International Affairs

Does Israel Have a Backdoor to US Intelligence?

June 12, 2013

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Does Israel Have a Backdoor to US Intelligence?

Edward Snowden’s leaks about the spying capabilities of the US government and Silicon Valley have ignited speculation about what the emerging “surveillance society” portends. Still, we’ve long endured many varieties of spying and tracking, and some lessons can be learned from the past.

The news last week that the US government had collected Verizon’s “metadata” on who had called whom when and from where was widely seen as a stunning revelation. Timothy B. Lee of the Washington Post warned:

For example, having the calling records of every member of Congress would likely reveal which members kept mistresses, which could be used to blackmail members of Congress into supporting a future president’s agenda. Calling records could also provide valuable political intelligence, such as how frequently members of Congress were talking to various interest groups.

Likewise, Jane Mayer reported for The New Yorker:

…in the world of business, a pattern of phone calls from key executives can reveal impending corporate takeovers.

And yet informed observers have assumed for most of this century that American telephone metadata may well already be available to a foreign military-intelligence complex via hypothesized “backdoors” coded into complex commercial software.

In December 2001, Fox News’ chief political correspondent Carl Cameron delivered a four-part series on Israel’s surveillance of American targets. For unexplained reasons, Fox disappeared Cameron’s series down the memory hole later that month, although copies of the episodes survive on the Internet.

“It apparently hasn’t hurt Israel that so many Washington and Wall Street insiders assume that Israel knows their secrets.”

Cameron drew attention to Israel’s strategic initiative to dominate communications software. For example, Amdocs is “the market leader in Telecommunication Billing Services.” This firm is publicly traded and registered in the tax haven of Guernsey.

It sounds dull, yet the CEO from 2002 to 2010 was Dov Baharav. In 2011, Israel’s formidable defense minister Ehud Barak appointed Baharav the new chairman of Israel Aerospace Industries Ltd., the government-owned arsenal that builds fighter jets. In other words, the boring-sounding billing guy may be connected.

Cameron reported for Fox back in 2001:

Amdocs has contracts with the 25 biggest phone companies in America, and more worldwide. The White House and other secure government phone lines are protected, but it is virtually impossible to make a call on normal phones without generating an Amdocs record of it.…But sources tell Fox News that in 1999, the super secret National Security Agency, headquartered in northern Maryland, issued what’s called a Top Secret / Sensitive Compartmentalized Information report, TS/SCI, warning that records of calls in the United States were getting into foreign hands – in Israel, in particular. Investigators don’t believe calls are being listened to, but the data about who is calling whom and when is plenty valuable in itself.

Cameron assured viewers:

US intelligence does not believe the Israeli government is involved in a misuse of information, and Amdocs insists that its data is secure.

But that was false for American tech companies. Why should we assume that Israeli-run firms would be less cooperative with their own nation’s intelligence community? Indeed, Israel’s booming high-tech sector appears to be intimately related to its spy works, just as Silicon Valley emerged out of America’s Cold War efforts.

In 2012, James Bamford reported in Wired:

According to a former Verizon employee briefed on the program, Verint, owned by Comverse Technology, taps the communication lines at Verizon, which I first reported in my book The Shadow Factory in 2008.…At AT&T the wiretapping rooms are powered by software and hardware from Narus, now owned by Boeing, a discovery made by A&T whistleblower Mark Klein in 2004.

What is especially troubling is that both companies have had extensive ties to Israel, as well as links to that country’s intelligence service, a country with a long and aggressive history of spying on the U.S.

Forbes reported in 2007 that many Israeli high-tech firms are founded by alumni of Unit 8200:

Unit 8200 is the technology intel unit of the Israeli Defense Forces’ Intelligence Corps. And one thing about it is clear to all—Israel’s high-tech world is “flooded” with Unit alumni, as entrepreneurs and company founders or junior and senior executives.

American whistle-blower William Binney, who resigned from the National Security Administration to protest its Orwellian trajectory, told Bamford:

In fact, according to Binney, the advanced analytical and data mining software the NSA had developed for both its worldwide and international eavesdropping operations was secretly passed to Israel by a mid-level employee, apparently with close connections to the country….

But what goes around comes around:

But Binney now suspects that Israeli intelligence in turn passed the technology on to Israeli companies who operate in countries around the world, including the U.S. In return, the companies could act as extensions of Israeli intelligence and pass critical military, economic and diplomatic information back to them.

What could you do if you knew who was calling whom?

The Efficient-Market Hypothesis taught at every MBA program says that you can’t beat the market consistently without trading on inside information, which is illegal. Economic theory thus implies that Wall Street should have become a low-margin commodity business, much like being a wheat farmer in South Dakota. A glance at the Forbes 400, though, suggests this hasn’t quite happened yet.

To get some sense of the long-term effects of constant electronic surveillance, one of the more intriguing perspectives comes from examining federal investigations into financial malfeasance, such as insider trading. If the government is in the mood, it can subpoena emails, phone records, and even order wiretaps to see if financial players know more than they ought to know.

For example, former McKinsey CEO Rajat K. Gupta, a member of Goldman Sachs’s board of directors, was convicted of insider trading for calling his billionaire buddy Raj Rajaratnam 23 seconds after he was done hearing from Goldman CEO Lloyd Blankfein that the vampire squid was going to announce a terrible quarter in late 2008.

Virtually nobody has been convicted of wrongdoing in the mortgage meltdown that set off the great crash of 2008, but the largest individual fine was the $67.5 million levied on former Countrywide Financial CEO Angelo Mozilo.

Much of the SEC’s case against Mozilo was based on frank emails the Ventura County golfer occasionally sent his executives, such as his sensible 2006 critique of Countrywide’s zero-down subprime mortgage: “In all my years in the business I have never seen a more toxic product.”

In other words, what plunged hyper-salesman Mozilo into the minimal amount of legal trouble he has endured were some of his rare moments of prudent management when he emerged from his Always-Be-Closing frenzy long enough to notice the looming risks.

One lesson to be learned is: Don’t use email, text messages, or anything else that leaves a digital trail. Face-to-face communications offer less legal danger, because in court who can remember exactly who said what?

Perhaps that explains something about the mysterious failure over the last couple of decades of what used to be called the Information Superhighway to decentralize elites. We were all promised that in the Age of Cyberspace it wouldn’t matter where we lived. No more having to live near an expensive, crowded city. Freedom!

Instead, it turned out that three metropolitan areas–New York, Washington, and San Francisco/Silicon Valley—became far richer, while much of the rest of the country got poorer.

It seems strange today, when the financial industry is so concentrated in the short stretch from Greenwich, CN to Jersey City, but back in the 1980s the biggest figure on Wall Street wasn’t on Wall Street. Instead, junk-bond king Michael Milken worked on Rodeo Drive in Beverly Hills. Milken had to put up with inconveniences to live in his native San Fernando Valley, such as being at his desk at 5AM every day to account for the three-hour time difference with New York. Yet even before the Internet, it could be done.

Then the elder Bush Administration nailed Milken on insider-trading charges and he went to prison for 22 months (which would be astonishing under the current Democratic administration).

One lesson that the financial industry may have drawn from the travails of these far-flung Californians is that it doesn’t pay to be so far away that communication inevitably leaves digital trails.

This doesn’t mean the government is defenseless against insider trading carried out in random restaurants in Greenwich. As Charles Ferguson pointed out in Inside Job, the state always has the ability to work their way up to Mr. Big by arresting some Manhattan call girls, getting them to roll over on Wall Street traders, then going after their managers who might have some dirt on the man in the corner office.

But that’s grittier police work than merely imposing electronic surveillance. The Obama Administration has shown little appetite for taking the Street to the mat.

What are some of the advantages of having the means to know who calls whom in the US? We can only speculate, but it’s perhaps not wholly coincidental that Israel has become a highly prosperous country, with investment flooding in. Moreover, the Israeli government is extremely popular in Washington, with Prime Minister Netanyahu receiving 29 standing ovations the last time he addressed Congress.

It could well be that Israel doesn’t actually have these snooping capabilities. But it apparently hasn’t hurt Israel that so many Washington and Wall Street insiders assume that Israel knows their secrets.

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