical infrastructures. When we share helpful 
prevention strategies with a business seeking to protect 
itself, or arrest a criminal who has disrupted a sensitive 
communications network and are able to restore the normal 
operation of the host, be it a bank, telecommunications carrier 
or medical service provider, we believe we have made a 
significant contribution toward assuring the reliability of the 
critical systems that the public relies upon on a daily basis.
    The Secret Service is convinced that building trusted 
partnerships with the private sector, local law enforcement, 
and academia is the model for combatting electronic crimes in 
the information age.
    Madam Chairman, that concludes my prepared statement. I 
will be happy to answer any questions that you or the other 
members may have. Thank you.
    [The prepared statement of Mr. Savage follows:]

   Statement of James A. Savage, Jr., Deputy Special Agent in Charge-
                       Financial Crimes Division

    Madam Chairman, members of the subcommittee, thank you for the 
opportunity to address the subcommittee regarding federal law 
enforcement efforts in combating cyber crime to protect our nation's 
infrastructures, and particularly the efforts of the Secret Service in 
this regard. I am particularly pleased to be here with my colleagues 
and partners in fighting cyber crime from the Federal Bureau of 
Investigation and the General Services Administration.
    As you know, the Secret Service was created in 1865 to address the 
burgeoning problem of counterfeit currency. At that time, it was 
estimated that approximately one third of all currency in circulation 
was counterfeit and the government recognized the urgent need to 
address this issue in order to maintain the public's confidence in the 
U.S. currency. In effect, the Secret Service was engaged in an effort 
to protect a critical governmental function long before the popular 
notion of critical infrastructure protection emerged.
    Today, the Secret Service continues to suppress counterfeit 
currency as part of its traditional role but also now includes fighting 
cyber crime as part of our core mission to protect the integrity of 
this nation's financial payment systems. Over time, modes and methods 
of payment have evolved and so has our mission. Computers and other 
``chip'' devices are now the facilitators of criminal activity or the 
target of such. The perpetrators involved in the exploitation of such 
technology range from traditional fraud artists to violent criminals--
all of whom recognize new opportunities and anonymous methods to expand 
and diversify their criminal portfolio.
    In this era of change, one constant that remains is our close 
working relationship with the banking and finance sector. Our history 
of cooperation with the industry is a result of our unique 
responsibilities as a law enforcement bureau of the Department of the 
Treasury. We believe that protection of the banking and financial 
infrastructure is our ``core competency'' area.
    Madam Chairman, there is no shortage of information, testimony, or 
anecdotal evidence regarding the nature and variety of cyber-based 
threats to our banking and financial infrastructures and the need to 
create effective solutions. There is, however, a scarcity of 
information regarding successful models to combat such crime in today's 
high tech environment. That is where the Secret Service can make a 
significant contribution to today's and future discussions of 
successful law enforcement efforts to combat cyber crime which play an 
important role in critical infrastructure protection.
    The Secret Service has found a highly effective formula for 
combating high tech crime a formula that has been successfully 
developed by our New York Electronic Crimes Task Force. While the 
Secret Service leads this innovative effort, we do not control or 
dominate the participants and the investigative agenda of the task 
force. Rather, the task force provides a productive framework and 
collaborative crime-fighting environment in which the resources of its 
participants can be combined to effectively and efficiently make a 
significant impact on electronic crimes. Other law enforcement agencies 
bring additional criminal enforcement jurisdiction and resources to the 
task force while representatives from private industry, such as 
telecommunications providers, for instance, bring a wealth of technical 
expertise.
    Although based in New York City, the task force provides assistance 
and conducts investigations, which span the country and often lead 
overseas, harnessing disparate repositories of resources and expertise 
from the academic, private and government sectors. It is not uncommon 
for the New York Task Force to receive requests for assistance directly 
from foreign law enforcement representatives based upon its reputation 
for responsiveness and as a center of excellence. The result is a 
significant impact domestically, and occasionally abroad, as well.
    Within this New York model, established in 1995, there are 50 
different federal, state and local law enforcement agencies represented 
as well as prosecutors, academic leaders and over 100 different private 
sector corporations. The wealth of expertise and resources that reside 
in this task force coupled with unprecedented information sharing 
yields a highly mobile and responsive machine. In task force 
investigations, local law enforcement officers hold supervisory 
positions and representatives from other agencies regularly assume the 
role of lead investigator. These investigations encompass a wide range 
of computer-based criminal activity, involving e-commerce frauds, 
intellectual property violations, telecommunications fraud, and a wide 
variety of computer intrusion crimes, which affect a variety of 
infrastructures.
    Since 1995, the task force has charged over 800 individuals with 
electronic crimes valued at more than $425 million. It has trained over 
10,000 law enforcement personnel, prosecutors, and private industry 
representatives in the criminal abuses of technology and how to prevent 
them. We view the New York Electronic Crimes Task Force as the model 
for the partnership approach that we hope to employ in additional 
venues around the country in the very near future.
    An important component in our investigative response to cyber crime 
and critical infrastructure protection is the Electronic Crimes Special 
Agent Program (ECSAP). This program is comprised of approximately 175 
special agents who have received extensive training in forensic 
identification, preservation, and retrieval of electronically stored 
evidence. Special Agents entering the program receive specialized 
training in all areas of electronic crimes, with particular emphasis on 
computer intrusions and forensics. ECSAP agents are computer 
investigative specialists, qualified to conduct examinations on all 
types of electronic evidence, including computers, personal data 
assistants, telecommunications devices, electronic organizers, 
scanners, and other electronic paraphernalia. ECSAP agents understand 
that not only do they have an investigative role, and that they can 
also help protect components of our critical infrastructure by 
providing their substantive insights regarding potential 
vulnerabilities and exploits which the Secret Service discovers during 
an investigation.
    As a specific example, in early August we will be meeting with 
representatives of a major financial group, which is in the process of 
developing its own computer forensic capability to bolster its defenses 
against internal and external computer based frauds and attacks. We 
hope to share with this prominent corporation the lessons we have 
learned in establishing and maintaining our ECSAP computer forensics 
program as well as explore areas for joint endeavors in the future.
    The Secret Service ECSAP program relies on the 4 year-old, 
Treasury-wide Computer Investigative Specialist (CIS) initiative. All 
four Treasury law enforcement bureaus--the Internal Revenue Service, 
Bureau of Alcohol, Tobacco and Firearms, U.S. Customs Service, and the 
U.S. Secret Service--participate and receive training and equipment 
under this program.
    All four Treasury bureaus also jointly participate in curriculum 
development and review, equipment design and distribution of training 
assets. As a result, financial savings by all Treasury bureaus are 
realized due to economies of scale. Additionally, agents from different 
bureaus can work together in the field in an operational capacity due 
to the compatibility of the equipment and training. In the end, the 
criminal element suffers and the taxpayer benefits.
    The Secret Service works cooperatively with other federal law 
enforcement and Department of Defense agencies in this work, to include 
the FBI and NIPC. No single agency or entity can prevent cybercrime or 
protect the critical infrastructure alone, so Secret Service agents 
work collaboratively with their peers in the field to investigate 
crimes and overcome technical problems. I would further add, Madam 
Chairman, that due to the proliferation and complexity of cyber crime 
there is certainly no shortage of opportunity to collaborate with our 
other Federal partners in this regard.
    Because of the recognized expertise of those in ECSAP, other law 
enforcement agencies regularly request training from the Secret Service 
or advice concerning their own computer forensics programs. These 
requests have come from agencies all across the country, as well as 
foreign countries such as Italy and Thailand. The Secret Service 
recognizes the need to promote international cooperation and remains 
proactive in the dissemination of information to law enforcement 
agencies, both domestically and internationally, regarding program 
initiatives and current financial and electronic crimes trends.
    Madam Chairman, we are committed to working closely with our law 
enforcement counterparts worldwide in response to cyber crime threats 
to commerce and financial payment systems. This commitment is 
demonstrated by our effort to expand our overseas presence. We 
currently have 18 offices in foreign countries and a permanent 
assignment at Interpol, as well as several overseas initiatives, 
including a cyber crime task force in Indonesia. New offices have been 
opened recently in Frankfurt, Lagos, and Mexico City. The Secret 
Service is also considering opening new offices in Bucharest and New 
Dehli. Our expanded foreign presence increases our ability to become 
involved in foreign investigations that are of significant strategic 
interest.
    In addition to providing law enforcement with the necessary 
technical training and resources, a great deal more can be accomplished 
in fighting cyber crime if we are able to harness additional resources 
that exist from the private sector and academia. The Secret Service 
believes there is value in sharing information during the course of our 
investigations with both those in the private sector and academia who 
are devoting substantial resources to protecting their networks and 
researching new solutions. On occasion the Secret Service has shared 
case-specific information derived from our criminal investigations 
after taking appropriate steps to protect privacy concerns and ensure 
that there are no conflicts with prosecutorial issues. I would add that 
there are many opportunities for the law enforcement community to share 
information with our private sector counterparts without fear of 
compromise. The Secret Service recognizes the need for a ``paradigm 
shift'' with respect to this type of information sharing between law 
enforcement and our private sector and academic counterparts.
    Finally, law enforcement in general is not sufficiently equipped to 
train all those in need nor can it compete with academic institutions 
of higher learning in the area of research and development. However, 
our partnerships with industry and academia have demonstrated that this 
should be an integral part of the solution.
    Partnership concepts are an important tool and strategy in both 
government and private industry to achieve greater results and 
efficiencies. Unfortunately, however, partnerships cannot be 
legislated, regulated, or stipulated. Nor can partnerships be 
purchased, traded or incorporated. Partnerships are built between 
people and organizations that recognize the value in joint 
collaboration toward a common end. They are fragile entities, which 
need to be established and maintained by all participants and built 
upon a foundation of trust.
    The Secret Service, by virtue of the protective mission for which 
we are so well known, has always emphasized discretion and trust in 
executing our protective duties. We learned long ago that our agency 
needed the full support and confidence of local law enforcement and 
certain key elements of the private sector to create and maintain a 
successful and comprehensive security plan. Furthermore, we are also 
keenly aware that we need to maintain a trusted relationship with our 
protectees so that we can work with them and their staffs to maintain 
the delicate balance between security and personal privacy.
    This predisposition towards discretion and trust naturally 
permeates our investigative mission where we enjoy quiet successes with 
our private sector partners. We have successfully investigated many 
significant cases with the help of our private sector partners such as 
network intrusions and compromises of critical information or operating 
systems. In such cases, even though we have technical expertise that is 
second to none, we still rely on our private sector counterparts to 
collaborate with us in identifying and preserving critical evidence to 
solve the case and bring the perpetrator to justice. Equally important 
in such cases is conducting the investigation in a manner that avoids 
unnecessary disruption or adverse consequences to the victim or 
business. With the variety of operating platforms and proprietary 
operating systems in the private sector, we could not accomplish these 
objectives without the direct support of our private sector 
counterparts.
    I would like to highlight several significant cases that the Secret 
Service has investigated over the years where we have protected the 
U.S. financial and telecommunications systems.
    In 1986, the USSS identified and prosecuted the ``Legion of Doom'' 
hacker group for compromising the 911 system in the southeast United 
States.
    In 1989, the USSS, working with the FBI and other law enforcement 
entities, identified and prosecuted the ``Masters of Deception'' hacker 
group which had compromised several communications networks in the U.S. 
enabling the group to identify and reveal the details concerning on-
going law enforcement wiretaps.
    In 1994, the USSS conducted the first e-mail wiretap ever conducted 
on the Internet as part of a telecommunications fraud investigation.
    In 1997, the US-SS identified and arrested a hacker responsible for 
compromising a telephone network switch on the east coast, effectively 
disabling power and communications to the Worcester, MA. Airport. This 
resulted in the first prosecution of a juvenile for violation of 18 USC 
1030.
    In 1998, the USSS and its task force partners in New York, 
identified and arrested individuals who were illegally monitoring law 
enforcement Mobile Data Terminals.
    Madam Chairman, the USSS continues to remain engaged in these types 
of significant investigations, which not only involve notable financial 
losses, but also represent the exploitation of technical 
vulnerabilities in and amongst interconnected computer-based systems 
which support our critical infrastructures. Of particular note is that 
such cases necessarily require a close working relationship with the 
private sector victim to achieve success.
    In fact, in one recently completed complex investigation involving 
the compromise of a wireless communications carrier's network, our case 
agent actually specified in the affidavit of the federal search warrant 
that representatives of the victim business be allowed to accompany 
federal agents in the search of the target residence to provide 
technical assistance. This is unprecedented in the law enforcement 
arena and underscores the level of trust we enjoy with those we have 
built relationships with in the private sector. It is also indicative 
of the complexity of many of these investigations and serves to 
highlight the fact that we in law enforcement must work with private 
industry to be an effective crime fighting force. In approving this 
search warrant, the court recognized that in certain cases involving 
extraordinarily complex systems and networks, such additional technical 
expertise could be a critical, and sometimes imperative, component of 
our investigative efforts.
    I must point out, however, that such cases are usually not 
publicized without the express consent of the U.S. Attorney and the 
corporate victim because it would breach our confidential relationship 
and discourage the victims of electronic crimes from reporting such 
incidents.
    Four recently concluded investigations demonstrate the breadth of 
cases the Secret Service is working, and provide concrete evidence of 
the continuing success of ECSAP. The cases include the malicious 
shutdown of a medical service provider's communications system, an 
intrusion into a telecommunication provider's network, an attack on a 
private investment company's trading network, and the disruption of a 
financial institution's complete operating system and communications 
network.
    The first case was initiated on March 5, 2001, when a local Secret 
Service field office received information that a medical diagnostic 
service provider had suffered a catastrophic shutdown of its computer 
network and communications system. The company reported that they were 
unable to access doctor schedules, diagnostic images, patient 
information, and essential hospital records, which adversely affected 
their ability to provide care to patients and assist dependent medical 
facilities.
    Within a matter of hours, a Secret Service ECSAP agent was able to 
regain control of the network by coordinating with the facility's 
system administrator to temporarily shutdown and reconfigure the 
computer system. The ECSAP agent also essentially ``hacked'' into the 
compromised system, and modified compromised password files to ``lock 
out'' the attacker. This was accomplished while maintaining control of 
the computer system log files containing evidence of how the intrusion 
had occurred.
    Using this evidence, a federal search warrant was obtained for the 
residence of a former employee of the hospital, who had recently been 
terminated from his position as system administrator. Computer 
equipment was seized pursuant to the warrant, the suspect admitted to 
his involvement, and federal computer fraud charges are pending.
    A case with obvious critical infrastructure implications was 
initiated on February 20, 2001, when two major wireless 
telecommunications service providers notified the New York Electronic 
Crimes Task Force that they had identified two hackers in different 
remote sites who were attacking their systems. These hackers were 
manipulating the systems to obtain free long distance service, re-route 
numbers, add calling features, forward telephone numbers, and install 
software that would ensure their continued unauthorized access.
    The level of access obtained by the hackers was virtually 
unlimited, and had they chosen to do so, they could have shut down 
telephone service over a large geographic area, including ``911'' 
systems, as well as service to government installations and other 
critical infrastructure components.
    On March 20, 2001, the Secret Service simultaneously executed 
search warrants in New York City and Phoenix and computer equipment was 
seized at both locations. One suspect was arrested on federal computer 
fraud charges, while the other suspect was questioned and released 
pending a decision by the Department of Justice as to whether or not to 
pursue federal charges.
    The third case occurred from March 9, 2000, through March 14, 2000, 
when a company located in New York, NY, received several Internet-based 
``denial of service'' attacks on its servers. A ``denial of service'' 
attack occurs when a perpetrator launches malicious programs, 
information, codes, or commands to a target or victim computer which 
causes it to shut down, thereby denying access by legitimate customers 
to those computers. In this instance, the company was a prominent 
provider of electronic trading services on Wall Street.
    While the attacks were still occurring, the company's CEO contacted 
the Secret Service's New York Electronic Crimes Task Force. The CEO 
identified a former employee as a suspect, based upon the fact that the 
attacks preyed on vulnerabilities, which would only be known to the 
former employee. These attacks continued through March 13, 2000, when 
ECSAP agents and task force members identified the attacking computer 
and arrested the former employee for violating Title 18, USC, Section 
1030 (Computer Fraud). In a post-arrest statement, the suspect admitted 
that he was responsible for the denial of service attacks. As a result 
of the attacks, the company and its customers lost access to trading 
systems. Approximately $3.5 million was identified in lost trading 
fees, commissions, and liability as a result of the customers' 
inability to conduct any trading.
    The last case began just last month when a financial institution 
notified local police who in turn notified the local office of the 
Secret Service, that its entire banking and communications network had 
been shut down. The institution reported that it was severely crippled, 
as it had no access to electronic data used in support of its ATMs, 
banking transactions, employee payroll and all other critical 
functions. Working with the local police and the bank's technical 
staff, a former employee emerged as a suspect and electronic evidence 
was developed that strongly indicated his involvement. During an 
ensuing interview with agents and police, the suspect admitted to 
disabling the bank's system and ``hacking'' an unrelated database in 
his attempts to exact revenge upon the bank CEO. Federal charges are 
pending.
    Let me emphasize the Secret Service's mission in fighting cyber 
crime as it relates to the bigger picture of critical infrastructure 
protection. As previously stated, we target cyber crime as it may 
affect the integrity of our nation's financial payment and banking 
systems. As we all know, the banking and finance sector comprises a 
very critical infrastructure sector and one, which we have historically 
protected and will continue to protect. In this context, our efforts to 
combat cyber assaults, which target information, and communication 
systems, which support the financial sector, are parts of the larger 
and more comprehensive critical infrastructure protection scheme. The 
whole notion of infrastructure protection embodies an assurance and 
confidence in the delivery of critical functions and services that in 
today's world are increasingly interdependent and interconnected. To 
put this all in perspective, the public's confidence is lost if such 
delivery systems and services are unreliable, unavailable, or 
unpredictable regardless of the cause of the problem.
    We also recognize that our unique protective responsibilities, 
including our duties as the lead federal agency for coordinating 
security at National Special Security Events, demand heightened 
electronic security awareness and preparation. A well-placed cyber 
attack against a weak technology or support infrastructure system can 
render an otherwise sound physical security plan vulnerable and 
inadequate.
    To further advance our efforts in this regard, the Secret Service 
will soon commence a significant collaborative project with the 
Software Engineering Institute (SEI) at Carnegie Mellon University 
which has operated the Computer Emergency Response Team (CERT) 
Coordination Center since 1988. Jointly, the Secret Service and the SEI 
plan to combine expertise in developing strategies and programs to 
effectively address cyber threats, which may impact our protective and 
investigative missions.
    Madam Chairman, it should also be noted that all deliberate 
infrastructure attacks, before they rise to such a threshold, are also 
cyber crimes and are likely to be dealt with initially by law 
enforcement personnel, both federal and local, in the course of routine 
business. In fact, I don't believe there is universal agreement as to 
when a ``hack'' or network intrusion rises to the threshold of an 
infrastructure attack and corresponding national security event but we 
would all probably recognize one when it reached catastrophic 
proportions.
    Given this continuum and interplay between computer-based crimes 
and national security issues, the Secret Service recognizes that its 
role in investigating and helping to prevent computer-based attacks 
against the financial sector can be significant in the larger plan for 
the protection of our nation's critical infrastructures. When we arrest 
a criminal who has breached and disrupted a sensitive communications 
network and are able to restore the normal operation of the host--be it 
a bank, telecommunications carrier, or medical service provider--we 
believe we have made a significant contribution towards assuring the 
reliability of the critical systems that the public relies upon on a 
daily basis. But greater satisfaction and success are achieved when a 
potentially devastating incident is prevented due to our prior 
involvement, participation, or sharing of information.
    As a footnote, the Secret Service met recently with representatives 
of the Financial Services Information Sharing and Analysis Center (FS/
ISAC) that was created pursuant to Presidential Decision Directive 
(PDD) 63. The directive mandated the Department of the Treasury to work 
with members of the banking and finance sector to enhance the security 
of the sector's information systems and other infrastructures, a 
responsibility managed by Treasury's Assistant Secretary of Financial 
Institutions. The role of the FS/ISAC is to devise a way to share 
information within the financial services industry relating to cyber 
threats and vulnerabilities. The Secret Service feels that it can make 
a significant contribution to the work of the FS/ISAC and is exploring 
common areas of interest with the FS/ISAC, to include information 
sharing.
    The Secret Service continues to receive requests from local law 
enforcement agencies and others for assistance, and we welcome those 
requests. On an increasing basis, our local field offices and the 
Financial Crimes Division of the Secret Service receive desperate pleas 
from local police departments for physical assistance, training and 
equipment in the area of computer forensics and electronic crimes so 
that they can continue to provide a professional level of service and 
protection for their citizens. The Secret Service has become an 
important option for local law enforcement, the private sector and 
others to turn to when confronted with network intrusions and other 
sophisticated electronic crimes.
    Over the past 3 years, Secret Service ECSAP agents completed 2,122 
examinations on computer and telecommunications equipment. Although the 
Secret Service did not track the number of exams done for other law 
enforcement agencies during this period, it is estimated that some 10 
to 15 percent of these examinations fell in this category. Many of the 
examinations were conducted in support of other agencies' 
investigations such as those involving child pornography or homicide 
cases simply because the requesting agency did not have the resources 
to complete the examination itself.
    We do provide assistance on a regular basis to other departments, 
often sending ECSAP agents overnight to the requesting venue to perform 
computer related analyses or technical consultation. In fact, so 
critical was the need for even basic training in this regard that the 
Secret Service joined forces with the International Association of 
Chiefs of Police and the National Institute for Justice to create the 
``Best Practices Guide to Searching and Seizing Electronic Evidence'' 
which is designed for the line officer and detective alike. Madam 
Chairman, with your permission, I would like to submit a copy of this 
guide for the record.
    We have also worked with this group to produce the interactive, 
computer-based training program known as ``Forward Edge'' which takes 
the next step in training officers to conduct electronic crime 
investigations. Forward Edge incorporates virtual reality features as 
it presents three different investigative scenarios to the trainee. It 
also provides investigative options and technical support to develop 
the case. Copies of state computer crime laws for each of the fifty 
states as well as corresponding sample affidavits are also part of the 
two-CD training program and are immediately accessible for instant 
implementation.
    Thus far we have dispensed over 220,000 ``Best Practices Guides'' 
to local and federal law enforcement officers and we will soon 
distribute, free of charge, over 20,000 Forward Edge training CDs.
    In an additional effort to further enhance information sharing 
between the law enforcement community and the financial industry, the 
Secret Service recently created the ``E Library'' Internet website 
which serves as a mechanism for all members to post specific 
information, images and alerts relating to fictitious financial 
instruments, counterfeit checks, and credit card skimming devices. This 
website is accessible free of charge to all members of the law 
enforcement and banking communities and is the only such tool of its 
kind.
    In today's high tech criminal environment, the challenge to federal 
law enforcement and government is to identify existing repositories of 
expertise and provide a framework for inclusion and productive 
collaboration amongst the many government agencies and their respective 
industry and academic counterparts. The Secret Service is convinced 
that building trusted partnerships with the private sector and its 
Federal and local law enforcement partners is the model for combating 
electronic crimes in the information age.
    Madam Chairman, that concludes my prepared statement, and I would 
be happy to answer any questions that you or other members of the 
subcommittee may have.

                                

 Additional Statement of James A. Savage, Jr., Deputy Special Agent in 
    Charge, Financial Crimes Division, United States Secret Service

  Please provide a summary of the Secret Service's efforts to provide 
             training to other law enforcement agencies----
    Because of the increased importance of electronic evidence in all 
types of criminal investigations, the demand for timely examinations of 
seized electronic media by well-qualified computer investigative 
specialists has skyrocketed during the past few years. Many state and 
local law enforcement agencies do not have the necessary resources or 
expertise to fully develop their own computer forensic programs, and 
are having difficulty keeping up with requests for examinations from 
their own officers and investigators. Secret Service personnel in the 
Electronic Crimes Special Agent Program (ECSAP) have provided timely 
assistance to such agencies with respect to counterfeit, financial and 
electronic crimes investigations. However, providing ECSAP support in a 
timely manner is becoming increasingly challenging in light of the 
rapidly escalating number of requests.
    In an effort to assist state and local law enforcement agencies 
improve their own computer forensic capabilities, the Secret Service 
has recently sponsored the attendance of a limited number of state and 
local officers and investigators at the six-week Basic Computer 
Evidence and Recovery Training (BCERT) course. This training program is 
identical to the initial training provided to those in ECSAP. The 
Secret Service has also developed a two-week Basic Computer Forensics 
(BCF) course exclusively for state and local officers and investigators 
that will be taught by Secret Service ECSAP personnel and outside 
vendors. The first BCF course, which is being offered at no cost to the 
12 attendees, is scheduled for September 17-28, 2001.
    Other law enforcement agencies regularly request training from the 
Secret Service regarding financial and electronic crime trends and 
investigative methodologies, as well as advice concerning their own 
computer forensics programs. These requests have come from agencies all 
across the country, as well as from foreign countries in Asia and 
Europe. The Secret Service remains proactive in the dissemination of 
information to law enforcement agencies, both domestically and 
internationally, with respect to program initiatives and current trends 
and schemes through a variety of partnerships and initiatives.
    In conjunction with the International Association of Chiefs of 
Police (IACP), the Secret Service developed the ``Best Practices for 
Seizing Electronic Evidence Manual'', to assist law enforcement 
officers in recognizing, protecting, seizing and searching electronic 
devices in accordance with applicable statutes and policies. The demand 
for the ``Best Practices'' guide has been so great that the supply from 
each of the first four printings, totaling over 220,000 copies, was 
exhausted literally within days.
    As a follow-up to the ``Best Practices'' guide, the Secret Service 
and the IACP produced the interactive, computer-based training program 
known as ``Forward Edge'' which takes the next step in training 
officers to conduct electronic crime investigations. Forward Edge 
incorporates virtual reality features as it presents three different 
investigative scenarios to the trainee. It also provides investigative 
options and technical support to develop the case. Copies of state 
computer crime laws for each of the fifty states as well as 
corresponding sample affidavits are also part of the two-CD training 
program and are immediately accessible for instant implementation.
    In an additional effort to further enhance information sharing 
between the law enforcement community and the financial industry, the 
Secret Service recently created the ``eLibrary'' Internet website which 
serves as a mechanism for all members to post specific information, 
images and alerts relating to fictitious financial instruments, 
counterfeit checks, and credit card skimming devices. This website is 
accessible free of charge to all members of the law enforcement and 
banking communities and is the only such tool of its kind.
    In December of 2000, the Secret Service coordinated an Identity 
Theft Workshop in Washington, D.C. This workshop was designed for the 
criminal investigator and was attended by investigators from agencies 
throughout the nation. The workshop provided investigators with a 
detailed explanation of how identity theft can occur, as well as an 
explanation of what tools are available to investigators.
    In May of 2001, the Secret Service made an identity theft 
presentation to the IACP Advisory Committee for Police Investigation 
Operations. During this presentation, the Secret Service proposed the 
production of an identity theft video geared toward police officers 
throughout the nation. The purpose of this video will be to emphasize 
the need for police to document a citizen's complaint of identity 
theft, regardless of the location of the suspects (if any). In 
addition, the video and its companion reference card will provide 
officers with phone numbers that can assist victims. The Advisory 
Committee is supportive of this effort, and is considering providing 
funding for it, and pursuing it jointly with the Secret Service, as was 
done with the ``Best Practices'' initiative.
    To emphasize the philosophy that financial and electronic crimes 
investigations are routinely international in scope, and to demonstrate 
the commitment of the Secret Service to strengthening investigative 
efforts and liaison with foreign law enforcement entities, 
representatives of the Secret Service have participated in briefings 
and provided instruction to over twenty different foreign law 
enforcement groups both in Washington, D.C. and at overseas locations 
around the world. Highlights include:
    Developing the curriculum for a two-week specialized course titled 
``Combating Counterfeit and Financial Crimes in the New Millennium'' 
that was taught by Secret Service instructors at the Bangkok 
International Law Enforcement Academy to a class of more than thirty 
command-level law enforcement officials from ten different countries;
    Sending two different delegations to Rome, Italy, to give briefings 
to the Guardia di Finanza regarding electronic crimes initiatives and 
computer forensics issues, as well as hosting two visits by Italian 
delegations to the Secret Service Financial Crimes Division; and
    Having a Secret Service Special Agent spend two weeks in Bangkok, 
Thailand, working with law enforcement officials and industry 
representatives to address means of combating Thailand's rampant 
cellular telephone fraud, including correcting systemic weaknesses and 
developing cellular telephone tracking and mapping techniques.

    Chairperson Feinstein. Thanks very much.
    We will begin the questions, and I am going to ask you one, 
Mr. Savage, if I may. The Secret Service does not participate 
in the NIPC, right?
    Mr. Savage. That is correct, Madam Chairman.
    Chairperson Feinstein. And why is that?
    Mr. Savage. We don't participate in a formal setting at 
this time. We have, I believe, a very good and improving 
relationship with the NIPC at this time. Just last week, I was 
on the phone probably at least a dozen times personally with 
personnel with the NIPC. We collaborate on cases of interest. 
We are also participating with the NIPC and the FBI with 
respect to some of the e-commerce cases that were mentioned, 
and we are currently discussing the possibility for a future 
formalized return there.
    Chairperson Feinstein. All right, thank you.
    Mr. Dick, you might be interested. My Judiciary counsel, 
Matt Lamberti, told Senator Kyl and I a story on our way to the 
vote that I want to relay to you. He said this past weekend 
that his girlfriend received an e-mail on her computer from her 
uncle and there was an attachment. And, while the e-mail didn't 
seem right, she opened the attachment and there was a lot of 
irrelevant stuff on it. She then got another e-mail from the 
uncle that said don't open any attachments; an attachment with 
a virus just ruined my hard drive. So Matt Lamberti keyed into 
your service and, through the Internet, downloaded software 
onto her computer which prevented the virus from being 
effective.
    Mr. Dick. Thank you.
    Chairperson Feinstein. So that was an actual instance of 
progress.
    I wanted to ask you this question as well: Terrorist groups 
are increasingly using computers and the Internet to develop 
plans, to raise money, to spread propaganda, as well as to 
communicate. Hizbollah, Hamas, the Abu Nidal organization, and 
the Bin Laden organization all rely on computers, e-mail and 
encryption to support their activities. There are even reports 
that a group affiliated with the Tamil Tigers has attacked 
foreign government Web sites.
    What information can you share with us in this setting 
about cyber attacks by international terrorist organizations?
    Mr. Dick. Madam Chairwoman, everything you just described 
is very accurate insofar as the threat is concerned. Obviously, 
this is a high priority within the Center, within the FBI and 
the other Government agencies that we deal with, is the threat 
that would come from terrorist activity.
    We have been very fortunate insofar as we have not been 
able to identify any known terrorist organizations using cyber 
means to attack facilities here in the United States. Now, not 
for this environment but perhaps another one, we can talk about 
issues in other countries. But as I have said many times, the 
threat is real, the potential for its use is very high, in our 
belief, and we need to be very diligent with our partners to 
protect ourselves.
    Chairperson Feinstein. How many of the NIPC's closed cases 
involve threats or attacks on our Nation's critical 
infrastructures, and were these cases really a threat?
    Mr. Dick. You mean critical infrastructures in those that 
would be defined as vital to our economic well-being and 
national security?
    Chairperson Feinstein. Yes.
    Mr. Dick. I don't have those figures readily available to 
me. One of things you have to realize about the Internet, and I 
am sure you are well aware, is that whenever you have an 
intrusion, we conduct investigations, and we conduct 
investigations that use the law enforcement authorities that 
are available to us because we never know who is behind that 
keyboard until we arrive behind that keyboard. So every 
investigation that we open up, we look at it in the context 
that it could be some 15-year-old criminal, but it also could 
be some sort of state-sponsored activity.
    Chairperson Feinstein. Yes. We have actually had the 
classified briefing on some of this. I would like to ask you, 
though, in writing, if you could give us a listing of those 
cases that you believe really are a threat or were a threat.
    Do you happen to know, of the pending cases, how many 
involve threats or attacks to our critical infrastructures?
    Mr. Dick. I would be just taking a wild guess.
    Chairperson Feinstein. Can you give me just a percentage?
    Mr. Dick. Many of the cases obviously involve crimes for 
greed, but those that I would rank in national security concern 
are probably 10 percent.
    Chairperson Feinstein. Ten percent?
    Mr. Dick. I think of the level that you are probably 
referring to.
    Chairperson Feinstein. And can you give me the number you 
have of pending cases?
    Mr. Dick. Twelve hundred, but that is a guess.
    Chairperson Feinstein. So it is 10 percent of 1,200, OK.
    Do you happen to have the GAO report in front of you?
    Mr. Dick. Yes.
    Chairperson Feinstein. I would like to ask you in the 
Executive Summary to respond particularly to those 
recommendations that I mentioned earlier. Let's go to page 12, 
the three factors that the GAO points out have hindered your 
ability to develop strategic analytic capabilities: no 
generally accepted methodology for analyzing strategic cyber-
based threats, prolonged leadership vacancies, and lack of 
adequate staff expertise. I understand you have picked up on 
some of this, but I would like you to comment. You have been 
operating with only 13 of the 24 analysts that officials 
estimate are needed to develop analytical capabilities. Could 
you give us a progress report on those three things?
    Mr. Dick. Insofar as the GAO's report and its assessment of 
our strategic capabilities, I frankly am in concurrence with 
what they had said there. We do need improvement in that area. 
As was articulated in the report, part of the issues associated 
deal with the leadership of the Analysis and Warning Section 
which is primarily responsible for the production of that.
    Since GAO did its report, we have had a number of changes 
in that regard. No. 1, sitting behind me is Admiral Plehal, who 
is a two-star admiral from the United States Navy who has been 
detailed as my deputy to the Center to help in this regard 
insofar as developing a process by which to provide more 
strategic information to our partners.
    In addition, the CIA has named an SIS individual to head up 
the Analysis and Warning Section. He has been on duty, I think, 
approximately 2 months and is making great strides insofar as 
his assessment as to what we need to do to provide the kind of 
strategic analysis that we need to do in the future.
    We have just gone through the process of meeting with NSA 
and doing interviews of individuals who will head up our 
Analysis and Information-Sharing Unit. We have actually 
selected an individual and made a recommendation to NSA for the 
reporting of that individual.
    With the Department of Defense and our watch capabilities 
which is specifically designed for them in the Analysis and 
Warning Section, Admiral Plehal is working everyday trying to 
get a final commitment in that regard, which I believe we will. 
So I think that we are making great progress in that regard.
    In addition to the leadership positions within the 
Department of Defense, for example, Admiral Plehal has been 
working with them insofar as filling of certain vacancies over 
there that we have. Currently, we have about 18 detailees on 
board and we fully expect to reach maximum capability in that 
in the very near future.
    Chairperson Feinstein. Is that the 18 out of 24?
    Mr. Dick. We have always had a goal of 40. There has never 
been a chiseled-in-stone number, but the goal has always been 
40. We have never reached it. We have hovered around 20, 22. I 
would have to look, but I think it is around 18 or 20 that are 
there now, but the point being that because of Admiral Plehal 
and the leadership from the CIA, we now have a plan in place by 
which to fill those positions.
    Another point I would like to make is one of the things 
that we are trying to do from the Center is to have our 
partners believe that they own or have ownership in the Center. 
One of the things that we are doing is I have established 
regular meetings with seniors from the other agencies to 
discuss Center issues as to what kinds of products do they want 
to receive from us, what is it they expect from us to 
facilitate in the area defining what is the strategic analysis 
that you want to receive from us. Through that, they will 
discern how can they facilitate our efforts for the community 
at large to provide those products. So I have to be able to get 
them to feel they own the Center in some respect.
    Do you want me to go through all of them?
    Chairperson Feinstein. I think we would like to know what 
progress has been made, wherever you can do it.
    Mr. Dick. OK. Insofar as the issue concerning information 
and our abilities to data-mine and warehousing of data, we are 
in the process of completing that project. Obviously, data-
warehousing and data-mining is going to be a multi-year-funded 
issue; it just doesn't stop because of the inflow of 
information.
    But at this point in time, we are beginning to do data-
mining and receiving of information from our field offices that 
are called 801s, where they report incident information. That 
piece of the data-mining project is in final phases of 
completion where information can be shared in that regard.
    Insofar as the performance measures, we have sent our 
policy statements to our field offices to discern what kinds of 
information they are receiving insofar as computer intrusions 
are concerned, developed a statistical basis by which to claim 
those statistics so that we can track them, and I think that we 
are making progress in that regard.
    Insofar as the ELES, or Emergency Law Enforcement Section 
plan, as I mentioned in my statement that has been completed. 
But, again, that is going to be an ongoing process with the 
Emergency Law Enforcement Sector Forum to continue to implement 
these recommendations that occur out of it.
    Insofar as our formalized relationships with the ISACs, as 
I mentioned a moment ago and as mentioned earlier, we do have 
one formalized ISAC agreement with NERC. We are in the process 
of negotiating others, but just because we don't have a 
formalized process or MOU, if you will, with the financial 
services ISAC or the other two doesn't mean that we are not in 
the process of information-sharing, as I pointed out in the e-
commerce vulnerabilities, where we work fairly routinely with 
alerts and advisories and get their counsel in that regard.
    Insofar as information-sharing and exchange is concerned, 
we talked a little bit about that and I believe that in the not 
too distant future we will have agreements and understandings 
with each one of the ISACs. In fact, I have been talking very 
closely with Howard Schmidt, who is heading up the IT ISAC. 
Howard Schmidt is with Microsoft, and as soon as they formalize 
how they are going to operate there is a great willingness on 
their part to discern how we are going to share and receive 
information back and forth from them. We have those kinds of 
relationships with every one of the ISACs.
    Did I miss any?
    Chairperson Feinstein. If you just go to the bottom of page 
15, the recommendation that the FBI Director and the Attorney 
General ensure that you have access to computer and 
communications resources, monitor the implementation of new 
performance measures, and develop an emergency law enforcement 
plan. Has any of that taken place?
    Mr. Dick. The plan, as I have said, is complete. We turned 
it into the National Security Council and the White House March 
2 of this year, so that is completed.
    Insofar as the resource requests, obviously we are going 
through the various budgetary processes, and the administration 
obviously prioritizes those requests, but we have made such a 
request through the administration.
    As I mentioned a moment ago, we are monitoring the 
implementation of the new performance measures out there 
through our own field offices and getting reporting in that 
regard. But there is more that needs to be done.
    Chairperson Feinstein. One last question. It has come to 
our attention that President Bush is considering issuing an 
executive order reorganizing the administration's policy in 
combatting cyber crime. Some details have been in the press. 
What has been reported is that an advisory board with 
representatives from over 20 Federal agencies would coordinate 
administration efforts to combat cyber crime. The Chairman of 
that board would report to the National Security Adviser.
    What would be the NIPC's role if this is an accurately 
reported executive order and when do you think that executive 
order will be forthcoming?
    Mr. Dick. I as the Director of the Center have been 
involved with the administration, as well as heads of the other 
Government agencies, in the review of that executive order. I 
think it is the administration's intent in the creation of the 
board to raise the level within the public and private sector 
of information assurance such that information assurance is not 
just a collateral duty of the head of an agency or a CEO, but a 
primary duty and a priority for that head of the agency.
    Insofar as our involvement, in the last draft that I saw of 
the executive order the Director of the NIPC would actually be 
on the board and a participant on the board, and hopefully an 
active participant in that regard. So we are very supportive of 
what the administration is trying to do. Now, insofar as when 
the administration will issue it, it is out of my control.
    Chairperson Feinstein. Thanks very much, Mr. Dick and Mr. 
Savage.
    Senator Kyl?
    Senator Kyl. Thank you, Madam Chairman. Let me first note 
that Jim Savage was a detailee in my office for almost a year 
from the Secret Service and did an excellent job. I am an 
advocate of detailees partially because of the efforts of 
people like Jim Savage.
    I am a little concerned that we haven't helped to make it 
easier for detailees to be utilized better by NIPC. I 
understand one of the problems is a lack of reimbursement to 
the host agency or the gifting agency, or whatever you call it, 
and, second, that nobody has any expertise to spare. I ask any 
of you what we can do to help address that problem so that NIPC 
can get more high-quality detailees.
    And the second part of my question is specifically to Mr. 
Dick. One of the criticisms in the report was the under-
utilization of these detailees and I would like to have you 
respond to that.
    Mr. Dick. I can go first, I guess. I can't speak for the 
past; I can certainly speak for since I have been director and 
the time I have been in the Center. You can call Admiral Plehal 
up, but I don't know of any resources, particularly technical 
expertise, that is under-utilized within the Center.
    I have got people, as I have said in my written statement, 
that are very dedicated, hard-working people that are working 
12, 14 hours a day, weekends, particularly of late with the 
Leaves as well as Code Red viruses. They are giving it 110, 120 
percent.
    I am not sure where that came from in the past, but I 
assure you that isn't the case today. Frankly, one of the 
things we have been talking about is burn-out, and I know all 
of our agencies are in the same boat. We are stretching our 
resources as thin as they can be and we are going to need to do 
something about it.
    Senator Kyl. How can we get good, expert detailees from 
these other departments?
    Mr. Dick. That is a very good question. In my experience 
with the other agencies, it is not a matter of desire; it is a 
matter of having the ability to have someone fulfill the 
functions they are doing when they leave. Obviously, that is a 
resource and funding issue.
    Senator Kyl. It seems to me it is also a leadership issue, 
though. I can't think of anything more important than making 
this NIPC and the related aspects of it work properly. Each of 
the agencies involved have important functions, no question 
about it, but protecting the Nation against cyber crime and 
cyber terrorism and cyber attack has to rank right up there at 
the top. I mean, I don't know of anything more important than 
national security, for example.
    So any of you who have any suggestion about what we can do 
to provide the leadership--I mean, do we have to have the 
President or the Vice President put out a notice and say, look, 
guys, I am going to be checking back, this is my priority, make 
somebody available? I mean, is that what it is going to take?
    Ms. McDonald. Sir, if I may, the General Services 
Administration has had somebody at the NIPC since its inception 
to address the concern that was brought out by GAO that perhaps 
maybe some of the detailees were not tasked as well as they 
should. I know that in our case we had sent an individual over 
as a liaison, and partly it was an error on our part. We didn't 
have the individual actually working in one of the units; he 
was more working in a liaison capacity. He wasn't involved in 
the work. Since then, we have amended that work arrangement and 
it is working much better.
    As far as additional resources for the NIPC, the entire 
Government has a very difficult situation because we cannot 
attract qualified people in this arena. So an agency that gets 
somebody who is qualified in the security arena is very 
reluctant to let that person go, so it is a larger issue than 
the NIPC. Reimbursement would assist, but that is not the 
entire answer.
    Senator Kyl. I am sure that is the case. Everybody we talk 
to needs qualified people. I had a question for Mr. Savage in 
this regard.
    At least I am informed that the Secret Service has a very 
good program to train agents as computer investigative 
specialists. It has been very successful. If that is true, what 
suggestions would you have for other agencies to train the 
number of people that are needed here?
    Mr. Savage. Senator, I would like to thank you for your 
previous kind comments on my behalf and I would like to respond 
to your question. The Secret Service does have what we believe 
to be a very good program. As a matter of fact, we partner with 
other three Treasury agencies in that regard. We have trained 
approximately 50 agents this year in that respect.
    We have actually been approached not only by State and 
local officers, whom we believe are an important part of this 
effort, but we have also been approached by other smaller 
Federal agencies as to how they might be able to start programs 
of a similar nature. What we have done is shared with them our 
past trials and tribulations and what has worked for us and 
what has not.
    What we are seeing on other Federal agencies is exactly 
what we have seen, and that is the issue of cyber crime and 
computer forensics completely transcends all portions of the 
operations and other aspects of other agencies, even if they 
are not involved in the law enforcement effort. So what we have 
tried to do is impart that past knowledge that we have learned.
    Senator Kyl. So, within limits, you would be willing to 
help others if they come to you and need a little expertise in 
getting a training program underway?
    Mr. Savage. Absolutely, Senator. As a matter of fact, the 
private sector, as well, seeks our input and we are more than 
happy to accommodate. We feel as public servants that is part 
of what we can do.
    Senator Kyl. Well, maybe one of the things we need to 
address is what we can do on a broader scale to make sure that 
we have the personnel available here.
    What is holding up the formal agreements with the other 
ISACs? Is there anything generic? This has been going on quite 
a long time now. What is taking so long? Is it just a matter of 
filling in some blanks here or is there some generic problem, 
especially one that we might help to address?
    Mr. Dick. From my standpoint, I don't know that there is 
one specific issue or problem because information-sharing comes 
down to one simple word; it comes down to ``trust.'' Trust is 
one of those things that is not legislated. You can't mandate 
it. It takes time and experience dealing with each other for 
that to evolve.
    For example, with NERC, we have had a long history with the 
electrical power sector in working together from a physical 
infrastructure standpoint. There has been a lot of trust that 
has built up not only with us in Government, but with the other 
partners in the electrical power sector, because they have to 
share information and share the power grid, and so forth. So 
the trust was built-in in that area.
    Financial services is a different arena. It is very 
competitive. I think what we are experiencing in this regard, 
in my opinion, is that through dealing with each other, through 
sharing information, through seeing that we can work together 
to the benefit of each other, more and more information is 
flowing. Through that trust building up, we will come to the 
resolution of agreements.
    It doesn't mean that information isn't flowing because 
there is not an agreement there, because it is. The volume of 
the information that is flowing is the key, and that is 
dependent upon the trust over time.
    Senator Kyl. Well, are there specific problems that 
industry has raised? For example, from time to time we hear 
concerns expressed about the antitrust laws potentially 
presenting a problem of industry folks getting together to talk 
about certain things, the FOIA problem that I mentioned before 
about providing information that then could be subject to 
mandatory release.
    I am also specifically interested, Mr. Dacey, in anything 
you picked up during the investigation that might help us 
determine whether there is something we can do to facilitate 
this trust.
    Mr. Dick. We are absolutely supportive of legislation that 
would encourage the private sector to voluntarily provide the 
Government, not just the NIPC, but the Government with more 
critical infrastructure information. There has been concern, as 
you rightly pointed out, and the Chair and you, as well as 
Senator Bennett, have worked, I think, very hard in trying to 
clarify the Freedom of Information Act so that the private 
sector would be encouraged to provide this information. I think 
if that provides the assurances to the private sector and the 
safeguards that they seek, then we should pursue that.
    Senator Kyl. Mr. Dacey, any other comments?
    Mr. Dacey. Basically, I have similar comments. I think 
anything that could be done to encourage the sharing of that 
information would be productive and those areas ought to be 
investigated for possible changes. I know you had the interest 
and Senator Bennett, as well as the House last year had a bill 
that they were discussing in this area.
    Senator Kyl. Well, there are a couple of other questions I 
might submit to you for the record and I would like to ask you 
to take under advisement the last two questions, really the 
question about are there endemic problems here that we could 
help address with these agreements, and, second, are there any 
other ways that we can help to train personnel. Any thoughts 
you have in that regard, I would like to have you communicate 
them to us.
    We have another panel, so I am going to just ask one final 
question, and that is the question about the NIPC's authority. 
Do you think that by now it is clear? Do you think it needs to 
be clarified, Mr. Dacey? And any particular comments, Mr. Dick, 
that you would have about the authority?
    Mr. Dacey. When we did our review, we got some conflicting 
views about what the roles and responsibilities of NIPC were 
based on PDD-63, and we put in our report a discussion of that, 
ranging from the national coordinator to others.
    I think it is important that that role be clarified so that 
everybody understands whose responsibility it is for critical 
infrastructure. We have already got a number of entities 
involved in critical infrastructure, many of which have been 
named today. So I think it is just important that that role be 
clarified.
    In terms of clarification, we have heard that the 
discussions with this executive order and discussions with the 
new national plan may address some of those issues. At this 
point, though, we really haven't seen anything specific that 
addresses those issues.
    Senator Kyl. Well, I think Senator Feinstein mentioned that 
and perhaps we can also make an inquiry and ensure that if 
there is further work done in this regard by the administration 
that that is one of the things that it addresses.
    There is much more to go into, Madam Chairman. I think what 
I will do is just submit a couple of questions for the 
panelists for the record and pass it back to you.
    Chairperson Feinstein. Thanks very much.
    Both Senator Kyl and I are very concerned with combatting 
terrorism. We are also members of the Intelligence Committee. 
We are aware that our efforts in this area are spread over some 
41 different departments.
    I would like to ask you, Mr. Dick, to arrange for us 
another classified briefing on terrorist cyber threats. I can't 
remember when we had the last one. Was it 2 years ago? But I 
think we need to get updated on some of those groups that are 
known and operating in the area.
    You mentioned Senator Kyl and Senator Bennett's 
legislation. How do you believe we can better handle the 
Freedom of Information Act issue with private companies, just 
straight exempting them from FOIA in this situation, or do you 
have other recommendations?
    Mr. Dick. Again, based upon my experience before I came 
into this job with the financial sector, there were safe 
harbors when the suspicious activity reporting was developed 
many years ago in the banking and finance area which provided 
the banking and finance sectors some safe harbor regarding the 
protection of that information and providing it. Perhaps that 
is a model that could be used, but there is greater expertise 
up on this Hill than I have in that regard.
    All I know is we believe that we have sufficient 
authorities to protect it. The private sector is not 
comfortable with it and we need to do something to make them 
feel comfortable because it is not a matter of they don't want 
to provide it; they just don't feel comfortable providing it.
    Chairperson Feinstein. So you are saying create a safe 
harbor that if you report this kind of information, you are not 
subject to FOIA?
    Mr. Dick. Right, because we believe we have that ability 
now, but some in the private sector do not.
    Chairperson Feinstein. Do you have any thoughts on whether 
the FBI would need an administrative subpoena power?
    Mr. Dick. I have several thoughts on issues regarding the 
legislation, if you would care for me to talk about a couple of 
them.
    Chairperson Feinstein. Please.
    Mr. Dick. One of them deals with Title 18 United States 
Code Section 1030. It defines that if an individual intrudes 
into a system and basically takes it over, we have to be able 
to demonstrate that there was at least $5,000 in damage done to 
that computer before there is a Federal crime. That sometimes 
is problematic to us, particularly in the early stages of an 
investigation when you have had somebody who has intruded into 
it.
    We believe that that might be more appropriately considered 
in determining penalties insofar as the damage is concerned. 
For example, the virus that are spreading out there now that 
come into your system, look at your address book and then re-e-
mail them--the damages associated with that to individual 
computers are probably not going to reach that threshold. 
However, the totality of the damage that is done across the 
network will be substantial.
    One of the other issues that we think needs to be looked at 
is pen trap and trace under Title 18 United States Code Section 
3122. The language used in that statute is probably--how do I 
phrase this--technologically outdated and needs to be looked at 
insofar as the Internet is concerned.
    It would be also beneficial for the courts if they could 
issue a nationwide order. One of the things that we continually 
run into is that there are different hop sites across the 
United States, as well as the world, and every time we go into 
a different judicial jurisdiction we have to go in and get 
another order or another pen trap and trace, or whatever, and 
it takes time. And as you well know, on the Internet things 
don't happen in minutes; they happen in nanoseconds.
    Fourth, I think a significant point is in a number of 
agencies there is a need to review Title III to determine 
whether it needs clarification, and a clarification, for 
example, in Title 18 United States Code 2517. We may need to 
clarify to allow for quick sharing--I say quick sharing--from 
law enforcement to the intelligence community of information 
obtained in a criminal case under Title III that turns out to 
demonstrate an actual or potential act against the U.S. by a 
foreign power or agent of a foreign power.
    So there are some legislative issues that I think could be 
looked at.
    Chairperson Feinstein. If you would be willing to make some 
recommendations to us in writing, I would appreciate that very 
much.
    Mr. Dick. OK.
    Chairperson Feinstein. Senator Cleland, you wish to speak 
on the second panel, is that correct?
    Senator Cleland. At your wish, Madam Chairman, I have a 
distinguished panelist to present.
    Chairperson Feinstein. For the second panel?
    Senator Cleland. Yes, ma'am.
    Chairperson Feinstein. That is correct.
    I think we are finished, unless you have additional 
questions.
    Senator Kyl. No. That is fine.
    Chairperson Feinstein. Let me thank this panel very, very 
much. We appreciate it. Thank you.
    The second panel, if you would come forward, is Mr. Michehl 
Gent, the President of the North American Electric Reliability 
Council, and Mr. Chris Klaus, founder and chief technological 
officer of Internet Security Systems.
    We have a surprise introducer in the form of the 
distinguished Senator from Georgia, Senator Cleland, and we are 
delighted to welcome you to our Subcommittee.

STATEMENT OF HON. MAX CLELAND, A U.S. SENATOR FROM THE STATE OF 
                            GEORGIA

    Senator Cleland. Thank you, Madam Chairman. It is a 
pleasure today to be with you and this distinguished panel to 
discuss the important topic of computer security.
    Hackers and cyber thieves are presenting an ever-growing 
threat to technology infrastructure as we know it. Recent 
experiences like the Melissa and I Love You computer viruses 
remind us how vulnerable we really are to the crippling attacks 
of an individual or group with access to the technology to 
disable individual computers or entire networks.
    I am particularly pleased this afternoon to introduce Mr. 
Christopher Klaus, founder and chief technology officer of 
Internet Security Systems, Incorporated, in Atlanta. Mr. Klaus, 
a graduate of the Georgia Institute of Technology, will provide 
you with some valuable background information and 
recommendations regarding the computer security threat.
    Chris Klaus is regarded as one of the world's foremost 
security experts. In 1991, he became interested in Government 
security while interning at the Department of Energy. Chris 
then began working on a ground-breaking technology that 
actively identified and fixed computer security weaknesses.
    The next year, while attending Georgia Tech, Chris released 
his product for free on the Internet. He soon learned the error 
of his ways. He received thousands of requests for his 
invention and decided he should sell it, in the great tradition 
of Thomas Edison. In 1992, he formed Internet Security Systems 
and developed the company's first software program and flagship 
product, Internet Scanner.
    He has been the topic of numerous stories and has been 
quoted in such publications as the Wall Street Journal, Forbes, 
and CNN. He continues to represent ISS as a spokesperson at 
technology events, and provides high-level security 
consultation to a number of government organizations and 
Fortune 500 companies throughout the United States and abroad.
    He was honored in MIT's magazine, Innovation Technology 
Review, as one of the top 100 young innovators for 1999. In 
addition, he received the award for Ernst and Young's 
Entrepreneur of the Year in 1999 in the category of internet 
products and services. He was the youngest person on the 1999 
Forbes 100 high-tech wealthiest list, and his recent $15 
million gift to Georgia Tech made him the youngest 
philanthropist to give a donation of this amount.
    We will see you after the meeting.
    [Laughter.]
    Senator Cleland. Chris' company, Internet Security Systems, 
is the worldwide leader in security management software. 
Internet Security Systems employs nearly 1,500 employees in 20 
countries focused exclusively on computer security. The company 
serves more than 8,000 customers, including 68 percent of the 
Fortune 500, 21 of the 25 largest U.S. commercial banks, the 10 
largest telecommunications companies, numerous U.S. Government 
agencies, and other non-U.S. Governments. Former Senator Sam 
Nunn, my predecessor, currently sits on the board of ISS.
    Madam Chairman and members of the committee, I am delighted 
to present Mr. Christopher Klaus.
    Chairperson Feinstein. Thank you very much, Senator 
Cleland.
    Mr. Klaus, after that introduction, we expect you to solve 
all the problems, and also add some spice to the hearing, being 
so young as well.
    [Laughter.]
    Chairperson Feinstein. So, Mr. Gent, if you don't mind, we 
will begin with Mr. Klaus.
    Senator, thank you very much for coming by and introducing 
him.
    Senator Cleland. Thank you.

STATEMENT OF CHRIS KLAUS, FOUNDER AND CHIEF TECHNOLOGY OFFICER, 
          INTERNET SECURITY SYSTEMS, ATLANTA, GEORGIA

    Mr. Klaus. Thank you, Senator Cleland, and thank you for 
the opportunity, Madam Chairwoman and Senator Kyl, for allowing 
me to present today. I am here representing Internet Security 
Systems, as well as the ITAA, to talk about the background of 
security threats.
    Many of the companies who are out there who are fighting 
the threat rely on both our technology that we pioneered as 
well as our managed services, where we are providing service on 
behalf of the companies or Government agencies.
    I have prepared a demonstration or anatomy of an attack, 
just a high-level attack. Really, it is going to be broken 
into----
    Chairperson Feinstein. Let me just thank you. It is very 
thoughtful of you to make it two-sided--most people do not do 
that--so that the people who are attending the hearing can also 
see it. So thank you very much.
    Mr. Klaus. Thank you.
    There is an attack happening right now called Code Red 
worm, and there was a little bit of a mention, but I thought it 
might be useful to describe in detail kind of how it works and 
what the effects are. I think right now Code Red is a good 
example of an effective worm that, with minor tweaking, could 
be a lot more dangerous in terms of what it is doing. But let 
me talk about some of the details here.
    We will start with a denial of service attack. A lot of 
people in the security industry know denial of service attacks 
as a way to break down or stop a company from interacting with 
the Internet. The way it works is a lot of these computers are 
set up connected to the Internet and they are typically 
accessing it through some kind of pipe, what you would call 
bandwidth, through their Internet service provider.
    What an attacker would do is flood the computers or flood 
that pump with a bunch of garbage data, and if the hacker's 
computer can generate enough traffic and his pipe is bigger 
than the pipe of the victim, they can over-flood it. It is kind 
of like a toilet system where you put too much toilet paper in 
there and it floods up and puts it out of commission. Well, 
that is what the attacker is doing here.
    The thing about this is a single computer probably doesn't 
have enough pipe in terms of bandwidth or enough toilet paper 
to clog up a large company's network. So what the intruders 
have done is come up with another method they call distributed 
denial of service of attack, and the way it works is basically 
there are thousands of computers out there that are vulnerable 
at universities, companies, government agencies.
    What the hacker would do is we have a data base we have 
been collecting of vulnerabilities. We have close to 10,000 
different vulnerabilities that we have catalogued and 
classified, and basically they affect every more operating 
system, from Microsoft, to Sun, HP, IBM. What the attackers do 
is they break into all these systems and they implant what we 
call a zombie client. It is a program that sits on the system.
    From there, what they can do is once they have compromised, 
say, 100 machines, they can have all those machines 
simultaneously trying to flood somebody's network. So even a 
huge company with a large bandwidth or a large pipe, even an 
attacker that was trying to flood them probably would be more 
of an annoyance. But when you have over 100 companies all with 
these zombie clients all over the Internet simultaneously in 
parallel with the aggregate effect of this flooding happening, 
it can pretty much take out any computer on the Internet. We 
saw that last year with Yahoo and eBay and those companies, and 
that was with, I think, small fire power at that time.
    Well, there is now a new attack we call Code Red worm, and 
the way it works is very similar. The Code Red worm was 
released at the beginning of July and what it does is it 
compromises, just like an attacker would, a set of machines 
using a known vulnerability. It actually attacks IIS Web 
servers.
    The difference between this and an attacker is that because 
it is a worm and it is automated, it is much faster at finding 
systems that are vulnerable. Once it finds a system that is 
vulnerable, it puts itself on that system as a host and then 
from there that machine is then being used to propagate itself, 
so it rapidly geometrically grows. Today, there are over 300 
machines infected with this worm because they haven't been 
patched for various vulnerabilities.
    What happened was there was some analysis done saying, OK, 
on July 20 it would flood whitehouse.gov. Fortunately, the 
attacker hard-coded the IP address of whitehouse. gov, so the 
White House staff was able to change the IP address so that 
when the flood did come, it was going to the wrong address. The 
scary thing is it is very easy within the program to change 
that to any IP address or pick multiple targets in the future.
    What we believe is the worm is actually stopped right now 
and it is flooding. After 7 days, at the end of the end of the 
month, it will then begin propagating again and it will 
continue. What we are seeing today, though, is----
    Chairperson Feinstein. Is that automatic?
    Mr. Klaus. It is automatic. It is written into the 
software. It switches from propagation mode to flooding mode, 
back to propagation mode.
    What we are starting to see is variations of this virus--
well, it is not really a virus, it is a worm, in that most 
viruses rely on you getting an e-mail and you clicking on it 
and, oops, I ran the attachment. Well, what is dangerous about 
this is that it doesn't require a person to sit there and click 
on the file. If the machine is vulnerable, it is going to 
infect it and take it over.
    Right now, the analysis looks like it is sleeping until the 
beginning of August and then it will start again. We have 
already seen where people have done analysis saying, hey, there 
are some flaws in this worm. And now there are updated versions 
of the worm as people are improving it to be more effective.
    So, that is basically one of the major threats out there 
and it is very effective just because it has hit hundreds of 
companies. I think, on average, it has scanned every Web site 
out there at least 20 times already. I saw that CNN and the 
Pentagon and a bunch of other places were infected by this 
worm. I think ultimately we need to have a program for stopping 
these worms.
    The good thing is, technology-wise, we can solve this. It 
is just more of a resource and priority of saying we need to 
put burglar alarms on these systems and we need to put a fixed 
vulnerability process in place. We knew about this issue long 
before this worm emerged. It is just a matter of putting in the 
right processes to fix those.
    Chairperson Feinstein. Can I just quickly ask you one 
question? Can you backtrack to get to the perpetrators?
    Mr. Klaus. It is difficult because, for example, even if 
you track it back to somebody, if the person is doing it 
outside the U.S. typically there are no laws against it. So it 
is very hard to enforce it.
    The I Love You virus--a guy wrote it in the Philippines and 
got caught and was let go the next day because there were no 
laws against it. So because it is an international issue, most 
of the time we recommend to our clients you just protect 
yourself and make sure you are not liable for getting infected 
with the Red worm or perpetrating the Red worm because you are 
infected. Maybe from there, somebody else could attack from 
your network because of that.
    In most cases, you can track back pretty close to where it 
was coming from, but one of the other issues that is a trend--
we were just at Defcon. We have an X Force research team, about 
200 researchers, and they stay on top of all the threats. At 
the Defcon hacker conference, which is based in Las Vegas, 
there were about 5,000 hackers and one of the themes was 
wireless technology.
    It used to be that you could track somebody back because 
they dialed in to their ISP or their Internet service provider 
and you could look up the caller I.D. information and find out 
whether they are dialing in and go back to their house. With 
wireless technology, it has no security, or very little 
security by most implementations.
    We are starting to see that a lot of the hackers are moving 
to that because there is no logging. So when someone breaks 
into a network through wireless, from there they can use that 
to spring-board in to attack any network they want. And the 
issue is when you go back to the logs, there are no logs other 
than the host company that was used to spring-board. I think 
that is going to be a huge issue to track some of the attackers 
that are out there.
    So this is at a high level, what we are seeing with some of 
the threats that are appearing. The good thing, like I said, is 
there are methods to actually reducing the risk, I think, 
through the burglar alarm systems. We asked recently 100 
companies how many of them do a monitoring of their network on 
a 24-by-7 basis. It was 100 CIOs of a Fortune 1,000 group of 
companies, and 2 people raised their hands that they actually 
monitor. Most of them don't. We do it today in the physical 
world with ADT, monitoring people's houses, homes, and 
businesses. We haven't quite gotten there with cyber security.
    I don't know if there are any other questions on the Code 
Red worm.
    Chairperson Feinstein. If you could conclude so that we can 
hear Mr. Gent, I know Senator Kyl has to leave shortly and I 
want him to have a chance to ask some questions.
    Mr. Klaus. In regard to the NIPC, just a couple of closing 
comments in regard to that. We have been working with them. 
They have been doing a good job within the resources they have. 
One of the suggestions for improvement is to explore ways to 
speed up the process of getting the information and releases 
out to the industry.
    I think information-sharing is key in the security 
industry. When I started in this, nobody wanted to talk about 
the security issues. It is starting to evolve. Companies are 
still reluctant to share sensitive information. I think that is 
an area we need to foster. We are very supportive of Senator 
Bennett and Senator Kyl's bill in regard to the FOIA and 
helping companies feel more comfortable in sharing the 
information.
    Most companies that we talk to would prefer not to tell 
anybody about their hacks. We get called in all the time where 
they have been broken into and they say it is cheaper to fire 
the person or not deal with it than have it go on in the public 
and ruin the brand or stock price and all that. So we would 
recommend that.
    Also, we are very positive on the ISACs. I think it is slow 
to change the culture and the mind set of a lot of these 
security professionals, but we are starting to see a lot of 
shift and change there. A few years ago, financial institutions 
and others of our customers were saying we don't want to share 
any of this information. Today, they are starting to say, you 
know what, let's get together and share best practices. That is 
actually a good thing we are seeing out in the industry.
    So with that, I would like to conclude.
    [The prepared statement of Mr. Klaus follows:]

    Statement of Chris Klaus, Founder and Chief Technology Officer, 
              Internet Security Systems, Atlanta, Georgia

                            I. Introduction
    I'm here today representing my company, Internet Security Systems, 
and also ITAA (the Information Technology Association of America) to 
provide you with some background information and recommendations 
regarding the computer security threat. Every day, Internet Security 
Systems stops criminal hackers and cyberthieves by addressing 
vulnerabilities in computers. These individuals use the Internet for 
business-to-business warfare, for international cyber-terrorism, or to 
cause havoc and mayhem in our technology infrastructure. Internet 
Security Systems is involved in every aspect of computer security, 
whether in making the security products or in managing them. We also 
monitor networks and systems around the clock (24 x 7 x 365) from the 
US, Japan, South America, and Europe in our Security Operations 
Centers. We search for attacks and misuse, identify and prioritize 
security risks, and generate reports explaining the security risks and 
what can be done to fix them. At the heart of our solution is our team 
of world-class security experts focused on uncovering and protecting 
against the latest threats. This team of 200 global specialists, dubbed 
the X-Force, understands exactly how to transform the complex technical 
challenges into an effective, practical, and affordable strategy. 
Because of all of these capabilities, companies and governments turn to 
us as their trusted computer security advisor.
    ITAA represents over 500 corporate member companies in the U.S., 
companies that build IT solutions for customers in industry and 
government. ITAA is a national leadership organization in the InfoSec 
area.
    Over the years, I have watched computer vulnerabilities increase 
dramatically. The Internet is so useful for the very reasons that it is 
so vulnerable. To give you an idea of what we are dealing with, I'd 
like to share an analogy. I'll compare a computer to a house. Every 
computer connected to the Internet has the equivalent of 65,536 doors 
and windows which need to be locked and monitored to make sure no one 
breaks in. Multiply 65,536 by every computer in every company or 
household and you begin to see the extent of the problem. Just as 
physical security companies like ADT monitor your physical doors and 
windows, computer security companies must lock and monitor the doors 
and windows of computers.
                II. Example of denial-of-service attack
    A denial-of-service attack, or ``DoS'', is a specific type of 
attack on a network that is designed to bring the network to its knees. 
A DoS causes a network to have zero accessibility by flooding it with 
useless Internet traffic and requests. Many DoS attacks exploit 
limitations in the network. During a distributed DoS attack, a hacker 
actually takes over multiple computers with a ``zombie'' program and 
then, from a remote location, sets them to launch an attack all at 
once. This attack makes it nearly impossible to trace the hacker since 
the attacks appear to have come from the infected computers - which 
could be anywhere, such as universities, the Federal Government, 
businesses, or your home. For all known DoS attacks, there are software 
fixes that system administrators can install to limit the damage caused 
by the attacks. But, like viruses, new DoS attacks are constantly being 
created by hackers. Last week's well-publicized Code Red email worm is 
an example of how a new DoS attack can be launched.
    Code Red was designed to launch a DoS attack that would effectively 
shut down the White House's Web site last Thursday evening. Code Red 
took advantage of systems running commonly used,software. Due to Code 
Red, more than 200,000 servers were infected to act as ``zombies'' that 
would wake up and flood the White House Web site with DoS traffic in 
order to force the site to shut down.
    The White House was fortunate and acted in time--in cooperation 
with industry--to side-step this attack, but Code Red has forced 
network and system administrators to spend hours installing and testing 
a patch for the infected servers. And some servers may remain infected, 
setting the stage for possible future attacks.
                          III. NIPC Discussion
    I'm here to represent industry's viewpoint on the General 
Accounting Office (GAO) report entitled ``Critical Infrastructure 
Protection: Significant Challenges in Developing National 
Capabilities''. As you know, this report examines NIPC (National 
Infrastructure Protection Center) and recommends how NIPC can improve 
its ability to combat cybercrime and cyberterrorism. Before getting to 
the details of my findings and recommendations, I would like to point 
out that NIPC has made great strides. Ron Dick has been an effective 
leader and should be commended for his efforts in a very complicated 
job.
    The GAO report had three main themes: 1) NIPC's limited analysis 
and warning capabilities; 2) lack of interagency cooperation at NIPC; 
and 3) reluctance of private companies to share information about 
cyberattacks with NIPC.
    The GAO found that NIPC's analysis and warning capabilities were 
limited. It is our experience that the NIPC has excellent sources of 
information from law enforcement and intelligence sources. While we 
understand that some information cannot be shared due to its sensitive 
or classified nature, the NIPC makes every effort to craft its 
information into meaningful warning messages suitable for distribution 
to the widest possible audience.
    Industry needs information as quickly as possible. However, we 
understand that NIPC puts a premium on accuracy in its warning products 
because it speaks for the federal government. Having worked with NIPC 
on warning products, we have seen this first hand. While obviously not 
all information can be provided to the private sector, in our 
experience NIPC shares a broad array of information with the private 
sector so it can be pondered and analyzed.
    Because both speed and accuracy are important, NIPC should explore 
ways to improve the warning process so that it can put out the most 
accurate warning products it can in the fastest possible time.
    GAO also pointed out that the reluctance of private companies to 
share information about cyberattacks was an issue in the effectiveness 
of NIPC. We agree that NIPC would be more
    effective if the private sector shared more information with it, 
but we have seen great strides in information sharing over the past 
couple of years. The private sector not only runs private 
communications facilities, but also runs most of the Government 
communications facilities. We think that the ISACs (Information Sharing 
and Analysis Centers) and other information sharing mechanisms are a 
good mechanism for this information sharing to take place. However, the 
ISACs and other information sharing mechanisms need time to further 
develop. We at ISS are very supportive of ISACs and are doing our part 
to make this initiative as effective as possible.
    We also support GAO's praise of Infraguard. Infraguard is an 
effective initiative.Infraguard is able to effectively get information 
out to the business and academic communities horizontally.
                   IV. Information sharing is the key
    All of the above themes involve more information sharing. We have 
discussed how the Federal Government could be better at sharing 
information. Companies also could be better at sharing However, sharing 
information about corporate security practices is inherently difficult. 
Companies are understandably reluctant to share sensitive proprietary 
information about prevention practices, intrusions, and actual crimes 
with either competitors or Government agencies. No company wants 
information to surface that they have given in confidence that may 
jeopardize their market position, strategies, customer base, or capital 
investments.
    Allowing the ISACs time to develop and grow is one way the 
Government can help private companies become more amenable to sharing 
information. The voluntary nature of ISACs or information sharing 
bodies is extremely important. Attempting to force this to happen would 
be a disaster. As I mentioned earlier in my testimony, speed is 
extremely important for security information to be most useful. Placing 
burdensome requirements on companies would cause information sharing to 
be a legal and time-consuming process.
    To help encourage growth of the ISACs, it is important to support 
legislation that will strengthen information sharing legal protections 
that shield U.S. critical infrastructures from cyber and physical 
attacks and threats. Legislation that will clarify and strengthen 
existing Freedom of Information Act and anti-trust exemptions, or 
otherwise create new means to promote critical infrastructure 
protection and assurance, would be very helpful. This legislation would 
likely have a catalytic effect on the initiatives that are currently 
under way. It is absolutely vital that we work collectively to remove 
barriers to information sharing. A broad industry coalition has been 
working with Senator Bennett and Senator Kyl on legislation in the 
Senate, and with Congressman Davis and Congressman Moran in the House. 
On behalf of ITAA, I want to express industry support for these bills.
                             V. Conclusion
    We are pleased that the Government is interested in taking computer 
security seriously. The United States Government spends billions of 
dollars buying weapons and gaining intelligence to protect our country 
from more conventional types of attack. Our computer systems must also 
be adequately protected, or our entire infrastructure could be 
compromised by one person with one computer. Even though the task is 
complicated, computer systems can be protected.
    The Government has taken great strides in the past few years. 
However, much, much more is needed. As industry has considerable 
resources and expertise, a continued partnership with industry is 
crucial. In addition, computer security must be a priority, and 
leadership and coordination are necessary in the Government. 
International leadership is also required. Perhaps most importantly, 
funding for secure Government systems must be increased by a 
substantial amount, and outsourcing should be considered as a viable, 
cost-effective option. The Government often does well with the 
resources it has been given. However, computer security specialists are 
required to implement and coordinate many different security products 
and services to adequately secure a system. As computer security 
expertise is extremely rare, the cost of computer security specialists 
is astronomical. To help address the cost of computer security, 
educational efforts must be undertaken to train the personnel required.
    Thank you for inviting me here today. I look forward to a 
continuing dialog on the computer security issue, and hope that, 
working together, we can adequately secure our country's assets and 
information.

    Chairperson Feinstein. Thanks very much, Mr. Klaus.
    Mr. Gent, I apologize for mispronouncing your name. Please 
proceed.

  STATEMENT OF MICHEHL R. GENT, PRESIDENT AND CHIEF EXECUTIVE 
     OFFICER, NORTH AMERICAN ELECTRIC RELIABILITY COUNCIL, 
                        WASHINGTON, D.C.

    Mr. Gent. Thank you, Madam Chairman, and good afternoon, 
Senator Kyl. I am here representing the North American Electric 
Reliability Council, and I am going to take the chairman's 
advice and cut my oral testimony short. If you have a copy of 
what was submitted, I won't be following it.
    I think it is obvious from the comments of previous 
witnesses that NERC, as we call it, has a very active role in 
this whole theater of protecting electric systems against major 
catastrophes. In fact, that is why NERC was formed. We are 
ourselves an ISAC. We didn't invent that name, but when you 
think about what we do, we do information security and we do 
assessment.
    We actually are responsible for coordinating the activities 
of some 150 control areas across the United States and Canada, 
and I have to emphasize the Canada part because as far as 
electricity goes, it does not know these country boundaries 
that we draw on maps and we have governments controlling. 
Electricity flows from Canada to the United States, and vice 
versa.
    I want to get right to the points. I read the letter coming 
down this morning on the train. I apologize for not being more 
direct in my written testimony and I would like to answer your 
questions.
    I think that our relationship with the NIPC works, and it 
works very well. We may be only one of the four that cleared 
the GAO's test screen, but we did clear it. We see absolutely 
no evidence that they are lacking in what they call interagency 
cooperation.
    Now, for the private sector, we don't see a lot of this 
interagency bickering, but there was a time when we did, when 
sabotage and terrorism were very big issues. I think you might 
recall back in the late 1980's we had study task forces, and I 
believe that then Vice President Bush headed up a team 
appointed by President Reagan to deal with the sabotage and 
terrorism issue.
    NERC became very much involved there and we saw an awful 
lot of interagency bickering. So what we did and what we have 
done ever since is we have cast our lot with the FBI. So when 
some agency wants to get involved--DOD, DOE; DOE is involved in 
many things--we tell them that we answer first and foremost to 
the FBI. And we are so committed to that that we quite 
periodically insist that all the electric utilities go 
reestablish their relationship at the local level with the 
local FBI office. Then we try to get the national FBI office to 
tell their local jurisdictions to go out and establish that 
contact.
    So what happens is whenever there is a physical terrorism 
attack, sabotage attack, the first people they contact are the 
FBI, and it is the same with cyber attacks. So it was quite 
natural for us to take what we had done in the physical area, 
add cyber to it, and incorporate it in all of our notification 
procedures. That is why this has worked very well for us.
    We also see no evidence where their capabilities are 
limited. We have had several instances where we have received 
advisories, and those advisories have been sent on through our 
communications system and been received by the proper 
individuals.
    Now, at the heart of all of this is the willingness of the 
electric industry to work with the Government. Some people say 
that this is because we were once all monopolies and it was 
quite easy to coordinate among monopolies. That may well be 
true. Today, that monopoly system is disappearing, however, and 
we are still able to coordinate.
    We have been asked by the Government, for instance, to deal 
with the EMP threats and we have done that. I mentioned dealing 
with sabotage and terrorism. All of you are familiar with the 
Y2K brouhaha that we had here a couple of years ago. The 
Department of Energy asked us to act to spearhead that with the 
electric utility industry and we did, and we think 
successfully. Now, we think we can also successfully handle 
cyber attacks.
    With that, I think you are probably more interested in 
asking me questions than hearing me rattle on about our 
credentials for doing this, so I will leave it to you for the 
questions.
    Thank you.
    [The prepared statement of Mr. Gent follows:]

 Statement of Michehl R. Gent, President, and Chief Executive Officer, 
              North American Electric Reliability Council

    The Electricity Sector Response to the Critical Infrastructure 
                          Protection Challenge
    My name is Michehl R. Gent, and I am President and Chief Executive 
Officer of the North American Electric Reliability Council (NERC). I am 
responsible for directing NERC's activities within the industry and 
with the federal government as these activities relate to terrorism and 
sabotage of the electric systems of North America. Since mid-1998, 
these activities include critical infrastructure protection.
    NERC is a not-for-profit organization formed after the Northeast 
blackout in 1965 to promote the reliability of the bulk electric 
systems that serve North America. It works with all segments of the 
electric industry--investor-owned utilities; federal power agencies; 
rural electric cooperatives; state, municipal, and provincial 
utilities; independent power producers; and power marketers--as well as 
customers to ``keep the lights on'' by developing and encouraging 
compliance with rules for the reliable operation of these systems. NERC 
comprises ten Regional Reliability Councils that account for virtually 
all the electricity supplied in the United States, Canada, and a 
portion of Baja California Norte, Mexico.
    In my testimony I will discuss NERC's relationship with the 
National Infrastructure Protection Center and several related critical 
infrastructure protection programs that NERC participates in: Critical 
Infrastructure Protection Working Group; Indications, Analysis, and 
Warnings Program; Electricity Sector Information Sharing and Analysis 
Center; Critical Infrastructure Protection Planning; and Partnership 
for Critical Infrastructure Security.
                                summary
    NERC has an excellent working relationship with the National 
Infrastructure Protection Center (NIPC). NERC and the electric industry 
worked closely with NIPC for about two years to develop a voluntary, 
industry-wide physical and cyber security indications, analysis, and 
warning (IAW) reporting procedure. This program provides NIPC with 
information that when combined with other intelligence available to it 
will allow NIPC to provide the electric industry with timely, accurate, 
and actionable alerts and warnings of imminent or emerging physical or 
cyber attacks. A high degree of cooperation with NIPC is possible 
because the industry has a long history of working with local, state, 
and federal government agencies. In addition, the NERC Board of 
Trustees in the late 1980s resolved that each electric utility should 
develop a close working relationship with its local Federal Bureau of 
Investigation (FBI) office, if it did not already have such a 
relationship. The Board also said the NERC staff should establish and 
maintain a working relationship with the FBI at the national level.
    The Indications, Analysis, and Warnings Program (IAW) reporting 
procedure is modeled on an existing electric system disturbance 
reporting procedure in which electric utilities report system 
disturbances meeting predefined criteria to the U.S. Department of 
Energy. A pilot IAW program was field tested in one NERC Regional 
Reliability Council in the fall of 1999 and winter 1999/2000. The 
program was refined and rolled out to the industry via three workshops 
held during the fall of 2000 and winter 2000/2001. A comprehensive 
communications program is being developed to bring this program to the 
attention of those industry entities that were not able to participate 
in the workshops.
            nerc national infrastructure security activities
    NERC has served on a number of occasions during the past decade as 
the electric utility industry (electricity sector) primary point of 
contact for issues relating to national security. Since the early 
1980s, NERC has been involved with the electromagnetic pulse 
phenomenon, vulnerability of electric systems to state-sponsored, 
multi-site sabotage and terrorism, Year 2000 rollover impacts, and now 
the threat of cyber terrorism. At the heart of NERC's efforts has been 
a commitment to work with various federal government agencies such as 
the U.S. National Security Council, U.S. Department of Energy (DOE), 
and FBI to reduce the vulnerability of interconnected electric systems 
to such threats.
    The report of the President's Commission on Critical Infrastructure 
Protection (PCCIP) in October 1997 led to a May 1998 Presidential 
Decision Directive (PDD-63). PDD-63 called for government agencies to 
become involved in the process of developing a National Plan for 
Information Systems Protection, and to seek voluntary participation of 
private industry to meet common goals for protecting the country's 
critical systems through public-private partnerships. The PCCIP 
specifically commended NERC as a model for information sharing, 
cooperation, and coordination between the private sector and 
government. In September 1998, Secretary of Energy Bill Richardson 
wrote to NERC Chairman Erle Nye seeking NERC's assistance, on behalf of 
the electricity sector, in developing a program for protecting the 
nation's critical electricity sector infrastructure. Responding to the 
(DOE) critical infrastructure protection initiative, NERC agreed to 
participate as the electricity sector coordinator.
    As part of this public-private partnership, DOE, the U.S. 
government's designated Energy Sector Liaison, worked through its 
Infrastructure Assurance Outreach Program to perform an information 
assurance assessment for a small number of nodes on NERC's industry 
information system. The purpose of this assessment was to help NERC and 
the electric industry develop an overall security framework to address 
the changing industry structure and the threat of cyber and physical 
intrusion. A second followon information system assessment was begun in 
late 2000 and will be completed shortly. The product of this study will 
be recommendations that will form the basis of a draft NERC policy on 
information assurance. In addition, to facilitate the transfer of 
information to industry that may be of value in the operation of the 
electric systems in North America, DOE has provided clearances for a 
number of industry personnel and clearances for other key industry 
personnel are anticipated. These clearances compliment those obtained 
from the Federal Bureau of Investigation (FBI) as a result of 
encouragement by NIPC, as discussed below.
            critical infrastructure protection working group
    After several exploratory scoping sessions with DOE and NIPC, NERC 
created a Critical Infrastructure Protection (CIP) Forum to evaluate 
sharing cyber and physical incident data affecting the bulk electric 
systems in North America. The meetings of this group were widely 
noticed and the participants included all segments of the electric 
utility industry and representatives from several government agencies 
including the Critical Infrastructure Assurance Office (CIAO) of the 
Department of Commerce, DOE, and NIPC. As a result of the groups' 
deliberations, NERC created a permanent group within the NERC committee 
structure--the Critical Infrastructure Protection Working Group 
(CIPWG). This working group reports to NERC's Operating Committee. It 
has Regional Reliability Council and industry sector representation as 
well as participation by the CIAO in the Department of Commerce, DOE, 
and NIPC.
              indications, analysis, and warnings program
    One of the first tasks of the Critical Infrastructure Protection 
Forum was to develop the incident data types and event thresholds to be 
used in an information-sharing program with NIPC. Information sharing 
(electronic and telephone) mechanisms have been developed for use by 
electric transmission providers, generation providers, and other 
industry entities for reporting on a voluntary basis to both NIPC and 
NERC. Assessments, advisories, and alerts prepared by NIPC (with NERC's 
support), based on the data provided by the electric and other industry 
sectors and government sources, will be stated in an actionable manner 
and will be transmitted to electric industry entities. This process was 
tested successfully within one Reliability Council Region during the 
fall 1999 and winter 1999/2000. Because some of the analyses involve 
classified information, U.S. government security clearances have been 
obtained by key industry personnel and NERC staff members. Other 
electric industry personnel are in the process of obtaining security 
clearances.
    The electric industry Indications, Analysis, and Warnings Program, 
which evolved from this work (Attachment A), was presented to the NERC 
Operating Committee in July 2000 for discussion and approval. The 
Operating Committee approved a motion to implement the program; initial 
emphasis is on reporting by security coordinators and control areas. 
Individual electric utilities, marketers, and other electricity supply 
and delivery entities are encouraged to participate by submitting 
incident data and receiving the various types of NIPC warnings and 
related materials. Workshops were conducted during the fall 2000 and 
winter 2001 to provide program details to the industry. A more 
comprehensive communications program is being developed by CIPWG to 
encourage broader industry participation in the program. NERC views the 
Indications, Analysis, and Warnings Program as a voluntary first step 
toward preparing the electricity sector to meet PDD-63 objectives.
       electricity sector information sharing and analysis center
    The PCCIP recommended that each of the critical sectors establish 
an Information Sharing and Analysis Center (ISAC) to help protect the 
infrastructures from disruption arising from coordinated intrusion or 
attack. The ISACs would gather incident data from within their 
respective sectors, perform analyses to determine potential malicious 
intent, share findings with other ISACs (private and government) in a 
manner that assures, as required, target identity protection, and 
disseminate actionable warnings so appropriate action can be taken 
within each sector. ISACs would serve as points of contact between 
sectors to facilitate communications, especially during a time of 
stress. ISACs would study cross sector interdependencies to better 
understand and be prepared for the possible impacts of an ``outage'' of 
one sector on another.
    The CIPWG has endorsed, and NERC has accepted, the naming of NERC 
as the Electricity Sector Information Sharing and Analysis Center (ES-
ISAC). The functions performed are essentially the same as those 
functions that have been required of NERC for physical sabotage and 
terrorism. The ESISAC's duties are:

1. Receive voluntarily supplied incident data from electric industry 
        entities.
2. Work with NIPC during its analysis of incident data to determine 
        threat trends and vulnerabilities.
3. Assist the NIPC personnel during its analyses on a cross private and 
        federal sector basis.
4. Disseminate threat and vulnerability assessments, advisories, and 
        alerts and other related materials to all those within the 
        electric industry who wish to participate.

    The ES-ISAC is staffed on workdays with on-call provision for all 
other periods. Should this capability need to be enhanced, NERC will 
likely request support for a 24-hour, seven days a week staffed 
facility. To this end, NERC also is exploring the feasibility of 
forming a joint ISAC with other sectors. NERC has established 
relationships with the other existing ISACs through the Partnership for 
Critical Infrastructure Security (see below) and will establish 
relationships with other ISACs as they form.
              critical infrastructure protection planning
    The CIPWG, working with CIAO, has written a Business Case for 
Action to delineate the need for critical infrastructure protection by 
the electric industry (Attachment B). Separate business cases have been 
prepared for Chief Executive Officers, Chief Operating Officers, and a 
NERC general overview (Attachments C, D, E, and F). The purpose of the 
business case is to persuade industry participants of the need to 
report cyber intrusion incidents and to be mindful of the possible 
business losses caused by cyber and physical intrusion.
    The CIPWG has developed a basic and fairly comprehensive plan to 
address CIP. The working group was concerned about generating an overly 
prescriptive plan too early in the process and has proceeded with a 
format that can assist in developing each entity's own plan. The 
prototype plan, which still is undergoing industry review, addresses 
awareness, threat and vulnerability assessment, practices that can be 
considered, risk management schema, reconstitution, and 
interdependencies between and among sectors.
    The essence of this ``Approach to Action'' is being considered for 
inclusion in Version 2.0 of the National Plan for Information Systems 
Protection being compiled by the U.S. Government. Richaard Clarke, 
Special Assistant to the President and National Coordinator for 
Security, Infrastructure Protection, and Counter-terrorism, has 
discussed the importance of establishing and maintaining a National 
Plan to the health of the government and private sectors, companies, 
and the nation. Version 1.0 of the Plan did a good job covering the 
threats and the government response, but it did not detail private 
sector response.
    The need for private sector participation is engendered by the fact 
that the government lacks private sector expertise and needs private 
sector ``buy in'' to CIP initiatives. The National Plan version 2.0, 
which will include private sector input, is scheduled for fall 2001.
            partnership for critical infrastructure security
    The Partnership for Critical Infrastructure Security (PCIS) was 
proposed in late 1999 by members of several private sectors; the PCIS 
is supported by CIAO and the U.S. Chamber of Commerce. Earlier this 
year, it established itself as a not-for-profit organization and 
elected a Board of Directors and company officers. NERC participates in 
PCIS and I serve as its Secretary.
    The PCIS Mission:
    Coordinate cross-sector initiatives and complement public/private 
efforts to promote and assure reliable provision of critical 
infrastructure services in the face of emerging risks to economic and 
national security.
    The PCIS held two general forums in 2000 and one so far this year. 
It is planning a second general forum on September 6-7, 2001. The PCIS 
has formed six active working groups: Interdependency Vulnerability 
Assessment and Risk Management; Information Sharing, Outreach and 
Awareness; Public Policy and Legislation; Research and Development and 
Workforce Development; Organization Issues and Public-Private 
Relations; and National Plan. The opportunities presented by PCIS 
include gaining a better perspective of the sector interdependencies, 
facilitating ISAC formation, and sharing of common research and 
development efforts.
      Emerging Business Risks to the Electric Power Infrastructure
               a case for chief executive officer action
    The introduction of competition in the wholesale and retail 
electricity markets, coupled with an increased demand for electricity, 
has led to electric utilities' to rely more on information technologies 
(IT). In addition to ensuring a utility's ability to generate, 
transmit, and distribute electricity to its customers, information 
systems are increasingly effective vehicles for exploring new markets; 
executing strategic business decisions; achieving internal operating 
efficiencies; and tracking the people, products, and services on which 
a firm's success depends.
    The reliability and security of these systems are critical to 
electric utility survival. Chief Executive Officers (CEO), boards of 
directors, and other senior-level executives responsible for overseeing 
the business operations of electric utilities need to understand the 
risks posed by this increased reliance on information technology. In 
addition, they also must manage and, where possible, mitigate these 
risks to their organizations and the industry through continuous 
communication and leadership. This management and mitigation 
responsibility requires close coordination with finance, customer 
services, operations, and other senior-level officials in their firms, 
and coordination within the industry, to address a widening range of 
competitive and operational vulnerabilities, including information 
systems, security, and other cyber-related threats. CEOs, boards of 
directors, and other senior-level officials are vested with authority 
and have an obligation to manage risks and liabilities through due 
diligence and prudent management. As such, it is important that they 
recognize that IT is not only an enabler of competitive advantage, 
customer service, and investor confidence, but also a source of 
vulnerability or business risk.

                                             What Is Changing?
 
 
 
                      Manned Facilities Operations                                      Unmanned Facilities
                                 Remote Monitoring                             Automated Monitoring/Control
                                                  Local Markets              Open, Reional/National Markets
                                                  Local Customer Services         Consolidated Call Centers
                      Customer Billing Information                            Customer Services Information
                          Heterogeneous Technology                                 Standardized/Homogeneous
                     Traditional Electric Services                                                      On-Line
 

                   business operational survivability
    Significant security risks stem from the interconnectedness of the 
communications networks that underpin utility generation, transmission, 
and distribution systems. Most of the approximately 3,200 electric 
utilities serving North America depend on IT networks, such as 
supervisory control and data acquisition (SCADA) systems, to manage 
generation, transmission, and distribution systems. These systems are 
linked to control networks and corporate management systems, many of 
which also are connected to systems outside the utility. In addition, 
the electric utilities participate in open markets, vastly expanding 
the size and complexity of the electric industry's IT infrastructure. 
Simply put, the electric industry, conducting arbitrage over real and 
virtual assets, relies on a nationwide network information systems to 
do business. These systems include Internet-based applications such as 
the Open Access Same-time Information System (OASIS), which facilitates 
the exchange of transmission availability information and on-line price 
negotiations.
    Like commodities trading, the buying and selling of electricity 
would be virtually impossible without the efficiencies of IT. The array 
of mainframes, desktop clients, operating systems, and network 
protocols used by power marketers add to the complexity of the electric 
power industry's IT infrastructure. Consequently, as the newly 
competitive energy market matures, generation, transmission, and 
distribution systems will become increasingly subject to both IT- and 
market-related forces. This maturation will present new challenges to 
ensuring the reliability of the electricity delivery systems in North 
America.
                        business competitiveness
    Reliability and security have also come under pressure from 
financial interests. A utility's previous ``obligation to serve'' to 
some degree is being pressured by industry stakeholders. Many expect 
that a competitive market place will shift reliability from a mandated 
``obligation'' to being a competitive feature of service in order to be 
in the electric business.\1\ Many also see that the electric industry 
will become a highly competitive commodities business that is largely 
customer-driven and dependent on technological and operational 
efficiency. The Power Company of America expects annual trading volume 
of electricity to reach an unprecedented high of $2.5 trillion by the 
year 2003.\2\
---------------------------------------------------------------------------
    \1\ John D. Mountford and Ricardo R. Austria, ``Keeping the Lights 
On!'' IEEE Spectrum (June 1999): 34.
    \2\ Tami Cissna, ``Wholesale Electric Power Sales Are Increasing-Is 
Anyone Profiting?'' Electric Light & Power (August 1998): 42.
---------------------------------------------------------------------------
    If this projection holds true, electricity will become the United 
States' most heavily traded commodity. Consequently, power marketers 
and utilities are competing aggressively for a substantial share of the 
market. Like the financial industry's commodities market, which may be 
a harbinger of how the electricity market will evolve, electricity 
worth billions of dollars will be traded over computer-controlled 
networks and telecommunications systems. Failure to maintain the 
confidentiality, integrity, and availability of these transactions 
could not only compromise an electric utility's business strategy but, 
if widespread, could also threaten the confidence of those 
participating in the electricity markets.

    Chairperson Feinstein. Thank you very much.
    Mr. Klaus, if I may, at least 4 days before the February 
2000 distributed denial of service attacks, computer experts at 
some of the Nation's largest banks received detailed warnings 
of possible attacks from the banking industry's warning 
network. These warnings helped the banks protect themselves, as 
you mentioned, from the attacks that shut down Yahoo, eBay and 
other companies.
    However, under Treasury Department restrictions, these 
warnings were not turned over to anyone outside the financial 
services industry, including law enforcement, so companies in 
other industries did not benefit.
    Do you think the ISAC model is the most effective way of 
protecting companies from cyberattacks, and how do we better 
encourage information-sharing between industries?
    Mr. Klaus. I think the ISACs lay the foundation for sharing 
the information. I think with the distributed denial of service 
attacks, the biggest issue I see with the security is just from 
a priority perspective. It is usually an after-thought when 
people are designing their networks and they are implementing 
their computer systems. The information is out there.
    In many cases like this worm, we knew about the IIS Web 
server vulnerability at least a month before the worm ever 
spread, but there were still 300,000 Web servers that were 
vulnerable. I guess the question will be how do we get people 
to put the resources in there.
    One of the aspects that we are seeing is insurance 
companies are becoming a driver for this, where they are 
selling hacker insurance or cyber security insurance, where 
they are saying we are not going to insure you unless you have 
a standard level of security. That is having an effect. Before, 
we could easily over the Internet grab the whole data base of 
credit cards.
    That is one of the misperceptions, is with the credit 
cards, encryption fixes that, when, in fact, most of the 
attacks that we are finding--we are working with a lot of banks 
right now where it is not when you are Web-surfing and you put 
in your credit card. Most people ask, should I do that, and the 
answer is it is probably encrypted.
    Where the attack is happening is the hackers go right into 
the data base itself, like the Oracle data base, and you can 
use the user name ``Oracle'' and the password ``Oracle.'' Any 
of the data bases have default accounts that never get changed, 
so you can grab every credit card that exists on that data 
base. So having some kind of standard level of security for 
most of those systems would help, I guess, raise the bar for 
most of the intruders.
    Information-sharing is good, but I would still say that a 
lot of that information exists today you can get out there. And 
ISACs help foster that, but I think the next thing will be how 
do we motivate industries to protect against those, once you 
have the information.
    Chairperson Feinstein. Mr. Gent, would you respond to that, 
and would you also respond to what the possibilities are of an 
attack on California's electricity grid, how likely it is and 
how it can be prevented.
    Mr. Gent. Right here on national TV?
    Chairperson Feinstein. Well, we can arrange that it not be 
done on national TV, if you would like.
    Mr. Gent. I think you are probably familiar with that one 
incident that happened to a Web server, the Cal ISO. The 
reporting was grossly overblown, and I was very happy to see 
that happen, actually. If hackers are going to attack Web sites 
that are holding information sources and not control sites, 
then I am perfectly happy with that.
    Electric systems are controlled by computers we call EMS 
systems, energy management systems, and for the most part they 
are not vulnerable to the same type of hacker attack, with one 
exception, and Chris pointed it out. The vendors very often 
will have default ways into the system so they can pull 
maintenance.
    Chairperson Feinstein. And not a worm either?
    Mr. Gent. No, but it could be, but it is not in this case. 
I believe you have to have a program running to be able to host 
a worm.
    What we have tried to do is to make this whole problem a 
business problem, and part of the stuff that I turned in with 
my testimony are brochures that we have produced with the help 
of the CIAO, ``Business Case for Action: A Case for Chief 
Executive Officer Action,'' what can an electric utility's 
chief information officer do, what utility operations executive 
do and what can NERC do?
    As Chris has stated, we have got to get them interested in 
doing this.
    One of the reasons that we have been so successful with 
large catastrophes like sabotage, terrorism, and so on, is that 
if you take out a very large facility, it will affect every 
utility on the network. In this case, if you attack a 
particular utility's Web site, the chances are you are only 
affecting that one business and you are not affecting companion 
businesses down the chain. So it is difficult to get them 
involved and interested, but that is what we are trying to do 
here, with the help of NIPC.
    To answer your question directly, I think there is little 
chance that the hackers can do any harm to either California or 
anything else in the West as far as operational control.
    Chairperson Feinstein. Little chance, you say?
    Mr. Gent. Little chance.
    Chairperson Feinstein. Little chance. That is good news.
    Mr. Gent. I hate to say never. I would like to, but I am 
not going to.
    Chairperson Feinstein. Thank you.
    Senator Kyl?
    Senator Kyl. Thank you, Madam Chairman. I just would note 
that we had an example in Arizona testified to by our State 
attorney general that a hacker wanting to erase his electric 
bill essentially got into the electric utility----
    Chairperson Feinstein. You are on national TV, Senator.
    Senator Kyl.--got into the utility that had his accounts. 
That utility also, however, is responsible for all of the dams 
that contain the water that provide the water source for the 
Phoenix metropolitan area. Once he was in, there would have 
been nothing to stop him from automatically opening the dams 
and letting all the water out, which would have created a huge 
problem. It simply illustrates the fact that it is possible to 
break in, and somebody who could break in for one purpose 
perhaps even inadvertently could cause some other kinds of 
problems. So it is not a trivial issue in any event.
    I have been asked to say that Senator Hatch intended to be 
here to participate in the hearing today. I know he has been 
detained and I would like to ask unanimous consent that his 
statement be submitted for the record, Madam Chairman.
    Chairperson Feinstein. So ordered.
    [The prepared statement of Senator Hatch follows:]

Statement of Hon. Orrin G. Hatch, A U.S. Senator from the State of Utah

              Improving our Ability to Fight Cyber-crime:
       Oversight of The National Infrastructure Protection Center
    There was a time when a battle began with the sound of a trumpet 
and a cavalry charge.
    In the 20th century, a battle was likely to begin with the sound of 
airplane engines on a bombing run.
    In this new century, a battle will likely begin with the sound of a 
person typing at a computer keyboard, and the release of an electronic 
virus designed to paralyze an adversary's computers.
    And it is not only warfare that is changing.
    No longer do aspiring bank robbers need to don a ski-mask and carry 
a shotgun into a bank. Millions of dollars can be stolen electronically 
by illegally accessing the computer networks of the financial services 
industry.
    No longer do aspiring terrorists need to plant a bomb to draw 
attention to their cause. Millions of people's lives can be threatened 
electronically--by disrupting air traffic control functions; or 
shutting down a power grid; or blocking access to 911 operators.
    As a recently as a decade ago, these threats were barely imagined. 
And it is only in the last three years that the federal government has 
formulated a comprehensive strategy to protect the nation's basic 
computer infrastructure from malicious attacks made by criminals, 
terrorists, and hostile foreign states.
    The National Infrastructure Protection Center has, for the last 
three years, been on the forefront of protecting our country's computer 
networks from outside attack. And, given where we were just three years 
ago, the NIPC has laid an important foundation in the protection of our 
critical computer infrastructure.
    But the integrity of our computer infrastructure is so vital to our 
well-being as a nation, and the technology is evolving at such a rapid 
rate, that it is essential that we continue to reevaluate whether the 
federal government is doing everything it can do to protect our 
critical computer infrastructure. And for that reason, I applaud 
Senator Feinstein, Senator Kyl, and the Senators on this subcommittee, 
not only for holding this hearing today, but also for having had the 
foresight, over a year ago, to order the GAO study that is the focus of 
today's hearing. As a result of that foresight, and the hard work of 
the GAO personnel who prepared the report, we are able to pursue 
today's inquiry at a much deeper level, and with a greater degree of 
insight, than would otherwise be possible. So I commend the senators on 
this subcommittee, and the hardworking staff at the GAO.
    I have examined the GAO's report, and I find it to be, on the 
whole, a balanced and wellreasoned assessment of the NIPC's 
performance. It highlights both the successes of the NIPC, and those 
areas where the NIPC has come up short of its original goals.
    Not surprisingly, the NIPC has succeeded at those functions that 
are most traditionally within the expertise of the FBI, and it has been 
less successful at those functions that are least familiar to the 
Bureau.
    The GAO found that ``the NIPC has provided valuable support and 
coordination'' in the investigation of computer crime. I agree, and I 
believe that the NIPC should be commended for its success, in a 
relatively short span of time, at making itself into a valuable 
resource for use by the law enforcement community when dealing with 
computer crime.
    To facilitate the investigation of illegal access to computer 
networks, the NIPC has established teams of specially-trained computer 
crime investigators in each of the FBI's 56 field offices. In addition, 
the NIPC provides technical assistance to the field offices and 
coordinates investigations among the field offices. Since 1998, the 
NIPC has issued 93 warnings to systems administrators, alerting them, 
and the general public, about specific threats and vulnerabilities 
within their computer networks. An advisory issued in March of this 
year regarding a specific ecommerce vulnerability is estimated to have 
stopped over 1600 attempted hacking incidents.
    Our experience over the last three years has shown the value of 
having a multi-agency entity, like NIPC, with the resources to 
investigate computer intrusions that are often national in scope.
    Obviously, there is room for improvement. The GAO report makes some 
specific recommendations to the NIPC leadership, such as improved 
information sharing between the NIPC and the agents in the field 
offices. I hope that the NIPC leadership gives serious consideration to 
these recommendations.
    Some of the other problems identified in the GAO report appear to 
be beyond the control of the NIPC's leadership--such as the failure of 
agencies outside the FBI to provide full cooperation with the NIPC. We, 
in the Congress, must continue to exercise our oversight authority over 
the Executive Branch to ensure that all agencies are motivated to 
provide the needed cooperation in this vital area. I, for one, promise 
to do everything in my power to discourage institutional rivalries 
between the Executive Branch agencies from disrupting the important 
mission of the NIPC.
    It is those functions furthest from the FBI's traditional 
responsibilities that the NIPC has had the most difficulty 
accomplishing. According to the GAO's findings, the NIPC has made 
little progress in producing a comprehensive, strategic analysis of the 
vulnerabilities of, and threats to, the nation's critical computer 
infrastructure. Similarly, the NIPC has not been particularly 
successful in establishing information-sharing arrangements with 
private industry.
    The development of a comprehensive, strategic threat analysis is 
certainly one of the most important tasks that has been assigned to the 
NIPC. In the absence of such a strategic assessment, law enforcement 
will be perpetually consigned to responding reactively--instead of 
proactively addressing and eliminating threats to the system.
    The GAO has identified several obstacles faced by the NIPC in 
performing its strategic assessment: the lack of an accepted 
methodology for evaluating threats; confusion within the Executive 
Branch about the scope of the NIPC's mandate; and inadequate technical 
expertise within the NIPC personnel.
    Implicitly, the GAO report raises a fair question--that is, whether 
the NIPC, which has so far served principally as an ``operational'' 
organization, is the best entity within the federal government to 
conduct what appears to be an abstract, almost academic, assessment of 
the strategic threats facing the critical computer infrastructure.
    By giving voice to this question, I do not mean to suggest that I 
have reached an answer. I simply do not know, at this point, whether or 
not the NIPC is the ideal entity to perform this analysis. It may well 
be that the NIPC brings more technical expertise to this question than 
any other governmental entity.
    The Administration has recently announced its intention to review 
Presidential Decision Directive 63, and to reevaluate the effectiveness 
of our national plan for cyberspace security and critical 
infrastructure protection. I hope and expect that, as part of this 
evaluation, the Administration will assess whether the NIPC is, in 
fact, the best entity to perform the strategic threat assessment. 
Certainly, I believe that Congress should await the Administration's 
determination on this matter, before reaching its own decision.
    The other area which the GAO highlighted as a shortcoming in the 
NIPC's performance is the NIPC's lack of success in establishing 
information-sharing arrangements with private industry. It is in this 
area that I believe Congress could potentially provide the NIPC with 
the most help.
    Obviously, the NIPC is hamstrung in its efforts to investigate 
computer intrusions when the private sector does not provide them with 
notification that an intrusion has occurred. On the other hand, private 
firms are often reluctant to report an intrusion, out of fear that 
publicity regarding an unauthorized intrusion will be detrimental to 
the firm's commercial interests. Although the NIPC has undertaken 
significant outreach efforts in an effort to win the private sector's 
confidence, there is little that the NIPC can do to overcome this basic 
divergence of interests.
    It is possible, though, that Congress can help.
    There is legislation pending, which I support, that would 
strengthen the FOIA exemption applicable to information provided by 
companies when they self-report an unauthorized computer intrusion.
    I believe that Congress can go even farther. I believe that we 
should explore a range of financial incentives to the private sector--
possibly tax credits or liability caps--for companies that provide the 
NIPC with full and timely notification of unauthorized computer 
intrusions. Only by reversing the private sector's financial incentives 
pertaining to cooperation with the NIPC can we enlist the aid of the 
private sector against the criminals and terrorists who would 
compromise our computer networks.
    In sum, I believe we should commend the leadership of the NIPC, who 
have, in the short span of three years, laid the groundwork for a 
comprehensive defense of our critical computer infrastructure. As with 
any new venture, there have been successes, and there have been areas 
in which the leadership has fallen short of their goals.
    Given the interconnected nature of today's digital world, it is 
impossible to overstate the importance of the NIPC's mission. 
Hopefully, the GAO Report, and today's hearing, have set in motion a 
healthy dialogue on how best to face these new and emerging threats to 
our well-being as a nation.

    Senator Kyl. I am going to have to go here in just a 
minute, but I guess one of the things that I should ask, since 
we have Chris Klaus' expertise here, is what are the first 
couple of things that you tell clients--I realize you have 
different kinds of clients come to you, whether it be a 
government client or a business client--when they say, well, 
what is the first thing I should do to protect myself or our 
company or our agency here?
    It might be useful to at least give folks an idea of the 
kinds of advice that you give, and then I have one follow-up 
question, if I might.
    Mr. Klaus. We get a lot of companies coming to us saying, 
OK, I have heard security is important, what do we do? 
``Security'' is such a big word. You hear about PKI, 
encryption, biometrics, firewalls, and the list goes on and on 
of all the different measures you can take.
    Initially, what we do is start with an assessment in terms 
of doing an assessment of what your current state of security 
looks like. There are any number of security companies such as 
ourselves and many others that do assessments on behalf of 
companies.
    It is kind of interesting, in that we are starting to see a 
trend where it is similar to the reason that you bring in the 
Big Five, like Ernst and Young or some of the other Big Five to 
do the books or the tax audits. It is the same reason you 
probably want a security team outside of that company to do a 
security audit to make sure it has not been tampered with.
    It is very easy to configure the software to come back and 
say, OK, there are no problems, this must be a good network, so 
having someone come in, do a penetration test, find out all the 
issues, and then from there start to design your security 
system so that you can understand where to put the proper 
security processes in place.
    I look at it a lot like physical security, in that there 
are certain places you may put a camera; there are certain 
places you will put locks, there are certain places you put 
guards, et cetera. The same metaphors can apply to a company's 
network. Where do you want a lock-down? What systems are 
critical? Where are your assets? Where are your key servers? 
What things do you want to lock down?
    So we help design and then help deploy that, and then on an 
ongoing basis a high recommendation is to have a 24-by-7 
monitoring and management of your security system. Security 
doesn't go away once you put it on the network; it is 
constantly there, and so we would recommend that.
    And then the last thing would be education, get educated 
about all the different issues, know about what is a worm, what 
is a virus, how do you defend against those, what are the 
latest methods of breaking in. I think education and 
information becomes key there.
    Senator Kyl. It is just like security in any other setting, 
be aware of the potential dangers, get good people to give you 
advice about how to take care of it and then take care of it.
    Mr. Klaus. Absolutely.
    Senator Kyl. If you could give us some advice here, you are 
looking at this from two or three different angles. It is 
obviously useful for there to be an entity like NIPC to give 
warnings, to assist in remediation of problems, to have 
organizations like the one Mr. Gent represents to be 
coordinating very carefully with groups like NIPC.
    You have seen the problems from the standpoint of both the 
private sector and the government clients that you represent. 
If you had to give us one or two suggestions about things that 
you think we might do to help to facilitate the exchange of 
information, to help entities like the one Mr. Gent represents, 
to improve NIPC, any of these things that we might do to help, 
what would be maybe the top one or two suggestions you could 
give to us?
    Mr. Klaus. Continue to raise cyber security as a high 
priority, and I think anything that can help raise the 
visibility and make sure people understand it is a serious 
issue that affects everyone. Also, I would say that one of the 
key issues we see--and this came from one of the industry 
analysts; they did a survey of companies and most companies 
spend more money on coffee and soda than they do on network 
security.
    So from a budget perspective, I think both for commercial 
and government, if we can somehow give governments more money 
to defend themselves so that they can hire the right people or 
at least get the right technology protection in place would be 
an additional benefit.
    I think legislatively any of the bills that would help 
foster more sharing of information, and probably more than just 
fostering information, but trust and building a process for 
commercial to work with government--we had a large user base 
and there was a group of about 200 people of very large 
companies. How many of you ever worked with law enforcement in 
regard to being hacked? I mean, all of them had been hacked at 
some point, and one of them raised their hand and that person 
happened to be from a Government agency themselves and by 
Federal law had to do that. But the rest of them had not worked 
with any kind of law enforcement.
    Chairperson Feinstein. Would you allow me on that point----
    Senator Kyl. I am going to have to go. Might I just thank 
both of you and the other panel for being here, and for the 
great demonstration. I hope that we will be able to expose this 
to more people in the future. I really apologize, but I am 
already late for a meeting.
    Mr. Klaus. Thank you, Senator Kyl.
    Chairperson Feinstein. Thanks, Senator, very, very much.
    Let me ask this question, Mr. Klaus: Do you know of any 
company that had an attack where the company provided 
information to the Government and that information was leaked?
    Mr. Klaus. No. I think it is more of a perception.
    Chairperson Feinstein. I think that these fears that 
companies have about information leaking out are really 
contraindicated by the record. I wonder why they continue to 
have them.
    Mr. Gent, can you comment on that?
    Mr. Gent. I share your concern. The companies that I work 
with seem to be paranoid against providing the Government with 
information, particularly commercially viable information. We 
have often put restrictions on any information released for, 
say, 9 days, any commercially viable information. So I think 
that is a whole area that needs to be investigated, 
particularly as it applies here.
    We have had several incidents, though, that show this is 
improving. We have reported maybe 20 or 30 incidents of hacker 
activity on our systems to the FBI. The FBI is always 
responsive. They come out, but they are held back by some of 
the laws that I heard from the previous panel, where they 
really can't do anything when they find it. But they can 
buildup a data base and a log of----
    Chairperson Feinstein. You mean because it originates out 
of the country?
    Mr. Gent. Either that or it doesn't have enough financial 
repercussions that they can demonstrate directly.
    Chairperson Feinstein. I see.
    Mr. Klaus. The other thing is I think the InfraGard has 
been beneficial. I know in Atlanta we have the InfraGard 
meetings and those have grown pretty large, and I think that 
has built up a lot of trust between having law enforcement 
there and the FBI there, as well as the commercial or private 
sector being able to interact and have a kind of personal 
relationship. Hey, we are running into this problem, how do we 
deal with this? Now that they have those ties or that personal 
networking through InfraGard, I think that is going to help out 
a lot.
    Chairperson Feinstein. I think what is interesting is 
because there are so many leaks from Government, companies 
incorrectly thought that they should not provide cyberattack 
information to the government. I don't believe leaks are a 
problem in this area. I think all these agencies really 
understand the importance of this information and the national 
security questions that are involved and that there aren't 
going to be any leaks of sensitive information. Therefore, 
companies have so much to gain by providing this information 
about cyberattacks so that law enforcement can get to the root 
of the problem and so that we in Congress know what laws to 
change to enable us to deter this activity.
    Cyber attack activity seems to be multiplying and getting 
more coordinated. If the White House just hadn't acted 
promptly. This Code Red worm would have taken down their whole 
database. Is that fair to say?
    Mr. Klaus. It would have taken down their connection to the 
Internet, yes.
    Chairperson Feinstein. But it wouldn't have affected their 
hard drive?
    Mr. Klaus. It depends on what is exposed to the Internet. 
When you go to whitehouse.gov, it is more of a Web site kind of 
just to give you education on the Web site. I don't think much 
of their internal stuff is exposed to the Internet.
    If the attacker really wanted to bring down stuff, he could 
target some more critical infrastructure that supports that 
Internet and it would have a much more serious effect. 
Whitehouse.gov is probably more symbolic. The Web site itself 
doesn't contain a lot of sensitive information, but any system 
on the Internet that is sensitive would be affected by Code Red 
by just simply changing the attack addresses.
    Chairperson Feinstein. Any other comment, Mr. Gent?
    Mr. Gent. Well, one other in regard to InfraGard. At the 
national level, through the NERC operating Committee we have 
what is called a CIP forum where we are attempting to get all 
interested parties, which would include the FBI and other 
agencies interested in this, together with all of the operating 
people across North America that are interested in these 
subjects. It is informal right now, but we are hoping that it 
will result in some standards being written and some processes 
and procedures put out there where somebody can say, well, what 
do I do to protect myself, and they at least have a checklist 
where they can start. Of course, the first might be to call a 
security expert, but at least we are starting to give stuff out 
like that.
    Chairperson Feinstein. That is terrific.
    Well, thank you both very much. We appreciate it, and 
please feel free to keep in touch with us, both Senator Kyl and 
myself. If you have any further thoughts, please let us know. 
Thank you very much.
    Let me thank the audience.
    This hearing is adjourned.
    [Whereupon, at 4:13 p.m., the Subcommittee was adjourned.]
    [Submissions for the record follow:]

                       SUBMISSIONS FOR THE RECORD

Statement of Hon. Charles E. Grassley, a U.S. Senator from the State of 
                                  Iowa

    Today, we examine the progress of the National Infrastructure 
Protection Center (NIPC), and to what extent they are fulfilling their 
charter as set forth in Presidential Decision Directive-63. Let me 
first thank all of the panel members for taking time out of their busy 
schedules to be here today. And, I would also like to thank the 
Government Accounting Office for their hard work in preparing their 
report.
    This is a time of extraordinary change. We sit here today in the 
midst of one of the most significant technological revolutions in the 
history of the world. With each passing day, we add to the dramatic 
expansion in computer capacity, most notably through the increase in 
the use of the Internet. This new medium has altered our society and 
our economy in many significant ways. The breathtaking technological 
advances led by the concept of free enterprise have left scarcely a 
corner of the globe untouched by this remarkable tool. And the day-to-
day activities of business and government have become enmeshed in the 
use of computers and the Internet to an extent that would have been 
unthinkable even ten years ago.
    The infrastructure foundations on which this nation depends are an 
extremely complex system of interrelated elements. And true to its free 
market roots, this has not been a jointly coordinated revolution. Each 
of these infrastructure elements have taken their own path to become 
the networks that they are today. And while each of these elements can 
also be viewed as islands unto themselves, they are all connected to 
each other and to the outside world by one common element: a telephone 
line. So, while we may be the most technologically advanced nation on 
earth, we are also the most technologically vulnerable.
    Consequently, the issue of public-private cooperation has become 
essential to the success of the safeguarding of our national 
infrastructure. We cannot count on the federal government alone to 
protect our critical infrastructure from cyber-terrorism, because the 
government doesn't own or operate the networks that carry most of our 
critical content. The private sector is not only needed, but pivotal in 
this endeavor. Private industry owns 90 percent of the national 
infrastructure, yet our country's economic well-being, national 
defense, and vital functions depend on the reliable operation of these 
systems.
    Cyber-Security and critical infrastructure protection are among the 
most important national security and economic issues facing our country 
today, and will only become more challenging in the years to come. 
Recent attacks on our infrastructure components have taught us that 
security has been a relatively low priority in the development of 
computer software and Internet systems. These attacks not only have 
disrupted electronic commerce, but have also had a debilitating effect 
on public confidence in the Internet.
    Recognizing this vital need to coordinate the protection of our 
critical systems, the NIPC was formed pursuant to the 1998, 
Presidential Decision Directive. We are here today to review the 
performance of the NIPC relevant to that charter. To be frank, there is 
not much here for me to be optimistic about.
    It is clear to me that the problems outlined within the GAO report 
are symptomatic of a mission that is incomplete in its conception. I 
would not take issue with those who advocate the position that many of 
the problems experienced by the NIPC can be attributed to a significant 
lack of definition within the PDD-63 charter. And, I am also mindful of 
the fact we are reviewing what some have termed as a ``start-up'' 
program that has only been in existence for three years. But I would 
suggest to you that the deficiencies noted by the GAO can also be 
attributed to a lack of operational capability. And that these problems 
are also symptomatic of a much larger issue within the NIPC, and the 
FBI in particular; that being the pervasive ``culture of arrogance'' 
within the bureau. One cannot underestimate the negative affect that 
this culture has had upon the ability of the NIPC to fulfill its 
mission.
    One of the few areas in this report where the GAO offers some 
positive evaluation is in the FBI's coordination of investigations of 
attacks on ``computer crimes''. But I don't believe this assessment 
takes into account the cooperative spirit called for within the NIPC 
charter. Instead of being a focal point to coordinate the 
investigations of various federal law enforcement agencies, the NIPC 
has simply become a conduit for the FBI to fund its own computer crime 
cases. The internal culture of the bureau is not built on the culture 
of sharing information with fellow law enforcement agencies. The NIPC 
charter calls upon the bureau to distribute cases according to 
expertise. With very few exceptions, this is not being done. A 
significant number of participating agencies have withdrawn their 
participation, not only because all of the incoming cases have been 
taken by the FBI, but also because their contributions and expertise 
have not been incorporated into the NIPC in any significant way. 
Consequently, the NIPC should not be held up as an example of success 
in the field of interagency cooperation.
    By its very nature, the FBI does not share information, it 
restricts information. Getting the criminal is the FBI's first 
priority--warning the public is secondary. For example, the NIPC has 
been tasked by this Presidential Decision Directive to provide timely 
warnings, mitigate attack and monitor reconstitution efforts. But the 
mission doesn't stop there; it also includes providing comprehensive 
analyses to determine if an attack is underway, the scope and origin of 
the attack, and the coordination of the government's response. In the 
realtime confusion of a cyberattack, the NIPC will have to decide 
whether or not an incident is an attack which will impact national 
security, or a criminal act that will require a criminal investigation. 
These conflicting national responsibilities impede decisions and put 
the nation at risk. The FBI's methodology for investigating crimes is 
incompatible with the mission intended for the NIPC. And that is why we 
should not allow the FBI to further commandeer this program.
    History has proven that the FBI cannot maintain effective 
partnerships within the federal government or even within their own 
federal law enforcement community. How can we then expect the bureau to 
establish effective partnerships with the private sector? Can we 
honestly expect that the widespread aversion within the private sector 
to entrust sensitive corporate information is any less assuaged by the 
FBI stewardship of this program? One answer can be found in the 
inability of the NIPC to establish successful sharing agreements with 
all but one of the Information Sharing and Analysis Centers. Further, 
the NIPC has failed to successfully establish either an adequate 
warning and analysis capability, or reconstitution design under the Key 
Asset Initiative--both crucial foundations of the charter. One approach 
that does appear to have acquired a successful constituency within the 
private sector is the InfraGuard Program, and I would encourage the 
continued expansion of this initiative.
    In conclusion, I want to once again thank the General Accounting 
Office for their hard work on this report. But I want to be clear that 
I take issue with some of its conclusions regarding the PDD-63 
framework. I would suggest that the deficiencies noted with the NIPC 
owe as much to the insular culture within the FBI than to the number of 
mitigating factors ascribed by the GAO. Our nations critical security 
and infrastructure programs are currently under executive review. I 
look forward to this evaluation and to working with the relevant 
parties to improve the protection of our nations critical computer-
dependent infrastructures.

                                

  Statement of Eugene F. Gorzelink, Director, North American Electric 
                  Reliability Council, Washington, DC

    My name is Eugene F. Gorzelnik, and I am the Director--
Communications for the North American Electric Reliability Council 
(NERC). Part of my job since the late 1980s is to facilitate NERC's 
activities within the industry and with the federal government as these 
activities relate to terrorism and sabotage of the electric systems of 
North America. Since mid-1998, these activities include critical 
infrastructure protection. I report directly to the President and CEO 
of NERC in these matters.
    NERC is a not-for-profit organization formed after the Northeast 
blackout in 1965 to promote the reliability of the bulk electric 
systems that serve North America. It works with all segments of the 
electric industry--investorowned utilities; federal power agencies; 
rural electric cooperatives; state, municipal, and provincial 
utilities; independent power producers; and power marketers--as well as 
customers to ``keep the lights on'' by developing and encouraging 
compliance with rules for the reliable operation of these systems. NERC 
comprises ten Regional Reliability Councils that account for virtually 
all the electricity supplied in the United States, Canada, and a 
portion of Baja California Norte, Mexico.
    In my testimony I will discuss several related critical 
infrastructure protection programs that NERC participates in: Critical 
Infrastructure Protection Working Group (CIPWG); Indications, Analysis, 
and Warnings Program; Electricity Sector Information Sharing and 
Analysis Center (ES-ISAC); Critical Infrastructure Protection Planning; 
and Partnership for Critical Infrastructure Security.
                                Summary
    The North American Electric Reliability Council (NERC) and the 
electric industry worked closely with the National Infrastructure 
Protection Center (NIPC) for about two years to develop a voluntary, 
industry-wide physical and cyber security indications, analysis, and 
warning (IAW) reporting procedure. This program provides NIPC with 
information that when combined with other intelligence available to it 
will allow NIPC to provide the electric industry with timely, accurate, 
and actionable alerts and warnings of imminent or emerging physical or 
cyberattacks. A high degree of cooperation with NIPC is possible 
because the industry has a long history of working with local, state, 
and federal government agencies. In addition, the NERC Board of 
Trustees in the late 1980s resolved that each electric utility should 
develop a close working relationship with its local Federal Bureau of 
Investigation (FBI) office, if it did not already have such a 
relationship. The Board also said the NERC staff should establish and 
maintain a working relationship with the FBI at the national level.
    The IAW reporting procedure is modeled on an existing electric 
system disturbance reporting procedure in which electric utilities 
report system disturbances meeting a predefined criteria to the U.S. 
Department of Energy. A pilot IAW program was field tested in one NERC 
Regional Reliability Council in the fall of 1999 and winter 1999/2000. 
The program was refined and rolled out to the industry via three 
workshops held during the fall of 2000 and winter 2000/2001. A 
comprehensive communications program is being developed to bring this 
program to the attention of those industry entities that were not able 
to participate in the workshops.
    NERC is satisfied with the working relationship it has with NIPC.
                              Introduction
    NERC has served on a number of occasions during the past decade as 
the electric utility industry (electricity sector) primary point of 
contact for issues relating to national security. Since the early 
1980s, NERC has been involved with the electromagnetic pulse 
phenomenon, vulnerability of electric systems to state-sponsored, 
multisite sabotage and terrorism, Year 2000 rollover impacts, and now 
the threat of cyber terrorism. At the heart of NERC's efforts has been 
a commitment to work with various federal government agencies such as 
the U.S. National Security Council, U.S. Department of Energy (DOE), 
and FBI to reduce the vulnerability of interconnected electric systems 
to such threats.
    The report of the President's Commission on Critical Infrastructure 
Protection (PCCIP) in October 1997 led to a May 1998 Presidential 
Decision Directive (PDD-63). PDD-63 called for government agencies to 
become involved in the process of developing a National Plan for 
Information Systems Protection, and to seek voluntary participation of 
private industry to meet common goals for protecting the country's 
critical systems through public-private partnerships. The PCCIP 
specifically commended NERC as a model for information sharing, 
cooperation, and coordination between the private sector and 
government. In September 1998, Secretary of Energy Bill Richardson 
wrote to NERC Chairman Erle Nye seeking NERC's assistance, on behalf of 
the electricity sector, in developing a program for protecting the 
nation's critical electricity sector infrastructure. Responding to the 
(DOE) critical infrastructure protection initiative, NERC agreed to 
participate as the electricity sector coordinator.
    As part of this public-private partnership, DOE, the U.S. 
government's designated Energy Sector Liaison, worked through its 
Infrastructure Assurance Outreach Program to perform an information 
assurance assessment for a small number of nodes on NERC's industry 
information system. The purpose of this assessment was to help NERC and 
the electric industry develop an overall security framework to address 
the changing industry structure and the threat of cyber and physical 
intrusion. A second follow-on information system assessment was begun 
in late 2000 and will be completed shortly. The product of this study 
will be recommendations that will form the basis of a draft NERC policy 
on information assurance. In addition, to facilitate the transfer of 
information to industry that may be of value in the operation of the 
electric systems in North America, DOE has provided clearances for a 
number of industry personnel and clearances for other key industry 
personnel are anticipated. These clearances compliment those obtained 
from the Federal Bureau of Investigation (FBI) as a result of 
encouragement by NIPC, as discussed below.
        Critical Infrastructure Protection Working Group (CIPWG)
    After several exploratory scoping sessions with DOE and NIPC, NERC 
created a Critical Infrastructure Protection (CIP) Forum to evaluate 
sharing cyber and physical incident data affecting the bulk electric 
systems in North America. The meetings of this group were widely 
noticed and the participants included all segments of the electric 
utility industry and representatives from several government agencies 
including the Critical Infrastructure Assurance Office (CIAO) of the 
Department of Commerce, DOE, and NIPC. As a result of the groups' 
deliberations, NERC created a permanent group within the NERC committee 
structure--the Critical Infrastructure Protection Working Group 
(CIPWG). This working group reports to NERC's Operating Committee. It 
has Regional Reliability Council and industry sector representation as 
well as participation by the CIAO in the Department of Commerce, DOE, 
and NIPC.
              Indications, Analysis, and Warnings Program
    One of the first tasks of the Critical Infrastructure Protection 
Forum was to develop the incident data types and event thresholds to be 
used in an information-sharing program with NIPC. Information sharing 
(electronic and telephone) mechanisms have been developed for use by 
electric transmission providers, generation providers, and other 
industry entities for reporting on a voluntary basis to both NIPC and 
NERC. Assessments, advisories, and alerts prepared by NIPC (with NERC's 
support), based on the data provided by the electric and other industry 
sectors and government sources, will be stated in an actionable manner 
and will be transmitted to electric industry entities. This process was 
tested successfully within one Reliability Council Region during the 
fall 1999 and winter 1999/2000. Because some of the analyses involve 
classified information, U.S. government security clearances have been 
obtained by key industry personnel and NERC staff members. Other 
electric industry personnel are in the process of obtaining security 
clearances.
    The electric industry Indications, Analysis, and Warnings Program, 
which evolved from this work (Attachment A), was presented to the NERC 
Operating Committee in July 2000 for discussion and approval. The 
Operating Committee approved a motion to implement the program; initial 
emphasis is on reporting by security coordinators and control areas. 
Individual electric utilities, marketers, and other electricity supply 
and delivery entities are encouraged to participate by submitting 
incident data and receiving the various types of NIPC warnings and 
related materials. Workshops were conducted during the fall 2000 and 
winter 2001 to provide program details to the industry. A more 
comprehensive communications program is being developed by CIPWG to 
encourage broader industry participation in the program.
    NERC views the Indications, Analysis, and Warnings Program as a 
voluntary first step toward preparing the electricity sector to meet 
PDD-63 objectives.
  Electricity Sector Information Sharing and Analysis Center (ES-ISAC)
    The PCCIP recommended that each of the critical sectors establish 
an Information Sharing and Analysis Center (ISAC) to help protect the 
infrastructures from disruption arising from coordinated intrusion or 
attack. The ISACs would gather incident data from within their 
respective sectors, perform analysis to determine potential malicious 
intent, share findings with other ISACs (private and government) in a 
manner that assures, as required, target identity protection, and 
disseminate actionable warnings so appropriate action can be taken 
within each sector. ISACs would serve as points of contact between 
sectors to facilitate communications, especially during a time of 
stress. ISACs would study cross sector interdependencies to better 
understand and be prepared for the possible impacts of an ``outage'' of 
one sector on another.
    The CIPWG has endorsed, and NERC has accepted, the naming of NERC 
as the Electricity Sector Information Sharing and Analysis Center (ES-
ISAC). The functions performed are essentially the same as those 
functions that have been required of NERC for physical sabotage and 
terrorism. The ES-ISAC's duties are:

        1. Receive voluntarily supplied incident data from electric 
        industry entities.
        2. Work with NIPC during its analysis of incident data to 
        determine threat trends and vulnerabilities.
        3. Assist the NIPC personnel during its analyses on a cross 
        private and federal sector basis.
        4. Disseminate threat and vulnerability assessments, 
        advisories, and alerts and other related materials to all those 
        within the electric industry who wish to participate.

    The ES-ISAC is staffed on workdays with on-call provision for all 
other periods. Should this capability need to be enhanced, NERC will 
likely request support for a 24-hour, seven days a week staffed 
facility. To this end, NERC also is exploring the feasibility of 
forming a joint ISAC with other sectors.
    NERC has established relationships with the other existing ISACs 
through the Partnership for Critical Infrastructure Security (see 
below) and will establish relationships with other ISACs as they form.
              Critical Infrastructure Protection Planning
    The CIPWG, working with CIAO, has written a Business Case for 
Action to delineate the need for critical infrastructure protection by 
the electric industry (Attachment B). Separate business cases have been 
prepared for Chief Executive Offcers, Chief Operating Officers, Chief 
Information Officers, and a NERC general overview (Attachments C, D, E, 
and F). The purpose of the business case is to persuade industry 
participants of the need to report cyber intrusion incidents and to be 
mindful of the possible business losses caused by cyber and physical 
intrusion.
    The CIPWG has developed a--basic and fairly comprehensive plan to 
address CIP. The working group was concerned about generating an overly 
prescriptive plan too early in the process and has proceeded with a 
format that can assist in developing each entity's own plan. The 
prototype plan, which still is undergoing industry review, addresses 
awareness, threat and vulnerability assessment, practices that can be 
considered, risk management schema, reconstitution, and 
interdependencies between and among sectors.
    The essence of this ``Approach to Action'' is being considered for 
inclusion in Version 2.0 of the National Plan for Information Systems 
Protection being compiled by the U.S. Government. Richard Clarke, 
Special Assistant to the President and National Coordinator for 
Security, Infrastructure Protection, and Counter-terrorism, has 
discussed the importance of establishing and maintaining a National 
Plan to the health of the government and private sectors, companies, 
and the nation. Version 1.0 of the Plan did a good job covering the 
threats and the government response, but it did, not detail private 
sector response. The need for private sector participation is 
engendered by the fact that the government lacks private sector 
expertise and needs private sector ``buy in'' to CIP initiatives. The 
National Plan version 2.0, which will include private sector input, is 
scheduled for fall 2001.
            Partnership for Critical Infrastructure Security
    The Partnership for Critical Infrastructure Security (PCIS) was 
proposed in late 1999 by members of several private sectors; the PCIS 
is supported by CIAO and the U.S. Chamber of Commerce. Earlier this 
year, it established itself as a not-for-profit organization and 
elected a Board of Directors and company officers. NERC participates in 
PCIS and Michehl R. Gent, NERC's President and Chief Executive Officer, 
serves as PCIS' Secretary.
    The PCIS Mission:

        Coordinate cross-sector initiatives and complement public/
        private efforts to promote and assure reliable provision of 
        critical infrastructure services in the face of emerging risks 
        to economic and national security.

    The PCIS held two general forums in 2000 and one so far this year. 
It is planning a second general forum on September C-7, 2001. The PCIS 
has formed six active working groups: Interdependency Vulnerability 
Assessment and Risk Management; Information Sharing, Outreach and 
Awareness; Public Policy and Legislation; Research and Development and 
Workforce Development; Organization Issues and Public-Private 
Relations; and National Plan. The opportunities presented by PCIS 
include gaining a better perspective of the sector interdependencies, 
facilitating ISAC formation, and sharing of common research and 
development efforts.

                                

 Statement of Taher Elgamal, Chairman, President & CEO, Securify, Inc., 
                           Mountain View, CA

                           Executive Summary
    Protecting our nation's critical infrastructures today is a great 
challenge given the open and global nature of the Internet. Since the 
Internet was not developed for commercial activity and since it does 
not recognize political borders, industry and government need to invest 
in new technologies and business practices in order to strengthen the 
Internet. Obviously more and more value resides online in networks. 
Increasingly, society itself is dependent upon computer-based 
communications and the Internet.
    Greater coordination between governments and industry is necessary. 
Information sharing and analysis is a good start. However, security 
needs to become a tool for running one's business or organization in a 
more effective manner, rather than a reaction to a problem. 
Fundamentally, security is first about being aware of what is actually 
happening on one's network. Simply putting up barriers at the perimeter 
of your network is not going to work. There are no walls in cyberspace: 
remote access by employees, consultants on site, and ever increasing 
interconnectedness with other networks eliminate any sense of walls. 
Rather than defending one's network from perceived outside threats, one 
must instead manage from the inside outward. Vigilance rather than 
repair will become the standard operating procedure for both industry 
and government networks.
                              Introduction
    Protection of our nation's critical infrastructure requires 
increased attention from business and government. With the advent of 
the Internet more of society is dependent on computer-based 
communications. This will not change. Globalization, economic 
productivity, trade, innovation, education, and other drivers 
accelerate dependency. Since the private sector owns or operates the 
vast majority of the world's information infrastructure and relies upon 
other infrastructures (e.g., energy, law enforcement, health care, 
finance, transportation, defense) that are recognized in many cases as 
government driven, both industry and government must cooperate closely 
on the significant issues before the Subcommittee today.
    Security,Inc., is pleased to be a witness. We believe that our 
approach to security enables business and government to be in a 
superior position to address today's infrastructure concerns. From my 
own professional experience I know first hand about the close working 
relationships between industry and government in the area of security. 
For example, my PhD thesis became the adopted DSS government standard 
for digital signatures. Based on this experience I respectfully suggest 
some public policy ideas for the Subcommittee to consider.
                      Background on Securify, Inc.
    One cannot have security without the ability to continually verify 
that actual activity comports with expectations, rules and policies. 
One can spend a lot of time and money on people and technology and not 
improve the quality of security. Verification is an essential and 
logical first step.
    Securify was founded in 1998 as VeriGuard, Inc. Within the first 10 
months the company changed its name to Securify and was then sold to 
Kroll-O'Gara, a publicly traded risk mitigation and security services 
firm. Kroll-O'Gara spun Securify out as an independent company in 2000. 
Today Securify is a privately held firm with approximately 100 
employees. Our headquarters are based in Mountain View, California.
    Securify began as a high-end information security consulting firm. 
Clients were Fortune 50 firms with very sensitive security needs. Early 
on Securify recognized that customers needed automated, technology 
driven and continuous security solutions. Customer needs escalated and 
outstripped the availability of security experts and consumed 
increasing portions of IT budgets. A proactive, cost-effective approach 
that served the business needs of the customer was necessary. For 
nearly two years Securify has researched and developed a unique, 
patent-pending technology. It is called SecurVantage.
    Securify designed this unique, managed service for measuring 
security effectiveness of business networks including intranets, 
production networks and connections to the networks of partners, 
customers and suppliers. Securify SecurVantage provides in-depth 
visibility and analysis of the security attributes of live network 
traffic, enabling security managers and IT staff to quickly detect 
misconfiguration, and the presence of unauthorized devices.
    Most organizations manage each security device independently and 
hope the combination of devices provides security. Securify 
SecurVantage provides a continuous method for comparing real time 
traffic to business-level security standards. Performing this analysis 
of real time traffic on a continuous basis is the best method to ensure 
live traffic is conforming to corporate security guidelines. Securify 
SecurVantage provides a high-level overview of security policy 
development, implementation, and continuous maintenance. It quickly 
targets inconsistencies and recommends corrective actions. Securify 
SecurVantage establishes a baseline, customized, business-driven 
security policy specification for each customer. Using this 
specification, network traffic is analyzed for conformance to the 
desired security requirements. If a violation is detected, the Securify 
Network Operations Center (NOC) staff alerts the customer of the 
violation and recommends corrective action. Securify SecurVantage can 
also be used to establish metrics to ensure traffic flowing between 
business partners meets required security parameters. This is 
particularly important for companies that rely on their distributed 
networks for day-to-day operations, wherever valuable data is accessed 
and stored.
 What Is Needed To Protect Critical Infrastructures: Verification and 
                                Security
    Securify's SecurVantage demonstrates the combination of security 
and verification. By continually verifying that the activity on your 
networks and the networks you connect to is what is expected, then one 
can focus on mitigating the deviations, anomalies, deviations and 
exceptions. This is a significantly smaller set of events to focus on 
than the ever evolving and growing universe of threats and 
vulnerabilities. Rather than reacting to the expanse of threats and 
vulnerabilities one can mitigate risk on a level that is customized and 
do so in an intelligent and managed manner. It is the difference 
between reacting on little or no information to acting according to a 
plan. And since this approach is a part of the every day functioning of 
the customer's business and their networks, they have the ability to 
assess security performance and other network attributes. So it is more 
than security; it helps make the network and the organization it serves 
healthier, more reliable and productive. It simply makes it more 
valuable.
    This is an important point. Government and business increasingly 
have more value and more at stake digitally than physically. Assets and 
value are based not on material objects but on information assets and 
network connections. From General Electric to Dell, from old to new, 
more businesses are using technology to change how they're run and to 
manage their operations and relations with employees, customers, 
suppliers and partners.
    More revenue is derived from network activity. More cost savings 
are gained from online activity. Today this is no longer headline news 
but a real fact of life for business and government alike.
    We all recognize that an organization cannot function properly, 
effectively, successfully, competitively or legally without sound 
financial management processes and systems. A business cannot function 
if it does not continually know the status of money coming in and money 
going out and who it touching the money. The same has become true for 
network activity and the increasingly valuable and critical information 
that flows through the network. Even today, discussions of corporate 
network security issues are delegated down from corporate management to 
the IT department. Recent reports by the GAO on the status of 
government network operations reveal a similar problem. We believe that 
a healthy dialogue between senior government officials, corporate CEOs 
and Boards of Directors, academia and others is required if these 
issues are to be appropriately addressed and resolved.
    As a vendor of security technology and solutions, Securify of 
course stands to benefit from spending on security by business and 
government. Securify is not here today to recite the latest statistics 
on the number of attacks and threats and their cost to business and our 
economy. Frankly, the damage done by overt activity is overshadowed by 
the costs resulting from poorly managed networks.
    Securify advocates the adoption of the proactive and continuous 
approach of verification. It is simply good business and trustworthy 
government. One cannot manage what they do not measure. If one does not 
have a network security policy in place and if one does not continually 
measure the actual activity on the network against this policy, then 
one will never know if they are secure. As a result the network is 
unreliable and it cannot ensure privacy, security, and integrity.
    It is important to note that the Internet was designed some thirty 
years ago by collaboration between government, industry and academia. 
The Internet was designed to be an open medium for sharing information. 
Security and commercial activity were not a part of the original 
programming. It is important to recognize this plain fact. Now that we 
are all dependent on the Internet and computer-based communications we 
need to take some new action to make the Internet strong enough.
    Action includes increased information sharing and analysis within 
industry and government. Action includes adopting new technologies and 
business practices. Spending on security has not really diminished in 
the current economic climate. A recent survey of the chief information 
officers of the Fortune 100 reported that security spending is the last 
item to be cut from an IT budget. This may be stating the obvious. One 
does not cut what protects one's assets. What is not so obvious is that 
security spending has increased in recent years but no one really knows 
how effective those investments have been.
    If one can start from the first point of a verified network then 
the owner and operator of that network has the ability to continually 
ensure that it is functioning within expected parameters. They can 
track activity and correct errors and analyze historical records for 
improvement and modification. Results of this include greater 
reliability (i.e., less network downtime), privacy assurance (i.e., one 
has the ability to determine if the set privacy rules and practices are 
being applied properly and followed) and greater security (i.e., one 
can track deviations and anomalies in real time across all networks).
    This is not some sort of big brother technology. It is a business 
tool. Just as a senior management team and a board of directors must 
know if there is a misuse of funds or property or some sort of illegal 
activity taking place inside their company, they must have the tools 
and ability to detect and mitigate the same sorts of unauthorized 
activity in the digital world. Such a tool provides for transparency in 
the operation of a business. Without it truly nefarious activity would 
be able to flourish and do so unchecked as no one would be readily able 
to detect it or mitigate it.
    By using SecurVantage our customers immediately see unauthorized 
activity such as an employee using a file server to transmit sensitive 
data to a competitor. Employees and consultants use a network and its 
resources to run gambling and pornography businesses. Many misuse their 
access to peruse parts of the network they don't need to see or should 
not gain access to. These are just a few examples. But they easily 
illustrate the costs of misuse of a network. From just the cost control 
perspective, network misuse increases operating costs. Why should a 
company pay for more bandwidth, energy, equipment or technical support 
than it has to in order to do its business? Again, security is really 
about running an organization correctly and effectively. It is not 
simply a matter of preventing attacks or locking secrets away. At some 
point, financial audits are less than complete if a company's network 
security vulnerabilities and practices are not reviewed and discussed, 
especially for certain types of firms. Any company involved in an 
acquisition today would want to investigate the target company's 
network security practices as an ordinary due diligence item.
   What This Means for the Public Policy Landscape: New Activity for 
                             Policy Makers
    The Administration recently announced its intention to change the 
approach of government on managing security and critical infrastructure 
policymaking functions. A fresh approach that accounts for the 
increasing significance of the issues is most welcome. Securify is 
involved in many government and industry groups. From the G8 to the 
OECD to the Council of Europe to the US Congress to the European 
Commission to the Japanese Government, there is, government driven 
activity. From the Global Business Dialogue on Electronic Commerce 
(GBDe), to various industry trade associations to the newly created 
information sharing and analysis centers (ISACs) for key industry 
sectors (e.g., IT, transport, energy, finance), there is increasing 
senior executive level attention to these issues.
    10
    Industry remains sensitive to control of technical standards and 
open, global markets. Governments remain interested in setting some 
parameters for best practices and liability for criminal activity. Some 
in industry fear sharing information in industry groups as an exposure 
to one's competitors and to attackers. Some in industry fear sharing 
information with government will lead to an unauthorized disclosure and 
possible public embarrassment and perhaps litigation. Multinational 
companies and some governments wonder how information sharing and 
analysis can cross borders when trust between parties may not be 
sufficient to address national security and espionage concerns. Many 
government officials and Members of Congress are concerned about 
foreign ownership of sensitive technologies developed here in the 
United States (e.g., Verio-NTT, VoiceStream-Duetsche Telekom, Silicon 
Valley Group-ASM Lithography (ASML), Lucent-Alcatel).
    Law enforcement of course needs to have lawful access to data. 
Cooperation between governments and companies across borders is 
critical. As information sharing and analysis cooperation between 
government agencies and industry groups grows in the US, we will need 
to focus on the issue of sharing across borders. This is not a radical 
idea. Indeed, we can learn from our past.
    Some sixty-five years ago academics, mathematicians, government 
intelligence specialists, cryptographers, chess masters, and others 
from several countries quietly

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