“Creative” Wall Street and Money-Laundering

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I have long maintained that we will eventually learn that Citibank took over where BCCI and then Riggs Bank left off: serving as a money laundering vehicle used by drug cartels and other organized crime, terrorists, and spooks. But this article (h/t scribe) on the role of big banks in laundering Mexican drug money reports that–while Citibank has been implicated in money laundering (but took the appropriate regulatory steps in response)–there are a number of other banks deeply implicated:

  • Wachovia (now owned by Wells Fargo)
  • Bank of America
  • American Express
  • HSBC
  • Banco Santander

Most of these banks were implicated in Mexican legal filings. But in March, Wachovia entered into a Deferred Prosecution Agreement with the government that reveals some of the details behind its money laundering.

The DPA lays out the means by which Wachovia enabled money laundering as follows:

  • Allowing Mexican Casas de Cambio (exchange houses) to wire through Wachovia. From May 2004 through May 2007, Wachovia had processed at least $373 billion in CDC wire activity.
  • Offering a “bulk cash” service, in which Wachovia would arrange physical transport of large amounts of US dollars collected by the CDCs into the US. From May 2004 through May 2007, Wachovia processed over $4 billion in bulk cash for the CDCs.
  • Providing a “pouch deposit” service, in which CDCs would accept checks and travelers checks drawn on US banks, aggregate them into a pouch, and then forward them to Wachovia for processing. By May 2005, Wachovia had set up a digital scan system for this service. From May 2004 through May 2007, Wachovia processed $47 billion in digital pouch deposits for all its correspondent banking customers, including what it did for the CDCs.

The DPA also describes how Wachovia helped telemarketers steal directly from victims’ accounts–the subject of an unrelated lawsuit going back some years.

So here are two key details of this.

First, it appears that Wachovia deliberately got deeper into money-laundering for CDCs in 2005 even as the government issued more alerts about the way drug cartels were using CDCs.

As early as 2004, Wachovia understood the risk that was associated with doing business with the Mexican CDCs. Wachovia was aware of the general industry warnings. As early as July 2005, Wachovia was aware that other large U.S. banks were exiting the CDC business based on [anti-money laundering] concerns.

Despite these warnings, Wachovia remained in the business. And in September 2005, Wachovia purchased the right to solicit the international correspondent banking customers of Union Bank of California (“UBOC”). Wachovia knew that UBOC was exiting the CDC market due to AML problems. Wachovia hired at least one person from UBOC who had a significant role in the CDC business at UBOC. After UBOC exited the CDC business, Wachovia’s business volume increased notably.

September 2005 was definitely before most people realized the giant shitpile–of which Wachovia held more than its fair share–was going to explode. But Wachovia was already deep into it.

So $373 billion in wire services (some of which were surely legal), $4 billion in bulk cash services, and some portion of $47 billion in digital pouch services (again, some of which is surely legal and may pertain to remittances). Compare those numbers to the $40 to $60 billion or so in Wachovia subprime losses Wells Fargo ate when it took over Wachovia. Was Wachovia laundering money for drug cartels because it was so badly exposed in mortgage-backed securities, or was it so heavily involved in products that could be used for money laundering just for fun?

Now, for all of this, DOJ made Wells Fargo pay $160 million: $50 million that is an outright fine, and $110 million for what DOJ said it had identified as clear drug proceeds laundered through Wachovia. Now, granted, DOJ is fining Wells Fargo (beneficiary of huge amounts of free money from the Fed in recent years and the recipient of huge tax deductions for taking over Wachovia), not Wachovia. And granted, this was the largest fine ever for money laundering. But as the Bloomberg story notes, that’s less than 2% of Wells Fargo’s profits last year. And isn’t even as much as Wachovia got in deposits–$418 million–from the fraudulent telemarketing scheme.

Then there’s the bigger question. Who else was using these vehicles? Banks that enable this kind of money laundering tend to be indiscriminate about their client base. And as I noted when I started this post, money laundering for drug cartels tends to go hand in hand with money laundering for other organized crime, terrorists, and spooks. Given the scale of what Wachovia was doing, where are the other busts?

And while we’re looking for those other busts, note that the investigation of Wachovia started in May 2007, 17 months before the government brokered the Wells Fargo takeover. Is there any chance that Treasury, which would have been involved in this, was unaware of the massive amounts of money laundering Wachovia had been engaged in when they brokered that deal? Recall, too, the weirdness over the competition between Citi and Wells Fargo for the privilege of taking on the Wachovia shitpile. The Federal government was at one point prepared to take on a portion of Wachovia’s shitpile to allow Citi to take over the bank for a dollar a share. And when Citi CEO Vikram Pandit lost out on the deal, Andrew Ross Sorkin reported in Too Big to Fail, he told Sheila Bair, that “This isn’t just about Citi … There are other issues we need to consider. I need to speak to you privately. … This is not right. It’s not right for the country. It’s just not right!”

I don’t want to get too tinfoil about this. But it strikes me that the efforts to keep Wall Street and all its celebrated creativity intact serves to make it easier for banks like Wachovia to engage in widespread money-laundering. That is, it’s not just shadow banking as it is politely understood, but banking for entire shadow networks, both our own and our enemies.

Update: Aaron v. Andrew fixed–thanks SaltinWound.

Update: Here’s the full Bloomberg story.

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Cowboys, T. Jeff’s Declaration, Bond Bitchez and Teh Porn Stash

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Hi there buckaroos and buckarettes. Sometimes a man has gots to do what a man has gots to do. Now is one of those times. Marcy up and penned this most awesome cutting, biting, truth to power wonderful post. And then she went and buggered the pooch with a sandpapered, plain vanilla, non confrontational milquetoast title.

Bleeeccchhh.

Responsible blog wingman and all that I am, I immediately pointed out the title should be “The Declaration of Independence, Obama’s Presidential Kill Cards and the Porn Stash”. Same old story; same old song and dance. Nobody ever listens to good old bmaz. Instead we went with the Wolf Blitzer/Jonas Brothers/Disney Lite title of “Keep Your Declaration of Independence Right Next to Your Assassination Cards”.

Yawn.

Come on, you just know that Michael Leiter, the designated human kill switch of the Obama Administration, keeps those two critical reference materials – the Declaration of Independence and the US Government’s deck of snuff cards – in the safest, most discreet and yet accessible, location to his bedroom. You know, right where he keeps his porn stash.

Now what is really odd about this report, and does not register at first blush, is that Leiter has mentally honed in and lasered his focus on the Declaration of Independence rather than the Constitution. Seriously; think about it. It is an incredibly telling difference.

Here is the opening text of the aggressive and intentionally somewhat in your face Declaration of Independence, the forward cry and belligerent marking of territory by a new nation staking its claim in the world:

When, in the course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the laws of nature and of nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

Then ponder the respectful, moral and enlightened reach of the Preamble to the Constitution, the hallowed document that Leiter and Obama ought to be paying attention to when deciding to remotely snuff human lives (including, by all reports, those of American citizens) without the protection of due process and by the cold mechanical death by drone:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

The Declaration is an affirmative statement of manifest authority; the Constitution is a self imposed restriction of manifest authority and protection of due process in the face of it. So, there are a lot of issues with this whole gig surrounding Leiter and his nighttime is the right time to kill thing. And people were worried about Hillary getting a 3 am call; seems all so quaint now.

Oh, and by the way, T. Jeff it has now been concluded made a mistake in drafting the Declaration of Independence, and had it even more authoritarian than anybody ever knew:

Preservation scientists at the Library of Congress have discovered that Thomas Jefferson, even in the act of declaring independence from England, had trouble breaking free from monarchial rule.

In an early draft of the Declaration of Independence, Jefferson wrote the word “subjects,” when he referred to the American public. He then erased that word and replaced it with “citizens,” a term he used frequently throughout the final draft.

The Library released news of the struck word for the first time on Friday.

Jeebus, even dead presidents and founders are going rogue.

The other quite random thought I cannot pry from my beady little mind is the slathering coverage of the super hot, most awesomest, Redhead Rooskie Spy Babe, Anna Chapman. At first I could not figure out the singular fascination of the press with this chick who is being billed as the new “Bond Babe”.

Then it dawned on me. Chapman is hot, red, sultry and enticing. And she looks eerily like a young and come hither Maureen Dowd. Come on, you just know Howie Kurtz and his penis er the media is thinking that.

Well, that is yer friendly Friday Night Emptywheel Trash Talk. New and improved with no sports! Eh, it will be Favre season soon enough, so do not despair. Tonight’s musical interlude is a little slice of the old west I know and love. Actually, I like both kinds of music, country and western. The incomparable Phil Lynott and Thin Lizzy with The Cowboy Song. Oh, and the Boys Are Back.

Happy trails pardners!

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Keep Your Declaration of Independence Right Next to Your Assassination Cards

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Call me crazy, but this is probably not exactly the kind of treatment Thomas Jefferson was thinking the Declaration of Independence would receive 234 years after he wrote it.

Many nights an item prompts a call to wake the NCTC director, Michael Leiter, 41, the junior member of the nighthawks. He displays a copy of the Declaration of Independence, next to a deck of baseball-style cards of high-value terrorist targets: “I keep the ones who are dead on top. It’s a little macabre, but that’s the world we live in.” When the NCTC calls in the middle of the night, he is often half-awake.

Among those cards, after all, is probably the one that signifies that the President has approved, with no due process, an order to assassinate US citizen Anwar al-Awlaki. That’s the kind of thing that Jefferson objected to when he called the following “Despotism”:

He has affected to render the Military independent of and superior to the Civil power.

[snip]

For Quartering large bodies of armed troops among us:

For protecting them, by a mock Trial, from punishment for any Murders which they should commit on the Inhabitants of these States:

[snip]

For depriving us in many cases, of the benefits of Trial by Jury:

[snip]

For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments:

While I’m making wildarsed Fourth of July guesses, let me also suggest that this kind of security porn–a 24-style terror play in 9 acts–is probably not exactly what Thomas Jefferson imagined as the role of the free press when he so furiously defended it.

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DOJ Blows Smoke on Timing of Russian Spy Bust

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Earlier Tuesday, I did a post aiming to understand the timing of Monday’s bust of 11 alleged Russian spies. Later in the day, Mark Hosenball did a post–heavily reliant on DOJ press spokesperson Dean Boyd–that doesn’t make any sense.

First, Boyd states on the record that the reason DOJ had to move now on the busts was because someone–who must be the woman posing as Anna Chapman, who was going to go to Russia next week–was about to leave the country.

Several of the reasons remain classified, U.S. officials say, but one contributing factor has now been disclosed: at least one of the suspects was about to leave the country. “These arrests had to be carried out Sunday for several critical law-enforcement and operational reasons,” Justice Department spokesman Dean Boyd tells Declassified. “Among these reasons was the fact that one of the suspects was scheduled to depart the United States and had to be arrested before departure. These operational considerations were the only factors that dictated the timing of the arrests.

Either Chapman is a more intriguing arrest than most of the other 10 defendants, or this is a load of bull. After all, the defendant posing as Richard Murphy was allowed to travel to Russia in February. And not only have they had Murphy under surveillance since at least 2004, but he seemed to serve as a bit of a sub-handler for the Seattle couple. By contrast, the FBI agent posing as a Russian handler for Chapman described the task he set her–passing money to another alleged spy ring member, the same role Murphy served with the Seattle couple–as “the next step.”  In other words, Murphy was already doing what Chapman was apparently being falsely tasked to do.

Now granted, maybe Chapman is more important than Murphy. But then that’s the reason they rolled up the network, right?

Then there’s the odd claim–one repeated widely in reporting on this story–that the defendants weren’t charged with a “real” spy charge.

As we previously reported, charges issued so far against the alleged “illegal” long-term Russian penetration agents do not accuse them directly of espionage—stealing or attempting to steal U.S. intelligence or defense secrets. Instead, court documents portray them as talent spotters, alleging that they were assigned to identify and ingratiate themselves with influential Americans who had access to U.S. policymakers or government secrets, the idea being that those individuals could then be targeted for more aggressive recruitment by other Russian spies.

Sure, these defendants appear not to have passed classified information. But they were charged with something that other notable spy defendants have been charged with recently: acting as an unregistered agent for a foreign power. Both the Venezuelan-Americans convicted of carrying a payment from Chavez’ government in Venezuela to Kirchner’s in Argentina and the cousin of Andy Card were charged with the same charge (though in the latter case, the charge was eventually dropped). (There’s also an Israeli alleged spy similarly charged, though I don’t have a ready link for it.)

There’s a narrative evolving about this bust that doesn’t make any sense.

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Why Roll Up the Russian Spy Network Now?

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As a number of you have commented, DOJ announced the arrest of 10 alleged Russian spies yesterday (with one person, based in another country, remaining at large). The alleged spies are basically people living under false identities tasked to network with influential Americans to learn specific information.

One of the most interesting questions about the bust is the timing. It’s clear from one of the complaints that the FBI has been tracking some of these alleged spooks for a decade. That suggests the government had been content, up to now, to simply track what Russia was tracking. But then, last week, they decided to roll up these alleged spies.

The timing and content of the two complaints adds to the interest of the question. The complaint describing the long-term surveillance, named Complaint 2 by DOJ, includes the following details from this year (showing the level of activity of the investigation with these longer-term suspects):

  • A March 7 intercept from the Boston couple’s townhouse
  • A search from the female Boston defendant’s safe deposit box conducted in April (one which implied there had been earlier searches of the box)
  • Discussion of the male New Jersey defendant’s travel to Russia in February to pick up a laptop (reflecting intercepts, physical surveillance, and business records)
  • Details describing the New Jersey defendant handing off the laptop he picked up in Moscow to the Seattle male defendant in early March
  • January intercepts capturing discussions of Russian handlers encouraging the New Jersey female defendant to take a job tied to lobbying

In other words, at least from what appears in this complaint, none of the surveillance on these eight long-term alleged spies was all that recent.

The date on this complaint–named Complaint 2 but reflecting the decade of surveillance these defendants have been under–was Friday, June 25.

Then there’s Complaint 1, which pertains to two additional defendants, Anna Chapman and Mikhail Semenko, and which is dated Sunday, June 27. The earliest dates in that complaint date back only to January 2010 (and June 2010 for Semenko), perhaps suggesting the FBI has had these two defendants under surveillance for a much shorter period of time. In addition, unlike the other complaint, this one does not provide details about the cover of the defendants (though there may be a number of reasons why this would be true).

Complaint 1 describes how FBI agents posed as Russian handlers and set up meetings with the two defendants on June 26–that is, the day after the complaint covering the eight other defendants was signed. In Semenko’s case, the FBI agent asked the defendant to carry out a drop which–the complaint explains–he did.

In Chapman’s case, the FBI agent asked her to hand off some money to another person purported to be another member of the same Russian network. Rather than carry out the task, Chapman bought an international cell phone (trying, unsuccessfully, to cover her tracks), suggesting she called overseas for direction. She did not carry out the designated task. All of this suggests, of course, that by late on June 26 (that is, Saturday) the Russians presumably would have known someone pretending to be a Russian agent was onto Chapman.

The way these two complaints work together suggest DOJ decided on or before last Friday to roll up a spy network it had been tracking for a decade. Then, after having set that process into motion, it attempted to implicate two additional members of the network (Chapman and Semenko) in the following days. Doing so with Chapman probably alerted the Russians to FBI pursuit on Saturday.

After the Chapman call, FBI probably had to roll up the network. But the FBI had already made the decision to arrest the others. So why did DOJ decide to roll up this spy network now? Why not continue tracking what the Russians are tracking?

I can think of three potential reasons:

  • To disrupt US-Russian relations
  • Because the Russians had detected US (or third party) sabotage
  • Because of other changes in DOJ personnel

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DiFi Will Cave on Intelligence Reform

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As I’ve noted before (here and here), confirmation hearings for James Clapper have gotten bogged down in a dispute between the Administration and both houses of Congress over whether Congress should have the tools to exercise real oversight of intelligence functions.

Right now, Nancy Pelosi is holding out for both extended notification to the Intelligence Committees and GAO audit power over intelligence community functions. But, in spite of earlier claims that she would not hold a confirmation hearing for Clapper until the intelligence authorization passed, DiFi now appears to be softening that stance. She told Chris Wallace yesterday that she will move forward with confirmation hearings provided that Obama chat to Pelosi about her intelligence related concerns (starting at 14:07).

Chris Wallace: One of your other hats that you wear is Chairman of the Senate Intelligence Committee–Director of National Intelligence Blair has been fired. The Acting Director Gompert is resigning. Meanwhile, House and Senate Democrats are deadlocked over the intel reform bill and the whole question of Congressional oversight of spy agencies. How quickly are you going to get this resolved and how quickly are you going to confirm so that we have a Director of National intelligence?

Feinstein: Well the process has begun, he has received the questions. On Friday–

Wallace: This is General Clapper?

Feinstein:  Yes, General Clapper. Friday I learned the questions have been answered. They were at the White House. We would expect to receive them this week. We can move. I have requested that the President call the Speaker and try to move our Intelligence bill. the reason the Speaker has a problem with it is because we removed two things which the White House found to be veto-able. One was an extension of notification on certain very sensitive matters to all Members rather than the Gang of Eight. The second was Government Accountability Office, we call it the GAO, oversight which was anathema to the White House. We took that out. The bill passed the Senate, our committee, and the Senate unanimously. We have conferenced it, we’ve pre-conferenced it, with the House Committee. We believe we are in agreement, we’re ready to move. If the Speaker will allow them to go to conference then we can move the bill–

Chris Wallace: But very quickly, will you hold up confirmation hearings for Clapper until you get resolution on the intel report?

Feinstein: Well, I have asked that the President would please talk to the Speaker. If he does that, I will move ahead.

Now, to be fair, Obama’s threatening a recess appointment for Clapper in any case. And–as Wallace pointed out–the resignation of  Acting Director of National Intelligence David Gompert and the planned retirement of his possible replacement has ratcheted up pressure to get a permanent replacement in (I’ll point out once again that there seems to be a double standard between the treatment of ODNI and OLC). So the choice is likely between a recess appointment with no intelligence reform and a confirmation hearing with intelligence reform (Clapper’s approval is not assured).

But Pelosi’s making a stand to fix two of the problems that the Bush Administration exploited–and which the Obama Administration, particularly given their veto threat, may plan to exploit as well. DiFi appears to be saying that the principle of real Congressional oversight is worth nothing more than a conversation with the President.

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A Recess Appointment for Militarized Spooks But Not for Rule of Law

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Remember how Dawn Johnsen’s nomination to head OLC languished and then died as Obama claimed–falsely–not to have the votes? Obama pointedly didn’t use a recess appointment to put his incredibly qualified candidate in the post.

Not so for James Clapper, whom Obama is preparing to recess appoint to head Director of National Intelligence rather than make concessions on intelligence oversight to Congress. As Marc Ambinder reports, DiFi won’t hold hearings for James Clapper until an intelligence authorization is passed, but Nancy Pelosi wants to use that intelligence authorization to force the Administration to expand notice on covert programs. And since that’s all going to take a lot of time (and Obama doesn’t want to be forced by Congress to expand notification), Obama’s likely to recess Clapper.

So not just is Obama appointing someone who wants to dismantle DNI even while Congress thinks it should be strengthened, but he’s doing so in such a way that deliberately avoids reestablishing the balance of power between the branches of government.

Hey, Obama? All that crazy covert stuff that will expand in DOD under Clapper? All the problems that’s going to cause? You own that.

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The Return of CIFA. Now, with Interrogation Capabilities!

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Jeff Stein notes that the Defense Intelligence Agency has plans to set up a new records center for its counterintelligence operation.

The Defense Intelligence Agency wants to open a new repository for information about individuals and groups in what appears to be a successor to a controversial counterintelligence program that was disbanded in 2008.

The new Foreign Intelligence and Counterintelligence Operation Records section will be housed in DIA’s Defense Counterintelligence and Human Intelligence Center, or DCHC, formed after the demise of the Counterintelligence Field Activity, or CIFA, according to an announcement that appeared Tuesday in the Federal Register.

As Stein notes, DCHC replaced CIFA, the DOD organization that got caught spying on Quakers and the blogger Jesus’ General. And now, they apparently want to set up a system that will be subject to the Privacy Act.

The Defense Intelligence Agency proposes to add a system of records to its inventory of record systems subject to the Privacy Act of 1974, (5 U.S.C. 552a), as amended.

Which I presume means they’ve got records of Americans in there.

Two points on this. First, as Mark Ambinder recently reported, the organization that took over CIFA’s activities, DCHC, is also the organization running our black site prison in Afghanistan.

It has been previously reported that the facility, beige on the outside with a green gate, was operated by members of a Joint Special Operations Command (JSOC)  group, allegedly outside of Harward’s jurisdiction. But JSOC, a component command made up of highly secret special mission units and task forces, does not operate the facility.

Instead, it is manned by intelligence operatives and interrogators who work for the DIA’s Defense Counterintelligence and Human Intelligence Center (DCHC). Read more →

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Killer Drones Coming To America!

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Like all new fads that start overseas and eventually make their way here to the US as the next “new thing”, drones are on their way to our friendly skies. From AP via Google News:

Unmanned aircraft have proved their usefulness and reliability in the war zones of Afghanistan and Iraq. Now the pressure’s on to allow them in the skies over the United States.

The Federal Aviation Administration has been asked to issue flying rights for a range of pilotless planes to carry out civilian and law-enforcement functions but has been hesitant to act. Officials are worried that they might plow into airliners, cargo planes and corporate jets that zoom around at high altitudes, or helicopters and hot air balloons that fly as low as a few hundred feet off the ground.

On top of that, these pilotless aircraft come in a variety of sizes. Some are as big as a small airliner, others the size of a backpack. The tiniest are small enough to fly through a house window.

Exciting! Cops want to use them to catch speeders, monitor traffic and track suspects (that is pretty much all of us). Border Patrol and Sheriff Joe Arpaio want to use them to chase down the brown (skinned that is). Fed Ex wants them so they don’t have to actually pay pilots. And the NSA wants them to spy on “suspicious” people (like the writers on this blog). Hey, it’s all good; what’s the loss of a little privacy when it comes to protecting America?

There is a tremendous pressure and need to fly unmanned aircraft in (civilian) airspace,” Hank Krakowski, FAA’s head of air traffic operations, told European aviation officials recently. “We are having constant conversations and discussions, particularly with the Department of Defense and the Department of Homeland Security, to figure out how we can do this safely with all these different sizes of vehicles.

Excellent! Because I will feel a lot better when the DOD and DHS have the “civilian airspace” saturated with their freaking drones; won’t you? Of course you will. And we are on the way there too. From Government Executive:

The Homeland Security Department expanded the use of unmanned drones along the U.S.-Mexico border this week, flying for the first time this sort of advanced technology in west Texas.

The Predator B unmanned aerial vehicle is providing support to U.S. Customs and Border Protection to help interdict drug smugglers and detect people trying to enter the United States illegally, key lawmakers said.

Texas lawmakers have been clamoring for years to have an unmanned drone assist in border security operations, but the move had been delayed by bureaucratic wrangling between DHS and the Federal Aviation Administration. Drone flights along the Southwest border had been limited to regions in Arizona and New Mexico.
……
By putting eyes in the sky along the Rio Grande, we will gather real-time intelligence on the ground to augment the good work of federal, state and local law enforcement….

Well, so drones are here among us, at least those of us near the Mexican border; and they are here to stay. Government drones are going to be ever more pervasive and ubiquitous throughout the entirety of the country if the law and order types in the federal, state and local governments have anything to say about it. And they will have their say; count on it. Swell, eh?

So, with all of the Afghani, Pakistani and Iraqi wedding parties that have been taken out by US Predator drone strikes, how long before they hit one of our precious wedding celebrations right here in the homeland of the good old “real America”? What will the NeoCon wingnuts say when it hits their own chosen ones?

[Incredibly awesome graphic by the one and only Darkblack. If you are not familiar with his work, or have not seen it lately, please go peruse the masterpieces at his homebase. Seriously good artwork and incredible music there.]

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White House Won’t Tell DNI It Should Be More Powerful

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Now for your latest installment of DOD’s expanding intelligence authorities, DNI’s increasing irrelevance, and the White House’s efforts to make sure those trends continue.

As you’ll recall, back in March, the Senate Intelligence Committee sent a scathing report on the many failures to stop the Undie Bomber. The report was most critical of the head of the National Counterterrorism Center, Michael Leiter. But instead of replacing Leiter right away, the Administration sat on the report for two months until it became public, and then used the report as its excuse to fire Director of National Intelligence Dennis Blair as the scapegoat for the Christmas Day attack. The White House reportedly tried to get either Leon Panetta or Chuck Hagel to take over, but after they refused, Obama nominated James Clapper, over the objections of both the Democrats and Republicans who need to confirm the position on SSCI. Two things make this worse: in the face of the need to scale back DOD’s intelligence portfolio to better balance our intelligence community as a whole, DOD has instead been expanding it. And Clapper signed an April memo arguing against a range of controls Congress was trying to put on DOD’s intelligence activities.

It turns out that in addition to SSCI’s March report finding NCTC most responsible for the Christmas Day attack, and Clapper’s April report calling for DOD to keep its expansive intelligence powers, the President’s Intelligence Advisory Board was issuing its own report, finished in March and sent to Congress on April 1. The report calls for a stronger DNI–precisely what Congress is trying to do but DOD and the White House are trying to prevent.

But the White House has not shared the report with the DNI’s office.

The White House has withheld a key report, which maps out a strategy for fixing the troubled Director of National Intelligence, from the Office of the Director of National Intelligence. The classified report, “Study of the Mission, Size, and Function of the Office of the Director of National Intelligence,” was completed by the Presidential Intelligence Advisory Board (PIAB) at least as early as March, several weeks before President Obama asked DNI Dennis Blair to resign. The report came at an inopportune time for the White House, which has pursued a policy course counter to the report’s advice.

Multiple sources within the Office of the Director of National Intelligence tell The Atlantic that the office, which employs about 1,500 people including the director himself, never received the report. The White House would not comment on how it was distributed, but Assistant Press Secretary Tommy Vietor said, “The study you reference was shared with DNI Blair, who provided us comments on the findings.” However, the findings are only a brief summary of the report’s unclassified sections; they are also freely available on Politico’s website. The full report, which is classified, has not been shared.

Of particular import here is the White House’s organized blow-off of Congress. Congress commissioned the PIAB report last year as part of the 2010 Defense Authorization.

Congress commissioned the PIAB report late last year as part of the 2010 Department of Defense Appropriations Act, requiring the board to evaluate the DNI and offer proposals for improving it.

At the same time, Congress included some provisions in the 2010 Intelligence Authorization–things like controls on expenditures and expanding budgets, review of the use of contractors, and an Inspector General for the entire intelligence community–that would strengthen the DNI and rein in DOD. SSCI sent a report to the White House in March that the White House used to start planning the ouster of Dennis Blair, who was sympathetic to the goal of a stronger DNI. And at the same time, the White House was refusing to share the PIAB report which would have strengthened Blair’s hand. Against the background of the report showing that the President’s advisory board thinks Congress, not DOD, is right about how the Intelligence Community is organized, the White House sends the Clapper nomination–which is designed to do just the opposite.

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