The CIA Crosses Over

Even as a Congressional commission investigates the agency's cold war incompetence, the CIA has expanded a high-risk plan to spy on U.S. economic competitors. our exclusive report exposes this secret program.

What is a NOC?

For resources on the CIA, see our resource guide.

Robert Dreyfuss' revelation that the CIA is engaged in economic espionage ("Company Spies," June 1994) was covered extensively in Japan, but so far no American newspaper or network has touched the story. Now, Dreyfuss offers more proof.

William Casey's ghost haunts the Central Intelligence Agency.

That ghost, a Central Intelligence Agency program revived by the late director in the 1980s, marries the spy agency to corporate America in order to gather intelligence on economics, trade, and technology. Now that the Cold War is over, agency officials have latched onto the idea of collecting clandestine economic data to justify the CIA's inflated budget, even as the CIA's competence--indeed, its very existence--is being questioned.

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And dozens of U.S. corporations--from Fortune 500 companies to small, high-tech firms--are secretly assisting the CIA, allowing the agency to place full-time officers from its operations divisions into corporate offices abroad.

Serving under what is referred to as "nonofficial cover" (NOC), CIA officers pose as American businessmen in friendly countries, from Asia to Central America to Western Europe. There, they recruit agents from the ranks of foreign officials and business leaders, pilfer secrets, and even conduct special operations and paramilitary activities.

The story of the CIA's NOC (pronounced "knock") program, revealed here for the first time, raises serious questions about the CIA at a time when the agency is already beset by scandal. Yet the NOC program has grown to its present bloated size without any public scrutiny--and with no open discussion within the companies whose interests could be harmed by a spy scandal.

NOC, NOC! Who's there?

One hundred and ten CIA officers currently serve as NOCs, according to a recent CIA retiree. Some of the most familiar firms in America's corporate hierarchy, CIA sources report, have sponsored NOCs overseas: RJR Nabisco, Prentice-Hall, Ford Motor Co., Procter & Gamble, General Electric, IBM, Bank of America, Chase Manhattan Bank, Pan Am, Rockwell International, Campbell Soup, and Sears Roebuck.

In some cases, flamboyant conservative businessmen like Ross Perot and the late Malcolm Forbes have actively cooperated with the CIA in stationing officers worldwide. In other cases, obscure U.S. companies doing business abroad--such as a tiny Texas firm that deals in spare tractor parts in Latin America, cited by a former CIA officer--have taken part in the NOC program. Shipping lines, mineral and oil exploration firms, and construction companies with international operations, like the Bechtel Corp., often house NOCs.

By joining the CIA in clandestine activities, a company tacitly accepts that some of its employees could routinely break the law in another country and, if exposed, embarrass the company and endanger its other overseas employees.

Unlike most CIA officers, who are stationed abroad disguised as State Department employees, military officials, or other U.S. government personnel attached to an American embassy, NOCs operate without any apparent links to the U.S. government. They are able to approach people who would not otherwise come into contact with a U.S. embassy official. The CIA's operations within terrorist, drug trafficking, and arms dealer networks often involve NOCs, who can move more easily in such circles without raising suspicion.

In recent years, according to several CIA sources, NOCs have increasingly turned their attention to economics. Using their business covers, they seek to recruit agents in foreign government economic ministries or gain intelligence about high-tech firms in computer, electronics, and aerospace industries. They also help track the development of critical technologies, both military and civilian.

NOCs frequently stay 5, 10, or more years in one place. During that time, the NOC is truly "out in the cold." Their contacts with control officers in the CIA station are strictly limited; they do not have access to embassy files; and they must report through secret communications channels and clandestine meetings.

"As a NOC officer you are truly alone," says John Quinn, who spent much of the 1980s as a NOC in Tokyo. "The sense of isolation and loneliness is difficult to describe to those who have never experienced it."

Because NOCs do not have the diplomatic immunity that protects CIA officers operating under embassy cover, if they are exposed they are subject to arrest and imprisonment--and they can be executed as spies.

How did we get here?

The NOC program is one of the CIA's most sensitive and closely held secrets.

Former CIA Director William Colby refuses to comment on the NOC program. "I better stay off of that. It's a very complicated subject. In deference to my old colleagues, the less chatter about that, the better." But, if American corporate executives do lend their overseas offices to the CIA, Colby adds, "They have my strong applause. They only do it because they're patriots."

The CIA has used private U.S. companies for cover overseas since its inception in 1947. "When the agency was being put together in the late 1940s, they made pretty extensive use of nonofficial cover," says Admiral Bobby Ray Inman, a former CIA deputy director.

Since it was cheaper to station spies in the U.S. embassy, cost-cutting led the CIA to scale down the number of NOCs by the 1960s. The program shrank further after ITT's involvement with the CIA in the 1973 military coup against Salvador Allende's government in Chile was revealed. "That clearly scared a lot of U.S. corporations," Inman says.

But events in the 1970s revived the use of NOCs. Investigative journalists and CIA defectors like Philip Agee publicized the fact that a cursory study of the State Department roster could identify CIA officers in any embassy, and publications like Counterspy even named individual CIA personnel.

At the same time, the U.S. government cut the number of embassy personnel worldwide. "With them, they also took out the cover billets for the clandestine services," Inman says.

When William Casey took over the CIA in 1981, one of his decisions, according to Inman (who served as Casey's number two), was to beef up the NOC program. Because of the closure of the U.S. embassy in Tehran in 1979, the CIA had virtually no presence in Iran. A NOC program, Casey reasoned, would at least have given the CIA a toehold inside the country.

Richard Kerr, another former deputy director of the CIA, says that in the 1980s Casey was also concerned about economic intelligence, technology, and trade secrets. That gave him another reason to expand the NOCs.

"There was an awful lot of technology theft. Tech transfer was the big thing," says Kerr. "People, in effect, stealing U.S. technology--either the Soviets or the Iraqis or the Iranians, or in some cases the Japanese."

According to a former high-ranking CIA operations officer, Casey tripled the number of NOCs in 1986. "Casey believed that economics was going to be more and more a part of the CIA's mission, including learning about other countries' economic plans and intentions," he says. "State Department pinstripers couldn't do that job. They simply couldn't associate easily with the commercial people in a country. So Casey ordered the CIA to refocus itself on economic issues. And that meant more NOCs."

It's a hard NOC life

Putting aside, for a moment, whether we should engage in economic espionage at all, perhaps the most damaging indictment of the NOC program is that, in the estimation of many of the people who are risking their lives for the program, it has wasted millions of dollars--while producing precious little of real value to decisionmakers.

Interviews with former CIA officers who have served overseas and with midlevel and senior retired CIA officials reveal that the NOC program is beset with bungling, corruption, and poor tradecraft. The program is so badly run that NOCs are resigning from the CIA in droves, many after serious mistakes by the CIA that could have resulted in their exposure, arrest, or worse.

Tom Darcy is a former CIA officer who served for five years as a NOC in Western Europe. Asked whether the CIA's clumsy management has caused any NOC to land in a prison overseas, Darcy says, "Yes. More than once. Or die."

"The NOC program is horribly mismanaged," says John Quinn. Though it costs hundreds of thousands of dollars to set up a NOC in an overseas corporation, CIA officers serving under embassy cover are rarely properly trained to work with NOCs. "There is a lot of suspicion and animosity between inside officers and NOCS," Quinn adds.

When errors involving the CIA program do come to light, CIA headquarters invariably corrects the problem in a way that favors the inside officers, not the NOCs. A CIA officer says, "Just like the way the Catholic Church protects priests accused of sexual abuse or wrongdoing, headquarters will always cover up for the division chief, the chief of station, or the deputy chief of station--and they will discipline the NOC."

In South America, for example, large sums of cash destined for a NOC were siphoned off by the CIA's station chief, who escaped without reprimand.

In that case, the innocent NOC's career was severely damaged. But Quinn and other former NOCs say that embezzlement is also frequent among NOCs, who often handle large amounts of cash without any real oversight.

Worse, the CIA pressures NOCS to produce intelligence, so their information is often questionable. "One NOC in Tokyo would fabricate intelligence reports based on what he thought the embassy officer wanted to hear," says Quinn.

A case history

Perhaps the most interesting NOC case history uncovered by this reporter unfolded in the late 1980s in Tokyo.

Japan has been a major theater of CIA operations since the United States' post-World War II occupation. During the Vietnam War, the CIA expanded its presence in Japan, with additional focus on the country's trade and political relations with the Soviet Union, China, Cuba, and other communist powers. According to a former CIA officer, the CIA's Tokyo station was one of the largest in the world.

Casey saw the Japanese threat as an economic one--and the NOC program as his vehicle to penetrate Japan's scientific, technological, and commercial institutions. Thirteen NOCs were stationed in Japan in the mid-1980s, including John Quinn.

According to him, one CIA target was a leading Japanese high-technology firm. "They wanted to know the structure of the company inside, who were the bigwigs, who were their policymakers, where was their R&D section, what was the R&D section working on, what was their budget, what were the critical technologies they were developing."

But a series of clumsy CIA mistakes caused the NOC program in Japan to self-destruct in 1988:

  • The CIA's Tokyo station chief installed a branch chief who "made it clear that he was not enamored of working with NOCs," says Quinn. The branch chief questioned expense accounts and ordered one group of NOCs to report another's petty infractions. Not surprisingly, the NOCs' morale plummeted.
  • The CIA's "glorious ineptitude," as another CIA officer calls it, alerted Japan's counterintelligence unit, the Public Security Investigative Agency (PSIA), that the CIA was seeking to penetrate its commercial sector. During a series of regular, friendly liaison meetings between U.S. and Japanese intelligence officers in Tokyo, the PSIA politely suggested "certain businessmen" be reined in. "But we, in our dullness, failed to respond," says the CIA officer.
  • The communications and electronics equipment the CIA gave NOCs to allow them to maintain contact with the U.S. embassy was made in Japan. "They didn't realize that the Japanese had built most of the stuff and knew its operating characteristics, so the systems weren't secure," says a senior CIA officer.
  • CIA embassy officers routinely took taxis to meet NOCs, taking few precautions not to be seen. All of this was duly noticed by Japanese security people, who kept careful records on meetings held by these "businessmen."
Finally, exasperated, Japanese PSIA officers trashed the homes and offices of several NOCs, stealing communications equipment and wreaking havoc. Their actions, a CIA officer says, were meant to send a message to the CIA that such activity would not be tolerated. The CIA quickly withdrew at least 10 NOCs, a fiasco that cost the agency millions of dollars in investments in NOCs, one of whom had been in place for 15 years.

Let's get smart about intelligence

Today, the CIA is trying to bridge the chasm between Cold War action and 21st-century diplomacy. Pressure is mounting for a sweeping, "zero-based" review of the entire $28 billion U.S. intelligence community. In response to the scandal after the arrest of CIA spy Aldrich Ames, Congress has appointed a blue-ribbon commission to review the CIA's operations by 1996.

Though the CIA is being downsized and there are calls to abolish it, there are also calls from CIA insiders, some congressional Republicans, and a few outside conservatives to expand the CIA's use of spies--known in the trade as "human intelligence" (humint)--at the expense of techint, or intelligence gathered by satellites, listening devices, or other technical means.

Robert Steele, a former CIA officer who has put forward a number of otherwise thoughtful ideas about reforming the CIA, recently called for a doubling of the agency's clandestine espionage and for placing all of the new spies under "nonofficial cover."

Steele's ideas may find a receptive audience on the Hill, following the conservative shift after November's election. Soon-to-be Speaker of the House Newt Gingrich, the Republican from Georgia, joining the debate over the CIA's future, cites the "need for stronger human intelligence"--i.e., more spies. And Larry Combest, a Texas Republican who could become the chair of the House Intelligence Committee, has said that he supports suggestions to increase the CIA's budget.

Critics and CIA loyalists alike contend that the vast bulk of economic information necessary for government decisionmaking can easily be obtained from newspapers, magazines, trade and technical journals, trade shows, and conventions. Most of the CIA's economic spying produces little or nothing of real value for America's policymakers.

Yet the spiderlike agency continues to weave tangled webs that ensnare its officers as well as the foreign companies they seek to entrap. It would be an irony indeed if the current wave of CIA reformism results in a decision to maintain--or even expand--the NOC program and its cousins.

Robert Dreyfuss is a Washington, D.C., freelance writer.

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