Commerce security under Daley a ‘joke’

October 17, 2000

WASHINGTON — When Al Gore’s campaign chairman, William Daley, took
over the reins at the Commerce Department more than three years ago, he
came under immediate pressure to tighten security in the wake of reports
of major security lapses, including loose handling of classified
information, at the department.

The problems came to light during congressional investigations of
former Commerce official John Huang, a convicted Clinton-Gore
fund-raiser with close ties to Beijing.

In 1997, a special security task force recommended sweeping
improvements in the way the department handles employee security
clearances and classified information. In a July 1997 internal memo,
Daley agreed to make the recommended changes.

But few of the changes have been made, and some of the money budgeted
for fixes has been “wasted” by the department’s security office on
employee retreats, seminars and outside consultants, security officials
told WorldNetDaily.

“Daley agreed to the security improvements, but they never happened,”
said a former Commerce security specialist. “He just paid lip service to
the recommendations.”

“Security there is a joke,” said another official who also wished to
go unnamed.

In fact, a secret report by the department’s inspector general takes
the security office to task for failing to carry out many of the
security fixes, citing several continuing “problems.” WorldNetDaily
obtained a copy of the March 1999 report, which still has not been
cleared for public release.

The security office is run by David Holmes, the former top Secret
Service agent for Gore’s White House security detail. In February 1998,
Daley installed him in the newly created position of deputy assistant
secretary of security to “reorganize” the office.

“We found problems with the office of security’s planning for the
reorganization and communications with the field units,” the inspector
general’s report said. “We also found several problems in the areas of
information technology management and systems security.”

In 1997, the Senate Governmental Affairs Committee criticized
Commerce for letting Huang keep his top-secret clearance after he left
the department in 1996 to raise funds in the Chinese-American community
(as well as overseas, it turns out) for the Democratic National
Committee.

The Senate panel also questioned whether Huang, a China-born
immigrant who was spared a full background check, shared classified
information with China through his former employer, the Lippo Group, and
whether he was forced to return all classified documents, as required,
when he left the government.

The “former political appointee brought a great deal of attention to
the management of security at the Department of Commerce,” the
still-secret report said. To “restore any loss of confidence in the
department’s security program,” the task force recommended revising the
way it handles security clearances and classified materials.

Before issuing security clearances, supervisors are now supposed to
justify an employee’s “need to know.” And political appointees are no
longer supposed to be granted clearances willy nilly.

But those rules haven’t been followed, security officials say.

“Holmes allows every political appointee who comes in there to get
clearance, regardless of derogatory information (in their background
files), and there are quite a few who came over from the White House to
Daley’s office with problems,” said a former official who worked under
Holmes.

“Once we started digging into these clearances, we found it’s just a
mess,” the official said. “People have access, but don’t have
clearances. People have clearance but have no need to have access.”

Look no further than new Commerce Secretary Norman Mineta, sources
say.

Mineta, the first Asian-American member of a U.S. Cabinet, “is now
accessing sensitive compartmented information and has no clearance to
view it,” said a security specialist. SCI contains code-word information
and is a level of classification higher than top secret.

The task force also recommended that Commerce do a better job of
accounting for classified documents, tracking their whereabouts in the
building, and making sure they don’t leave the building with employees.

“At least annually, and also upon departure, OES [Office of Executive
Support] should notify employees of the documents the log indicates are
in their possession and should require them to certify their disposition
(destroyed, retained, returned, reassigned),” the 1997 task-force report
said. “Employees should not be cleared to leave employment if any
discrepancies are outstanding.”

A lot of back-dating

“That was never done, at least not on a routine basis,” a former
security specialist said. “People would depart and then we’d find out
afterwards that they left, and then we would have to back-track and see
if forms were signed, which in most cases they were not. The records
down there will show a lot of back-dating.”

Even in the rare instances where there have been debriefings, the
forms that departing employees signed certifying they no longer
possessed any classified documents are “a joke,” one security official
said.

“You could put them in your attache case and take them home with you,
and all you have to do is say, ‘Yeah, I destroyed them.’ Then you just
sign and date (the form), and that’s it — you’re out the door,” the
official said.

“Instead of accounting for them, they just trust people,” the
official added. “No one asks how they destroyed them. Did they shred
them? Burn them? Flush them down a toilet?”

And Commerce only tracks secret and top secret information. It
doesn’t control documents marked “confidential,” yet such information
“would give a foreign power information they don’t need to know,” the
official said.

Senate investigators revealed that Huang routinely carried documents
in a brief case across the street to the Willard Hotel, sometimes on
days he got CIA briefings. Fax records show he sent documents from a
hotel office to China and Indonesia.

Huang wasn’t the only official who walked out of Commerce with
documents that should have been kept locked in office safes.

Commerce special counsel Ira Sockowitz, who worked for Gore during
the ’92 campaign, took 136 files totaling 2,800 pages out of his safe,
put them in a box and walked out the door when he left the department
during the ’96 campaign.

The trove contained classified data vital to U.S. security — and
valuable to rival nations like China.

Sockowitz, who held a top secret clearance, walked out with documents
on satellite encryptions, remote sensing satellites, presidential
waivers for satellite launches and space commerce, as well as country
files on China, Russia and India.

Encryption data are used by U.S. intelligence to keep government
communications — including instructions sent to satellites or nuclear
missiles — secret.

William Ginsberg, the late Commerce Secretary Ron Brown’s chief of
staff, kept papers detailing state secrets, including information on
satellite surveillance, intelligence personnel and capabilities, and
notes of a National Security Council meeting, among other classified
information.

Alarming as these security breaches are, employees can
still walk out of Commerce with classified documents,
according to Donald Forest, who until recently headed
Commerce’s China desk.

“When department employees take classified documents
out of the building, do they have to clear it with
anyone? Do they have to show anyone what it is they’re
taking out of the building?,” Forest was asked by
Judicial Watch in a deposition taken last year.

“No,” Forest replied, “not to my knowledge.”

Even though Forest has left the department, his
security clearance for top-secret and
sensitive-compartmented information has not been
canceled, sources say. It’s still active.

“He was never out-processed,” a former security
specialist said.

Found in the basement

Former security officials also complain that security containers, or
safes, storing classified information are not properly tracked.

“No one controls the hundreds of containers out there that may or may
not have classified material,” one official said.

A container being scrapped, for instance, was recently found in the
basement of the Commerce building with classified material still in it,
department sources say.

Forest also was asked if he knew of any changes in security
procedures since 1997, when the Huang-related lapses came to light.

“I’m not aware of any,” Forest testified, except for the recent
distribution to individual offices of “shredders to destroy classified
documents.”

Security officials say that Daley, despite his public vows to tighten
security, is not security-minded.

A recent eye-opening statement by Daley during a TV interview bears
that out.

“In the three years I’ve been at Commerce, one of the things I’ve
noticed is there is an incredible amount of material that is classified,
way beyond what is necessary,” Daley said in a June 8 appearance on CBS’
“Face the Nation.” “There is just way too much material that’s
considered classified.”

“People think these are the great national security (secrets),” he
added. “But I think security and the classification of material is
something that’s got to be looked at by the government.”

Daley’s comments caused many jaws to drop among the department’s
security and counterintelligence agents.

But they say his views help explain why Holmes, Daley’s hand-picked
security chief, hasn’t implemented many of the 1997 upgrades for
protecting classified trade and military secrets.

In fact, some say the anti-security politics can be traced back to
the vice president’s office.

“Holmes is a trusted Gore guy. He used to be his detail leader. The
security interview panel passed on him when he first applied for the
job. Gore made sure he was hired through Daley’s direct appointment,”
said one former Commerce security official. “He was given to Daley to
mitigate these security changes so they wouldn’t slow the conduct of
political business and they could get whomever they needed in and out of
the Office of the Secretary and ITA (International Trade
Administration),” where Huang worked and many other Chinese-Americans
with classified clearance still work.

The official says Holmes, who is said to still be close to Gore, was
able to keep Commerce clear of a congressional investigation of lax
security at federal buildings. Agents for the General Accounting Office,
which conducted the undercover sting, were able to penetrate 19
government installations using fake law-enforcement badges.

Virginia Beach retreat

“Even the big security sting conducted by GAO this year did not hit
Commerce, because of Holmes’ connections,” the Commerce official said.
“He claimed he had trained many of the agents who worked the sting.”

But GAO spokesman Jeff Nelligan argues that the
watchdog agency didn’t do a sting at Commerce because
it was too far down the list of targets.

“Our success rate was just so high, there really
wasn’t any need to continue down the list,” Nelligan
says.

GAO put the Labor and Transportation departments ahead
of Commerce. Both those agencies were stung.

Nelligan confirmed that Robert H. Hast, the head of
the GAO office that conducted the special
investigation, is a former Secret Service agent and a
“contemporary” of Holmes.

And the superviser in charge of the sting, who wished
to go unnamed, says he is a former Secret Service
agent and friend of Holmes. But he says he didn’t
consult with Holmes about the operation.

Holmes’ office got its own line item in Commerce’s budget starting
with fiscal year 1999. Congress set aside $8 million in fiscal 1999 to
help Commerce reorganize the office and beef up security.

But security specialists who worked in the office say at least
$100,000 of the money has been “wasted” on retreats, training seminars
and contracts with consultants.

“Money Congress gave them after the John Huang situation to beef up
security and consolidate operations was pretty much squandered by Holmes
and other directors going to these high-priced executive-training
courses in West Virginia, which can run as high as $5,000,” said one
former official.

And several employee retreats and seminars, costing up to $30,000
each, proved to be “just a waste of time and money,” the official said.

For example, Holmes took the security staff on a week-long retreat in
Virginia Beach, Va., in May, and gathered them together again in July
for a two-day seminar on team communication in Gaithersburg, Md.

“They also hired (consulting firm) Booz-Allen & Hamilton to tell us
stuff we already knew, rather than spend the money on actually beefing
up security,” the source said. “They could have hired more people to do
background checks (for security clearances) with that money, or put in
place an electronic system for tracking all security containers in the
department.”

“One of the biggest problems after Huang was the tracking of these
documents and determining who got to see them,” the official added.

The secret inspector general’s audit cited staffing shortfalls in the
security office which have led to deficiencies in building security,
classified-information security and counterintelligence.

Part of the problem is that security personnel are constantly pulled
off their core duties to travel with the secretary as his bodyguards on
the many campaign-related trade junkets, including ones to China, that
this administration has led.

A table in the secret report shows how many times 11 eligible
security agents and managers had to drop their regular duties to serve
on Daley’s protective detail.

“In the period from September to December 1998, much of the
protection burden fell on four special agents who have worked 20
weekdays or more on protective detail,” the report said. “Because there
are so few staff eligible for protective detail, the office of security
countermeasures (in which two information security specialists are
employed) and the office of security operations (in which the building
security coordinator is employed), consistently bear the greatest
responsibility for executive protection.”

“To the extent that they are used repeatedly,” the report concluded,
“the special agents’ other responsibilities receive lower priority and
are delayed, creating disruption to their OSY (office of security)
units.”

Though he agreed to do so, Commerce press secretary Morrie Goodman
still has not responded to requests made last month to review the
security office’s reorganization plan and budget. Phone calls to Holmes’
office were not returned. Calls to the Gore campaign also were not
returned.

Daley left Commerce July 15 to run Gore’s presidential campaign. In a
Gore White House, sources say he’d be in line for a top post, such as
chief of staff. In fact, when Gore called to ask him to take over his
campaign, Daley reportedly thought for a moment that he might be asking
him to be his running mate.

Responding to concerns about the Wen Ho Lee nuclear case, Daley
assured the public in September that “our secrets are protected.”

“Americans have no reason to fear anything right now,” Daley told
“Face the Nation” host Bob Schieffer. “We’re in great shape from a
national security perspective.”