- The Washington Times - Wednesday, November 10, 2010

Financial intel killed

The Pentagon’s intelligence directorate is killing off one of its most strategically important mission areas: monitoring efforts by foreign governments to buy U.S. firms and technology, such as the multiple efforts by China’s military-linked equipment company Huawei Technologies to buy into the U.S. high-technology sector.

Defense officials tell Inside the Ring that Thomas A. Ferguson, acting undersecretary of defense for intelligence (USDI) and a former Defense Intelligence Agency (DIA) space analyst, initiated the dismantling of the financial-threat intelligence monitoring.

According to the officials, Mr. Ferguson thinks the financial mission is not appropriate for the USDI office, even though the Treasury Department lacks the resources to do similar monitoring. Defense Secretary Robert M. Gates signed off on the change, the officials said.

Mr. Ferguson and Pentagon spokesmen could not be reached for comment.

Defense Secretary Robert Gates speaks during a joint press conference at Malaysia's Ministry of Defense in Kuala Lumpur, Malaysia, on Tuesday, Nov. 9, 2010. (AP Photo/Lai Seng Sin)
Defense Secretary Robert Gates speaks during a joint press conference at Malaysia’s ... more >

The officials said that the move will kill one of the Pentagon’s most important and successful financial-threat monitoring programs, designed to track illicit and legal acquisition efforts by China and other foreign nations.

The USDI’s threat-finance officials played a key role in revealing undercover Chinese technology activities. The data was provided to the Treasury-led Committee on Foreign Investment in the United States, which in 2008 blocked a proposed merger between Huawei and 3Com.

Last week, according to the Wall Street Journal, Sprint Nextel decided not to go ahead with an equipment deal with Huawei over reported national security worries that China would electronically penetrate U.S. cell-phone networks through the equipment.

“This will eliminate DoD’s capability to uncover nefarious foreign financial and economic activities,” said a person close to the issue who opposes the change.

The intelligence mission focus, called threat finance, was carried out under a Pentagon directive after similar efforts by the DIA were found to be insufficient.

Edward T. Timperlake, a former director of technology security assessments at the Pentagon, said eliminating the USDI financial-threat monitoring is a mistake.

“Activities by the People’s Republic of China pose an across-the-board threat, including espionage, agents of influence and financial activities,” Mr. Timperlake said. “To de-emphasize the monitoring of foreign financial activities is disturbing and unexplainable.”

Mr. Timperlake said he hopes the new Republican-led House will look into the Pentagon policy change.

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