Dirtier than Watergate

The Reagan-era espionage system that has managed to stay under the radar.

It was described as dirtier than Watergate, and involved US government dealings with Iraq, Libya, Korea and even the late British publishing tycoon Robert Maxwell. The story is deep, dark and complex; a web of strange dealings and dubious characters, it implicates wealthy arms dealers, Israeli intelligence services, the Soviet KGB, MI5 and the CIA. But unlike Watergate, this scandal, from a particularly dark chapter in American history, has appeared in no Hollywood film and is yet to reach a satisfying conclusion.

It began in the late 1970s, when the Washington-based software developer Inslaw pioneered people-tracking technology, designed to be used by prosecutors to monitor case records. Known as the Prosecutor's Management Information System (PROMIS), the software was developed under grants from the US department of justice. The US government, as it helped fund the creation of PROMIS, had been licensed to use the software on condition that it did not modify, distribute or create derivative versions of it. The government, however, did not stick to this agreement.

Under the Ronald Reagan administration's covert intelligence initiative known as "'Follow the Money", the US National Security Agency (NSA) misappropriated PROMIS for sale to banks in 1982. The version of PROMIS sold by the NSA had been "espionage-enabled" through a back door in the programme, allowing the agency to covertly conduct real-time electronic surveillance of the flow of money to suspected terrorists and other perceived threats to US national interests.

A letter from the US department of justice in 1985, later obtained by Inslaw, documented more plans for the covert sale and distribution of the espionage-enabled version of PROMIS, this time to governments in the Middle East (which would surreptitiously allow the US to spy on foreign intelligence agencies). The letter outlined how sales of the software were to be facilitated by the late Saudi billionaire Khalid bin Mahfouz and the arms dealers Adnan Khashoggi and Manucher Ghorbanifar. PROMIS should be delivered without "paperwork, customs, or delay", it stated, and all of the transactions paid for through a Swiss bank account.

In the years that followed, friends of then attorney general Edwin Meese, including a Reagan associate, Dr Earl Brian of the government consultancy firm Hadron, Inc, were reportedly allowed to sell and distribute pirated versions of PROMIS domestically and overseas. As a House judiciary committee report found in 1992, these individuals were apparently permitted to do so "for their personal financial gain and in support of the intelligence and foreign policy objectives of the United States".

Brian, who was later jailed for four years on an unrelated fraud charge in 1998, has since denied any association with the Inslaw case. According to the former arms broker and CIA "contract operative" Richard Babayan, however, he was instrumental in selling PROMIS to the governments of Iraq, Libya and Korea. When Brian was unable to market PROMIS further, it is claimed that, with the help of Rafi Eitan, a high-ranking Israeli intelligence officer, the British publisher Robert Maxwell was recruited to assist.

In a sworn affidavit, the investigative author Gordon Thomas recounts how Eitan told him Maxwell alone sold over $500m worth of espionage-enabled versions of PROMIS – including licences to the UK, Australia, South Korea, Canada and the Soviet KGB. The British counter-intelligence agency MI5, according to Eitan (who himself was an adviser to the UK secret service MI6), used PROMIS to track members of the Irish Republican Army (IRA), as well as Irish republican political leaders including Gerry Adams.

Inslaw alleges the US government, by selling PROMIS to other governments around the world, engaged in what equates to "multibillion-dollar theft". This claim was supported by two separate courts in 1988, which ruled that it "took, converted, stole" PROMIS from Inslaw "through trickery, fraud and deceit". Three years later, however, a court of appeal overturned both rulings on a "jurisdictional technicality" after pressure from the federal justice department.

Now more than two decades since he pioneered PROMIS, the Inslaw president Bill Hamilton today believes the story illustrates an enduring, fundamental problem at the heart of the US justice system. "[It] chronicles the continued inability of the US government to enforce federal criminal laws in cases involving national security issues, or even to render ordinary civil justice," he says. "National security appears to suspend the checks and balances built into the system of government in the United States, to the detriment of the citizens."

Some, including the US government, have tried to dismiss the Inslaw saga as conspiracy. But a message relayed to Bill Hamilton and his wife from the former chief investigator of the Senate judiciary committee, Ronald LeGrand, seems to confirm that the strange PROMIS affair – which remains unresolved – is much more than just a case of chronic paranoia.

"What Mr and Mrs Hamilton think happened, did happen," LeGrand wrote, conveying information he had received from a trusted government source. "The Inslaw case is a lot dirtier for the Department of Justice than Watergate was, in both breadth and depth. The Department of Justice has been compromised in the Inslaw case at every level. "

Ryan Gallagher is a freelance journalist based in London, currently working for the Frontline Club. His website is here.

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Why Russia holds the key to resolving the North Korea crisis

China is propping up North Korea’s economy, but it seems to get little influence in return.

For more than half a century, China has seen North Korea as a dangerous irritant as much as an asset. It might be useful for keeping the United States off guard, and regarded as an essential buffer by the military establishment, but China would happily ditch it if there were a better option.

The North Korean regime has tended to be characterised as uniquely irrational and unpredictable. From its perspective, however, its behaviour makes eminent sense: in fact, its argument for developing a nuclear capability closely echoes the rationale of the great powers. It has no declared intent to launch a first strike, but as long as others have nuclear weapons, North Korea reasons they serve a deterrent function. The regime also argues, as others have, that there are associated benefits with civil nuclear power.  

The long history of North Korea’s nuclear programme follows a recognisable path, previously trodden by Israel, India and Pakistan. It goes from the ambition, formed in the mind of North Korea’s founding dictator, Kim Il-sung, through the long years of a clandestine programme, to the gradual revelation of a reasonably mature, if relatively small, nuclear capability. Signalling is also an element in deterrence. The regime is certainly unpleasant and destabilising, but it is a mistake to imagine that there is no clear purpose and no plan.

The dynasty began life as a Soviet puppet, sandwiched between a powerful USSR and a weak China. But from the start, Kim Il-sung’s muscular nationalism and concern for regime survival suggested that he was unlikely to be a docile dependent of either. His attempt to unify the peninsula by force in 1950 led to a bloody war in which Mao Zedong was obliged to come to his rescue. In the course of that war, “fire and fury” did indeed rain down on North Korea: the US dropped as much ordnance on North Korea as it had during the whole of the Second World War Pacific theatre, including the carpet bombing of Japan. To this day, any building site in Pyongyang is likely to turn up some unexploded ordnance. North Korea was born in a rain of fire, which it has incorporated into its national story.

The regime succeeded in maintaining relations with both its patrons through the dramas and tensions of the Sino-Soviet split to the end of the Cold War. But as Kim Il-sung contemplated the future survival of his regime, he concluded that a nuclear programme was essential insurance, both against his major enemies (the US and South Korea) and any territorial ambitions or excessive demands from China or Russia.

China was and remains North Korea’s major ally, but that does not make North Korea obedient. Their bilateral history is a story of growing defiance and increasing alienation: Kim Il-sung ignored Mao Zedong’s attempt to dissuade him from naming his eldest son, Kim Jong-il, as his successor. He had visited Beijing once a year and had promised that his son would follow suit, but Kim Jong-il only visited Deng Xiaoping’s China once, in 1983. His next visit came three years after Deng’s death, a death for which Kim had offered no formal condolences, as even the most minimal protocol required. 

On that visit, Kim heard the unwelcome news that China, already closer to the United States than he would have wished, was to open relations with his bitter rival, South Korea. When the third dynastic leader, the young Kim Jong-un, took power in 2011, relations with China slid further. Tellingly, Kim Jong-un has not visited Beijing at all, nor has China’s leader, President Xi Jinping, visited Pyongyang, although he has held four summit meetings with South Korea.

Kim Jong-un has made his defiance publicly evident. Not only has he chosen to test his missiles and weapons, but he has selected such highly sensitive moments as last year’s G20 summit in Hangzhou to do so.

China is propping up North Korea’s economy, but it seems to get little influence in return, and the value of the relationship has long been openly questioned by China’s foreign policy analysts. China has had little success in encouraging the regime to loosen controls on the economy and make limited market reforms.

 In the current crisis, China has consistently urged restraint, while co-operating with the tightening of UN sanctions. Beijing’s attitude, however, remains ambivalent: it doubts that sanctions will be effective, and is highly sensitive to US suggestions that Chinese companies that breach sanctions would be subject to punitive measures.  For China, the dangers of bringing North Korea to the edge of collapse are greater than the difficulties of seeking another solution.

Today, North Korea’s relations with Russia are warmer than those with Beijing and if President Trump is serious in his search for someone to solve his North Korea problem for him, he could do worse than to call his friend Mr Putin. No doubt there would be a price, but perhaps Trump would have less difficulty in appeasing Russia than in making concessions to Kim Jong-un. 

In July this year, China and Russia put forward a proposal that both sides should make concessions. North Korea would suspend its nuclear and its missile testing in return for a suspension of South Korea’s annual military exercises with the United States. Buried in the joint statement was the assertion that third parties should not negatively affect the interests of other countries.

Both China and Russia aim to reduce US influence in Asia, an ambition greatly aided to date by Trump’s withdrawal from the Trans-Pacific Partnership trade agreement, conceived as a vehicle of US influence; his treatment of long-standing US allies; and his decision to withdraw the US from the Paris agreement on climate change.

Today the US seems poised between demanding that China solve the North Korea problem and beginning a trade war with Beijing. China’s challenge on the Korean peninsula, always difficult, has grown even greater.

Isabel Hilton is the CEO of the China Dialogue Trust

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear