Business Intelligence and National Intelligence:
Davenport College/Smiths Industries Distinguished Visitor, 1993
One of the hottest topics in business today is competitive intelligence, the effort by a company to obtain enough information about its competitors to give it a strategic edge over them in the marketplace. During the past decade, a number of books have been written in this country advising business managers on how to mine various sources of public information for this purpose: trade shows, public speeches by company executives, articles in obscure journals, and government agencies like the Food and Drug Administration (1). Some large companies have even hired former FBI and CIA personnel to help them develop more effective in-house intelligence-gathering capabilities (2).
The sheer amount of competitive information that can be obtained from open sources in the U.S. is so massive that it may seem foolish for companies to run the legal risks associated with industrial espionage or other dirty tricks. And yet these practices still go on, in part because they are seen to be cheap alternatives to expensive R&D efforts or aids in under-bidding competitors for a lucrative contract (3). According to this way of thinking, it doesn't make sense to spend the money to reinvent the wheel if you can more cheaply steal the blueprint or piece it together by sifting through the trash that might be purchased from your competitor's custodial staff.
Other shady methods that companies have used include offering discreet financial inducements to a competitor's engineers or marketers who might be persuaded to jump ship and tell you what they know about a hot product under development. In one case, a disgruntled employee at 3M stole some of its sensitive information about a new kind of tape used to set broken bones, and quietly passed on this data to four of 3M's competitors with an offer to consult for any of them for a fee. Sadly, not all of the recipients of that data had the ethical backbone to reject it out of hand. In fact, 3M alleged in a later lawsuit that one of those firms, Johnson & Johnson, not only didn't turn it down but actually used it to develop a competing product, which it was able to market ahead of 3M's. The court eventually made J&J pay dearly for that mistake, though (4).
Still other companies have posted bogus job openings they had no intention of filling, in order to milk proprietary information from any applicants who might emerge from competing firms to take the bait. There is also the old tactic of having young employees call up competitors and pretend to be students doing research projects (5). In short, given sufficient incentives and pressures to stay ahead of the game, some managers will rationalize activities on behalf of their companies that they would howl about if they found other firms doing it to them. I've personally seen many corporate codes of ethics that had very strong rules against employees revealing proprietary information to outsiders, and yet had no ethical guidelines on respecting the proprietary information of other companies.
Sometimes the rationalization of unorthodox methods advocated by businesspeople takes the form of a complaint that "everybody else is doing it," followed by the prediction that if we don't follow suit we'll be out of business pronto. This argument has become more common as American companies size up the number of trade secrets that they're losing to foreign competitors, and judge that the U.S. competitive edge is slipping in some strategic industries in part due to the work of foreign spies. A few months ago, former CIA Director Robert Gates reported that nearly 20 nations are actively involved in spying targeted against U.S. corporations, and that some foreign intelligence services can legally tap phone lines used by a U.S. company in their country (6). Other experts have said that the intelligence agencies of countries like Russia, France and Japan occasionally work in tandem with their native companies to spy on U.S. firms. France, for example, is said to have specifically targeted IBM and Texas Instruments for espionage operations (7).
As it happens, this altered business climate also coincides with a period of significant change within the U.S. intelligence establishment. Since the breakup of the Soviet Union and the end of the Cold War, the mission and priorities of the CIA have come under intense scrutiny not only by prominent members of Congress but also within the executive branch. One recent proposal made by some government officials and business leaders would have the CIA use its Cold-War-developed skills to directly assist American companies, not only to protect them from foreign spies, but also to spy on their behalf (8).
How should we view this proposal? What are some of its ethical implications? I will argue on the one hand that some forms of assistance to American business by U.S. intelligence agencies are legitimate, but that others are either clearly improper or so questionable as to demand considerably more public debate than what we have witnessed thusfar.
It may be helpful to begin by outlining the typical sorts of activities that the CIA is assigned to carry out on behalf of the U.S. Government. Clarity on those matters is essential to determining what may be proper or improper for the Agency to do for U.S. business.
During the six years that I lived in Washington, DC, although I never sought a security clearance nor had access to classified information, I did have an opportunity to interview a number of retired CIA officers, including former Director William Colby, and to elicit their comments on CIA methods that had already been revealed in published manuscripts, such as the memoirs of other CIA officers. Those interviews helped me to develop a picture of the overall work of the CIA that I believe to be fairly accurate but which doesn't reveal anything not already known to other countries' intelligence officials.
The principle tasks of the CIA can be grouped roughly under five categories: Intelligence Collection; Analysis; Counterintelligence; Counterespionage; and Covert Action.
First of all, the CIA collects intelligence basically in three ways: from public sources that in theory are available to anyone; from hidden sources by technical means, such as electronic bugs planted in rooms, hidden cameras, or intercepts of phones, faxes, cables, electronic mail, and so on; and finally, from hidden sources by means of human agents or spies, recruited almost entirely among foreign citizens. Occasionally one hears arguments to the effect that technology has made the spy obsolete, but that really isn't the case because spies can interpret nuances in the private conversations of foreign leaders that are too impractical if not impossible to obtain by technical means alone. It's been said that technical means are great at estimating military capabilities, but that you may need a spy to tell you if and when a foreign leader intends to use them. In late 1990, for example, the CIA knew that Saddam Hussain could very easily invade Kuwait, but the Agency may not have had any spies planted at high levels of the Iraqi regime who might have indicated that Saddam intended to invade and when (9).
Once the raw data of intelligence has been collected from both overt and covert sources, it must be analyzed and interpreted if it is to be useful. This is the CIA's second major activity. As well as producing classified reports for senior policy-makers, CIA analysts also release public reports on economic activities and trends in foreign countries. Of course, these reports are written so as not to reveal any secret intelligence sources or methods. One of the more interesting pieces that CIA publishes is a daily report of its Foreign Broadcast Information Service, to which any of us can subscribe, by the way. This report prints transcripts of radio programs from all over the world, everything from the tedious public speeches of Chinese communist party leaders, to brief messages from obscure guerrilla groups furtively broadcast by means of mobile transmitters that are quickly dismantled lest they be discovered by the police.
In addition to intelligence collection and analysis, the third of CIA's major tasks is counterintelligence, which is mainly a defensive effort to prevent and uncover foreign espionage targeted against U.S. secrets. Counterespionage, in contrast, is primarily an offensive effort to penetrate an opposing intelligence agency by planting or recruiting a "mole" inside the organization.
Finally, the CIA is also called upon to conduct covert action, which can include deceptive propaganda, secret financing of political leaders, or the removal of those leaders by means of coups d'etat. Let's examine covert action first, since in many ways it's the most controversial kind of CIA activity.
One of the most notorious cases of CIA covert action, the overthrow of Guatemala's president Arbenz in 1954, was actually carried out in close cooperation with a prominent U.S. corporation, the United Fruit Company (10). At one time, United Fruit monopolized Guatemala's banana industry and literally owned the country's telephone and transportation systems. But the company had also strenuously resisted all attempts by the Guatemalan government to force it to pay its fair share of taxes and to allow its workers to form unions.
When the company felt its position beginning to weaken under pressure from the Guatemalan government in the late 1940's, though, it made discreet overtures to the CIA to arrange a coup d'etat. United Fruit had the distinct advantage of having friends in high places at CIA under both Truman and Eisenhower. CIA Director Allen Dulles, for example, had previously worked for the powerful New York law firm of Sullivan and Cromwell, which had in years past helped United Fruit to arrange profitable deals in Guatemala. Furthermore, Dulles' predecessor as CIA Director, Thomas Bedell Smith, who was not only a close friend of a United Fruit Company lobbyist, but in addition, while being intimately involved in planning the Guatemalan coup, was at the same time negotiating with the company to land an executive position within it. And we think we have problems today in the executive branch with conflicts of interest and the "revolving door"!
In an extraordinary example of the lengths to which the U.S. Government went to please United Fruit, Allen Dulles promised the company that whoever CIA selected as the next Guatemalan leader would not be allowed to nationalize the company's operations or disrupt them in any way. The CIA-backed coup did eventually succeed in overthrowing the Guatemalan president in 1953, and in its aftermath, labor unions were dissolved and the company regained its earlier privileges and powers.
There are two overarching reasons why this sort of covert action seems so outrageous to us in hindsight. First is the injustice done to Guatemalan citizens, who were forced to accept a government they did not choose, dominated by a foreign company that did not recognize their rights. But a second objection arises from the corruption of U.S. national interests to serve the narrow objectives of a particular company. Although I do believe that there are situations where covert action can be justified in the interest of undermining a tyrannical regime or in supporting political dissidents when it is not possible to do so openly, it is highly doubtful, in my opinion, that covert action could be justified solely on the basis of its presumed benefits to a U.S. company. This doesn't mean that covert action justified on more solidly ethical grounds might not also serve the interests of business overseas, only that those interests must be incidental to the justification.
Let's move on to another type of CIA activity, the recruiting and handling of espionage agents. In general, spies for the CIA are recruited in three ways: one, they volunteer or freely agree to spy; two, they are fooled into it; or three, they are coerced in more or less blatant fashion.
Some voluntary agents, first of all, are motivated primarily by the allure of being a secret agent, others by financial inducements. But many others commit espionage out of a deep-seated antagonism toward their native governments. This was true, for example, of a number of high-ranking Soviet military and KGB officials who either passed sensitive documents to the CIA or who defected when they no longer in good conscience could serve the Soviet regime (11). Agents who remain in place to work against a tyrannical regime have a compelling ethical claim to have their clandestine activities very closely guarded by their CIA handlers. This often means that only a few people within the U.S. Government can be allowed to know about the intelligence that they provide. The old adage, "loose lips sink ships" applies here: if the secrets that these spies deliver are revealed to the wrong persons, it may enable their own country's secret police to track them down.
This already suggests, I believe, a strong argument against the CIA engaging in espionage on behalf of American companies, namely, that if intelligence is circulated too widely it can in some cases endanger the lives of agents and officers. I doubt that CIA agents working voluntarily at high levels within the governments of North Korea or Cuba, for example, would be amused to learn that they were risking their lives to deliver reports of secret economic plans so that U.S. companies could develop strategies to tap those untouched markets. Last April, former CIA Director Robert Gates said that U.S. intelligence "does not, should not, and will not engage in industrial espionage. . . . Some years ago," Gates continued, "one of our clandestine service officers said to me: 'You know, I'm prepared to give my life for my country, but not for a company.'" Gates added, "That case officer was absolutely right" (12). Here's an example of the kind of thing that sends chills down the spines of even the most hardened CIA officer, from a February 1991 article in the New York Times:
The safety and security of agents is one of the reasons why the information they provide is highly compartmentalized and restricted to only those who absolutely need to know it. If the number of those in the loop is expanded to include business executives, my hunch is that the CIA would be very nervous about the risk of leaks.
Now admittedly many scenarios could be imagined where the lives of CIA agents or officers would not literally be in danger if they were caught spying on behalf of American business; but the general point remains that if you're going to ask someone to undergo considerable risk to obtain intelligence for you, make sure that your objectives are worthy of the task.
So far, I've only spoken about agents who spy voluntarily, but there are many other spies who are "recruited," so to speak, through deception. In some cases, people who wouldn't willingly work for the CIA are made unwittingly to do exactly that by passing sensitive information to a trusted friend who happens to be in CIA employ but who presents himself as one with loyalties more congenial to the person being duped (14). This method is sometimes called "false-flag" recruitment, since the recruiter claims to be someone he's not. It's really a classic con game, a flim flam, in which you first assess the potential agent's basic loyalties and core values in order to figure out a way to persuade him to provide sensitive information to you without upsetting his conscience or arousing his suspicions. As one former CIA officer explained in his memoir, "There are unsuspecting zealots around the world who are managed and paid as spies; they sell their countries' secrets believing all the while they are helping 'the good guys'" (15).
The third method of obtaining spies is by coercion, which usually takes the form of blackmail. In some cases, the CIA's knowledge of a person's potentially embarrassing or patently illegal activities is used to extort espionage service. Prospective agents may be confronted by a CIA officer with proof of their past crimes, and blackmailed into working as spies in exchange for the CIA keeping such evidence from their own country's police. In other cases, embarrassing scenarios can be fabricated in order to entrap previously innocent persons, after which the threat of publicity is used to extort their compliance (16).
One CIA officer has argued that an element of control is imperative in agent recruitment:
No espionage service can tolerate the merest whiff of independence or reserve on the part of an agent. . . . With a new agent, the case officer's first task is to maneuver him into a position where there is nothing that he can hold back--not the slightest scrap of information nor the most intimate detail of his personal life. Until this level of control has been achieved, the spy cannot be said to have been fully recruited (17).
Although some former CIA officers have argued that blackmail is never an effective recruitment tool, since the agent is constantly scheming to take revenge against you and only grudgingly produces the minimum amount of information you request (18), I think we can nevertheless surmise that many espionage agents are regarded by their handlers merely as means to the end of collecting intelligence. The full range of habits, beliefs, virtues and vices that make up the character of an individual agent are often seen merely as helps or hindrances to their production of useful intelligence. People who are forced to become spies through deception or coercion have in effect been manipulated, and their rights to privacy and freedom have been infringed.
Now, I am willing to accept that the gravity of a particular situation might justify deception or coercion of this type. After all, even though we normally condemn the killing of other people, we recognize that killing is sometimes justified in the defense of individuals, communities and nations. So also, if espionage can effectively prevent an aggressive war from occurring, then it may be acceptable to engage in deception or coercion to obtain vital intelligence. The philosopher Sissela Bok put this rather well when she said, "Whenever it is right to resist an assault or a threat by force, it must then be allowable to do so by guile" (19).
But the fact that deception and coercion do infringe the rights of some people means that for such actions to be morally justified there must be more important rights at stake. Clearly many of the reasons that American companies might offer to persuade the CIA to spy on their behalf would not be weighty enough to override the rights of foreign citizens duped or coerced into committing espionage.
Actually, I'm persuaded that when business leaders call upon the CIA to spy for them, they don't really know what they're asking. They forget that when the CIA is ordered to obtain particular kinds of information, it is able to employ an extraordinary range of tools and methods, including many that are ethically questionable. The history of the CIA suggests that when the President says he wants something, the Agency will do almost anything to get it. If business leaders continue to lobby for U.S. intelligence to serve their ends, they at least ought to specify some intelligence methods that should not be included in the arsenal for ethical reasons.
Now, I do think that U.S. business is on firmer ethical ground in requesting CIA help in the form of counterintelligence, which you'll recall is mainly a defensive effort to prevent and uncover espionage activities. Domestically, counterintelligence is handled by the FBI, which can arrest foreign citizens who violate federal laws on industrial espionage. In 1982, for example, the FBI arrested employees of Hitachi in California's Silicon Valley who had made off with confidential IBM documents (20).
In other countries, though, U.S. firms obviously operate without many of the protections of U.S. law. The CIA doesn't have the authority to arrest anyone in any country, though it can and does collaborate with Interpol and many countries' domestic security agencies. And even if the CIA became aware that a foreign government or company was spying on a U.S. company overseas, it may not want to reveal what it knows for fear of tipping off the foreign organization that it was being monitored, and possibly thereby revealing how it was being monitored, which is often the more important secret.
It might be possible, though, for the CIA to provide advice of a more general sort to American companies, though my hunch is that it would prefer to leave direct contacts to State Department personnel rather than risk having its officers blow their cover. In certain respects, this is not an entirely new idea. In terms of "quiet diplomacy," for example, the State Department has always provided some assistance to American companies overseas. U.S. diplomats help to arrange business negotiations with foreign officials, cut through bureaucratic red tape, and lobby for lower taxes and customs fees. They also brief corporate managers on political risks, on legal and regulatory conditions, and on economic trends in countries where they hope to do business, as does the Department of Commerce. I recently learned from an employee newsletter put out by Grand Rapids' own Smiths Industries that the State Department is now sponsoring a program through the Overseas Security Advisory Council to advise U.S. companies on tactics to use overseas to protect their proprietary information from industrial spies. In some cases the Department apparently is even providing secure phone lines for U.S. firms to use in communicating with embassy staff (21). I don't doubt that some of the knowledge and expertise that the State Department uses in these programs comes directly from the CIA.
In sum, my advice to American business in this area is this: by all means, ask for U.S. Government help in counterintelligence tactics in order to protect your proprietary information from being surreptitiously looted in this country or overseas, but don't ask the CIA to spy for you. Espionage puts at risk the rights and well-being of too many people to allow it to be done in the interest of giving a company an edge in the global marketplace.
(1) See, e.g., William Sammon, et al., Business Competitor Intelligence (New York: Wiley, 1984), Richard Eells and Peter Nehemkis, Corporate Intelligence and Espionage (New York: Macmillan, 1984), and Leonard Fuld, Competitor Intelligence (New York: Wiley, 1985).
(2) Michael Stedman, "Industrial Espionage: What You Don't Know Can Hurt You," Business and Society Review, (unknown issue date, 1991), 25-32.
(3) Lynn Sharp Paine, "Corporate Policy and the Ethics of Competitor Intelligence Gathering," Journal of Business Ethics 10 (1991), 423-436.
(4) This case was reported in Business Week in 1991.
(5) Paine, "Corporate Policy," 426-427.
(6) Geoff Turner, "I Spy," Computerworld, 26 October 1992, 129-130.
(7) Mitch Betts, "CIA Steps Up Foreign Technology Watch," Computerworld, 20 April 1992, 121.
(8) Amy Borrus, "Should the CIA Start Spying for Corporate America?" Business Week, 14 October 1991, 96-100.
(9) Walter S. Mossberg and Gerald F. Seib, "Delay in Naming New CIA Chief Leaves Spy Agencies Unable to Start Overhaul," Wall Street Journal, 23 July 1991, A24.
(10) See Stephen Schlesinger and Stephen Kinzer, Bitter Fruit: The Untold Story of the American Coup in Guatemala (Garden City, NY: Doubleday, 1982).
(11) For examples, see William Hood, Mole (New York: Random House, 1982; Ballantine, 1983); Harry Rositzke, The CIA's Secret Operations: Espionage, Counterespionage, and Covert Action (Boulder, CO: Westview, 1988), 67-69, and Oleg Penkovskiy, The Penkovskiy Papers, trans. Peter Deriabin (New York: Doubleday, 1965).
(12) George Lardner, Jr., "U.S. Demands for Economic Intelligence Up Sharply, Gates Says," Washington Post, 14 April 1992, A5.
(13) Michael Wines, "2 or 3 Agents Are Believed Killed After Rare U.S.-Syrian Contacts," New York Times, 7 February 1991, A1, A18.
(14) On this tactic, see Miles Copeland, The Real Spy World (London: Sphere, 1978), 125-129.
(15) David Atlee Phillips, The Night Watch (New York: Ballantine, 1982), 263-264.
(16) Copeland, Real Spy World, 115, 127-128.
(17) Hood, Mole, 29.
(19) Sissela Bok, Lying: Moral Choice in Public and Private Life (New York: Pantheon, 1978; Random House, 1979), 151.
(20) This case is described in William L. Sammon, "Competitor Intelligence or Industrial Espionage?" in Sammon et al., Business Competitor Intelligence, 39-60.
(21) Smiths Industries, Employee Security Connection 6/2 (October-December 1992), 2.
This article is copyright by David L. Perry, 1993.