Testimony of F. Michael Maloof
Chief, Technology Security Operations
Defense Threat Reduction Agency
Department of Defense
Before the House Committee on Government Reform
24 June 1999
Mr. Chairman, Members of the Committee.
I am appearing today in response to a subpoena from the Committee.
My name is F. Michael Maloof. I am Chief of the Technology Security Operations Division in the Technology Security Directorate of the Defense Threat Reduction Agency, in the Department of Defense.
You asked that I address the Administration’s efforts to curb the flow of dual-use technology to China and efforts to safeguard U.S. facilities. You also asked for my testimony on intimidation or retaliation against government employees who have been involved in these policy areas and have expressed either reservations or opposition to Administration policies.
I’m not in a position to discuss the Administration’s efforts to safeguard U.S. facilities. However, I can address the issues of dual-use technology flows to China, and intimidation.
By way of brief background, Mr. Chairman, I have been with the Department of Defense since 1982. I have been a member of senior management in the Technology Security Directorate since the creation of the Defense Threat Reduction Agency last year.
Before that, I had been Director since May 1985 of Technology Security Operations in the Defense Technology Security Administration when it was in the Office of the Secretary of Defense.
The duties of my staff are to work with other agencies to monitor and act as a catalyst to halt the diversion of sensitive technology to proscribed destinations, their weapons of mass destruction and strategic conventional weapons development programs.
From the data collected and detailed analysis conducted relating to diversion activity, my staff determines what technologies are being targeted and by whom, and then identifies and develops policy issues, and appropriate responses.
In this connection, my office also works closely with the intelligence community and enforcement agencies.
This was the case during the Cold War period in which we were responsible for halting diversions of sensitive technologies to COCOM proscribed countries of the former Soviet Union and Warsaw Pact, as well as China.
One of our major cases during that period was the highly-publicized Toshiba case, in which the former Soviet Union illegally acquired militarily-sensitive embargoed technology used in manufacturing specially-skewed propellers to quiet submarines and thereby prevent their detection.
Our efforts not only included the detection of this development but, working with the governments of other COCOM members, we were able to stop further western assistance to that program.
During Desert Shield and Desert Storm, my staff, along with a Naval Intelligence Reserve unit assigned to our organization, identified, analyzed and sought to halt western technologies on which Iraq depended for its conventional and unconventional weapons development programs.
One of those cases involved uncovering the diversion of sensitive night vision devices to Iraq by a Dutch company. The timeliness of this discovery allowed for appropriate counter-measures to be developed and delivered to our troops on the ground prior to the start of Desert Storm. I like to believe that our efforts resulted in saving the lives of many of our troops.
Another case involved the ultimate seizure by U.S. Customs of a high temperature furnace which was about to be exported to Iraq. It was to be combined with a number of other uncontrolled furnaces to form a complex for the melting of materials essential for nuclear weapons development. After the Gulf War, this case served as a basis for expanding export regulations to include a "catch-all" provision for uncontrolled technologies with application for chemical and biological weapons development, and their delivery systems.
The duties of my office also include doing end-user/end-use checks for license applications, whether dual-use or munitions. We make every effort to apply analysis, information from the intelligence community and enforcement data to every application.
With this background, Mr. Chairman, it was natural for me in the early 1990’s to raise concerns with my management over what I would call the beginning of wholesale liberalization and decontrol of militarily critical technologies without the benefit of thorough strategic analysis. In my opinion, such sweeping initiatives made virtually irrelevant any analysis as to their strategic consequence.
Technologies included such areas as machine tools, high performance computers, telecommunications, propulsion for power projection, stealth and technologies with application for nuclear uses.
Even though we were undergoing a change in policy, it was apparent that it was designed to allow greater technologies to go to China. This policy change assumed a good end-user/end-use. In China, that was almost impossible to detail, since Chinese officials had placed a ban on U.S. officials from undertaking pre-license and post-delivery shipment checks for sensitive technology exports.
The previous policy, in coordination with the Joint Chiefs of Staff, had identified six special mission areas for which technologies for any one of them would be subject to close scrutiny, regardless of end-user and end use.
On a number of occasions, I had suggested to my management that a policy review of those special mission areas was necessary to update them and steer away from what I believe was a questionable end-user/end-use approach.
I also expressed concern many times to my Front Office about not escalating cases on which we initially would recommend denial in interagency appeal sessions. All that the other agencies had to do was wait us out, knowing that our Front Office would not escalate a serious case to higher level policymakers, and it would be approved.
In addition, I suggested on numerous occasions that we needed to undertake cumulative impact assessments of those technologies which had been approved to determine the strategic impact of those exports.
One of a number of such cases which manifested all of these concerns was the export in 1994 to China of a considerable number of controlled and uncontrolled machine tools from a McDonnell-Douglas facility in Columbus, Ohio. My concern here was over the potential for diversion of some or all of those machine tools, and that is exactly what happened. And because that case almost five years later still is under criminal investigation by the Justice Department, it would not be appropriate for me to go into detail of it here.
So it is not surprising that my management would regard me and my views on China as a, quote, "Cold War throwback who can’t reconcile himself to the inevitable easing of export controls," end-quote, according to the attached November 27, 1998 Wall Street Journal.
My concerns, however, were and remain over the strategic impact of these exports, not the commercial advantage they would give to certain companies.
I can only presume that it is this perspective which led to an open clash between me and my management over China, beginning in April 1998, over the Hughes-Loral satellite matter.
A New York Times article had detailed how the administration was allowing further space activities with China despite the fact that a grand jury was meeting concerning the possible illegal release of sensitive technical data to the Chinese.
The technical data involved assisting China in solving certain guidance problems of rockets used to orbit commercial satellites.
On the day of the New York Times piece, I received a call from Assistant Secretary of Defense for Public Affairs, Ken Bacon. He said he wanted to know what was behind the story, that the Secretary of Defense had been having breakfast with reporters and was "blindsided" by events surrounding the story. I gave him a brief summary.
He called back later to ask for more details and I offered to go to his office to show him what we had on the case as background for the Secretary. He accepted. I also informed my front office.
The initial Front Office reaction was that no materials were going to be provided to Mr. Bacon. Later, Mr. Bacon called my Front Office and it was agreed that my boss would take the meeting with Mr. Bacon, but I was not to accompany him. My boss said that he had to inform Mr. Bacon of events which were occurring on this case, but he would not elaborate.
I then received a call from an individual in C3I inquiring about the background of the news story. That individual did an electronic mail summary to her boss. My Front Office obtained a copy. I was called in, asked why I had discussed the issue on something which I was not working.
I corrected my bosses and informed them that we had been involved earlier in the process and I had some ten volumes of binders from the exporters in my office to prove it. The immediate response was disbelief and a further admonition that I had not been working the issue.
This comment was my first indication that issues relating to satellites were being handled, but only by a few people in our entire organization, with my office being bypassed for the most part.
Furthermore, my Front Office accused me of using "poor judgment" in talking to the individual at C3I. This reaction, and its vitriolic tone, took me totally by surprise.
I sought to obtain what the New York Times described as a "highly classified Pentagon report" on the satellite issue, but was informed that I could not have access to it, since I did not have a "need to know."
It is my understanding that the report, developed in cooperation with the Department of State, was very critical of certain U.S. satellite exporters.
Indeed, in subsequent cases relating to China, my front office continued to use this mantra of not having a "need to know" as justification to keep me from learning details or the outcome of certain China cases, many of which I had worked at various stages.
I expressed my dismay to the Front office over this kind of treatment. I informed them that in all the years I had worked at the Defense Department and looked into possible diversions, I never had been told to refrain from looking into possible export control violations.
Despite the admonition not to speak to anyone about the Hughes-Loral matter, I called our U.S. Customs liaison officer, who confirmed that there had been an ongoing Justice Department investigation of the case for almost a year. Customs was pursuing the investigation on behalf of the Justice Department. He further stated that continued approval of satellite exports was damaging the case.
It then became apparent to me that the reason for handling Chinese satellite issues among a very few people and keeping quiet any information concerning an investigation was to insure that satellite cases continued to be approved, unimpeded.
I can only surmise that my Front Office recalled previous cases in which we had suspended all license applications of an applicant prior to any indictments or convictions even before the completion of an investigation. There were two such cases, one of which involved the Dutch company diversion of night vision devices to Iraq, a case I referred to earlier.
Given the admonition not to speak to anyone outside DTSA about the Hughes-Loral matter, I did not think such a restriction applied to people within DTSA.
I approached our satellite technical expert, who immediately became quite nervous. I specifically wanted to know if we were seeing any of the Presidential waivers, and what technologies they may have encompassed. The waivers were required because of Tiananmen Square sanctions to satellite exports to China.
The engineer stated that he was under a gag order, had been interviewed a year earlier by the Justice Department concerning its investigation and that our boss had known about the investigation for all that time.
In response, the engineer said that our boss had electronically "firewalled" any recommendations to the Front Office that he made on the cases so that even he could not retrieve them. In addition, the engineer said that he had been ordered to destroy any hardcopy of his recommendations.
As a career employee, I felt obliged to report this episode to U.S. Customs agents who were investigating the Hughes-Loral matter on behalf of the Justice Department. By this time, I had been working with the investigators to provide background papers and positions on previous cases, all relating to China.
The Assistant U.S. Attorney and Customs investigators interviewed the engineer. He returned after a number of hours, confronted me and said that the Assistant U.S. Attorney and Customs agents had identified me as the source of their information. The engineer then proceeded to inform the Front Office.
All of this took place in April 1998. It was during this period and succeeding months that all of our records pertaining to China, including past cases, were subpoened by law enforcement authorities. The same materials were made available in a central reading room under the control of the Defense Department General Counsel to the myriad of congressional committee investigators from the House of Representatives and the Senate.
I personally received two congressional subpoenas – one from Senator Fred Thompson, Chairman of the Senate Governmental Affairs Committee, and the other from Representative Christopher Cox. All of my records pertaining to China also were in the hands of the Cox Committee, and I was asked about them in depositions to the Committee Staff.
Since then, the Front Office has systematically isolated me from any of the major issues with which our organization is involved. In seeking to find out what those issues are, my bosses interpreted my inquiries as "spying" and asked me why I wanted to know.
In addition, virtually all weekly Directors’ meetings had ceased, which remains the case to this day. The Front Office also had created a so-called COMSAT group comprised of representatives from every division within DTSA, except mine. I and my staff were kept from any satellite discussions.
This also was the period in which job appraisals were due. I was informed that I would be given an "Outstanding" rating, but would not be given a cash bonus. I later was informed that I was the only DTSA director who received an "Outstanding" rating but did not receive any cash bonus.
The reason given was that I needed to do work more in keeping with senior DTSA management priorities. I asked my bosses how I could be accused of "spying" on the one hand to determine DTSA priorities but be admonished for not following them in view of the isolation treatment. There was no ready answer.
In my opinion, this action constituted political retribution.
The isolation continues to this day. Discussion and action on issues are conducted by the Front Office, with the participation of a chosen few.
In addition, as people have rotated from my staff, the positions either are not allowed to be filled, or the billet is taken away. This was the case recently when one of my Navy personnel retired. This billet was transferred to accommodate an increase in satellite monitors. Congress recently authorized some 30 such billets to DTSA. I then asked if that slot could be returned, due to the need we have to fulfill our analytical and monitoring duties. I never received a response.
My deputy of many years recently transferred to another part of the agency but, to this day, the Front Office has not allowed me to fill that billet either. Instead, I have had to write a series of memos to justify the need to fill it. Still, no response. This slow chipping away comes at a time when we should be doing more analysis and cumulative assessments of technology transfers and determining their impact on U.S. strategic capabilities. In my opinion, this is one of the value-added roles of the Department of Defense in the export licensing process.
I say this, notwithstanding the fact that the intelligence community for the most part is not providing such analysis, whether for conventional or unconventional weapons development programs in countries and suppliers of strategic concern.
Last July, I decided to do such a limited analysis on my own. I determined that the cumulative effect of just some of those exported technologies have provided the Chinese military with an integrated Command, Control, Communications, Computer and Intelligence (C4I) encrypted network not only for modernizing its military but also for its emerging intercontinental ballistic missiles. I let our technical experts review it, as well as DIA analysts. To this day, there has been no challenge to the analysis, which I interpret to mean that it is valid.
In addition to an enhanced C4I capability, I believe that the cumulative effect of other technologies provided to China over the past seven years has given China insights into MIRVing its developing ICBM force and miniaturizing nuclear warheads.
In addition, I believe technology transfers over time have helped China improve power projection for its surface fleets, submarines and long-range cruise missiles, apply stealth technologies to weapons development programs and permitted China’s military to produce more proficient fighter and bomber aircraft capable of greater distances and speed.
These advances happen to coincide with those special mission areas identified in the mid-1980s by the Joint Chiefs of Staff to be concerned about regarding technology transfers.
Those special mission areas were nuclear weapons and their delivery systems, intelligence gathering, electronic warfare, anti-submarine warfare, air superiority and power projection.
In referring back to the Nov. 28, l998 Wall Street Journal, Mr. Ken Bacon, the Defense Secretary’s spokesman said, quote, "In talking to Mr. Maloof’s bosses and others, we do not believe we have allowed the transfer of technology to China that presents national security vulnerabilities," end-quote.
Mr. Chairman, I would suggest that this conclusion is at extreme variance with the results of the Cox Committee study.
I have come to realize that there is little recourse for professionals to sound an alarm when the system is unresponsive.
Two years ago, for example, Peter Leitner and I approached the DoD Inspector General’s office because of our belief that strategic concerns in the handling of China cases were being ignored. We were told to leave.
I am equally dismayed over the magnitude of the strategic contributions from cumulative technology transfers to China, that they have occurred on my watch even though I sought to avoid such a development but instead was isolated, ignored and subject to political retribution.
The tragedy is not what is being done to me now. The real tragedy is that we will not realize the full military impact and national security threat from these technology transfers for another five to ten years. Only then, will we understand the extent and true cost for having mortgaged the security of our children and our Nation’s wellbeing.
Thank you, Mr. Chairman. That concludes my statement.
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