[Peace-discuss] Vanity Fair article (long) on SAIC's history & pervasive connections

[Stuart Levy]

There's been some discussion of government/military/intelligence/all-purpose
contractor, SAIC, which has an office in the South Research Park.
Paul Mueth has an article which is about to appear in the public i, I think,
but pending that here is a wide-ranging review from Vanity Fair, March 2007:

    http://www.vanityfair.com/politics/features/2007/03/spyagency200703

	    Washington's $8 Billion Shadow

    Mega-contractors such as Halliburton and Bechtel supply the government
    with brawn. But the biggest, most powerful of the "body shops"—SAIC,
    which employs 44,000 people and took in $8 billion last year—sells
    brainpower, including a lot of the "expertise" behind the Iraq war.

    by DONALD L. BARLETT and JAMES B. STEELE
    March 2007


The McLean, Virginia, offices of Science Applications International
Corporation, a "stealth company" with 9,000 government contracts,
many of which involve secret intelligence work. Photograph by Coral
von Zumwalt.

One of the great staples of the modern Washington movie is the dark
and ruthless corporation whose power extends into every cranny
around the globe, whose technological expertise is without peer,
whose secrets are unfathomable, whose riches defy calculation, and
whose network of allies, in and out of government, is held together
by webs of money, ambition, and fear. You've seen this movie a dozen
times. Men in black coats step from limousines on wintry days and
refer guardedly to unspeakable things. Surveillance cameras and
eavesdropping devices are everywhere. Data scrolls across the movie
screen in digital fonts. Computer keyboards clack softly. Seemingly
honorable people at the summit of power—Cabinet secretaries, war
heroes, presidents—turn out to be pathetic pawns of forces greater
than anyone can imagine. And at the pinnacle of this dark and
ruthless corporation is a relentless and well-tailored titan—omniscient,
ironic, merciless—played by someone like Christopher Walken or Jon
Voight.

To be sure, there isn't really such a corporation: the Omnivore
Group, as it might be called. But if there were such a company—and,
mind you, there isn't—it might look a lot like the largest government
contractor you've never heard of: a company known simply by the
nondescript initials SAIC (for Science Applications International
Corporation), initials that are always spoken letter by letter
rather than formed into a pronounceable acronym. SAIC maintains its
headquarters in San Diego, but its center of gravity is in Washington,
D.C. With a workforce of 44,000, it is the size of a full-fledged
government agency—in fact, it is larger than the departments of
Labor, Energy, and Housing and Urban Development combined. Its
anonymous glass-and-steel Washington office—a gleaming corporate
box like any other—lies in northern Virginia, not far from the
headquarters of the C.I.A., whose byways it knows quite well. (More
than half of SAIC's employees have security clearances.) SAIC has
been awarded more individual government contracts than any other
private company in America. The contracts number not in the dozens
or scores or hundreds but in the thousands: SAIC currently holds
some 9,000 active federal contracts in all. More than a hundred of
them are worth upwards of $10 million apiece. Two of them are worth
more than $1 billion. The company's annual revenues, almost all of
which come from the federal government, approached $8 billion in
the 2006 fiscal year, and they are continuing to climb. SAIC's goal
is to reach as much as $12 billion in revenues by 2008. As for the
financial yardstick that really gets Wall Street's
attention—profitability—SAIC beats the S&P 500 average. Last year
ExxonMobil, the world's largest oil company, posted a return on
revenue of 11 percent. For SAIC the figure was 11.9 percent. If
"contract backlog" is any measure—that is, contracts negotiated and
pending—the future seems assured. The backlog stands at $13.6
billion. That's one and a half times more than the backlog at KBR
Inc., a subsidiary of the far better known government contractor
once run by Vice President Dick Cheney, the Halliburton Company.

It is a simple fact of life these days that, owing to a deliberate
decision to downsize government, Washington can operate only by
paying private companies to perform a wide range of functions. To
get some idea of the scale: contractors absorb the taxes paid by
everyone in America with incomes under $100,000. In other words,
more than 90 percent of all taxpayers might as well remit everything
they owe directly to SAIC or some other contractor rather than to
the IRS. In Washington these companies go by the generic name "body
shops"—they supply flesh-and-blood human beings to do the specialized
work that government agencies no longer can. Often they do this
work outside the public eye, and with little official oversight—even
if it involves the most sensitive matters of national security. The
Founding Fathers may have argued eloquently for a government of
laws, not of men, but what we've got instead is a government of
body shops.

The unhappy business practices of the past few years in Iraq—cost
overruns, incompetence, and corruption on a pharaonic scale—have
made the American public keenly aware of the activities of
mega-contractors such as Halliburton and Bechtel. Although SAIC
takes on government projects such as those pursued by contractors
like these, it does not belong in exactly the same category.
Halliburton and Bechtel supply the government's brawn. They pour
concrete, roll out concertina wire, build infrastructure. They call
on bullnecked men to provide protection.

In contrast, SAIC is a body shop in the brain business. It sells
human beings who have a particular expertise—expertise about weapons,
about homeland security, about surveillance, about computer systems,
about "information dominance" and "information warfare." If the
C.I.A. needs an outside expert to quietly check whether its employees
are using their computers for personal business, it calls on SAIC.
If the Immigration and Naturalization Service needs new record-keeping
software, it calls on SAIC. Indeed, SAIC is willing to provide
expertise about almost anything at all, if there happens to be a
government contract out there to pay for it—as there almost always
is. Whether SAIC actually possesses all the expertise that it sells
is another story.

What everyone agrees on is this: No Washington contractor pursues
government money with more ingenuity and perseverance than SAIC.
No contractor seems to exploit conflicts of interest in Washington
with more zeal. And no contractor cloaks its operations in greater
secrecy. SAIC almost never touts its activities in public, preferring
to stay well below the radar. An SAIC executive once gave a press
interview and referred to the enterprise as a "stealth company," a
characterization that is accurate and that has stuck. "Nobody knows
who they are," says Glenn Grossenbacher, a Texas lawyer who has
battled SAIC in court on a whistle-blowing case. "Everybody knows
Northrop Grumman and G.E., but if you went out on the street and
asked who the top 10 [defense] contractors are, I can guarantee you
that SAIC would not be one of them."

Which is all the more remarkable in light of two developments. The
first is a mounting collection of government audits and lawsuits
brought by former employees for a variety of reasons, some of them
personal and some coming under federal whistle-blower statutes. In
a response to written queries, SAIC characterized itself as a "highly
ethical company and responsible government contractor, committed
to doing the right thing." But a review by Vanity Fair of thousands
of pages of documents, including corporate e-mail messages, offers
disturbing revelations about the company's inner workings, its
culture, and its leadership.

=== page 2 ===

SECRETS

The second development is that several of SAIC's biggest projects
have turned out to be colossal failures, failures that have occurred
very much in public.

One involves the National Security Agency, America's intelligence-gathering
"electronic ear" and for many years SAIC's biggest customer. The
volume of telephone, e-mail, and other electronic communications
that the N.S.A. intercepts worldwide is so massive that the agency
urgently needs a new computer system to store it, sort it, and give
it meaning—otherwise it will keep missing clues like the Arabic
message "Tomorrow is zero hour," intercepted the day before 9/11
but not translated until the day after. SAIC won the initial $280
million, 26-month contract to design and create this system, called
Trailblazer. Four years and more than a billion dollars later, the
effort has been abandoned. General Michael V. Hayden, the former
head of the N.S.A. and now the director of the C.I.A., blamed the
failure on "the fact we were trying to overachieve, we were throwing
deep and we should have been throwing short passes." Happily for
SAIC, it will get the chance for a comeback in the second half. The
company has been awarded the contract for a revised Trailblazer
program called ExecuteLocus. The contract is worth $361 million.

Another failed effort involves the F.B.I., which paid SAIC $124
million to bring the bureau, whose computer systems are among the
most primitive in American law enforcement, into at least the late
20th century. The lack of information-sharing is one reason why the
F.B.I. failed to realize that in the year leading up to 9/11 two
of the future hijackers—including one with known "jihadist
connections"—were actually living in the San Diego home of an F.B.I.
informant. SAIC set to work on a system called the Virtual Case
File. V.C.F. was supposed to become a central repository of data
(wiretap transcripts, criminal records, financial transactions)
from which all F.B.I. agents could draw. Three years and a million
lines of garbled computer code later, V.C.F. has been written off
by a global publication for technology professionals as "the most
highly publicized software failure in history." The failure was due
in part to the bureau's ever shifting directives, which points up
the perverse nature of government-by-contract. When the government
makes unrealistic demands, the contractors go along anyway: they
are being paid not to resist but to comply. If it turns out they
can't deliver, new contracts will simply be drawn up. Responding
to questions about the F.B.I. project, the company conceded that
"there were areas in which SAIC made mistakes, particularly where
we failed to adequately communicate our concerns about the way the
contract was being managed."

These and other SAIC activities would seem to be ripe targets for
scrutiny by the new Democratic Congress. But don't be surprised if
you hear nothing at all: SAIC's friends in Washington are everywhere,
and play on all sides; the connections are tightly interlocked. To
cite just one example: Robert M. Gates, the new secretary of defense,
whose confirmation hearings lasted all of a day, is a former member
of SAIC's board of directors. In recent years the company has
obviously made many missteps, and yet SAIC's influence in Washington
seems only to grow, impervious to business setbacks or even to a
stunning breach of security.

Much to the embarrassment of a company entrusted with some of the
nation's most precious secrets, its San Diego offices were mysteriously
burgled in January of 2005. A censored San Diego police-department
report reveals the basic outline. The report notes that the building
"is patrolled by DOD certified security" and that "the interior
lights are on motion sensors and would have been activated by the
suspects." Nevertheless, burglars managed to break into SAIC's
headquarters, pry open 13 private offices, and walk out with one
desktop-computer hard drive and four laptops. By SAIC's account,
the computers contained personal data on thousands of present and
past employees, presumably including the company's many former
C.I.A. operatives, N.S.A. executives, and Pentagon officials. To
date, the burglary remains unsolved.

SAIC has displayed an uncanny ability to thrive in every conceivable
political climate. It is the invisible hand behind a huge portion
of the national-security state—the one sector of the government
whose funds are limitless and whose continued growth is assured
every time a politician utters the word "terrorism."

SAIC represents, in other words, a private business that has become
a form of permanent government.

A Plain Brown Envelope

On the evening of January 17, 1961, Dwight D. Eisenhower came down
from the White House living quarters to the Oval Office and delivered
his last address to the American people as president. This was the
famous speech in which he warned against the "disastrous rise of
misplaced power" in the hands of what he called "the military-industrial
complex"—the sturdy hybrid formed by crossbreeding American corporate
interests with those of the Pentagon and the intelligence community.

As Eisenhower spoke, a quietly ambitious man on the other side of
the country, John Robert Beyster, was going about his business as
head of the accelerator-physics department at the General Atomic
corporation, in La Jolla, California, one of many secretive companies
that sprouted early in the atomic era. Beyster had grown up outside
of Detroit, served in the navy during World War II, and earned a
Ph.D. in nuclear physics from the University of Michigan before
migrating to Southern California in the 1950s. He was a lanky and
nerdy-looking technocrat, but the tortoiseshell glasses concealed
a driven personality. Beyster believed that General Atomic didn't
appreciate his ideas, and he began to lay plans. Within a decade
of Eisenhower's farewell speech, Beyster would create an enterprise
epitomizing the military-industrial complex that caused Eisenhower
such dismay. Now, four decades later, that company epitomizes
something beyond Eisenhower's worst nightmare—the
"military-industrial-counterterrorism complex."

Science Applications International Corporation was born in February
of 1969 in a stucco office building in La Jolla next to a ballet
studio overlooking the Pacific. "I was not the brilliant,
flash-of-inspiration type of entrepreneur," Beyster would later
recall; rather, he was more a "persistent builder type." The name
he decided on for his company, though brilliantly opaque, reflected
an assumption that the real future of national defense—or, at any
rate, the real future profits to be had from national defense—lay
in science and technology, not in boots on the ground. And a lot
of that scientific work would necessarily be analytical; it would
be about thinking as much as about making. Beyster's very first
government contract came from the Defense Atomic Support Agency:
he was given the task of calculating "the output of nuclear devices."

Beyster understood that this particular moment of the American
Century was the perfect time for shrewd consultants to get into the
war business. The conflict in Vietnam was still raging, and the
Cold War seemed to have become a permanent fixture of the geopolitical
landscape. The Nixon administration was promoting a missile-defense
system to protect its ICBM installations. Scientists were hard at
work on a host of nuclear projects, including the fabled neutron
bomb. Although computers had yet to revolutionize government and
business, visionaries like Beyster could see that eventually they
would, and so, for SAIC, computer systems represented another target
of opportunity.

=== page 3 ===

Joined by research scientists from General Atomic and elsewhere,
Beyster developed a straightforward business plan. As he later
explained it, "People who came into the company went out and got
contracts." Everyone who worked for SAIC had to carry his own weight.
You might have a Ph.D. in physics or applied mathematics, but at
SAIC your job fundamentally was to sell your high-tech ideas and
blue-chip expertise to the army, navy, air force, C.I.A., N.S.A.,
Atomic Energy Commission, and any other government agency with money
to spend and an impulse to buy. Contracts were everything. There
is much to be said for SAIC's approach: in its four decades of
existence, the company has turned a profit every single year.

Beyster aggressively packed his company with former generals,
admirals, diplomats, spies, and Cabinet officers of every kind to
fill the company's board of directors and the upper echelons of its
staff. These were the kinds of people who would always have easy
access to the agencies they had left behind—and who someday might
even go back into government. To be sure, every Beltway defense
contractor tries to bring retired generals and admirals into the
fold, but Beyster offered an incentive that others couldn't match:
an internal stock-ownership program, which promised to make government
officials rich after they left public service. The stock-ownership
program would eventually be expanded to include everyone on the
company's payroll, but it began as Beyster's way of rewarding favored
executives and board members, whose identities were kept secret. A
lucky recipient would learn of his good fortune when a messenger
appeared in his office carrying a plain brown envelope containing
a newly minted stock certificate.

SAIC had its own brokerage subsidiary, licensed by the S.E.C., a
kind of in-house Merrill Lynch called Bull, Inc. The name accurately
predicted the stock's vitality. Beyster and his board managed every
aspect of the stock—the number of shares, who received them, and,
most important, the price. Unlike on Wall Street, where individual
stock prices go up and down, the SAIC stock price, controlled by
Beyster and his board, usually moved in one direction only: up. The
more contracts you landed, the more stock you received. Even if you
stayed at SAIC for only a short time, you could in the long run
earn a lot of money. And if you left SAIC to go back into government
service, you had considerable incentive to keep SAIC's continuing
good fortunes in mind.

SAIC's internal stock market was instrumental in the company's early
success. Peter Friesen, a San Diego attorney who has represented
former SAIC employees in civil complaints against the company, says,
"If you find somebody [in government] who wants a job with SAIC
later, and he sees the steady rise in the stock price over the years
and knows he can get a job with stock options and stock bonuses,
then he's going to be sending business over to SAIC. And it worked."

SAIC opened its Washington office in 1970. Although San Diego would
remain SAIC's home base, the workforce in the Washington area soon
eclipsed the workforce everywhere else. To ensure support on Capitol
Hill, corporate outposts were prominently set up in key congressional
districts. Meanwhile, scores of influential members of the
national-security establishment clambered onto SAIC's payroll, among
them John M. Deutch, undersecretary of energy under President Jimmy
Carter and C.I.A. director under President Bill Clinton; Rear Admiral
William F. Raborn, who headed development of the Polaris submarine;
and Rear Admiral Bobby Ray Inman, who served variously as director
of the National Security Agency, deputy director of the C.I.A., and
vice director of the Defense Intelligence Agency.

SAIC's relative anonymity has allowed large numbers of its executives
to circulate freely between the company and the dozen or so government
agencies it cares about. William B. Black Jr., who retired from the
N.S.A. in 1997 after a 38-year career to become a vice president
at SAIC, returned to the N.S.A. in 2000. Two years later the agency
awarded the Trailblazer contract to SAIC. Black managed the program.
Donald Foley, a current SAIC director, came out of a top position
at the Defense Advanced Research Projects Agency, the Pentagon group
responsible for developing new military technology. SAIC might as
well operate an executive shuttle service between its McLean,
Virginia, offices and the C.I.A., the F.B.I., the Pentagon, and the
Department of Energy. Technically, federal ethics rules stipulate
that former government officials must wait one year before contacting
anyone in their former agencies. Sometimes they can't wait: Mark
A. Boster left his job as a deputy assistant attorney general in
1999 to join SAIC, and was already calling Justice three months
later on behalf of his new employers—a violation of federal law.
Boster paid $30,000 in a civil settlement.

The Young-Boy Network

The driving force behind SAIC, the man who shaped its personality
and culture across nearly four decades, until he was forced out in
2004, was of course Bob Beyster. From the beginning Beyster was
indefatigable, constantly on the road, promoting SAIC to any
government official who would listen. On a 10-day trip, he'd jam
in as many as 80 appointments. If he had an hour between planes,
he'd order his secretary to jam in one more. Beyster may have been
a scientist by training, but he was a salesman at heart. He described
himself as a "marketeer."

Although he could be an engaging companion when dealing with military
brass and agency heads, around the office Beyster could also be
distant and imperious, an autocrat who ruled with an iron hand.
SAIC presented itself as a friendly "employee owned" company. Inside,
everyone understood how the stock program was really used—to punish
and reward. No one harbored any illusions about whose company it
was. "In Bob Beyster's mind, that company was not the shareholders'
company, it was Bob Beyster's company," said Gerald Pomraning, a
nuclear physicist who helped Beyster set up SAIC, in a legal
proceeding. "When I was on the board of directors, he told us many
times that the board of directors was simply a legal entity that
was required, but it was his company."

Beyster advocated a form of internal entrepreneurship that led to
cutthroat competition for contracts. Operations were chaotic because
divisions independent of one another frequently fought for the same
business. Glenn Grossenbacher, the Texas lawyer, describes the
dynamic as "eat what you kill." Chief financial officers, frustrated
by Beyster's exacting and sometimes mercurial demands, came and
went. The company's organizational chart was often in flux. According
to one former executive, Beyster was known around the office as a
"control freak" who undermined managers by going around them and
dealing directly with their staffs. Bernice Stanfill King, a former
SAIC executive who managed the company's internal stock program,
says that Beyster would often assign a single job to two executives.
"He would call in one high-level guy and put him on a project," she
explains. "Then he would call another guy in a totally different
part of the company and put him on the project. Then these guys
would bump into each other and [wonder], 'What's he doing?' You
never honestly knew what was going on inside. Nothing was ever in
the open."

=== page 4 ===

As befits a company with deep ties to the intelligence and
national-security community, SAIC's culture has always had a military
cast to it. Employees are expected to follow orders. Even former
employees are wary of discussing SAIC. One former manager who has
worked on sensitive, even dangerous assignments abroad spoke about
SAIC only after receiving assurances of anonymity, saying, "This
is a very powerful company."

In the years when most corporations had glass ceilings for women,
few were lower or thicker than the one at SAIC. Although Beyster
was married (and the father of three children), his behavior toward
women often ranged from coolness to open hostility. His former
secretary, Linda Anderson, once testified that Beyster was
"uncomfortable with women." She recalled that when a woman came
into a meeting Beyster's manner became stilted. "Even his posture
changed," she said. King, who sued the company for sex discrimination
and won, said in an interview with Vanity Fair that when passing
Beyster in the hall she was not to speak to him or even to look at
him. Women were made to address the boss as "Dr. Beyster"; men
called him "Bob." When a woman made a mistake, Beyster typically
called her on it, using words like "stupid" or "incompetent." When
a man made a mistake—well, it was just that, a mistake. Beyster's
former secretary testified that he once instructed her, on the eve
of a major corporate function, to make sure he wasn't seated next
to SAIC's one female board member, "because all women talked about
was where they got their hair done."

Beyster's close associates within SAIC were a succession of young
men. Known as aides-de-camp, they were usually handsome, well
educated, and intelligent, with a facility for numbers and a
willingness to perform personal tasks for their boss. Beyster was
an ardent sailor, and in the summertime he liked to spend afternoons
cruising the waters off San Diego aboard his yacht in the company
of these young men. George Wilson, who once headed SAIC's
public-relations operation, has stated in a legal proceeding that
the young men provided a variety of personal services for Beyster,
including using SAIC equipment to make copies of pornographic movies
that Beyster would watch aboard his boat.

When Beyster traveled on business, he often took one of the
aides-de-camp with him, and asked his secretary to arrange for them
to stay in the same hotel room—this according to the secretary's
courtroom testimony. Wilson said in a deposition that one of the
young men he knew who slept in the same room with Beyster on these
trips told him that he didn't like doing it, but that "it was part
of traveling with Beyster." Some of the young aides-de-camp went
on to become executives at SAIC. Bernice King testified that Beyster
had a name for his young assistants: he called them his "baby boys."
When asked about these assertions, which surfaced in a sex-discrimination
case, Beyster declined to comment on any particulars, saying,
"Although I cannot address the specific points you raise from court
testimony, I will say that during this trial a number of very
personal accusations were leveled against me that are not accurate."

Klondike on the Euphrates

Civilians at SAIC used to joke that the company had so many admirals
and generals in its ranks it could start its own war. Some might
argue that, in the case of Iraq, it did.

There isn't a politically correct way to put it, but this is what
needs to be said: 9/11 was a personal tragedy for thousands of
families and a national tragedy for all of America, but it was very,
very good for SAIC. In the aftermath of the attacks, the Bush
administration launched its Global War on Terror, whose chief
consequence has been to channel money by the tens of billions into
companies promising they could do something—anything—to help. SAIC
was ready. Four years earlier, anticipating the next big source of
government revenue, SAIC had established the Center for Counterterrorism
Technology and Analysis. According to SAIC, the purpose of the new
unit was to take "a comprehensive view of terrorist threats, including
the full range of weapons of mass destruction, more traditional
high explosives, and cyber-threats to the national infrastructure."
In October of 2006 the company told would-be investors flatly that
the war on terror would continue to be a lucrative growth industry.

SAIC executives have been involved at every stage of the life cycle
of the war in Iraq. SAIC personnel were instrumental in pressing
the case that weapons of mass destruction existed in Iraq in the
first place, and that war was the only way to get rid of them. Then,
as war became inevitable, SAIC secured contracts for a broad range
of operations in soon-to-be-occupied Iraq. When no weapons of mass
destruction were found, SAIC personnel staffed the commission that
was set up to investigate how American intelligence could have been
so disastrously wrong.

It is Wednesday afternoon, March 25, 1998, and David A. Kay, who
had been a U.N. official in Iraq in the aftermath of the 1991 Gulf
War, is on Capitol Hill testifying before the Senate Armed Services
Committee. Americans generally remember Kay as the head of the Iraq
Survey Group, the man who showed that Saddam Hussein didn't possess
W.M.D. when America invaded in 2003, and that the war was launched
under false pretenses. But today, in 1998, he is not David Kay,
weapons inspector, but David Kay, director of SAIC's Center for
Counterterrorism Technology and Analysis. He is a stockholder in a
company known to cognoscenti in the hearing room as a fraternal
twin of the intelligence establishment. With great authority, Kay
tells the committee that Saddam Hussein "remains in power with
weapons of mass destruction" and that "military action is needed."
He warns that unless America acts now "we're going to find the
world's greatest military with its hands tied."

Over the next four years, Kay and others associated with SAIC
hammered away at the threat posed by Iraq. Wayne Downing, a retired
general and a close associate of Ahmad Chalabi, proselytized hard
for an invasion of Iraq, stating that the Iraqis "are ready to take
the war … overseas. They would use whatever means they have to
attack us." In many of his appearances on network and cable television
leading up to the war, Downing was identified simply as a "military
analyst." It would have been just as accurate to note that he was
a member of SAIC's board of directors and a company stockholder.
(Downing was also the chief proponent of a weapons system called
Metal Storm, capable of firing a million rounds of ammunition a
minute; SAIC received $10 million from the Pentagon to develop
prototypes, but in the last two years the Metal Storm company has
lost millions.) In the run-up to the war, David Kay remained
outspoken. He told NBC News in October of 2002, "I don't think it's
possible to disarm Iraq as long as Saddam is in power and desires
to maintain weapons of mass destruction."

=== page 5 ===

On all these points Kay and Downing were buttressing the views of
Vice President Dick Cheney, Defense Secretary Donald Rumsfeld, and
others in the Bush administration. They were also echoing the
assertions of Iraqi exiles living in the United States, who had
been trying to overthrow Saddam Hussein for years. Many of those
exiles—people like Khidhir Hamza, a onetime atomic-energy official
in Iraq, who insisted that Saddam posed an imminent nuclear danger
to the United States—would in time receive paychecks from SAIC.
Although his evidence had long been discredited by weapons experts,
Hamza was among about 150 Iraqi exiles designated by the Pentagon
as members of the newly chartered Iraqi Reconstruction and Development
Council. The plan was that, once American troops secured Iraq, the
I.R.D.C. recruits would move into influential positions in a rebuilt
Iraqi government.

SAIC served as the paymaster for the Iraqi exiles under a $33 million
government contract. It brought them all together in the Washington,
D.C., suburbs, rented apartments for them, paid their living expenses,
provided various support services, and, later, after the invasion
and occupation, flew them to their jobs in the new, democratic Iraq.
This SAIC operation reported to Douglas Feith, the undersecretary
of defense for policy at the Pentagon, a key assistant to Rumsfeld,
and one of the architects of the Iraq invasion and occupation.
Feith's deputy was Christopher "Ryan" Henry, a former SAIC senior
vice president.

It was understood in Washington, long before the actual onset of
"shock and awe," that the Iraq war would be a Klondike gold rush
for contractors. Prior to the war, SAIC was awarded seven contracts,
together worth more than $100 million, without competitive bidding.
The Defense Department's justification for the no-bid contracts:
"We need the immediate services of a fully qualified contractor who
has the unqualified support and confidence of the Pentagon leadership."
SAIC's personnel, designated "subject-matter experts," were expected
to lend a hand on such matters as "business development, international
and regional political relations, the role of women in government,
and government reform." Among SAIC's subject-matter experts was
Shaha Riza, an Arab feminist and communications adviser at the World
Bank. Riza also happened to be the girlfriend of Paul Wolfowitz,
the deputy secretary of defense.

One week before the invasion, SAIC was awarded yet another no-bid
contract, this one for $15 million, which within a year would balloon
to $82 million. The contract gave SAIC the responsibility for
establishing a "free and independent indigenous media network" in
Iraq, and for training a cadre of independent Iraqi journalists to
go with it. The selection of SAIC for this job may have seemed
counter-intuitive. A year earlier, SAIC had been involved in a
Pentagon program designed to feed disinformation to the foreign
press. The program was overseen by a Pentagon entity with the
Orwellian name of Office of Strategic Influence, and its aims proved
sufficiently odious that someone inside the Pentagon leaked its
existence to The New York Times. An unrepentant Donald Rumsfeld
stated that he would shut down the Office of Strategic Influence—but
in name only: "There's the name. You can have the name, but I'm
going to keep doing every single thing that needs to be done."

To create its Iraqi Media Network, SAIC hired professional newsmen
from the United States as consultants. One of them was a former NBC
News staff member, Don North, who had launched his career as a
cameraman in Vietnam and eventually rose to become the NBC News
bureau chief in Cairo. North began with high expectations. Once
Saddam Hussein was ousted, he and his colleagues hoped to create a
BBC-like news operation, instilling "standards of international
broadcasting and news reporting" that Iraqis had never known before.
It soon became clear that the Pentagon and the Coalition Provisional
Authority had other ideas. To them, the Iraqi Media Network represented
an opportunity to push the U.S. agenda in Iraq in the most simplistic
sort of way. With SAIC's cooperation, the network quickly devolved
into a mouthpiece for the Pentagon—"a little Voice of America," as
North would put it. Iraqis openly snickered at the programming.
Every time North protested, he recalls, he was rebuffed by SAIC
executives. "Here I was going around quoting Edward R. Murrow,"
North says, "and the people who were running me were manipulating
and controlling a very undemocratic press and media that was every
bit as bad as what Saddam had established." In the end the network
was turned over to Iraqi control. Today it is a tool of Iraq's
Shiite majority and spews out virulently anti-American messages day
and night. "And to think we started it," says North. The SAIC-created
television network may be the only functioning weapon of mass
destruction in today's Iraq.

As everyone now acknowledges, no other such weapons have ever been
found, although search teams ran through more than $1 billion looking
for them. The closest they came was the discovery, in May of 2003,
of a "mobile bioweapons lab" in the form of a tractor-trailer whose
interior configuration looked suspicious. David Kay was on hand to
lend credence to the notion that the trailer was a weapons lab.
"This is where the biological process took place," he explained in
one NBC News broadcast. "You took the nutrients. Think of it sort
of as a chicken soup for biological weapons. You mixed it with the
seed stock, which came from this gravity-flow tank up here into the
fermenter, and under pressure with heat, it fermented." Kay outlined
the process step by step. The discovery of the trailer was, as the
NBC News interviewer allowed, "very close to that elusive smoking
gun."

It turned out, however, that the mobile weapons lab was nothing of
the kind. To be sure, the military, back in the United States, did
have in its possession something that looked a lot like the Iraqi
trailer. In advance of the invasion, SAIC had built its own version
of a mobile bioweapons lab, intended to help U.S. troops recognize
such a facility if they ever came across one. SAIC had built, in
effect, a self-fulfilling prophecy.

After failing to find the W.M.D., Kay told Congress in January of
2004: "Let me begin by saying we were almost all wrong, and I
certainly include myself here." The next month President Bush
appointed a commission to look at how American intelligence managed
to miss the truth about Iraq's weapons programs. The commission
delivered its report one year later, and although it sternly pointed
to obvious intelligence failures, it kept its gaze, as it had been
told to do, at a very low level—and far away from the issue of
whether senior policymakers had deliberately manipulated intelligence
findings: "The Commission found no indication that the Intelligence
Community distorted the evidence regarding Iraq's weapons of mass
destruction," the report concluded.

Three of the commission's staff members had direct ties to SAIC.
One was Gordon Oehler, the commission's deputy director for review.
When Oehler left the C.I.A., in October of 1997, after a 25-year
career, he in essence walked down the street and into the McLean
offices of SAIC to become a vice president for corporate development.
A second commission staff member with ties to the company was Jeffrey
R. Cooper, vice president for technology and chief science officer
in one of SAIC's major sub-units. The third member was Samuel S.
Visner, who holds a graduate degree in Washington's revolving-door
system. From 1997 to 2001, Visner was an SAIC vice president for
corporate development, and also a business-development manager.
Next, he moved into a government spymaster job, becoming chief of
signals-intelligence programs for the National Security Agency.
During this time SAIC was one of several firms to receive a $280
million contract from the N.S.A. to develop one of its secret
eavesdropping systems. In 2003, Visner returned to SAIC to become
a senior vice president and the director of strategic planning and
business development of the company's intelligence group.

=== page 6 ===

As for General Downing, he has become a regular contributor on
television as a military expert on the war in Iraq and America's
options. Everyone seems to have forgotten his earlier bellicosity.

The Flying Hummer

SAIC's ability to prosper is all the more remarkable given its
record of lawsuits, charges brought by whistle-blowers, allegations
of profiteering, fines assessed by federal judges, and repeated
investigations and government audits. According to one former
executive, in a sworn deposition in 1992, the practice of "mischarging"
became "institutionalized within the company." (SAIC denies such
allegations.)

The job of establishing the Iraqi Media Network's infrastructure—cables,
transmitters, dishes—was rife with corruption and waste. In one
instance, government auditors questioned an SAIC invoice for
approximately $10 million. (SAIC says it is unaware of the auditors'
report.) In March of 2004 the Pentagon's inspector general found
widespread violations of normal contracting procedures: improper
payments to subcontractors, unsubstantiated equipment purchases,
unauthorized personnel on the payroll. One of the more blatant
transgressions concerned SAIC's overall manager of the media effort
in Iraq. The investigators discovered that he had bought a Hummer
and a pickup truck in the United States and then chartered a DC-10
cargo jet to fly them to Iraq. When a Pentagon official refused to
allow the charge, the inspector general reported, "SAIC then went
around the authority of this acquisition specialist to a different
office within the Under Secretary of Defense for Policy to gain
approval and succeeded." SAIC's performance on the Iraqi Media
Network contract is now, indirectly, at issue in a lawsuit brought
by an employee who alleges that she was fired after she tried to
draw the attention of SAIC executives to what she described in the
suit as "unethical, illegal, and unsafe practices" by the company
in Iraq. Because of the pending legal action, this employee declined
to be interviewed, but considerable documentation is already part
of the public record, including portions of her personnel file.
SAIC's corporate priorities are suggested by one commendation the
employee received, for her "excellent billing credentials."

This way of doing business has been an SAIC character trait for
years. In 1991, SAIC was charged with falsifying data submitted to
the E.P.A. on soil samples from Superfund toxic-waste sites. The
law required the E.P.A. to identify toxic dumps and determine which
ones posed the gravest risks. To perform the analysis, the E.P.A.
contracted with independent labs, including SAIC's Environmental
Chemistry Laboratory, in La Jolla. The lab was supposed to test
soil and water samples within a certain number of days of their
being received "to ensure the chemicals being tested for would not
have dissipated in the interim." But technicians at SAIC's lab
tested some samples after the deadline and then backdated the
results. SAIC mounted a high-powered behind-the-scenes campaign to
escape prosecution. A member of SAIC's board of directors, former
secretary of defense Melvin R. Laird, wrote a personal letter to
Attorney General Dick Thornburgh. "I can assure you there was no
wrongdoing on the part of the corporation," Laird stated. Criminal
prosecution of SAIC, he went on, would be "entirely inappropriate."
Ultimately the company was accused by the government of making
"false, fictitious and fraudulent statements," and pleaded guilty
to 10 counts of making false statements or claims. SAIC paid $1.3
million in fines and restitution.

A few years later SAIC was in trouble again, this time over its
efforts to design a flat-panel liquid-crystal-display screen to be
used as a navigational device in the cockpits of air-force fighter
jets. The initial contract had been awarded in 1987, but SAIC kept
going back for more money. The government would shell out millions—even
as SAIC assured the air force that steady progress was being made.
And in fact air-force officials had no reason to believe otherwise:
they had seen what they thought was a demonstration model when SAIC
officials unveiled a slick-looking compact box with a backlit screen.
SAIC officials traveled to military bases around the country to
show off the prototype. A respected magazine, Engineering Design
News, published a photograph of the display screen on its cover.

But the box was a fake. SAIC had been unable to develop the actual
technology. The prototype—in effect, nothing more than a cheap video
game—had been cobbled together with components taken from TV sets,
computers, and everyday consumer appliances. When two SAIC employees
complained to their superiors, both were fired. Two employees later
filed whistle-blower lawsuits charging SAIC with defrauding the
government. While denying any wrongdoing, in 1995 SAIC settled the
suit with the government and paid a fine of $2.5 million.

The ill-fated cockpit-display project was hardly an isolated case.
A recent case revealed one method SAIC employed to increase the
profits on a contract. In San Antonio, the air force awarded SAIC
a $24 million contract to clean up contaminated-waste sites at Kelly
Air Force Base. Once the project was under way, the SAIC manager
overseeing the job realized that the work would cost much less than
the amount SAIC had negotiated. "It was massively overstaffed,"
Michael Woodlee, the former manager, said in an interview. "I didn't
need that many [people]." Woodlee said he told one of his superiors
that "there was no way under the moon we could spend all this money."

This is not what SAIC wanted to hear. Woodlee said that, because
he couldn't spend everything in his budget, his SAIC superiors
suggested that he "harvest money out of [his] project and send it
up the corporate ladder." After he resisted, Woodlee contended, the
project was taken away from him, and he was laid off.

In 2002, Woodlee filed a whistle-blower lawsuit charging SAIC with
fraud under the federal False Claims Act. Working with air-force
investigators, the U.S. attorney in San Antonio concluded that SAIC
had in fact grossly understated profits on the contract: rather
than the 8 to 10 percent profit the contract allowed, SAIC had,
"unbeknownst to the Air Force," realized profits of three times
that amount, and had submitted "false and fraudulent statements of
its expected costs and profits."

SAIC's response was audacious. It told federal officials, in effect,
that the government was right: the company does increase the profit
margin beyond the terms of the contract. But there's a reason: risk
is involved, and the additional profit is compensation for that
risk. According to documents in the case, SAIC explained that it
employs something called "Quantitative Risk Analysis" to identify
potential business risks, and that it factors those costs into its
contracts, although without ever mentioning the fact to customers.
In a written response, the company stated that this kind of risk
analysis is "commonly used throughout industry" and "such purely
judgmental information was not required to be disclosed under
[federal law] based on longstanding legal principles." But by failing
to disclose that information to federal negotiators, the air force
maintained, SAIC induced it "to agree to much higher prices than
[the air force] would have agreed to had SAIC truthfully disclosed
its cost and pricing data." After SAIC's "risk defense" surfaced,
the air force issued a written alert to warn other agencies about
SAIC's business methods, which it said SAIC "intends to continue
using."

=== page 7 ===

Although the amount of money in contention was relatively small,
the principle involved was large, and it had potentially national
implications. Was SAIC using the same formula in thousands upon
thousands of other contracts it had with the government? We'll never
know. For reasons that remain unclear, the Justice Department decided
against expanding the probe beyond San Antonio. Is it possible that
a call was made from one well-placed individual to another? In April
of 2005, SAIC, while denying wrongdoing, settled the San Antonio
lawsuit by paying a fine of $2.5 million.

More important, the company had forestalled a wider investigation.
One of Woodlee's lawyers, Glenn Grossenbacher, who has represented
other whistle-blowers against other companies, describes SAIC as
unlike any other company he has ever confronted. "These guys handle
things very differently than other people," he said. "They had
better access to the Pentagon than the government's own attorneys.
They are so well connected they were able to isolate this one case.
This should have been a [national] case. The reason it wasn't was
because of their political clout to shut it down and localize it."

Not every SAIC client is as forgiving as the United States government.
When SAIC failed to deliver a highly touted security system for the
2004 Athens Olympics, the Greek government refused to make a final
payment. SAIC had proposed the most extensive security shield in
Olympic history: more than 100 command posts, vehicle-tracking
devices and sensors everywhere, 1,600 video cameras, and a blimp
loaded with "sensitive equipment" floating "silently overhead acting
as an airborne surveillance center." As video feeds flowed to a
central command post, SAIC's state-of-the-art software would link
all these capabilities. The system was to remain in place as an
anti-terrorism tool in Athens for years to come. But turmoil within
SAIC plagued the effort from the start. Project managers came and
went. On the eve of the games a source close to the Olympic planners
stated that "the entire Committee without exception believe that
the … system doesn't work."

The Olympics started up on schedule. SAIC's security system did
not. A newspaper in Athens described the system as "operationally
useless," and Greek officials improvised simply by adding more
guards. Before the games began, SAIC and the Greek government had
quietly come to an agreement that called for continued testing of
the system and "final acceptance to occur no later than October 1,
[2004]"—one month after the games ended. A payment of $23 million
would follow. SAIC missed this deadline, too. After more wrangling
the two sides, according to an Athens newspaper, reached an
understanding that calls for SAIC to complete work by May 2008,
almost four years after the Olympics. As of last fall, SAIC's losses
on the project totaled a staggering $123 million, and the company
acknowledges "our poor performance on the Greek Olympics contract."
SAIC is trying to recoup some of its losses in an arbitration and
so far has managed to keep the lid on potentially embarrassing
revelations about the competence of a company whose operations are
built on claims of technical expertise.

Radiation Sickness

Given that its founder came from a company called General Atomic
it is hardly surprising that SAIC has been heavily involved in the
nuclear business. One early project came in the 1970s and 80s, when
SAIC received Pentagon contracts to reconstruct the amount of
radiation absorbed by military personnel during atomic-bomb tests
and other service-related exposures. The government's bookkeeping
was so erratic from the early days of the Cold War that it was often
difficult to tell how much radiation soldiers had received and
whether it might have been responsible for their various cancers.
When SAIC did the numbers, few veterans qualified for compensation.
The Pentagon's nuclear testing was in effect off the hook, and
ailing veterans were out of luck. After years of hearings, Congress
in 1988 passed the Radiation-Exposed Veterans Compensation Act,
which gave veterans the benefit of the doubt. It was presumed that
their cancer was attributable to nuclear exposure without considering
the radiation dose. By then many of the veterans were dead. A health
physicist who testified later on behalf of the veterans spoke
unkindly of the original SAIC work: "Atomic veterans have been
deprived of benefits intended by Congress through [SAIC's] deceptive
internal dose reconstructions and poor understanding of radioactive
material distribution in the body." SAIC disagrees, saying that it
"continues to work with the government to apply the best science
to performing dose reconstruction for atomic veterans."

Periodically over the years, the Nuclear Regulatory Commission and
the U.S. Department of Energy, prodded by executives in the nuclear
industry, have sought to ease the rules against re-using "lightly"
contaminated radioactive waste. The impetus has been the inexorably
growing stockpile of nuclear debris—much of it lethal—that has been
accumulating at weapons sites and power plants in America for
decades. One way to draw down the stockpile would be to recycle
large volumes of discarded nickel, aluminum, copper, steel, and
other irradiated metals into usable products. If slightly radioactive
metal were combined with other metals, the resulting material could
be made into all kinds of consumer items—knives and forks, baby
strollers, chairs, rings, eyeglass frames, bicycles, reclining
rockers, earrings, frying pans. It also could be used in construction.

Lest any of this sound improbable, in the 1980s radioactive table
legs began turning up in the United States everywhere from restaurants
to nursing homes. A radioactive gold ring cost a Pennsylvania man
his arm. The public outcry was so great that in 1992 Congress set
out to ban this form of recycling. The N.R.C., D.O.E., and nuclear
industry saw the ban coming and were not happy about it, but they
also saw a way out: maybe it would be possible to develop broad
guidelines that would allow the contaminated waste to be recycled
based on what were deemed "safe" exposure levels. Never mind that
there is no such thing as a safe dose of radiation. Two months
before the ban was signed into law, the N.R.C. gave the
multi-million-dollar job of formulating the guidelines to an outside
contractor. The contractor was SAIC.

As the years slipped by, across town, another federal agency, the
Department of Energy, was handing out a $238 million contract to
B.N.F.L. Inc., at that time the U.S. subsidiary of British Nuclear
Fuels, "to clean up and reindustrialize three massive uranium
enrichment facilities" at Oak Ridge National Laboratory, in Tennessee.
The agreement called for B.N.F.L. to recycle "hundreds of thousands
of tons of metals." British Nuclear Fuels had a questionable track
record in the nuclear industry. For decades it had dumped plutonium
and other radioactive waste into the Irish Sea and the North Atlantic.
Its workers had falsified critical quality-control data. When the
D.O.E. announced the contract, SAIC was identified as a major
subcontractor in the recycling of radioactive scrap metal.

Because the N.R.C. and the D.O.E. for some reason weren't talking
to each other, the elegance of this arrangement escaped everyone's
attention. To connect the dots: SAIC was writing the regulations
for one government agency, the N.R.C., which would set the permissible
limits of radioactive contamination for recycling, even as it
partnered with another company, under contract to a different federal
agency, the D.O.E., to recycle the radioactive metal for which it
was drafting the regulations.

=== page 8 ===

The synergy of this arrangement was discovered accidentally by a
Washington lawyer, Daniel Guttman, whose longtime passion has been
conflicts of interest that inevitably—purposefully—arise from
government outsourcing. Guttman called attention in public hearings
to what was happening, thoroughly embarrassing officials at the
N.R.C. and the D.O.E. and stirring the ire of public-interest groups.
The N.R.C. killed its contract with SAIC. The recycling project was
put on hold. And the N.R.C. filed suit against SAIC, alleging "false
and/or fraudulent representations to the effect that [SAIC] was
providing services to the NRC which were free from bias." SAIC has
denied the conflict-of-interest claims, and the suit is still
pending.

But SAIC is by no means out of the nuclear business. It may be under
a cloud at the N.R.C., but it's still a partner, with the construction
giant Bechtel, in the largest nuclear project of all—the $3.1 billion
effort to build a repository for America's high-level radioactive
waste. The firm Bechtel SAIC is constructing the repository deep
under Yucca Mountain, Nevada, where the buried waste will remain
lethal for at least 10,000 years. It could provide a revenue stream
for SAIC as far into the future as one can imagine.

The Permanent Government

Bob Beyster turned 79 in 2003. He was in his 34th year with the
company. A writer for The San Diego Union-Tribune, granted a rare
interview around this time, observed that Beyster was a "little
more stooped now," but still vigorous. He continued to run three
or four miles almost every day. Over the years numerous executives
rumored to be his successor had come and gone as it became apparent
that Beyster had no intention of relinquishing power. But the sheer
size of the company and its aggressive, internally competitive style
were catching up to Beyster. Even Pentagon officials had begun to
complain that SAIC's overlapping divisions were creating confusion.
When the Pentagon talks, contractors listen. In 2003, the SAIC board
forced him out. By 2004, SAIC had a new chairman, Kenneth Dahlberg,
a top executive at General Dynamics with long experience in the
defense industry.

In October of 2006, SAIC carried out a long-anticipated I.P.O.,
selling 86 million shares at $15 a share in its debut on the New
York Stock Exchange, raising $1.2 billion. Reflecting investor
bullishness, shares rose to $21 in a matter of days. Its prospects
have never looked brighter.

Unlike traditional wars, which eventually come to an end, the Global
War on Terror as defined by the Bush administration can have no
end: it is a permanent war—the perfect war for a company that has
become an essential component of the permanent government. Political
change causes scarcely a ripple. As one former SAIC manager observed
in a recent blog posting: "My observation is that the impact of
national elections on the business climate for SAIC has been minimal.
The emphasis on where federal spending occurs usually shifts, but
total federal spending never decreases. SAIC has always continued
to grow despite changes in the political leadership in Washington."

And the revolving door never stops spinning. One of the biggest
contracts ever for SAIC is in the works right now. It's for a
Pentagon program called Future Combat Systems, which is described
as "a complex plan to turn the U.S. Army into a lighter, more lethal,
more mobile force" and also as "the most difficult integration
program ever undertaken by the U.S. Department of Defense." The
contract runs into the billions of dollars. The man who helped craft
this program at the Pentagon was Lieutenant General Daniel R. Zanini.
Zanini recently retired from the army, and he now has a new job.
Can you guess where it might be?