Ms. LAWTON. Thank you, Senator.

Chairman BOREN. Thank you very much, Senator Specter.

And again let me thank both of you for being with us today. We value your comments.

Ms. LAWTON. Thank you, Mr. Chairman.

Mr. MARTIN. Thank you, Mr. Chairman.
Chairman BOREN. Thank you.

Our next witness is Morton H. Halperin, Director of the Washington Office of the American Civil Liberties Union, who is very well known to us on this Committee as are his many constructive efforts to ensure that our civil liberties are preserved and protected. Legislation in this area inevitably raises questions of balancing such rights and liberties against the needs of Government for maintaining adequate security. So we look forward to your counsel in this regard.

I note that the statements of our remaining two witnesses are rather lengthy and I might suggest that we insert them in full into the record and then perhaps you could summarize for us and hit the high points of your testimony and direct us to the major areas of your concern.

Mr. HALPERIN. Thank you, Mr. Chairman. I was going to suggest doing that and I am glad to do that.

[The prepared statement of Mr. Halperin follows:]

Mr. Chairman:

PREPARED STATEMENT OF MORTON H. HALPERIN

I very much appreciate this opportunity to testify on behalf of the American Civil Liberties Union (ACLU) on S. 2726 and the Jacobs' Panel legislative recommendations to improve counterintelligence. The ACLU is a non-partisan organization of over 275,000 members dedicated to the defense and enhancement of civil liberties guaranteed by the Bill of Rights.

INTRODUCTION

Since 1985, the "year of the spy", the American Civil Liberties Union has made clear its belief that the counterintelligence activities of the United States can and should be reorganized to deal more effectively with spying while reducing the harm to civil liberties caused by the current system.

We were therefore encouraged by the formation of the Jacobs' Panel and find much to commend in its activities and recommendations. We appreciate the efforts of the Panel to strike a balance between the needs of national security and civil liberties concerns. At the same time we regret that the Panel, despite the well known interest of the ACLU in these issues, did not choose to consult with us in the course of its deliberations. While we find much to support in the recommendations of the Committee, we cannot support the overall bill embodying its proposals. There are some items that we simply cannot accept and some other proposals which we could accept only as part of a more balanced package. We also regret that the Panel did not recommend any legislation to require changes in the current system. We believe that such changes are needed to make the process more consistent with the individual rights of those affected.

Before turning to a specific discussion of these issues, I would like to make some general remarks about the Panel's approach. The report adopts many of the basic points that we believe should guide any reorganization of the counterintelligence efforts of the United States. Let me try to make each of these points explicit.

The first fundamental insight of the report is that economic and not ideological motives lead people to espionage. Moreover, the decision to become a spy occurs after a person has obtained a security clearance and gained access to high-level classified information; people do not get clearances in order to be able to provide information to a foreign power. Thus, the focus of attention should be on economic incentives and job dissatisfaction and not on ideology or other extraneous factors. The present system of concentrating resources on an unnecessarily intrusive initial

clearance should be replaced with a system which gives equal priority to the initial clearance and subsequent reclearances for those persons who most likely would be targeted by foreign intelligence services.

The security clearance process and counterintelligence efforts should focus on the nexus between the behavior and attributes of the person, and the likely causes of the decision to become a spy. The Jacobs' Panel does a good job of redirecting these efforts towards economic and other relevant concerns. The Panel does not, however, propose specific legislation that would require the Executive branch to stop focusing on irrelevant concerns. The ACLU believes that this must be done for two compelling reasons. First, these other inquiries frequently lead to violations of civil liberties. Second, bureaucracies change their patterns of behavior slowly and with great reluctance. The national security bureaucracy will continue to spend its time compiling irrelevant personal information until it is ordered to address the true security risk-cleared employees who become spies out of greed or job dissatisfaction.

The current failure to focus on the appropriate nexus shows up most clearly in the emphasis on "left" political ideology and the special attention given to gay men and lesbians who seek security clearances. Both of these trends persist despite the evidence that people do not spy because of their ideology or their sexual orientation, and that neither marxists nor gays are more likely to become spies than anyone else.

The government continues to ask security clearance applicants about their political beliefs, and specifically if they are members of the Communist Party. It also discriminates based on sexual orientation. We believe that any statutory reform of the process must explicitly prohibit such practices. We do not mean to exclude all inquiry into political beliefs or associations or sexual practices. We do, however, argue that such questions are improper unless there is some reason to believe that they are relevant based on a specific security concern arising out of the particular circumstances of the individual being investigated. There is no basis for treating one ideological group (leftists or marxists) or those who have one particular sexual orientation (gay men and lesbians) any differently from others.

A second issue raised by the report is the scope of counterintelligence statutes. Because too much information is classified and too many people have clearances, counterintelligence can only be effective when the government focuses on the relatively small group of people who have access to the truly critical information that is likely to make them targets of the intelligence efforts of foreign governments. The Panel understood this principle and singled out those with TOP SECRET clearance for special treatment.

Although a step in the right direction, this does not go far enough. The number of people with TOP SECRET clearance is simply too large to permit the counterintelligence effort to be properly focused. Moreover, most people with TOP SECRET clearance are unlikely to be targeted by a foreign intelligence service. For one thing, many people have TOP SECRET clearance only because they occasionally handle such material. For another, much TOP SECRET information is not in fact of great value to a foreign intelligence service if acquired clandestinely. For example, much foreign policy information is TOP SECRET only because of the harm to diplomatic

1 The government continues to single out homosexuals as a high security risk. See High Tech Gays v. Defense Industrial Security Clearance Office (DISCO), 895 F.2d 563 (9th Cir. 1990). Its argument, however, has shifted somewhat in recent years. Homosexuals are now deemed a security risk not because they are vulnerable to blackmail, as once perceived, but because the Soviets target homosexuals on the belief that "the homosexual frequently is shunted by society and made to feel a social outcast. Such a person may seek to retaliate against a society that has placed him in this unenviable position." Id. at 575, citing a DIA report in Federal Government Security Programs, 1985: Hearings Before the Permanent Subcomm. on Investigations of the Senate Committee on Governmental Affairs, 99th Cong., 1st Sess. (1985).

The Ninth Circuit upheld the Defense Department's discriminatory security clearance approval process against homosexuals on the grounds that "hostile intelligence efforts are directed at homosexuals," and dismissed as "irrelevant" the plaintiffs' assertion that the "reasons for targeting homosexuals [are] based on continuing ignorance or prejudice." 895 F.2d at 578 (citing a 1975 Resolution of the American Psychological Association which states that homosexuality "implies no impairment in judgment, stability, reliability or general social or vocational abilities").

By logical extension, the government could advocate, and the courts would presumably allow, the same discriminatory practice if it found that the Soviets targeted blacks, women, Jews, or any other group under the same ignorant and prejudicial belief that they too were shunted by society and made to feel social outcasts, and therefore might seek to retaliate against a society that has placed them in this unenviable position. Obviously, practices of the KGB could not justify policies so inconsistent with our fundamental principles.

relations that would occur if the information were to become public not because the information is inherently valuable to foreign countries.

We believe that the group that is singled out for special treatment should be limited to individuals with specifically designated clearances beyond or in addition to TOP SECRET where the managers of such special access programs certify that the program is likely to be targeted by foreign intelligence services. Obviously, this would include communications and intelligence activities.

The Committee will know, or can find out, if any of those who have become spies in the last ten years had only a TOP SECRET clearance. If not, it would make sense to limit these reforms to those with special clearances. If some of those who have spied only had TOP SECRET clearances, it may be possible to identify the sub-category of such people who need to be included in the program, and then to require the head of the agency to include in this program those individuals who have only a TOP SECRET clearance based on a specific finding that because of their positions they are likely to be targets. By limiting the statute to the likely targets of foreign intelligence services, Congress can ensure both that counterintelligence efforts are most effective and that the civil liberties of those who pose little security risk are not abridged.

Turning to another basic issue, we agree with the Panel that the end of the cold war does not mean that there is no foreign intelligence threat and no need for security clearance and counterintelligence programs. The American Civil Liberties Union does believe, however, that we need to end the cold war at home as well as abroad. That means that we need to consider whether the restrictions that were accepted in the past in the name of national security remain necessary and appropri

ate.

In particular, there is a need to consider both the definition of what should be classified and the process of classifying information. As Senator Metzenbaum indicated in his statement when the Jacobs' Panel presented its findings to this Committee, the time is ripe, indeed overdue, "to revisit the entire fundamental definition of what is national security information" and to consider "a complete overhaul of the classification system."

As Senator Metzenbaum noted, the Information Security Oversight Office (ISOO) found a high degree of overclassification, for reasons "including sheer ignorance of the standards for classification, overcaution, and a desire to give more prestige to one's work or to avoid routine oversight." Drastically limiting the amount of classified information, and the number of people who have access to it, will greatly facilitate the protection of information that needs protection and will do so in a way that minimizes constitutional infringements.

Again, Senator Metzenbaum: "Once the material to be protected is limited to that which truly merits protection, far fewer people will need access to that material. There will be more respect, moreover, for the need to protect the information. There will also be more justification for the inconveniences and invasions of privacy that we are asked to impose upon people with access to these secrets." We heartily

concur.

A 1985 House Committee Staff report found that roughly ninety per cent of the classified information was classified needlessly. It recommended a two-tiered reform of the classification system: "Four types of information deserve the strongest protection: high technology products, codes, operational plans, and sources and methods (narrowly defined) of intelligence. A definition limiting classified information to these four categories rules out nine-tenths of what is now classified." Everything else that the government wants to keep secret should be labelled "administratively controlled information." Thus, "[t]he security clearance process and espionage penalties should apply only to high level national security data, while the category of administratively controlled information should be subject to much the same protections that businesses accord their proprietary information." Preliminary Joint Staff Study on the Protection of National Security Secrets, House Judiciary Subcommittee on Civil and Constitutional Rights and House Post Office and Civil Service Subcommittee on Civil Service (Oct. 25, 1985). Although the ACLU does not agree with everything in this report, we support this recommendation.

Any effort to reform the system must also include provisions that insure that those who are denied security clearances are afforded appropriate due process. As the Committee knows, the Administration circulated a draft Executive Order last year that contemplated drastic reductions in existing protections.

Procedural due process standards should be spelled out by statute and included in any comprehensive legislation.

There is one assumption of the Panel with which we profoundly disagree: its emphasis on future economic and industrial "espionage." We recognize that economic

issues will become more important and that foreign governments may join others who now seek to learn the secrets of American companies. However, we see very serious dangers in any governmental effort to use the procedures and apparatus designed to protect the national defense and foreign policy secrets of the American government to protect the secrets of American business. The many restrictions on individual rights that have been justified by the compelling governmental interest in protecting military and foreign policy secrets should not be extended to economic information, which, although important, is not critical to the physical security of the United States. Any attempt to focus on protecting American economic information seriously risks further erosion of basic rights.

The Intelligence Community itself has advocated the need to change its mission to combat an increased foreign threat to United States economic interests. Director of Central Intelligence Webster, in an address last fall to the National Press Club, charged that the Soviet clandestine intelligence threat to the U.S. was, if anything, increasing, but that it has refocused away from military targets towards economic targets. Accordingly, Webster asserted that the U.S. should refocus and increase its counterintelligence efforts in the economic arena. We believe that Congress, and in particular this Committee, should concentrate on inhibiting the Intelligence Community from moving in this faulty direction, rather than on encouraging or authorizing such conduct.

At the same time, we would not object if the Intelligence Community were tasked to collect additional economic intelligence as long as the collection process focuses on foreign governments. Without this limitation, however, there is a danger that the Intelligence Community will seek to gather economic information from American business firms that have this information but have chosen not to share it with the government.

The Panel report is not entirely clear as to whether the government should assume greater responsibility in preventing foreign governments from gaining access to the secrets of American firms. Apart from providing such firms with information about secure communications, we do not believe that this is an appropriate task for the Intelligence Community. We urge the Committee to monitor closely the work of the Intelligence Community on economic issues.

With this background let me turn to the specific proposals of the Panel as presented in the bill. For the convenience of the Committee, I will consider them in the order in which they appear in the bill, although some obviously raise much more serious civil liberties problems than others.

I. Section 2: Amendment to the National Security Act of 1947, providing uniform requirements for persons granted TOP SECRET security clearances.

As stated in the introduction, the ACLU believes that the authorities and restrictions granted under this bill should apply only to persons with TOP SECRET and above clearances who have been specifically designated by the managers of special access programs, or by the agency head, on the grounds that the program, or the position is likely to be the target of intelligence services. Thus, the sections concerning "Minimum Requirements" and "Requirements for Additional Investigations" should be amended to apply only to this smaller group of individuals.

For the reasons outlined above, we think the bill's focus on financial and travel information concerning individuals with these high level clearances is appropriate and should be helpful in curbing espionage. At the same time, we think the statute should explicitly prohibit the government from asking questions about political beliefs or sexual orientation, unless it can establish that such questions are directly related to a specific security concern about the particular individual under investigation. The statute should also affirmatively require that denials or revocations be based on reasons that have a nexus to a demonstrated security concern.

For example, sexual conduct could be a legitimate subject of investigation where such conduct could result in making an individual susceptible to blackmail, coercion or other financial pressures. But the fact that conduct is homosexual rather than heterosexual does not in itself justify subjecting an individual to heightened scrutiny or investigation. The current practice of subjecting individuals with certain political beliefs or sexual orientations to intrusive questioning and discriminatory treatment infringes their constitutional rights. Moreover, as the Jacobs' Panel recognized, it is unrelated to any effective program of preventing and detecting espionage. We would be willing to work with the Committee on language to incorporate this limitation.

We also think that it is both undesirable and unnecessary to limit such access only to United States citizens. The 1986 Immigration Reform and Control Act points in this direction by prohibiting discrimination based on national origin or citizen

ship status. 8 U.S.C. § 1324b.2 We are aware of no evidence in the last twenty years that a permanent resident alien imminently intending to become a citizen poses a higher security risk than a citizen. Indeed, we think it would be detrimental to United States interests to deny a clearance to a clearly qualified person who intends to become a citizen based solely on citizenship status.

We are also concerned that the proviso in proposed § 802(1) does not adequately protect employees from losing a clearance due to the government's delay in completing an investigation. We believe it should be amended by adding the word "solely" before "attributable," to make clear that loss or denial of a security clearance can only be based on a failure to complete an investigation that is "solely attributable to the subject of the investigation." This is necessary to prevent de minimis actions by an employee-such as turning a form in a few days late-from being used against him or her.

We also believe that as drafted the bill is unconstitutionally overbroad because it applies to employees of the judiciary and the Congress as well as to employees of executive agencies. Although the bill states that Article III judges and elected officials are entitled to access to information without obtaining a security clearance in accordance with the statutory procedures, proposed § 804(a), it goes on to provide that the President shall issue regulations that shall be binding upon the legislative and judicial branches as well as the executive. Proposed § 805. We believe that each branch should establish its own procedures. Such a distribution and balance of power in this area is more likely to protect individual rights and prevent abuses of power.

We are also concerned about the use of the term "national security" in the definition of covered information in § 803(3), because the term is overbroad and vague. Everything that contributes to the strength of our country has an effect on our national security. We think the term "national defense or foreign relations of the United States," which is the definition of national security in Executive Order 12356, should be incorporated in the bill.

Finally, we think that in addition to creating uniform requirements for high level security clearance determinations, the statute should provide minimum due process procedures for all persons who are denied security clearances, either for an initial clearance or for an upgrade, and for persons whose clearances are revoked.

While we agree that no one has a "right" to a security clearance, we strongly disagree with those who maintain that clearance denials are not subject to the basic due process requirement that the government not act arbitrarily, but only for good reason after giving the affected individual the opportunity to be heard. Despite the government's disclaimer, clearance denials are in fact viewed as an assessment of an individual's character, integrity, loyalty, trustworthiness, and judgment. A clearance denial or revocation can have a devastating impact on future job opportunities, both within the government and in the private sector.

For this reason alone, no clearance should be denied or revoked unless the person is given an opportunity for a full and fair administrative hearing with a right to judicial review. A fair hearing requires that the employee be permitted to confront all witnesses and review all relevant documentary evidence.

Recent events make clear that the right to these fundamental safeguards is under attack. As we noted in the introduction, last year the Administration circulated a draft Executive Order that would have stripped away many of the due process procedures that have been in place for the last thirty years. Executive Order 10865, DOD Directive 5200.2-R, and other agency regulations currently provide minimum due process standards for most government and government contractor employees and applicants. The draft Order would have eliminated these due process standards for clearance denials, and would have significantly lowered the standards for revocations. In the face of significant public and congressional opposition, the Administration withdrew its proposed Order for further study.

Moreover, many government agencies are interpreting the Supreme Court's decision in Department of the Navy v. Egan, 484 U.S. 518 (1988)-which held that the Merit Systems Protection Board has no authority to review the merits of a security clearance determination—to mean that they do not have to afford their employees

2 "(a)(1) It is an unfair immigration-related employment practice for a person or other entity to discriminate against any individual (other than an unauthorized alien, as defined in section 274A(h)(3)) with respect to the hiring, or recruitment or referral for a fee, of the individual for employment or the discharging of the individual from employment

(A) because of such individual's national origin, or

(B) in the case of a citizen or intending citizen (as defined in paragraph (3)), because of such individual's citizenship status."