Report to Accompany S. 2089, the Counterintelligence Reform Act of 2000 (July 20, 2000)

[Senate Report 106-352]
[From the U.S. Government Printing Office]



                                                       Calendar No. 701
106th Congress                                                   Report
                                 SENATE
 2d Session                                                     106-352

======================================================================



 
               THE COUNTERINTELLIGENCE REFORM ACT OF 2000

                                _______
                                

                 July 20, 2000.--Ordered to be printed

                                _______
                                

 Mr. Shelby, from the Select Committee on Intelligence, submitted the 
                               following

                              R E P O R T

                         [To accompany S. 2089]

    The Select Committee on Intelligence, to which was referred 
the bill (S. 2089) to amend the Foreign Intelligence 
Surveillance Act of 1978 to modify procedures relating to 
orders for surveillance and searches for foreign intelligence 
purposes, and for other purposes, having considered the same, 
reports favorably thereon with amendments and recommends that 
the bill as amended do pass.

                                PURPOSE

    The proposed legislation is intended to improve 
coordination within and among the U.S. Government agencies 
investigating and prosecuting espionage cases and other cases 
affecting national security. The legislation clarifies in 
statute the obligations of each of the affected agencies, 
ensures accountability in decisionmaking by relevant agency 
heads, and codifies current law and practice with respect to a 
determination of ``probable cause'' under the statute.

                       SCOPE OF COMMITTEE REVIEW

    The Committee conducted a detailed review of the 
Counterintelligence Reform Act of 2000. The Committee conducted 
hearings and received comments from the affected agencies of 
the intelligence and law enforcement communities. The following 
report explains the Committee's amendments to the bill as 
reported by the Judiciary Committee on May 23, 2000, and 
highlights several additional issues that the Committee 
considered in the course of its evaluation of S. 2089.

Background

    Investigations into espionage by the People's Republic of 
China (PRC) against Department of Energy (DOE) nuclear weapons 
laboratories and other U.S. Government facilities have 
identified extensive problems and shortcomings in the 
government's response to this critical counterintelligence 
threat.\1\ At the structural level, attention has focused 
primarily on reforming and reorganizing DOE security, 
counterintelligence, and national security structures and 
programs, as well as altering attitudes toward security among 
DOE scientists. Concern over PRC espionage, in particular the 
PRC's use of sophisticated, non-traditional methods, has also 
fueled existing concerns over the adequacy of government wide 
counterintelligence structures, programs, and policies to 
address both emerging threats and traditional adversaries using 
cutting edge technologies and tradecraft in the 21st century.
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    \1\ PRC espionage and the U.S. Government's response have been the 
subject of investigations by, inter alia, the Senate Select Committee 
on Intelligence, the House Select Committee on U.S. National Security 
and Military/Commercial Concerns with the People's Republic of China, 
the President's Foreign Intelligence Advisory Board (PFIAB), the Senate 
Committee on Governmental Affairs, the Senate Judiciary Subcommittee on 
Administrative Oversight and the Courts, and most recently, the 
Attorney General's Review Team (``Bellows Report'').
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    At the operational level, investigations into PRC nuclear 
espionage have identified extensive problems in the DOE and FBI 
investigations into the compromise of classified information on 
the W-88 warhead and other U.S. nuclear weapons, including:
           the FBI's failure to devote adequate 
        resources and attention to this critical investigation;
           extensive failures in coordination, 
        information-sharing, and follow-through, both within 
        and between the DOE and the FBI, that led to many 
        missed opportunities and critical failures to act; and
           problems in the Department of Justice's 
        response to the FBI's application for surveillance 
        pursuant to the Foreign Intelligence Surveillance Act 
        of 1978 (FISA).
    Since March 1999, the Senate Select Committee on 
Intelligence (SSCI) held numerous hearings and briefings on PRC 
espionage against DOE labs and the resulting damage to U.S. 
national security; the DOE and FBI investigations, including 
the use of the FISA; longstanding DOE security and 
counterintelligence problems; and DOE reorganization. In 
addition, the Committee held three hearings and Member 
briefings on counterintelligence policies and programs 
government wide, including two sessions on the Administration's 
draft counterintelligence reorganization plan entitled 
``Counterintelligence for the 21st Century.''
    In response to some of the issues identified in the 
investigation of espionage at the DOE labs, on February 24, 
2000, Senators Specter, Torricelli, Thurmond, Biden, Grassley, 
Feingold, Helms, Schumer, Sessions and Leahy introduced the 
``Counterintelligence Reform Act of 2000'' (S. 2089). In early 
April 2000, the SSCI held a closed hearing to receive testimony 
on S. 2089 and other issues involving the FISA. The bill was 
considered by the Senate Judiciary Committee on May 18, 2000, 
and ordered favorably reported with an amendment in the nature 
of a substitute. On May 23, S. 2089 was reported to the Senate 
and immediately referred to the SSCI for consideration.

The Office of Intelligence Policy and Review

    The Office of Intelligence Policy and Review (OIPR) in the 
Department of Justice is responsible for advising the Attorney 
General on matters relating to the national security of the 
United States. As part of its responsibilities, the OIPR 
prepares and presents to the Foreign Intelligence Surveillance 
Court (FISC) all applications for electronic surveillance and 
physical searches under the Foreign Intelligence Surveillance 
Act of 1978.
    In June 2000, the National Commission on Terrorism 
(referred to as the Bremer Commission) issued its report 
entitled, ``Countering The Changing Threat of International 
Terrorism.'' One of the significant findings of the Bremer 
Commission was that the Department of Justice applies the FISA 
statute in a ``cumbersome and overly cautious manner.'' Based 
on testimony before the Select Committee on Intelligence and 
agency discussions, the Committee agrees with the conclusions 
of the Bremer Commission regarding the Justice Department's 
application of the FISA statute. Agencies have informed the 
Committee that the FISA application process, as interpreted by 
the OIPR is administratively burdensome and, at times, 
extremely slow. Many applications undergo months of scrutiny 
before submission to the court because the OIPR prescribes 
standards and restrictions not imposed by the statute.
    In its substitute amendment to S. 2089, the Judiciary 
Committee added a provision authorizing a substantial increase 
in funds for the OIPR. While the Committee agrees that the OIPR 
must act immediately to address the issues highlighted above, 
the Committee doubts that the significant infusion of funds 
authorized in Section 6, by itself, will remedy the majority of 
these problems. Since many of these problems stem from policy 
restrictions rather than resource constraints, the Committee 
expects the OIPR to conduct a review of the way it conducts 
business, including a ``zero-based'' review of all requirements 
and restrictions imposed upon the FISA application process to 
ensure they are specifically mandated by the statute. In order 
to ensure that the OIPR is properly addressing these issues, 
the Committee has prohibited the expenditures of funds 
authorized in Section 6 until the OIPR submits a report to the 
appropriate committees setting forth how it will utilize these 
additional funds to remedy the issues addressed above, and the 
results of the ``zero-based'' review described above.

Prior agent relationships

    Sections 2(a) and 3(a), as adopted by the Judiciary 
Committee, require FISA applications for counterintelligence 
purposes to include a detailed description of any current or 
relevant prior relationship of the subject of an investigation 
with any intelligence or law enforcement agency. Although these 
sections were deleted in the Intelligence Committee mark, the 
Committee believes that a current relationship between an 
agency within the U.S. Intelligence Community and the subject 
of a counterintelligence investigation should be acknowledged, 
to the extent practicable and with due regard for the 
protection of sources and methods, in any FISA request 
targeting that particular subject.
    The Committee also notes that, in certain cases, prior 
relationships between an agency within the U.S. Intelligence 
Community and the subject of a counterintelligence 
investigation may be useful in the consideration of a request 
for a FISA order targeting that subject. The Committee expects 
that any agency requesting an order to conduct electronic 
surveillance or physical searches under the FISA will fully 
inform the OIPR, to the extent practicable and with due regard 
for the protection of sources and methods, of any current or 
relevant prior relationship between the agency and the target 
of the FISA application.

Past activities in establishing probable cause

    The Department of Justice has been criticized for its 
failure, in the summer of 1997, to approve for submission to 
the FISC the FBI's application for FISA surveillance of Dr. Wen 
Ho Lee and his wife, Sylvia Lee, suspects in the FBI 
investigation into the compromise of classified information 
relating to the W-88 warhead. In particular, the OIPR has been 
criticized for an overly restrictive interpretation of the FISA 
``currency'' requirement. This is the issue of how recent a 
subject's activities must be to support a finding of probable 
cause that the subject is engaged in clandestine intelligence 
gathering activities.
    Subsection 2(c) of S. 2089 amends the FISA to state 
explicitly that past activities of a target may be considered 
in determining whether there is probable cause to believe that 
the target of electronic surveillance is an ``agent of a 
foreign power.'' Subsection 3(c) adds an identical provision 
governing FISA applications for physical searches.
    While existing law does not specifically address ``past 
activities,'' it does not preclude, and legislative history 
supports, the conclusion that past activities may be part of 
the totality of circumstances considered by the FISC in making 
a probable cause determination. This reflects the practical 
consideration, well-known to the drafters of the FISA, that 
espionage is by its very nature clandestine, and that to 
maintain cover, a clandestine agent may lie dormant, often for 
years, between espionage activities.
    The OIPR and the FBI have informed the Committee that in 
their view, this provision represents a codification of current 
law and practice. This is precisely the Committee's intent: to 
clarify and make explicit, for the benefit of future FBI 
agents, OIPR attorneys, and FISC judges, that the FISA 
contemplates, and always has contemplated, that the past 
activities of a target may be considered in a determination of 
probable cause.

Classified Information Procedures Act

    Originally, an additional amendment to S. 2089 was proposed 
by one of the bill's cosponsors for consideration when the bill 
reached the full Senate that would have amended the Classified 
Information Procedures Act (CIPA) (18 U.S.C. App.) to address 
concerns about the handling of the Dr. Peter H. Lee case by the 
Department of Justice, the Department of Defense, and the U.S. 
Navy. Lee, a former employee of Los Alamos and Lawrence 
Livermore Nuclear Laboratories and TRW Inc., in December 1997 
pled guilty to transmitting classified national defense 
information to the PRC in violation of 18 U.S.C. 793(d) and 
making false statements about his contacts with PRC nationals 
in violation of 18 U.S.C. 1001.\2\
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    \2\ Dr. Peter Lee was sentenced to 12 months in a halfway house, a 
$20,000 fine, and 3,000 hours of community service.
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    The proposed amendment reflected a belief that there was a 
lack of coordination and cooperation between the Department of 
Justice and other agencies that affected adversely the 
decision-making process in the case. This Committee is 
concerned that the original proposed amendment would allow 
excessive intrusion into the prosecutorial function.
    In light of this Committee's concerns with the potential 
impacts of the proposed amendment, the Committee agreed to 
include a much narrower amendment to the bill in Committee. 
Accordingly, Section 7 of S. 2089 codifies existing practice 
followed by Department of Justice prosecutors in cases 
involving classified information. Section 7 requires the 
Assistant Attorney General for the Criminal Division and the 
United States Attorney, or their designees, to provide 
briefings to the head of the agency that originated the 
classified information at issue in the case. These briefings 
will begin as soon as practicable and appropriate, consistent 
with rules governing grand jury secrecy, and will continue 
thereafter, as needed, to keep the agency head fully and 
currently informed. The purpose of the briefings is to make 
sure that the agency head understands the scope and volume of 
the CIPA procedures. In addition, the agency head will have an 
opportunity at various stages of the case to make his or her 
views known to the prosecutors as to whether sources and 
methods and other classification concerns are receiving 
adequate protection. The Committee notes that a successful 
prosecution depends on informed prosecutors, and believes that 
this provision will aid in ensuring an appropriate flow of 
information between prosecutors and affected agencies.
    The Committee believes that the Department of Justice has a 
responsibility to ensure that its prosecutors, and affected 
agency officials, are fully aware of, and understand, the CIPA 
procedures. The CIPA has proven to be a successful mechanism 
for enabling prosecutions that involve national security 
information to proceed in a manner that is both fair to the 
defendant and protective of classified information. Before the 
CIPA, the United States Government sometimes had to make the 
difficult choice between either dismissing a criminal case or 
proceeding in the face of the risk that classified information 
might be made public. Neither alternative was in the best 
interests of the intelligence or law enforcement agencies--or 
of the American people. The CIPA provided pre-trial procedures 
for the court to resolve in camera and ex parte these issues in 
a manner that protects both the national security and the 
defendant's right to a fair trial. The government may take an 
immediate appeal of adverse rulings and, if the issues cannot 
be resolved in a manner that protects national security, may 
then make informed decisions on whether to dismiss some or all 
of the charges.
    In any case in which classified information is at issue, 
the so-called ``victim agency'' that originated the information 
is the agency whose equities are most directly implicated. The 
head of that agency is responsible for protecting the 
information and, accordingly, will have a strong interest in 
the key decisions made by the prosecutors as the case develops. 
The Committee believes that, in the vast majority of cases, the 
lawyers from the Department of Justice and the United States 
Attorneys Offices who are responsible for making the 
prosecutorial decisions consult on a regular basis with the 
agency head or his or her designee. While prosecutorial 
discretion ultimately rests with Department of Justice 
officials, it stands to reason that in cases designed to 
protect the national security--such as espionage and terrorism 
cases--prosecutors should ensure they do not make decisions 
that, in fact, end up harming the national security.

Sharing within the Intelligence Community of information collected 
        under FISA court orders

    By definition, information collected pursuant to a court 
order issued under the Foreign Intelligence Surveillance Act is 
foreign intelligence not law enforcement information. 
Accordingly, the Committee wants to clarify that the FISA 
``take'' can and must be shared by the Federal Bureau of 
Investigation with appropriate intelligence agencies. For the 
intelligence mission of the United States to be successful, 
there must be a cooperative and concerted effort among 
intelligence agencies. Any information collected by one agency 
under foreign intelligence authorities that could assist 
another agency in executing its lawful mission should be shared 
fully and promptly. Only then can the United States Government 
pursue aggressively important national security targets 
including, for example, counterterrorist and counternarcotics 
targets.
    The Committee has been briefed on the recent efforts by the 
Federal Bureau of Investigation and the Central Intelligence 
Agency to enhance their ability to share valuable information 
collected under FISA orders. The Committee commends these 
efforts and expects them to continue and to be broadened to 
include all areas of the foreign intelligence mission. Only 
when an efficient and effective program is in place to ensure 
full sharing of information possessed by the United States 
Government will the Committee be satisfied that the national 
security needs of the country are being protected.

              SECTION-BY-SECTION ANALYSIS AND EXPLANATION

Section 1. Short title

    The bill is entitled the ``Counterintelligence Reform Act 
of 2000.''

Section 2. Orders for electronic surveillance under the Foreign 
        Intelligence Surveillance Act of 1978

    Subsection 2(a) of S. 2089 requires the Attorney General to 
review personally any application to conduct electronic 
surveillance under the Foreign Intelligence Surveillance Act 
(FISA), if requested to do so in writing by the Director of 
Central Intelligence, the Director of the Federal Bureau of 
Investigation, the Secretary of Defense, or the Secretary of 
State. If the Attorney General disapproves the application, the 
disapproval must be in writing and must set forth the 
modifications, if any, to the application that would be 
necessary for the DOJ to forward the request to the FISC. 
Delegation of either the request or the review may occur in 
cases where the agency head is disabled or otherwise 
unavailable. The Committee adds a technical amendment to ensure 
the delegation authority functions as intended. The Committee 
notes that this provision is intended to be an extraordinary 
authority, permitting an opportunity for the heads of the 
enumerated agencies and departments to appeal a decision to the 
Attorney General, who ultimately is charged by statute to 
approve FISA applications for review by the FISA court. The 
Committee will monitor implementation of this provision to 
ensure it remains a process for appeal of FISA applications 
that are particularly sensitive and warrant personal review by 
the Attorney General.
    Subsection 2(b) amends the FISA to state explicitly that 
past activities of a target may be considered in determining 
whether there is probable cause to believe that the target of 
electronic surveillance is an ``agent of a foreign power.'' 
Current law does not specifically address ``past activities,'' 
but nothing precludes, and legislative history supports, that 
past activities be part of the probable cause determination. 
The Committee understands that the FISC will assess the 
relevance of past activities in determining probable cause.

Section 3. Orders for physical searches under the Foreign Intelligence 
        Surveillance Act of 1978

    Subsection 3 of S. 2089 adds the identical requirements, as 
described in Subsection 2, for applications relating to 
unconsented physical searches.

Section 4. Disclosure of information acquired under the Foreign 
        Intelligence Surveillance Act of 1978 for law enforcement 
        purposes

    The Committee modifies Section 4 as adopted by the 
Committee on Judiciary and replaces the provision with an 
amendment to current semi-annual reporting requirements under 
Section 108(a) of the Foreign Intelligence Surveillance Act of 
1978 (50 U.S.C. 1808(a)). The Attorney General will be required 
to track the use of FISA material for law enforcement purposes, 
either as leads or as evidence at trial, and to include such 
data in the Attorney General's Semi-Annual report to the 
Committees on Intelligence. Additionally, the Attorney General 
is directed to submit a report on the authorities and 
procedures utilized by the Department of Justice for 
determining whether to disclose information acquired under the 
FISA for law enforcement purposes. This report will be 
submitted to the House and Senate Committees on Intelligence 
and the Judiciary.

Section 5. Coordination of counterintelligence with the Federal Bureau 
        of Investigation

    Section 5 of S. 2089 establishes specific procedures 
regarding the conduct and coordination of counterintelligence 
investigations. The Committee believes that the determination 
of whether to leave a subject in place should be retained by 
the host agency. The Committee modifies subsection 5(a) to 
require the FBI to provide a written assessment of the 
potential impact of agency actions on a counterintelligence 
investigation, rather than a written finding that the subject 
of a counterintelligence investigation should be left in place. 
The host agency shall use the assessment as an aid in 
determining whether a target should be retained in place, and, 
if so, under what circumstance, and provide written 
notification of the determination to the FBI. The Committee 
envisions that there will be a give-and-take between the two 
agencies in reaching the best result.
    Subsection 5(b) adds ``in a timely manner'' to the 
statutory requirement that the FBI provide information and 
consultation to a concerned agency or department regarding an 
espionage investigation pertaining to the personnel, 
operations, or information of such agency or department.
    Subsection 5(c) requires the FBI to notify appropriate 
executive branch officials of the commencement of a full field 
espionage investigation of an executive branch employee. The 
head of a department or agency is required by this subsection 
to consult and coordinate with the FBI prior to conducting a 
polygraph examination, interrogation, or other action that is 
likely to alert a subject of an investigation.

Section 6. Enhancing protection of national security at the Department 
        of Justice

    At the request of the OIPR, the Judiciary Committee added 
Section 6 of S. 2089 which authorizes additional resources to 
meet increased personnel demands to process FISA applications, 
combat terrorism, participate effectively in counterespionage 
investigations, provide policy analysis on national security 
issues, and enhance secure computer and telecommunications 
facilities. The Committee amends the provision in a manner that 
does not change authorization requirements, but adds the 
Intelligence Committees as recipients of the Attorney General's 
report required by the section.
    The Committee notes that the OIPR received $4.089 million 
for fiscal year 2000. Due to the substantial increase in funds 
authorized by this provision for the OIPR, the Committee 
further amends Section 6 to make the authorization of 
additional resources subject to the Attorney General submitting 
a report to the appropriate committees on how these resources 
will be used by the OIPR to improve and strengthen its 
oversight of field offices, streamline and increase efficiency 
of the FISA application process, and address issues identified 
in the April 2000 semiannual report of the Attorney General to 
the Intelligence Committees under section 108(a) of Foreign 
Intelligence Surveillance Act of 1978.

Section 7. Coordination requirements relating to the prosecution of 
        cases involving classified information

    Section 7 amends the Classified Information Procedures Act 
to require the Department of Justice to brief senior officials, 
including the agency head or his designee, of an affected 
agency as soon as practicable after the prosecution team 
determines that a case involving classified information could 
result in a prosecution, and at such other times as to ensure 
that appropriate officials are fully and currently informed 
regarding the status of the case.

Section 8. Severability

    This section is simply a savings clause that ensures that 
any section in the Act that is held invalid will not prejudice 
any other provision of the Act.

                            COMMITTEE ACTION

    On July 18, 2000, by a vote of 15-0, the Select Committee 
on Intelligence approved the bill with amendments and ordered 
that it be favorably reported as amended.

                           ESTIMATE OF COSTS

    No Congressional Budget Office estimate was available at 
the time the report was filed. The Committee will publish the 
estimate in the Congressional Record as soon as it is received 
from the Congressional Budget Office.

                    EVALUATION OF REGULATORY IMPACT

    In accordance with paragraph 11(b) rule XXXVI of the 
Standing Rules of the Senate, the Committee finds that no 
regulatory impact will be incurred by implementing the 
provisions of this legislation.

                        CHANGES IN EXISTING LAW

    It is the opinion of the Committee that it is necessary to 
dispense with the requirements of section 12 of rule XXVI of 
the Standing Rules of the Senate in order to expedite the 
business of the Senate.