-Caveat Lector- CIA Faces Criminal Probe in China Case Information Given To Satellite Firm By Vernon Loeb and John Mintz Washington Post Staff Writers Saturday, December 5, 1998; Page A01 The Justice Department has initiated a criminal probe of the CIA to determine whether the agency obstructed justice when it provided information to Hughes Electronics Corp. about the scope of an ongoing congressional investigation into the transfer of sensitive U.S. space technology to China, according to senior federal government officials. High-ranking CIA officials, including the agency's general counsel, have agreed to testify next week before a federal grand jury in Washington about information provided earlier this year to Hughes, which has supplied the CIA with satellites and sophisticated communications equipment for decades. Government sources say the CIA provided information to Hughes about the Senate Select Committee on Intelligence's technology transfer investigation that might have enabled the firm to anticipate the moves of congressional investigators. The Justice Department initiated the obstruction probe at the request of the Senate committee, sources said. The committee became alarmed after learning that the CIA had informed Hughes of names of company officials that the agency had previously supplied to the committee to assist in its investigation, sources said. A CIA spokesman said the agency is fully cooperating in the obstruction probe. Another CIA official, speaking on background, acknowledged that the agency may have erred in providing certain information to Hughes. But the information was turned over in the normal course of business between the agency and one of its major classified contractors with no intention of interfering with the investigation, the official said. The CIA official also stressed that agency employees who provided information to Hughes did so in their official capacities with approval of their superiors, not as individuals acting on their own. The official said that some of what the CIA gave Hughes pertained to the investigations precisely because there was no intent to hide anything, and that agency officials informed the committee of their communications with Hughes. Hughes spokesman Richard Dore said, "Hughes has not been provided information by the CIA regarding the details of federal criminal investigations involving Hughes." Much of the information provided by the CIA to Hughes is contained in CIA documents subpoenaed by the Senate and by federal investigators conducting a parallel probe into the transfer of U.S. technology to China, sources said. Hughes and Loral Space & Communications Ltd. are under investigation by the Justice Department and two congressional committees for their role in transferring technology to the Chinese after Hughes and Loral satellites were destroyed in two Chinese rocket explosions. Government sources said it is highly unusual for the Justice Department to investigate a fellow federal agency -- particularly one as sensitive and secretive as the CIA -- for possible obstruction of justice. Sources said the matter began this fall when a CIA analyst specializing in Chinese technology, Ronald Pandolfi, was called to the Senate committee and told staff members that he had concluded in 1995 that Hughes had been too aggressive in marketing high-technology equipment in China. At the time, according to an account from several sources, Pandolfi conducted interviews with Hughes executives about their work in China, causing Hughes to complain angrily to the CIA that he was operating outside of customary channels. The CIA office that regularly deals with Hughes reprimanded Pandolfi, who, after being summoned by the committee, in September laid out a set of accusations against the firm, sources said. Aware of Pandolfi's views, the CIA gave Hughes a heads-up about his discussion with the committee and offered to supply the panel with the names of Hughes executives who might explain the disagreement, sources said. Meanwhile, in a related development of concern to federal investigators, the House select committee looking into the transfer of sensitive U.S. space technology to China has indicated that it wants to grant immunity to certain Hughes employees from future prosecution based on information they would provide to Congress. One federal government source said that some of those employees are subjects of the Justice Department probe. Federal investigators are concerned by the prospect because congressional immunization can complicate any attempt to prosecute those individuals on any future charges. In one celebrated instance, former White House aide Oliver North had his federal conviction in the Iran-contra scandal overturned after arguing that witnesses who testified against him may have relied on some of the immunized testimony he supplied Congress. The controversy involving Hughes is rooted in its practice, shared by other aerospace firms, of launching commercial communications satellites atop Chinese rockets because they are much less expensive than Western launchers, particularly the market-leading French Ariane rocket. Hughes also works closely with the CIA and the National Reconnaissance Office, designing and manufacturing truck-sized satellites that eavesdrop on Earth from 22,000 miles in space. The firm, in the elite of trusted contractors for the U.S. intelligence community, has had intimate ties with the CIA for decades, since the time the company was run by swashbuckling aviation pioneer Howard Hughes. It's not known whether U.S. government officials believe Hughes's communications with Chinese authorities in 1995 about space technology harmed U.S. security in any way. But Air Force intelligence officials have concluded that Loral's transfer of data in 1996 may have hurt U.S. national security by helping the Chinese to improve their ballistic missiles. In both cases, the companies' disclosure of technical data followed failed launches of China's balky Long March rockets carrying the firms' satellites into space. In January 1996 a Long March rocket lifting off from a remote mountainous site in southwestern China exploded, destroying the Hughes satellite aboard and raining down fiery metal that killed hundreds of villagers. Chinese space officials, traditionally defensive and close-mouthed, blamed the Hughes satellite, saying it had caused the explosion. Western space executives scoffed at the accusation. The Chinese stance presented a quandary for Hughes, since the firm wanted to remain in favor with China's space program as a cheap launch alternative. But Hughes officials privately explained to some in the U.S. space community that the Long March rocket was responsible for the accident. The Chinese "became unglued" at what it viewed as Hughes's audacity, an industry official said. Amid the recriminations, Hughes sought and received Commerce Department approval to review with the Chinese some of its findings about the explosion's cause. Pentagon officials are supposed to monitor such contacts to ensure U.S. engineers don't disclose information that could help China design more capable ballistic missiles. But in this case, military monitors kept tabs only peripherally on Hughes's talks with the Chinese, sources said. The Justice Department probe focuses on whether Hughes misled Commerce about how much data it planned to give the Chinese, and whether Hughes disclosed more than Commerce had approved. The company has insisted it provided the Chinese only vague information that could not possibly have harmed U.S. security. Loral is under investigation for its activities following the destruction of one of its satellites in the February 1996 explosion of a Long March rocket. U.S. officials say the explosion killed more than 200 villagers in a torrent of burning rocket fuel. Because of China's record of misstatements following past Long March failures, insurance industry executives who had insured the $85 million Loral satellite demanded that Western space officials investigate the cause of the mishap. Loral headed the panel, and its members included Hughes representatives. In May 1996, a Loral staff member on the panel faxed the Chinese a copy of its after-accident report. Loral superiors informed the State Department immediately about the disclosure, saying it was the result of a subordinate's inattention to security rules. Loral, too, insists the data couldn't have helped China build better missiles. Staff writers Roberto Suro and Walter Pincus contributed to this report. © Copyright 1998 The Washington Post Company ( Warning! Walter Pincus is suspected by many of being a CIA asset. -- J2) DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance—not soapboxing! These are sordid matters and 'conspiracy theory', with its many half-truths, misdirections and outright frauds is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. 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