Transcript: 9/11 Commission Hearing (washingtonpost.com)

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Following is a transcript of hearing held by National Commission on Terrorist Attacks Upon the United States:

SPEAKERS: Thomas H. Kean, Commission Chairman
Lee H. Hamilton, Commission Vice Chairman
Richard Ben-Veniste, Commission Member
Fred F. Fielding, Commission Member
Jamie S. Gorelick, Commission Member
Slade Gorton, Commission Member
John F. Lehman, Commission Member
Timothy J. Roemer, Commission Member
James R. Thompson, Commission Member
Bob Kerrey, Commission Member
Philip Zelikow, Commission Executive Director
Christopher Kojm, Commission Deputy Executive Director
Barbara Grewe, Commission Senior Counsel

WITNESSES: Louis J. Freeh, Former Director, FBI
Janet Reno, Former Attorney General of the United States
Thomas J. Pickard, Former Acting Director, FBI
Ambassador J. Cofer Black, Former Director, Counterterrorism Center, CIA
John Ashcroft, U.S. Attorney General

As chair of the National Commission on Terrorist Attacks on the United States, I hereby convene this commission's 10th public hearing. The hearing will run all of today and tomorrow.

Our focus for the next two days will be law enforcement and the intelligence community.

As we did with our two prior sets of hearings this calendar year, we receive each series of witnesses with a statement from the commission staff. These statements are informed by the work of the commissioners as well as the staff, and they represent the staff's best efforts to reconstruct the factual record of what happened.

Judgments and recommendations are for commissioners and the commission to make, because we'll do that in the course of our work and most definitively and finally in our final report.

Viewers, by the way, who are watching at home can obtain staff statements at www.911commission.gov.

KEAN: Before we begin, let me make just a brief request to members of the audience who have taken the time to be with us today.

We are going to be hearing from a lot of witnesses in the course of the next two days. As a courtesy to them and the commissioners, I ask you if you could refrain from any loud demonstrations of approval or disapproval, because that simply takes time away from the witnesses and takes time away from the commission members who are questioning. There are ample other ways which you can inform the commission of your opinions and I encourage you to avail yourselves of them.

On behalf of the witnesses, on behalf of the staff and the commission, thank you very much for your cooperation.

We will now hear our first staff statement. It is entitled, "Law Enforcement, Counterterrorism and Intelligence Collection in the United States Prior to 9/11."

It will be read by our executive director, Phil Zelikow, of the commission staff.

ZELIKOW: Members of the commission, with your help your staff has developed initial findings regarding law enforcement and intelligence collection in the United States prior to the 9/11 attacks.

These findings may help frame some of the issues to be discussed during this hearing and inform the development of your judgments and recommendations.

We remain ready to revise our understanding of this topic as our investigation progresses. This staff statement represents the collective efforts of a number of members of our staff. Caroline Barnes, Christine Healey, Lance Cole, Michael Jacobson, Peter Rundlet, Doug Greenburg and Barbara Grewe did most of the investigative work reflected in this statement.

We were fortunate in being able to build upon strong investigative work done by the congressional joint inquiry and by the Department of Justice's Office of the Inspector General. We've obtained excellent cooperation from the FBI and the Department of Justice, both in Washington and in six FBI field offices across the United States.

The role of the FBI: The FBI played the lead role in the government's domestic counterterrorism strategy before September 11th.

ZELIKOW: In the 1990s most of the FBI's energy was devoted to after-the-fact investigations of major terrorist attacks in order to develop criminal cases. Investigating these attacks always required an enormous amount of resources. As most of these attacks occurred overseas, many of the FBI's top terrorism investigators were deployed abroad for long periods of time.

New York was the office of origin for the Al Qaida program and consequently where most of the FBI's institutional knowledge on Al Qaida resided. Working closely with the U.S. attorney for the Southern District of New York, the Justice Department and the U.S. intelligence community, the FBI's New York field office was often successful in these investigations; many of the perpetrators of these plots were identified, arrested, prosecuted and convicted. These were episodes such as the World Trade Center bombing, the landmarks plot, the Manila Airlines plot, the Khobar Towers bombing, the East Africa embassy bombings, the millennium plot and the USS Cole bombing.

Going to the top of page three of the statement, the approach to counterterrorism, the FBI took a traditional law enforcement approach to counterterrorism. Its agents were trained to build cases. Its management was deliberately decentralized to empower the individual field offices and the agents on the street. The bureau rewarded agents based on statistics reflecting arrests, indictments and prosecutions. As a result, fields such as counterterrorism and counterintelligence, where investigations generally result in fewer prosecutions, were viewed as backwaters.

Agents developed information in support of their own cases, not as part of a broader, more strategic effort. Given the poor state of the FBI's information systems, field agents usually did not know what investigations agents in their own office, let alone in other field offices, were working on. Nor did analysts have easy access to this information. As a result, it was almost impossible to develop an understanding of the threat from a particular international terrorist group.

Agents also investigated their individual cases with the knowledge that any case information recorded on paper and stored in case files was potentially discoverable in court.

ZELIKOW: Thus there was a disincentive to share information, even with other FBI agents and analysts. Analysts were discouraged from producing written assessments which could be discoverable and used to attack the prosecution's case at trial.

In the investigative arena, the field office had primacy. Counterterrorism investigations were run by the field, not headquarters. Moreover, the field office that initiated a case maintained control over it, an approach the FBI called the office of origin model. This decentralized management structure allowed field offices to set their own priorities with little direction from headquarters.

Management priorities and challenges: The FBI determined early on the 1990s that a preventive posture was a better way to counter the growing threat from international terrorism. In its first budget request to Congress after the 1993 World Trade Center bombing, the FBI stated that, "merely solving this type of crime is not enough; it is equally important that the FBI thwart terrorism before such acts can be perpetrated."

By the late 1990s, the FBI recognized that certain limitations undermined a preventive counterterrorism strategy. It initiated several significant reforms.

Yet the FBI's leadership confronted two fundamental challenges in countering terrorism.

First, the FBI had to reconcile this new priority with its existing agenda. This immediately required choices about whether to divert experienced agents or scarce resources from criminal or other intelligence work to terrorism. As the terrorism danger grew, Director Freeh faced the choice of whether to lower the priority the FBI attached to work on general crime, including the war on drugs, and allocate these resources to terrorism.

The Department of Justice inspector general found that when the FBI designated national and economic security as its top priority in 1998, it did not shift its human resources accordingly.

Although the FBI's counterterrorism budget tripled during the mid-1990s, FBI counterterrorism spending remained relatively constant between fiscal years 1998 and 2001. The inspector general stated that before 9/11, "the bureau devoted significantly more special agent resources to traditional law enforcement activities such as white- collar crime, organized crime, drug and violent crime investigations, than to domestic and international terrorism issues."

ZELIKOW: According to another external review, there were twice as many agents devoted to drug enforcement matters as to counterterrorism. On September 11, 2001, only about 6 percent of the FBI's total personnel worked on counterterrorism.

Former FBI officials told us that prior to 9/11 there was not sufficient national commitment or political will to dedicate the necessary resources to counterterrorism. Specifically, they believed that neither Congress nor the Office of Management and Budget fully understood the FBI's counterterrorism resource needs.

Nor did the FBI receive all it requested from the Department of Justice under Attorney General Janet Reno. Reno told us that the bureau never seemed to have sufficient resources given the broad scope of its responsibilities. She said, in light of the appropriations FBI received, it needed to prioritize and put counterterrorism first. She also said that Director Freeh seemed unwilling to shift resources to terrorism from other areas, such as violent crime. Freeh said it was difficult to tell field executives that they needed to do additional counterterrorism work without additional resources.

Finally, even though the number of agents devoted to counterterrorism was limited, they were not always fully utilized in the field offices. We learned through our interviews that prior to 9/11, field agents often were diverted from counterterrorism or other intelligence work in order to cover major criminal cases.

The second core challenge was a legal issue that became a management challenge as well. Certain provisions of federal law had been interpreted to limit communication between agents conducting intelligence investigations and the criminal prosecution units of the Department of Justice. This was done so that the broad powers for gathering intelligence would not be seized upon by prosecutors trying to make a criminal case. The separation of intelligence from criminal investigations became known as the wall.

New procedures issued by Attorney General Reno in 1995 required the FBI to notify prosecutors when facts and circumstances are developed in a foreign intelligence or counterintelligence investigation that reasonably indicate a significant federal crime has been, is being or may be committed.

ZELIKOW: The procedures, however, prohibited the prosecutors from, quote, "directing or controlling," close quote, the intelligence investigation.

Over time, the wall requirement came to be interpreted by the Justice Department, and particularly the Foreign Intelligence Surveillance Court, as imposing an increasingly stringent barrier to communications between FBI intelligence agents and criminal prosecutors.

Despite additional guidance on information sharing issued by Attorney General Reno in February 2000 and by Deputy Attorney General Larry Thompson in August 2001, the wall remained a source of considerable frustration and concern within the Justice Department.

Justice Department prosecutors and FBI criminal agents were responsible for large criminal cases, like the embassy bombings. The intelligence side of the FBI, though, had the legal tools essential for domestic intelligence work, such as FISA surveillance. In this environment, domestic counterterrorism efforts were impaired.

Attempts at reform: There were attempts at reform. Start with the 1998 strategic plan.

The FBI issued a five-year strategic plan in May 1998 spearheaded by Deputy Director Robert Bryant. The plan mandated development of a strong intelligence base, including human sources, intelligence collection and reporting requirements.

As a result of the strategic plan, the FBI created an Office of Intelligence that was superseded by a new Investigative Services Division created in 1999. That division was intended to strengthen the FBI's strategic analysis capability across the spectrum of traditional criminal, counterintelligence and counterterrorism cases.

Thus for the first time, the strategic analysis function was made independent of the operational divisions. The Investigative Services Division also was intended to increase the professional stature of analysts.

An internal review of the FBI's intelligence analysis function at the time found that 66 percent of the bureau's analysts were not qualified to perform analytical duties. The review made recommendations for improvements. It appears that these recommendations were either not implemented or not enforced.

ZELIKOW: The new division did not succeed. FBI officials told us that it did not receive sufficient resources, and there was ongoing resistance to its creation from the senior managers in the FBI's operational divisions. Those managers feared losing control. They feared losing resources. They feared they would be unable to get the assistance they wanted from the new division's analysts.

Director Robert Mueller dismantled the division soon after the 9/11 attacks. We will discuss his changes in Staff Statement No. 12.

The Counterterrorism Division and MAXCAP 05: In 1999, the FBI also created separate Counterterrorism and Counterintelligence Divisions to ensure enough focus on these missions.

By late 1999, Dale Watson, the first head of the new Counterterrorism Division, recognized the urgent need to elevate the counterterrorism capacity of the FBI organization-wide. He developed a strategy he called MAXCAP 05. His goal was that the bureau reach its maximum feasible capacity in counterterrorism by 2005 through a strategy focused on intelligence gathering, valid and straightforward reporting and tracking mechanisms, effective interagency liaison and cooperation, and accountable program management.

During July and August of 2000, at four regional conferences, Counterterrorism Division leadership presented the new strategy to all of the FBI's assistant directors and special agents in charge of the FBI's 56 field offices.

Field executives told Watson that they did not have the analysts, linguists or technically trained experts to carry out the strategy. Watson asked for help from the Training Division and the new Investigative Services Division. Watson told us that trying to implement this strategy was the hardest thing he had ever done in his life.

One year after the regional conferences, almost every FBI field office's counterterrorism program was assessed to be operating at far below maximum capacity. Watson thought the FBI had to step up to a major choice of mission, perhaps turning over a significant share of narcotics enforcement to the DEA in order to free up resources for countering terrorism.

Although he thought FBI Director Freeh was sympathetic, most FBI managers opposed such a fundamental change before 9/11, and none of the pre-9/11 budgets made that choice.

The FBI's new counterterrorism strategy was not a focus of the Justice Department in 2001.

ZELIKOW: Attorney General Ashcroft told us that upon his arrival at the department he faced a number of challenges that signaled the need for reform at the FBI.

He mentioned the Ruby Ridge and Waco incidents, the Wen Ho Lee investigation, FBI agent Robert Hanssen's espionage, the late discovery of FBI documents related to the Timothy McVeigh case, and public disclosures about lost laptops and firearms.

The new Bush administration proposed an 8 percent increase in overall FBI funding for fiscal year 2002. This included the largest proposed percentage increase in the FBI's counterterrorism program since fiscal year 1997.

On May 9, 2001, Attorney General John Ashcroft testified at a hearing on U.S. efforts to combat terrorism. He testified that the Justice Department had no higher priority than to protect citizens from terrorist attacks.

On May 10, the department issued guidance for developing the fiscal year 2003 budget that made reducing the incidence of gun violence and reducing the trafficking of illegal drugs priority objectives.

Watson told us that he almost fell out of his chair when he saw the memo because it made no mention of counterterrorism.

The department prepared a budget for fiscal year 2003 that did not increase counterterrorism funding over its pending proposal for fiscal year 2002. It did include an enhancement for the FBI's information technology program, intended to support the collection, analysis and rapid dissemination of information pertinent to FBI investigations.

Acting FBI Director Thomas Pickard told us he made an appeal to Attorney General Ashcroft for further counterterrorism enhancements not included in this budget proposal. On September 10th, the attorney general rejected that appeal.

Despite recognition by the FBI of the growing terrorist threat, it was still hobbled by significant deficiencies. Some of those deficiencies were, for instance, in intelligence collection.

Intelligence collection efforts should begin with a strategy to comprehend what is being collected, identify the gaps, and push efforts toward meeting requirements identified by strategic analysis.

Prior to 9/11, the FBI did not have a process in place to manage its collection efforts effectively. It did not identify intelligence gaps.

Collection of useful intelligence from human sources was limited. By the mid-1990s, senior managers were concerned the bureau's statistically-driven performance system was resulting in a roster of mediocre sources.

ZELIKOW: The wall between criminal and intelligence investigation apparently caused agents to be less aggressive than they might otherwise have been in pursuing Foreign Intelligence Surveillance Act, FISA, surveillance powers in counterterrorism investigations. Moreover, the FISA approval process involved multiple levels of review, which also discouraged agents from using such surveillance.

Many agents also told us that the process for getting FISA packages approved was incredibly lengthy and inefficient. Several FBI agents added that, prior to 9/11, FISA-derived intelligence information was not fully exploited anyway but was collected primarily to justify continuing the surveillance.

The FBI did not dedicate sufficient resources to the surveillance or translation needs of counterterrorism agents. Surveillance personnel were more focused on counterintelligence and drug cases. Many field offices did not have surveillance squads before 9/11. Similarly, the FBI did not have a sufficient number of translators proficient in Arabic and other languages useful in counterterrorism investigations, and that resulted in a significant backlog of untranslated FISA intercepts by early '01.

FBI agents received very little formalized training in the counterterrorism discipline. Only three days of the 16-week new agents course were devoted to national security matters of any kind, counterterrorism or counterintelligence, and most subsequent counterterrorism training was received on an ad hoc basis or on the job.

Additionally, the career path for agents necessitated rotations between headquarters and the field in a variety of work areas, making it difficult for agents to develop expertise in any particular area, especially counterterrorism or counterintelligence. We were told that very few field managers of the FBI had any counterterrorism experience, and thus either were not focused on the issue or did not have the expertise to run an effective program.

Finally, agents' investigative activities were governed by attorney general guidelines, first put in place in 1976, the so-called Levi guidelines, and revised in 1995, to guard against misuse of government power.

The guidelines limited the investigative methods and techniques available to agents conducting preliminary investigations of potential terrorist activities or connections. They prohibited the use of publicly available source information, such as that found on the Internet, unless specified criteria were present.

ZELIKOW: These restrictions may have had the unintended consequence of causing agents to even avoid legitimate investigative activity that might conceivably be viewed as infringing on religious liberties or lawful political protest.

Agents we interviewed believed these limitations were too restrictive and adversely affected their intelligence investigations.

Strategic analysis: It is the role of the strategic analyst to look across individual operations and cases to identify trends in terrorist activity and develop broad assessments of the terrorist threat to U.S. interests.

The goal is not abstract. Such analysis drives collection efforts. It is the only way to evaluate what the institution does not know. The FBI had little understanding of, or appreciation for, the role of strategic analysis in driving investigations or allocating resources.

The role of the tactical analyst, on the other hand, is geared toward providing direct support to investigations. Agents viewed tactical analysts as performing duties that advanced their cases. They failed to see the value of strategic analysis, finding it too academic and therefore irrelevant.

Creation of the ill-fated Investigative Services Division may even have worsened this attitude by distancing strategic analysts from agents in the operational divisions.

Moreover, strategic analysts had difficulty getting access to the FBI and intelligence community information they were expected to analyze. The poor state of the FBI's information systems meant that analysts' access to information depended in large part on their personal relationships with individuals in the units or squads where the information resided.

As a result, prior to 9/11 relatively few strategic counterterrorism analytical products had been completed. Indeed, the FBI had never completed an assessment of the overall terrorist threat to the U.S. homeland.

According to the Department of Justice inspector general, FBI officials were comfortable relying on their individual professional judgment regarding the terrorist threat and, quote, "did not value a formal written assessment that uses a structured methodology," close quote.

ZELIKOW: Compounding this situation was the FBI's tradition of hiring analysts from within the agency, rather than recruiting individuals with the relevant educational background and expertise.

In our field visits, we encountered several situations in which poorly qualified administrative personnel were promoted to analyst positions as a reward for good performance in other positions. When the FBI hired or promoted people with appropriate analytical skills, the bureau's lack of a long-term career path and a professional training program caused many capable individuals to leave the bureau or move internally to other positions.

In addition, managers often did not use qualified analysts effectively, especially in the field. Some field analysts we interviewed told us they were viewed as uber-secretaries, expected to perform any duty that was deemed non-investigative, including data entry and answering phones.

Headquarters managers often did not have sufficient staff support, so they too turned to analysts to perform policy-oriented and programmatic duties that were not analytic in nature.

Knowledge management: Prior to 9/11, the FBI did not have an adequate ability to know what it knew. In other words, the FBI did not have a mechanism for effectively capturing or sharing its institutional knowledge. FBI agents did create records of interviews and other investigative efforts, but there were no reports officers to condense the information into meaningful intelligence that could then be retrieved and disseminated.

The FBI's primary information management system, using 1980s technology, already obsolete when installed in 1995, limited the bureau's ability to share its information internally and externally. The FBI did not have an effective system for storing, searching or retrieving information of intelligence value contained in its investigative files.

Director Freeh told us that he went before congressional staff and members twice a year begging and screaming for funds to improve the FBI's information technology infrastructure. Former Department of Justice and FBI officials told us that the FBI lacked personnel with the necessary expertise leading its information technology improvement efforts, increasing Congress's reluctance to support funding proposals in this area.

ZELIKOW: Once Freeh brought former 30-year IBM executive Robert Dies on board in 2000, the bureau developed a comprehensive IT plan that Congress did support.

The FBI received congressional approval in late 2000 for the Trilogy project, a 36-month plan for improving its networks, systems and software.

Dies told us that, given the enormity of the task at hand, his goal was merely to "get the car out of the ditch."

As of September 2001, the project was under way, but by no means fully implemented.

The FBI's Joint Terrorism Task Forces -- JTTFs -- were the primary mechanism for sharing counterterrorism information with other law enforcement agencies in the field. The FBI expanded the number of JTTFs throughout the 1990s. By 9/11, there were 35.

The JTTFs, while useful, had limitations. They set their own priorities in accordance with regional and field office concerns. Most were not fully staffed. Many state and local entities believed they would gain little from having a representative on a JTTF. Most detailees were mainly there as liaison rather than as full working members of the JTTFs. And many did not have access either to FBI information systems or their own home agency systems while in the FBI workspace.

Moreover the supervisors in their home agency chains of command often did not have security clearances, making it difficult to share important intelligence information.

We were told that at headquarters information sharing between the FBI and CIA improved greatly when the agencies began exchanging senior counterterrorism officials in 1996. After serving on rotation, they understood each other's agencies and missions better than they had before.

But as will be discussed in the next staff statement, there were other problems with information-sharing between the FBI and the CIA.

The FBI's unwillingness or inability to share information reportedly frustrated White House national security officials.

Richard Clarke told us that the National Security Council never received anything in writing from the FBI whatsoever. Former Deputy National Security Adviser James Steinberg said the only time the FBI gave the NSC relevant information was during the millennium crisis.

ZELIKOW: Clarke told us that Attorney General Reno was notified the NSC could not run an effective counterterrorism program unless it had access to FBI information.

The Justice Department representative on Clarke's interagency group, the CSG, has told us, however, that to his knowledge neither Clarke nor anyone else at the NSC raised any systemic issue of FBI information sharing as a policy issue or a matter to be considered by Attorney General Reno. Reno, in any case, initiated biweekly briefings of National Security Adviser Samuel Berger with FBI Director Freeh.

Reno told us that she was very concerned about the bureau's information sharing and intelligence capabilities. In 2000, she sent several memoranda to Director Freeh expressing these concerns. One memo stated, "it is imperative that the FBI immediately develop the capacity to fully assimilate and utilize intelligence information currently collected and contained in FBI files and use that knowledge to work proactively to identify and protect against emerging national security threats."

Reno's requirements included improved information sharing, improved counterterrorism training, a threat assessment and a strategy to counter the threat. It is not clear what actions the FBI took in response to these directives from the attorney general.

Terrorist financing: The FBI worked hard on terrorist financing investigations. The bureau primarily utilized an intelligence approach. Agents in a number of field offices gathered intelligence on a significant number of suspected terrorist financing organizations. Before 9/11 those FBI offices had been able to gain a basic understanding of some of the largest and most problematic conspiracies that have since been identified.

The agents understood that there was a network of extremist organizations operating in the United States supporting global Islamic jihadi movements. They did not know the degree to which these extremist groups were associated with Al Qaida. It was also unclear whether any of these groups were sending money to Al Qaida.

The FBI operated a web of informants, conducted electronic surveillance and had opened investigations in a number of field offices. Numerous offices -- including New York, Chicago, Detroit, San Diego and Minneapolis -- had significant intelligence investigations into groups raising money for extremists.

ZELIKOW: Many of these groups appeared to the FBI to have some connection either to Al Qaida or bin Laden.

But the problems in the FBI's counterterrorism program affected these investigations too.

The FBI was hampered by an inability to develop an endgame. Its agents continued to gather intelligence with little hope that they would be able to make a criminal case or otherwise disrupt the operation. Agents were stymied by rules regarding the distinction between intelligence and criminal cases, in part due to the wall then in place between criminal and intelligence investigations, as described above.

Making a terrorist financing case was at least as difficult -- perhaps more so -- than other similarly complex international financial criminal investigations. The money inevitably moved overseas. Once that occurred, the money was much harder to track and the agents were at a dead end.

In addition, due to the FBI's inadequate information management system, strategic analysis and information sharing capabilities before 9/11, the FBI lacked a fundamental strategic understanding of the nature and extent of the Al Qaida fund-raising problem in the U.S. As a result, the FBI could not fulfill its responsibility to provide intelligence on domestic terrorist financing to policy-makers; it did not contribute to national policy coordination on this issue.

Instead, FBI agents simply kept tabs on the fund-raisers, even as millions of dollars flowed to foreign Islamic extremists.

Conclusion: From the first World Trade Center attack in 1993, FBI and Department of Justice leadership in Washington and New York became increasingly concerned about the terrorist threat from Islamic extremists to U.S. interests both at home and abroad.

Throughout the 1990s, the FBI's counterterrorism efforts against international terrorist organizations included both intelligence and criminal investigations. The FBI's approach to investigations was case-specific, decentralized and geared toward prosecution.

Significant FBI resources were devoted to after-the-fact investigations of major terrorist attacks, resulting in several successful prosecutions.

The FBI attempted several reform efforts aimed at strengthening its ability to prevent such attacks, but these reform efforts failed to effect change organization-wide.

ZELIKOW: On September 11, 2001, the FBI was limited in several areas critical to an effective counterterrorism strategy that could prevent attacks. Those working counterterrorism matters did so despite limited intelligence collection and strategic analysis capabilities, despite a limited capacity to share information, both internally and externally, despite insufficient training, an overly complex legal regime, and despite inadequate resources.

KEAN: We will now hear from our first witness, the Honorable Louis J. Freeh, who served as director of the Federal Bureau of Investigation from 1993 to 2001.

KEAN: Director Freeh, we're very pleased to welcome you this morning. Will you please rise and raise your right hand?

Do you swear or affirm to tell the truth, the whole truth and nothing but the truth?

Director Freeh, a prepared statement will be entered into the record in full. As you know, we've got an agreement that your statement summarized will be about 10 minutes long. And so please proceed.

Let me just begin by, again, expressing publicly my condolences to the families of the 9/11 attack and to extend my prayers and support for them, and my wishes that this commission, as the joint Intelligence Committees before it, does not only find some answers but certainly recommendations for change and improvement, many of which have already been undertaken, so that this type of awful, horrific human and personal tragedy never affects anyone else.

I want to just make a couple of points. I certainly appreciate the work of the staff and the report of the executive director. And maybe not addressing all of the details of what has been a very careful review of the FBI operations, certainly prior to September 11th and thereafter, and a very good audit with respect to many of the programs and operations.

FREEH: I would like to talk about some larger general issues, and certainly then engage in whatever questions you want.

I think the point that I would like to make is that it is imperative, in my view, that the commission distinguish between the period before September 11 and the period after September 11; that this is, I would respectfully suggest, a central question for the commission and for the American people. And I think the inability to focus on that question leaves not only a lot of speculation, but I think a lot of misinformation about some of the activities and some of the dynamics here involved.

I guess my view is that Al Qaida declared war on the United States in 1996. That's when bin Laden issued his first fatwa.

The 1998 fatwa was much more specific. It directed his followers to kill Americans anywhere.

That was followed by attacks against American soldiers in Yemen in 1992, which was actually the subject of a Southern District of New York FBI indictment returned in June of 1998 prior to the attacks against the embassies in East Africa.

The attacks upon the American soldiers in Somali, Project Restore Hope, was an activity sponsored by and directed by Al Qaida soldiers. That, as you know, was one of the overt acts publicly identified in the New York City indictment with respect to bin Laden.

The attacks against the embassies in 1998: acts of war against the United States. The attacks against our warship in 2000: acts of war against the United States.

FREEH: I remember briefing Senator Kerrey and Senator Shelby after one of these attacks -- it was the embassy attacks -- and he asked me a very good question, a question that I think is maybe more relevant today than it was then. And he said, "Why is the FBI over in East Africa, hundreds of FBI agents sifting through a crime scene maintaining chain of custody, talking to people and giving them their Miranda rights, when this is an act of war against the United States?"

And my response then, as it would be now, is that, absent a declaration of war backed by the United States against Al Qaida, against this very competent and very dangerous terrorist organization, we were left with the tools that were available to fight terrorism and to neutralize and incapacitate, not just bin Laden, but many of his operatives and allied organizations.

The point there is not that anybody in the FBI or anybody in the United States thought that investigating these cases was the best response to a war that was declared against the United States. You could poll any FBI agent, any jury that tried and convicted many of the people in these cases and they would tell you absolutely not. An arrest warrant, two of them for bin Laden in the Southern District of New York, was not going to deter him from what happened on September 11th.

FREEH: But the point of these investigations was in the absence of invading Afghanistan, in the absence of armed Predator missiles seeking out our enemies, in the absence of all the things that were appropriately done after September 11th, when the United States declared war back on Al Qaida, we were left with alternatives which were better than no alternatives. And as I said in my statement, sometimes they worked.

And the investigations were not investigations that dealt with individuals. When the FBI investigated La Cosa Nostra, it wasn't investigating a particular person or group of people; it was investigating the organization and the enterprise. The purpose there was to get as much information as possible to incapacitate the leadership and dissolve the organization. The Watergate investigation would be the same example of that. These investigations were not cases; they were initiatives that were designed to gather information.

So before September 11th most of the information that was residing in the United States government with respect to Al Qaida came from FBI investigations, not from intelligence operations, not from collection. It came from the cooperating witnesses that we found in 1993, after the World Trade bombing in February. The FBI conducting an investigation but an investigation that went to the identification of the people who might have been involved in supporting that attack led to, if you recall, the prevention -- and I stress that word -- the prevention of a second major terrorist attack against the United States in New York City which was called the day of terror. And the organization was going to blow up tunnels and bridges and the United Nations and federal office buildings, killing potentially thousands and thousands of Americans.

FREEH: It was the investigation of the World Trade tower that prevented that and also gave us an arrest warrant for one Ramzi Yousef. Ramzi Yousef, related to Sheikh Khalid Mohammed, one of the architects of the September 11th attack.

He was found in Pakistan, staying in an Al Qaida guest house, by FBI agents who had an arrest warrant, and without that arrest warrant, he would never have been brought back to the United States.

Why was it important to have an arrest warrant? Because incapacitating him would prevent him from further attacks against the United States.

As you know, in 1995, he and others -- Sheikh Khalid Mohammed being one of them -- were planning to blow up 12 U.S. airliners over the Pacific Ocean, killing hundreds of Americans. That was aborted due to a series of events, but precisely the FBI criminal investigation served to prevent that from happening.

My point is that these investigations or projects that seek to gather maximum amount of information so the organization can be stopped from committing future acts of terrorism.

It was never our notion in the FBI that criminal prosecutions of terrorists and investigations of their organizations was a substitute for military action, for foreign policy action, for the United States doing what it did on September 11th, declaring war on an enemy that had declared war on us many years ago.

The point of it is that these investigations, as they existed, prevented acts of terrorism.

FREEH: With very limited resources, the FBI, as you know, before September 11, had 3.5 percent of the federal government's anti- terrorism budget. And it's no news to anybody that for many, many years, as your executive director recounted, the resource issue and the legal authority issue certainly limited what we were able to do before September 11th.

In the budget years 2000, 2001, 2002, we asked for 1,895 people: agents, linguists, analysts. We got a total of 76 people during that period. That's not to criticize the Congress, it's not to criticize the Department of Justice, it is to focus on the fact that that was not a national priority.

It's to repeat what we saw in the 2000 presidential election. Terrorism was not discussed. This was not an issue that candidates talked about, that the American people talked about during that period. And this was right after the attack on the USS Cole.

For many, many years, a lack of these resources and, maybe more importantly, a lack of legal authority, prevented us from doing what was easily done after September 11th. The Patriot Act, the November 18, 2002 decision by the court of review, which threw out a 20-year interpretation of the FISA statue. The court said to the judges, to the Department of Justice, to the FBI, to the intelligence community, "You've been misreading the statute for 20 years." Not only does the Patriot Act provide for this, but the actual statute provides for that.

So this wall that had been erected was a self-erected wall by the United States government, confirmed by interpretations, by the FISA court.

FREEH: But when challenged for the first time in 20 years, it was found by the court of review to be inconsistent with the statute, as well as inconsistent with the Constitution.

All of these things being said, the point I guess I want to make to you this morning and which I tried to make in my statement, is that we had a very effective program with respect to counterterrorism before September 11th given the resources in my view and given the authorities that we had.

Bin Laden was indicted in June of 1998. He was indicted again after the African bombings. He was put on our top 10 list. George Tenet and I reviewed plans to have him arrested and taken into custody in Afghanistan and brought back to the United States. I went over to see then-Chief Executive Musharraf in 2002 and made the case for him that this person be thrown out of Afghanistan; that he help us take him into custody so we could bring him back to the United States.

All of the other things that were being done were being done in a limited framework, given, again, lack of resources and, maybe more importantly, the legal authorities that we had to live with.

The final point I think I want to make then is that we could change the law, we can pass new statutes, we can add billions of dollars to the fight. We need to keep in perspective, however, what was the reality before September 11th and what was the reality thereafter.

FREEH: And at the end of the day, the FBI, as a part of the Department of Justice, has to obey the law. And whatever that law is, it's one that protects us, it protects our Constitution, it also protects our people. And that law can change but I think we have to keep in mind that when that changes, we can't judge what happened in the past by different standards.

FIELDING: Good morning, Mr. Director. Thank you very much for being here today and for all of the cooperation you've provided to the commission and its staff in closed sessions heretofore and for your really fulsome statement that you gave us. And also thank you on behalf of the whole commission for your public service, both in the executive and the judicial branch.

I am sure it's no surprise to you or anybody here that there's a lot of interest in today's hearings and there's a lot of interest simply because on September 11th we were totally beaten. We were beaten and all our systems failed.

Our systems to stop hijackings failed. Our intelligence, domestic and foreign apparatus failed. We had 19 people who were able to -- some of whom were known by the CIA to be terrorists -- entered our country, got visas, were living under their own names in this country, took flight lessons. They beat the security screening with knives to get into the aircraft and turn four aircraft into missiles.

And they had to have -- it was interesting -- they had to have 100 percent success in order to do this and they did.

FIELDING: So we've now found in our discovery that there have been some clues, some dots, as we say, that might have been connected, were not. We're not passing judgment on that at this point, but what we're trying to determine here is how this intelligence failure occurred so that we can deny it from occurring again, if at all possible.

And, quite frankly, we're also trying to determine whether the FBI should continue to have its counterterrorism responsibility; whether it's capable of carrying out the new mission of counterterrorism, and the enhanced mission and the enhanced responsibility. So we appreciate your being here.

You became the director in September of '93, and had a long service through June of '01. So you're clearly aware of the terrorists targeting U.S. interests in the '90s.

It was often said that because you're a former field agent yourself, that you had little time for headquarters, and that you created or enhanced what has been described to us as the culture of the field. And during your tenure, counterterrorism investigations were run out of the field, as we understand it. The New York field office was the office of origin for Al Qaida, and therefore, as the staff statement said, our expertise for the large part was there.

FIELDING: Now, also in 1994, when you came on, you reassigned over 600 headquarters, supervisory, administrative agencies out in the field, ostensibly to make the FBI more efficient and to put more FBI agents on the street.

Now, some have looked at this approach -- and I want to read a quote. It says, "The FBI's policy to decentralize investigations was inefficient for counterterrorism operations, especially against international terrorist targets." And that's from the report of the House Permanent Select Committee on Intelligence that analyzed this approach.

So my first question to you is, you, obviously, made this decision. How -- to you what were the strengths of this approach of using the office of origin concept as opposed to the FBI's now current, more centralized approach to counterterrorism?

FREEH: Well, you've asked a number of questions. Let me see if I can respond to some of them.

With respect to the 600 agents being assigned out of headquarters, that wasn't because I believed that we shouldn't have them in headquarters, but should have them in the field. It was because for 22 months, the FBI had a hiring freeze. So while we were having offices around the country literally, the R.A. offices -- the resident agencies -- becoming vacant because there were no agents being hired -- 22 months, not one FBI agent was hired.

So my reassignments in 1994 were not to decentralize the FBI, it was to put agents in spaces where they had to be put with respect to that.

Al Qaida, in terms of the cases -- as you call them correctly -- but also the investigation of Al Qaida was centralized in New York City.

FREEH: That's where the primary office and the three squads that were established ultimately in New York City dealt with the Cole bombing, the East Africa bombing, as well as the Al Qaida organization in general.

That doesn't mean that we didn't organize and centralize and direct those investigations from headquarters. We set up, as your executive director mentioned in 1999, a Counterterrorism Division. The purpose of the Counterterrorism Division was to control and help support a national program where cases, although they have to be worked in the field -- that's where the U.S. attorneys are -- they also were directed and supervised by headquarters.

It was interesting that when I submitted the proposal for the Counterterrorism Division, with the full support of the attorney general, Janet Reno, it took nine months for the Office of Management and Budget and the Congress to approve that, which again goes to my point before about the priorities with respect to getting things done.

We had Al Qaida-Osama bin Laden unit set up at headquarters. In our SIOC operation, we had 24-by-7 coverage of those matters and those cases.

So the cases were being worked in New York City -- I don't know where else they could have been worked -- but the coordination between headquarters and the field, in my view, was very, very good.

For instance, I went to Pakistan to ask Mr. Musharraf to help us arrest bin Laden. I also asked him for witnesses, which he ultimately agreed to send one to New York City for the trial. I went to East Africa and negotiated the return of Oday and some of the other hijackers to be prosecuted in New York, where they were convicted.

FREEH: So there was a lot of headquarters involvement. In fact, there was huge headquarters involvement in the New York cases. The fact that they were in the field was just the reality of that's where cases are and that's where grand juries and prosecutors and courts are.

But the point is that that group of New York City agents were functioning not just as case agents, they were the intelligence, they were the analysis, they were the whole embodied knowledge of the United States government at that time with respect to Al Qaida and its principals. And their job was to disable the organization, eliminate the leadership at that point by arrest or custody. And many efforts -- heroic efforts on their part were extended in that regard.

FIELDING: OK. Then is it your testimony that the Al Qaida cases, if you will, that were being run out of the New York office were really being directed out of headquarters?

FIELDING: OK. Then help me a little. How, under that structure, would the rest of the field offices really have the same sense of urgency, understanding or know-how, if you will, to contribute to the counterterrorism effort?

For instance, use as the example the infamous or famous Phoenix memo that never seems to get where it should get. Could you comment on that?

FIELDING: Doesn't this decentralization inhibit the interplay between the offices, so to speak?

I mean, the cases had to be worked where they were worked. We had a body of expertise with respect to Al Qaida, and bin Laden's residence in New York. We had an equal and ample, in my view, body of expertise at our headquarters, with Dale Watson and Debbie Stafford and Mike Rollins, all the people that your staff has spent many, many hours with over the last few months.

So, you know, we didn't only have the expertise in New York. And Dale's job and Mike Rollins' job and the Counterterrorism Section, before it was the Counterterrorism Division's, job was to ensure that, first of all, expertise was available to support cases in smaller offices that perhaps didn't have that kind of experience, would not have had that kind of experience.

The purpose of, you know, MAXCAP 05, the purpose of seminars, the purpose of SAC conferences was to disseminate all of that information and make sure that the field not only was aware of those investigations, but if they had matters in their own division -- and there were 70 cases around the FBI in the summer of 2001 -- not on Al Qaida members or bin Laden supporters, but on fundamentalists, jihadists who were of great interest to the bureau because of their potential, as we saw in East Africa and other cases, to be co-opted and enlisted into operations.

So the decentralization, I don't think, is something that I would characterize it as.

With respect to the Phoenix memo, which is your second question, you know, my understanding of that memo, mostly what I've read in the newspapers, is that it was sent to headquarters. It was not decentralized in the sense that it never made it to headquarters.

FREEH: It was looked at there. It was analyzed. People took what they thought was the appropriate action at the time.

I know as an aftermath of the information contained in that memo, everyone was interviewed -- the people who were identified in the memo. All the leads were run out after the fact, and there was nothing about the information contained in that memo, as far I've read or as I understand it, that would have lead you to September 11th.

FIELDING: Well, then, do you disagree -- well, let me ask it another way. The Pentbomb investigation is now being run out of headquarters. Would you disagree with the way that Director Mueller is running that?

FREEH: No. Again, I think after September 11th, there had to be a completely new restructuring of how counterterrorism cases and operations were going to be conducted. So I would not have any disagreement with that.

And, by the way, if you were going to do a criminal prosecution there, not that that would be appropriate, you would do it in the Eastern District of Virginia. So it wouldn't make any sense for agents in New York City to be working on it if you were to do a criminal case.

FIELDING: So you think that, post-9/11, that's the better way to run counterterrorism cases?

FREEH: I don't think you can run counterterrorism cases out of headquarters. That's not my experience or my view. I think you have to coordinate them out of headquarters.

The liaison throughout the government, the ability to share intelligence, the overseas connections that are necessary, you can't run it without headquarters. But you can prepare a criminal case for a field presentation in a U.S. district court in headquarters. That's just my own view.

In September of 1999, the GAO issued a report that recommended that the FBI develop a national-level terrorist threat and risk assessment so it could be used to determine how to allocate resources and budget and dealing with domestic threats, plus analyzing the likelihood of such a threat and to identify any potential intelligence gaps -- I believe was part of the charter.

And it was my understanding that the department and you agreed to do that. And that's September -- the end of '99. And that wasn't completed until January of 2003.

And when we were talking to people that were involved in that, a senior CIA official that was detailed to the FBI after 9/11 told the commission that the assessment was completed actually by CIA analysts that had in detail to the FBI, since the FBI analysts were not capable of producing such a product.

Now, I'd like your comment on that. And even the deeper question of was the FBI unwilling to do an analysis, or was it unable to do an analysis from '99 at least until you left?

FREEH: Well, I don't think it was incapable of doing that. In fact, there were analyses that were made with respect to assessments, which were done in the context of the Counterterrorism Division, which was set up at about the same time.

FREEH: Did we have a deficiency with respect to analytical capability? Absolutely.

I talked about that at appropriation hearings over many years. Most of the nonagent resources in our three-year request for 1,895 people were analysts. They were people who could perform strategic, as opposed to tactical, analysis for us and give us the type of strategy plans and disruption plans that we began to see actually in the spring and summer of 2001 in the FBI with respect to Al Qaida.

But that capability was not there when I was director. You know, we're in the process now of hiring 900 analysts, but that's 2004. It doesn't cover the gaps over many, many years, particularly the years that you cite.

FIELDING: But you would agree that counterterrorism needs that as a component of its total effort, would you not?

FREEH: Absolutely. It needs linguists which were also, you know, requested year after year. We asked for the authority to hire Arabic and Farsi speakers at a higher rate than the GS scale provided for in New York City. You can't hire an Arabic or Farsi speaker for a GS-6 salary, which is what we were relegated to.

We did get a brief experiment with respect to a Title 5 exemption, but not what is now available and funded at least to the point where you can make an issue of it.

FIELDING: OK. Now, the last -- I guess that is my last one. I'm sorry. I see my time is up.

BEN-VENISTE: As you know, the purpose of this commission may be divided into two broad categories.

BEN-VENISTE: First, we are charged with providing a full accounting of the 9/11 catastrophe, a challenging investigative responsibility.

Second, we're asked to make recommendations in a wide variety of areas, all of which with the common goal of improving the security of our nation.

We should be reminded that the ability to have such a commission to operate in part through public hearings and to ultimately deliver a report to the president of the United States, to the United States Congress and to the American people, a report on our findings and recommendations, is a remarkable testimonial to the strength and durability of our democracy. Few countries in the world would tolerate, much less welcome, such an open and public process.

Director Freeh, you have served in two of the three branches of government. You were an FBI agent, an assistant U.S. attorney in the Southern District of New York; an office for which I have great affection, as you know, and continuing admiration. Indeed, during my service as an assistant United States attorney I worked closely with many FBI agents who I regarded as among the most dedicated and patriotic Americans I've ever met. Indeed some of them are close friends today.

You have served as a federal district court judge in the Southern District of New York, appointed by President Reagan, and then you were appointed by President Clinton to be FBI director. Your experience and observations will be an important source of information for this commission.

BEN-VENISTE: You have reemphasized this morning the fact that the New York office of the FBI, which was led by James Kallstrom and then Barry Mawn and John O'Neill, particularly focused on the Al Qaida terrorist threat.

In fact, John O'Neill perished in the attack on the World Trade Center on September 11th, 2001, at the hands of cowards who murdered civilian men, women and children, people who John O'Neill had hunted with a determination that sometimes bordered on an obsession.

Indeed, in January 2001, O'Neill's concerns stimulated an interagency group white paper urging greater protection of federal buildings in Lower Manhattan.

And that white paper noted that, "Osama bin Laden, his Al Qaida organization and affiliated extremists groups currently pose a clear and immediate threat to U.S. interests."

Do you recall discussions with John O'Neill about the threats from Al Qaida or others that might occur within the United States?

If you recall, the trial was actually starting in January of 2001. It went through May.

FREEH: This was the trial of the four subjects in custody for the East African bombing.

So the New York office, as well as headquarters and myself, were intensely concerned about the security for that trial. And if any of you saw the courthouse during the period of that trial, there were cement trucks, streets closed, because we were focused on a domestic attack in the United States by the co-conspirator in that case, indicted but a fugitive, to Osama bin Laden.

BEN-VENISTE: Let me ask you this: You have talked this morning and in your submitted statement and previously about your efforts to increase the counterterrorism budget; efforts that were not accepted by the Congress of the United States in allocating more funds for you.

But can you tell us whether it was possible within the FBI structure to reallocate resources within a particular field office or in general, perhaps using, as an example, James Kallstrom, the former head of the New York office of the FBI, who unilaterally shifted resources to counterterrorism from other areas?

I believe you have told us in staff meetings that Jim Kallstrom had half of his Criminal Division working on counterterrorism, pulling agents away from such traditional investigative efforts as bank robberies, drug investigations: the type of investigations which can overlap with other federal agencies or with state and local operations.

BEN-VENISTE: Did Kallstrom's, sort of, entrepreneurial decision on his own, recognizing the terrorist threat to make those reallocations, trouble you?

FREEH: Well, no. Since I concurred in it, I wouldn't call it an entrepreneurial decision at all.

I mean, when we needed to put 400 FBI agents in East Africa in August of 1998, we put them there. Now, they weren't allocated in our congressional funding stream as counterterrorism agents, but we sent them there because we needed them there.

For years, in the New York office, we -- the term is overburned the number of agents working counterterrorism cases.

Now, there were only three squads that were full-time assigned to bin Laden cases and Al Qaida investigations. But when we had a trial or we had an emergency, like we were preparing for the 50th anniversary of the U.N. or the NATO meeting or the pope was coming to New York, we would, of course, allocate hundreds and hundreds of agents who were not authorized budgetarily to perform counterterrorism assignments to that job. So that was something we did continuously.

There was never a case, Mr. Ben-Veniste, anywhere in the bureau that I was aware of where we could not assign agents in an emergency or in the threat of danger to help prevent that. But the reality is in terms of our congressional budget, they were not then authorized to be working the matters they were working.

BEN-VENISTE: Well, given the fact that you concurred and supported Jimmy Kallstrom's efforts in New York City, and given the fact that there has been criticism about the FBI's inability to reallocate resources toward the growing threat of terrorism and reallocate those resources, as I say, away from more traditional FBI jurisdictional areas which could be covered by other federal and state agencies, how do you answer that criticism?

One, you know, the positions that are authorized by the Congress and audited by their committees, as well as GAO, have to be allocated to the program areas where they're funded to. That's number one.

Now, from time to time, as in the New York case, we would ask the congressional committees for temporary reallocations. We would advise them as to what we were doing.

My answer to getting counterterrorism resources to fight terrorism was to ask for them and ask for them in addition to what we already had.

BEN-VENISTE: Were you ever reprimanded for reallocating on your own, either on the basis of emergency or on a more generalized basis, resources to counterterrorism as a result of congressional oversight?

FREEH: No. But I think that's because we were doing it on a emergency basis and on a temporary basis.

If we had taken a thousand agents from our criminal programs and assigned them full-time to counterterrorism matters, I don't believe we could have done that and I don't believe the committees would have permitted it at the time.

FREEH: No, I did not try that because that's not the way resources are allocated.

BEN-VENISTE: Let me turn to the subject of the state of the intelligence community's knowledge regarding the potential for the use of airplanes as weapons, a subject of obvious interest to this commission.

BEN-VENISTE: Did the subject of planes as weapons come up in planning for security of the Olympics held in Atlanta in 1996?

FREEH: Yes, I believe it came up in a series of these, as we call them, special events. These were intergovernmental planning strategy sessions and operations. And I think in the years 2000, 2001, even going back maybe to the 2000 Olympics, that was always one of the considerations in the planning. And resources were actually designated to deal with that particular threat.

BEN-VENISTE: So it was well-known in the intelligence community that one of the potential areas or devices to be used by terrorists, which they had discussed, according to our intelligence information, was the use of airplanes, either packed with explosives or otherwise, in suicide missions?

BEN-VENISTE: Did that come up, the same subject, come up again? I know you carried on from the Clinton administration through six months, more or less, of the Bush administration. Did that subject come up again in the planning for the G-8 summit in Italy?

FREEH: I don't recall that it did, but I would not have been involved in that planning. The FBI would not have been involved in that particular planning.

BEN-VENISTE: We were advised that there was a CAP or no-fly zone imposed over first Naples, in the preplanning session, and then Genoa during the meeting of the eight heads of state.

BEN-VENISTE: And that subsequently it was disclosed the President Mubarak of Egypt had warned of a potential suicide flight using explosive-packed airplanes to fly into the summit meeting.

FREEH: I don't dispute that. But that planning would be done by the Secret Service, probably the Department of Defense. We would not have been involved in that event outside the United States in terms of the special planning, although we probably detailed some people there.

BEN-VENISTE: Let me ask you this: To your knowledge, coming back to the United States, was the intelligence information accumulated by the year 2001 regarding various plots, real or otherwise, to crash planes using suicide pilots integrated into any air defense plan for protecting the homeland, and particularly our nation's capital?

BEN-VENISTE: Can you explain why it was, given the fact that we knew this information, and given the fact that, as we know now, our air defense system on 9/11 was looking outward in a Cold War-posture, rather than inward, in a protective posture, that we didn't have such a plan? Was that a failure of the Clinton administration, was that a failure of the Bush administration, given all of the information that we had accumulated at that time?

FREEH: Well, I mean, I don't know that I would characterize it as a failure by either administration.

I know, you know, by that time there were air defense systems with respect to the White House. There were air defense systems that the military command in the Washington, D.C., area, you know, had incorporated.

I don't think there were probably -- at least I never was aware of a plan that contemplated commercial airliners being used as weapons after a hijacking. I don't think that was integrated in any plan.

But with respect to air defense issues and that threat, it was clearly known and it was incorporated, as I mentioned, into standard special events planning.

BEN-VENISTE: Into special events, but never into the actual defense posture for the homeland protection of the United States.

Let me ask you a final question with respect to the millennium threat. The FBI and the CIA have been criticized for being unwilling to work cooperatively together, yet it appears during the period of heightened alert prior to the millennium, the FBI and CIA worked closely together and had several notable successes as the result thereof.

Could you explain how that operation worked and whether you reported to the National Security Council of the United States?

FREEH: Well with respect to the millennium planning, I reported of course to the attorney general. The attorney general and I worked very closely in concert with the National Security Council, with the director of central intelligence, the CIA, military components, civilian components.

This was an integrated and long-term planning operation with respect to millennium threats, which were not only issues concerning technology exploitation, but also the occasion of the millennium as a terrorism attack.

FREEH: But your more important question, I think, is the CIA-FBI cooperation. I don't think it was unique to the millennium planning. My experience in eight years there is that there was extremely good cooperation between the FBI and the CIA. And that goes back to matters such as the Cole bombing, the East African embassy bombings cases.

The Alex (ph) station -- which you know from your staff was set up in 1997 -- the CIA and the FBI together and a station dedicated to Al Qaida investigations and disruption activities overseas. FBI agents would regularly accompany CIA officers overseas to exploit Al Qaida cells and disrupt them.

I think that cooperation, in my view, was a very outstanding one for many years.

I've asked for the microphone only to say that I will not be questioning Director Freeh or Attorney General Reno. Under our commission policies, several commissioners have recused themselves from considering various issues that they worked on or elements of the government that they've worked with at one time or another.

While I'm recused only from review of actions during my tenure at the Department of Justice, which ended in March of 1997, because I worked closely with Director Freeh and with Attorney General Reno, I've decided not to participate in this questioning at all.

GORELICK: As my colleagues know, the vast preponderance of our work, including with regard to the Department of Justice, focuses on the period of 1998 forward, and I have been and will continue to be a full participant in that work.

First, I'm interested in your communications with the White House. When you had a serious problem, where you thought there were threats, did you go directly to the president or was there another mechanism you used to communicate with the White House, either in the Clinton administration or the Bush administration or both, I guess?

FREEH: Well, I mean, my procedures would normally be to communicate first with the attorney general on many occasions. After that communication we would go to the White House. If it was a national security issue, we would certainly see the national security adviser.

In the last year that Janet Reno and I served together, we actually had a routine meeting with the national security adviser I'd say probably every two or three weeks. We had another one with Secretary Albright probably once a month, and the purpose of those meetings was to discuss not just counterintelligence and counterterrorism matters, but even other Department of Justice issues that had national security implications.

On some occasions I would go directly to the national security adviser. I did not have an experience in either administration of going directly to the president on a matter.

KEAN: One of the questions that -- maybe one of the most important that our commission is charged with, is looking at the intelligence agencies and seeing whether any changes ought to be made.

KEAN: Now, I read our staff statement as an indictment of the FBI for over a long period of time.

You know, when I read things like that 66 percent of your analysts weren't qualified, that you didn't have the translators necessary to do the job, that you had FISA difficulties, that you had all the information on the fund-raising but you couldn't find a way to use it properly to stop terrorism.

And that's without counting, of course, the things that were going on at the same time: Ruby Ridge, Waco, the Wen Ho Lee case, the Hanssen case, the lost laptops and firearms and all of the rest.

The present director, your successor, has a whole series of reforms that he is trying to put to make the agency work better. You tried reforms. You tried very hard to reform the agency. According to our staff report, those reforms failed.

I guess my question to you is, looking at this director's efforts to reform the agency, can those reforms work or should there be some more fundamental changes to the agency and the way we get our intelligence?

FREEH: Well, first of all, I take exception to your comment that your staff report is an indictment of the FBI. I think your staff report evidences some very good work and some very diligent interviews and a very technical, almost auditing, analysis of some of the programs.

I think the centerpiece of your executive director's report, as I heard it, came down to resources and legal authorities.

FREEH: So I would ask that you balance what you call an indictment, and which I don't agree with at all, with the two primary findings of your staff. One is that there was a lack of resources; and two, there were legal impediments.

With respect to your question, I certainly support and applaud the director's efforts. The Patriot Act, the court of review, a couple of billion dollars is certainly a big help when we're talking about changes.

With respect to the jurisdiction of the FBI, I do not believe that we should establish a separate domestic intelligence agency with respect to counterterrorism. I think that would be a huge mistake for the country for a number of reasons.

One, I don't think in the United States we will tolerate very well what, in effect, is a state secret police even with all of the protections and the constitutional entitlements that we would subscribe it with. Americans, I don't think, like secret police. And you would, in effect, be establishing a secret police.

Secondly, if you look at the models around the world where this has been tried, it hasn't worked very well, in my opinion.

The other thing, it would take a long time to integrate. If the Homeland Security Department and 170,000 people to be integrated is going to take a couple of years; standing up a brand new domestic intelligence agency would take a decade and we would lose very precious time at a very dangerous time for the United States.

FREEH: If you look at some the analyses of MI-5 operations, and you can look at the Bishop Gate bombing, you can look at the Dockland's bombing -- the Matroyan (ph) case -- I'm sure your staff has looked at that -- it's been found to be not very effective.

In fact, one of the studies that I know your staff has looked at in the United Kingdom that looked at this actually said the FBI was a preferred model because it breaks down the barriers between enforcement and intelligence. A lot of the good work of this commission has been to identify the barriers that existed -- and still exist -- between intelligence and law enforcement.

Standing up a separate intelligence agency will just increase those barriers. And if you thought the wall was a big one, that's a fortress in my view and will make for a very ineffective counterterrorism program and, I think, expose the country to dangers.

So I think we ought to have the Department of Justice, supervised by the attorney general, FBI agents who are schooled in the Constitution, who have a transparent operation with respect to oversight by courts, as well as by Congress. Give them the tools, give them the legal authority, give them the budget, and they'll do this job very well.

It's not very different from looking at organized crime, from looking at counterintelligence, which, in my view, the bureau has done exceptionally well for decades.

The difficulty with the wall was that the wall that was set up in Janet Reno's guidelines of July 19th were completely appropriate with respect to counterintelligence cases because counterintelligence cases happen in two dynamics. One, there is an investigation, and then there is either an indictment or an expulsion.

Counterterrorism cases are completely different. Because of the threat, there is always an ongoing need to act and to use the intelligence to prevent attacks from taking place.

FREEH: So the wall is not an appropriate one with respect to counterterrorism, and that's been repaired both by the Patriot Act and the court of review.

Director Freeh, I'll do whatever I can here to make sure I don't call you "Director Clarke" as I ask you these questions.

First of all, do you think it was a mistake not to -- talking about Khobar now, starting in Khobar in '96 -- not to have you report directly to the National Security Council and the president on what was going on in that investigation?

FREEH: Well, I did report through the attorney general and directly to the national security adviser.

I mean, Dick Clarke and Mr. Steinberg (ph), the deputy at National Security Council, said that there was never any written reports sent by the FBI to the NSC. Is that not true?

KERREY: Actually, I'm -- begin with Khobar, but all the way through this time period, it seems to me it was a mistake not to have you report directly on what you were learning to the National Security Council or to the president. Since it was a domestic agency going over to investigate, as I consider it, an act of war against a U.S. military installation in Saudi Arabia, it seemed to me that there should have been a reporting right back to the National Security Council on what was going on.

FREEH: But I guess what I'm saying is, there was. I mean, Janet Reno and myself, together on a very, very regular basis; myself, individually, on numerous occasions directly with Sandy Berger.

In an otherwise, I thought, exceptional staff report, the staff, I think, miscorrectly describes the seven cases that you were involved with, saying that most of those were overseas. In truth, three of them were domestic, and four of them were overseas. World Trade Center number one landmarks plot number one, the millennium, and indeed if you include the threats against the city of New York during the 2001 trial, there were four domestic attacks and/or efforts.

Did the FBI ever produce an evaluation of the threat to the homeland during this period to the president? Or was there one requested of you?

FREEH: There was none requested, that I'm aware of. I don't think we ever furnished a national threat report to the president with respect to homeland security.

KERREY: I mean, of all the facts that -- in this whole process, that have just caused scales to fall from my eyes was listening to Betty Ong, a flight attendant on flight 11, talk to the ground and hear the ground surprised by a hijacking. I mean, not only were we not at a high state of alert in our airports, we were at ease. We stacked arms. I mean, we weren't prepared at all.

And it's baffling to me why some alert wasn't given to the airlines to alter their preparedness and to go to a much higher state of alert. It seems to me a lot of things would of changed if that would of happened.

And I would respectfully disagree with your assessment of the Williams memo coming out of Phoenix, because I think had it gotten into the works, to the highest possible level, at the very least 19 guys wouldn't have gotten on to these airplanes with room to spare.

FREEH: Well, Senator, I served on the Gore commission, as your staff may know. And, you know, I thought the leadership, first of all, by the vice president there was outstanding. I think the recommendations were outstanding.

FREEH: We spent many, many months writing detailed recommendations that asked for passenger screening, asked for many, many things which were never implemented. The whole purpose and the conclusions of that report, if you read it, was that the airline industry and operations were vulnerable at multi points with respect to hijackings and terrorist attacks.

KERREY: But I mean, you said that, you know, we couldn't have had a declaration of war because public opinion wasn't there. I probably would disagree with that. Public opinion wasn't on the side of the Bosnian war or the Iraq war in the beginning either, and the president made a determination in both cases to come to the American people and say, "There's a crisis."

But even absent a declaration of war, why did we let their soldiers into the United States? Because that's what the Al Qaida men were, they were soldiers. They were part of an Islamic army called the jihad to come into the United States. Why did we let them into the United States? Why didn't President Clinton and/or President Bush issue an order to change the FISA procedures and other orders to INS, et cetera, to make sure that their soldiers couldn't get into America? Why did we let them in?

FREEH: Well, again, I think part of my answer is that we weren't fighting a real war. We hadn't declared war on these enemies in the manner that you suggest that would have prevented entry had we taken war measures and put the country and its intelligence and law enforcement agencies on a war footing.

The Joint Intelligence Committee, in one of their reports -- I think I excerpted the conclusion in my statement -- said that neither administration put its intelligence agencies or law enforcement agencies on a war footing.

A war footing means we seal borders. A war footing means we detain people that we're suspicious of. A war footing means that we have statutes like the Patriot Act, although with time set provisions, give us new powers.

Now, whether there was a political will for it or not, I guess we could debate that. But the fact of the matter is we didn't do it and we were using grand jury subpoenas and arrest warrants to fight an enemy that was using missiles and suicide boats to attack our warships.

THOMPSON: I want to explore in a little more detail one of the assumptions of Commissioner Ben-Veniste's questions.

In looking at the Olympics, you had a defined event, in a defined place, over a defined period of time, a defined air space above the Olympic facilities. And so I presume that law enforcement planning to prevent any interruption or interdiction of the Olympics would have imagined any kind of possibility of intrusion of bomb, missile, plane, whatever into that space; is that correct?

THOMPSON: And though you say the FBI was not involved with the planning of the G-8 summit in Italy, the same sort of assumptions would have been made, would they not: defined event, defined time, place, air space?

THOMPSON: Is it a fair assumption to leap from those kinds of examples to the notion that you could, with the best of intelligence or law enforcement or thought, gone to an assumption that on any given day, in any part of the United States, on any one of the more than 4,000 flights that are in the air on any given day in the United States, utilize the same methods and guard against the same kind of attacks?

FREEH: Well, I think, you know, to amass the kinds of resources and protective operation that you've both alluded to in your questions, there's a limited capability in terms of duration for that kind of an operation.

For instance, with respect to the millennium, we were planning for months and months prior to that event. And at the time of the millennium, you know, thousands and thousands of law enforcement agents and other government agents, military personnel, you know, were on duty around the world because of a specific event. The attorney general and I were in, you know, our command post through the night on December 31st.

But we could not have sustained that, you know, for weeks and weeks beyond that period, nor would there have been a basis to do that without a specific threat.

So I think to do the kinds of protective operations that we would like to do, and do, in fact, perform when NATO is meeting, when the pope is visiting, when the president is at a summit, when the World Cup is going on, when presidential conventions are in session, all of those events in specific places and times, because of the threats as we understood them, including airborne threats, we were able to marshal resources and perform protective operations. But you need a time and place to do that if you have resources available.

THOMPSON: You testified that you transferred 600 agents from headquarters to the field because there was a 22-month hiring freeze in the FBI.

THOMPSON: Why was there a 22-month hiring freeze in the FBI and when did it occur?

FREEH: Well, you have to ask Congress about why they had the freeze, it occurred for...

When I became director in September of 1993, we were in the middle of that freeze, and it went for a total period of 22 months, which is why I was putting people on the street from headquarters.

THOMPSON: Now the budgeting process in the federal government with particular regard to the FBI do I assume works something like the FBI decides how much money they'll ask for in any given fiscal year, it moves up through the attorney general's office, goes from there to OMB, and from OMB to the Congress? Is that right?

THOMPSON: In the whole time that you were the director of the FBI, did your initial requests for funding, going up to the AG, ever make it through that process -- the level that the FBI requested?

THOMPSON: So true not only for you and the FBI, but your predecessors and successors and for every federal government agency, is that right?

The Patriot Act has some provisions that are due to expire next year, I believe. Do you believe that those provisions should be renewed? And do you think the Patriot Act needs strengthening in any provision apart from that to help us protect America from terrorism?

FREEH: Which provisions in particular are you speaking about with respect to renewal?

THOMPSON: There's a -- there were at least two and I think it may not have been in your testimony but in the testimony we'll hear later this afternoon from Acting Director...

FREEH: It's not in my testimony. I mean, I'll comment on them, I just don't know which ones you're referring to.

THOMPSON: I think maybe in Pickard's -- well, let me come back to that after I find what I'm looking for and let me ask you this...

FREEH: Yes, with respect to one area that's not addressed -- and I've mentioned this in my testimony and members of the Intelligence Committee and others have heard me testify about this repeatedly -- nowhere in the Patriot Act, nor in any of the other post-September 11 measures, is there any effort to address the issue of encryption.

It's mindboggling to me that in the aftermath of September 11th and the information that we've accumulated today, including the use of encrypted channels of communication by terrorists, that our law enforcement agencies still do not have either the authority or the technology to break down encrypted messages.

And for those who don't know about the issue -- none of the commissioners but other people -- encryption is the technology that allows message bits, communications, either data or voice, to be scrambled so you can't understand what's being said.

Again, it's mindboggling to me -- and I testified dozens and dozens of times, along with Janet Reno and others, for some relief that this is completely unaddressed. I think it's a huge gap in our national security, and one that I would urge the commission to look at.

My good friend and former mentor Jim Thompson I think has misinterpreted the question put to you about the recognition by the intelligence community of the potential for planes being used as missiles.

My question to you was -- given the substantial state of information, whether by rumor or by actual intelligence relating to the use of kamikazes, suicide pilots to crash planes into buildings -- my question was: Was it a failure in thinking not to reposition our domestic air defense, led by NORAD, to protect the capital and elsewhere against the possibility of attack on the United States by air? And particularly, during time of heightened threat.

First, during your tenure, there were sanctuary laws enforced by New York City, by L.A., San Diego, Houston, Chicago and some other cities. These were well-known to Al Qaida, if not to the American public.

These laws, as you know, in defiance of Section 133 of the Immigration Act, prohibit local authorities in those cities from cooperating with the FBI or INS in any matters having to do with immigration.

Did this trouble you during your tenure? And did you try to do anything about it?

FREEH: Well, as I mentioned in my written testimony, at the request of then Deputy Attorney General Gorelick, I made a series of recommendations with respect to the INS and asked that certain measures be taken, including legislative changes to give us a better ability to, first of all, identify alien terrorists and then detain them and remove them promptly from the United States.

With respect to the laws that you mention, I can't think of an instance in my tenure when that was a prohibition or an inhibition from us either getting some information or doing something that we wanted to do. We were more frustrated with the length of time that it took to remove aliens for whom we had documented information with respect to terrorist activities.

LEHMAN: And those recommendations that you recommended to Justice, they were turned down or just ignored or...

In fact, President Clinton, to his great credit, introduced in 1996 the Antiterrorism Bill, H.R. 2703. Unfortunately, when it was in the House there was an amendment that was entered which was passed by a large majority that stripped the bill of most of its important counterterrorism measures; in fact, the ones that Deputy Attorney General Gorelick and I recommended. In fact, I think two of you actually voted on the amendment.

The case law approach has been the subject of a great deal of criticism from many of the witnesses interviewed and interviewees.

LEHMAN: You've made an able defense of it in your op-ed piece and in your testimony, however it certainly has some limitations according to some of the witnesses we've had.

We've had very senior officials in CIA tell us that they were unaware of any of the connections among the '93 World Trade Center terrorists because all the information was sealed and protected and not shared during the trial of the people.

Particularly after that material was released, and particularly after you were able to apprehend Ramzi Yousef, one of the principal actors who had escaped to Baghdad -- Abdul Rahman Yasin -- was in Baghdad and on the payroll of Iraqi intelligence.

Did you recommend doing anything to extradite him or to render him in any way as one of the key Al Qaida operatives?

FREEH: Well, over the period of years after the World Trade Tower indictments in 1993, but then maybe more particularly following the Manila Air indictment in 1995, and of course the 1998 indictments with respect to bin Laden and his associates, we continuously recommended, and actually put into play, operations to arrest and render fugitives back to the United States in those cases.

With respect to Khalid Sheik Mohammed, in early 1996, we actually staged agents over in the Persian Gulf and had an operation well under way to arrest him.

FREEH: He was transiting a country that we thought we could get access to him. Unfortunately, that didn't work. We believe he was actually tipped off about the operation.

People like Kasi, who, of course, murdered the people outside the CIA. He was arrested by FBI agents, brought back, convicted of murder in Fairfax County. Ramzi Yousef, we spoke about.

So we continuously tried to get -- and did, in many cases -- get these fugitives. I don't recall a particular plan with respect to Yasin.

LEHMAN: One last question. The Oklahoma City case -- again, one of the criticisms has been that one of the problems of the case law approach to intelligence is that, once you focus on a convicting particular terrorists, that there has to be a hypothesis of the case and that's where all of the investigative resources are put in.

In the case of Oklahoma City, the hypothesis was that there were two Americans and they acted alone. There's a new book out now, as you probably know, called "The Third Terrorist," that has new information that begs for further investigation showing the links or purporting very significant links between Terry Nichols and Ramzi Yousef in the Philippines, and also links between the two perpetrators and Hussein al-Husseini, the Iraqi, perhaps, agent.

Are you satisfied that you ran all of these potential Al Qaida links to ground with McVeigh and Nichols?

FREEH: Well, other than that book, which I haven't read, you know, I don't know any other credible source with respect to that kind of a link.

No, I have not run those links myself. I certainly was not aware of them when I was FBI director. I know that there is a review going on with respect to some of the matters that have been raised by his attorney in connection with the state murder prosecution that's ongoing. I guess I don't want to say anything with respect to that case as it's being tried now by a judge and a jury.

But I don't know of any connections, except the one you've just mentioned, between Ramzi Yousef and that terrorist act.

You commented in your opening statements about resources on several occasions, and I was looking at your recommendations at the end of your statement, your printed, your written statement. And I quickly calculated about eight or 11 of those recommendations require additional funding.

Maybe I'm a little sensitive to this because of my experience in the Congress. I took a quick look at the appropriations for the FBI from 1996 to 2001. It went up from $2.3 billion to $3.3 billion, roughly. That's a very, very dramatic increase.

The amount of FBI personnel and funding dedicated to counterterrorism more than tripled between 1993 and 2001. Can't get into the specifics of those figures on counterterrorism because I think they're classified.

HAMILTON: But I want to get a sense from you about this resource problem. I can understand in your position how you would constantly see the need for more resources. I'm not really critical of that.

But your sense is -- my sense of your testimony is that you could have done an awful lot better if you'd had a lot more resources. And in fact, you were receiving a lot more resources.

FREEH: No, there's no question we were receiving a lot of resources. I think my position, which was the attorney general's position, is there were not enough resources to work a counterterrorism program as the lead agency for the United States.

As I said in my testimony, the FBI had 3.5 percent of the government's counterterrorism resources.

And as you see in my recommendations -- you know, the FBI only has 200 more agents now than it had back in 1999. It's not just a question of allocating agents from criminal programs to counterterrorism programs. It's really substantially enhancing not just the numbers, but the training, the expertise, the continuity of people in that particular program.

I'll give you examples that have nothing to do with people. The technical support center, which the Congress actually authorized in 1995 -- the purpose of that center was to create a domestic civilian law enforcement facility where we could use technology to solve encryption problems, to solve digital telephony problems, et cetera, et cetera.

But the purpose was to give us and our state and local counterparts a counterterrorism civilian technical ability, in those cases. It wasn't funded until after September 11th.

FREEH: CALEA was never funded fully after 1994. Example and example of that, which doesn't mean -- and there is nobody more respectful of the budget process than myself, perhaps you -- I know how the budget works and I'm not blaming anybody for not getting these resources.

FREEH: What I'm saying is that we weren't focused on them the way we are focused on them today.

And I listened to a lot of reports from commissions when I served in the Congress and one of the advantages the commission always has over the Congress is we don't have to worry about raising the money. We can just make the recommendations to spend it. And there is a big difference, of course.

Director Mueller has made the pitch over and over again, and he's done it very effectively, that the FBI is changing its focus from law enforcement to the prevention of terrorism. And everybody, of course, nods their head in agreement. That's exactly what ought to be done.

This question goes a little outside the commission's responsibility. But you mentioned a moment ago that we really have not had a large increase in agents. So what's happening is we're shifting a lot of resources, money and agents, from law enforcement, from criminal prosecution to terrorist prevention. And in the environment of today's world, that makes a lot of sense to most of us. But do you worry, then, that the FBI is going to lose its effectiveness in law enforcement, in criminal prosecution?

FREEH: Well, that's an excellent question. I guess I don't believe that investigations are inconsistent with prevention.

FREEH: I subscribe to the theory that Mary Jo White and I testified to before the Joint Intelligence Committee, and which actually the court of review, in its November 18th opinion noted, investigations do lead to prevention. I don't think there's a dichotomy between them. Manila Air, the millennium, the day of terror in New York were all preventions as a result of good investigation.

So I think that's a false dichotomy between investigations and prevention. If you're doing good investigations, you're developing informants, cooperating defendants like Omar in the Trade bombing case. You are creating a database, you're sharing intelligence with other people.

I do think there's a great danger in taking people off investigations that aren't, again, case- or defendant-specific but are enterprise-specific and, you know, when agents are off the streets, as my bias perhaps as a street agent, they're not making informants, they're not developing sources.

September 11th, had we had the right sources overseas or in the United States, could have been prevented. We did not have those sources. We did not have that telephone call. We didn't have that e- mail intercept that could have done the job. You get that by having sources and you get sources by good investigations. You also prevent terrorism in that regard.

Welcome, Director Freeh. Nice to see you. And I want to just express my appreciation to you and your family for the sacrifices you made while you served as FBI director, and also for your attention here today.

You probably paid attention to the last several weeks of testimony before the 9/11 commission. We had somebody here by the name of Mr. Clarke and somebody here about a week later called Dr. Rice. They didn't agree on much. They didn't see eye to eye on much. They didn't share many of the same opinions.

They did agree on one thing, and that was that the FBI could have and should have done a better job than they did leading up to 9/11.

ROEMER: I want to point out two instances where we may have had an opportunity to do something about 9/11. Now, I haven't come down on any kind of conclusion whether 9/11 was preventable, but let me throw these out to you and ask you to carefully respond to them.

One's the Phoenix memo, which I'll get to. The other is an instance where you have just talked about the informants of developing informants -- getting information, sharing information.

We had an opportunity where we had two of the hijackers have numerous contacts with an active FBI informant. Out of the 19 hijackers, two of them have active contacts with an FBI informant.

Doing the right kind of things, developing that informant, sharing information ahead of time from 9/11, the right kind of training for an FBI agent; why wouldn't this have made a difference leading up to 9/11?

FREEH: OK, let me give you a careful answer. And again I don't know all the facts except again as you note, you know what I've been reading and listening to.

You know, the presence of those two hijackers in San Diego and their intersection with the informant, obviously, you know, a very fruitful opportunity for exploitation -- intelligence information, maybe in the best of all circumstances, leading to prevention.

FREEH: It would have been helpful for the FBI at that particular point in time to know the names of those two individuals, that the information which was generated in the January 2000 physical surveillance -- not by the CIA, but by a liaison agency -- if that information and the initiation for that surveillance, which were phone calls to a central number, which you're well aware of, which plays an integral role not only in the East African bombings case, but also in the Cole investigation, the, you know, June meeting, when three but not all of the photographs were disclosed to FBI agents, and the subsequent description of those events -- if all of that had worked the way it could have worked and that informant, as well as informants all over the FBI's domain, were tasked to find out information about two specific people, you could have had a completely different result.

ROEMER: Later on we'll ask representatives of the CIA and the FBI whether or not that meeting in Kuala Lumpur should have led to the sharing of some of that information and those names.

Let me ask you another question. Here is a declassified copy of the Williams memo. And you said in an answer to a previous question that you thought things might have been handled the proper way.

This agent asked that two things be done. One, that the FBI should accumulate a listing of civil aviation universities and colleges around the country and share these with the appropriate liaison; and, two, that the FBI should discuss this matter with other elements of U.S. intelligence community.

Now, I agree with you, this is not the road map to 9/11, but it's certainly asking to do two things to New York and headquarters. Neither one of them are done. Why not?

FREEH: Well, I don't know. I can't answer that obviously for the time and space reasons that are obvious.

I can speculate on it. And what I would say is that the simple fact -- or the apparent simple fact -- of getting from all of those civil aviation schools around the United States -- you know, names and identifying information of those students -- first of all, you would have had to overcome a couple of federal statutes that prevent educational institutions from giving that information out without a subpoena or a grand jury request.

ROEMER: But Mr. Williams didn't do that in Phoenix, did he? I mean, he found out the trend in Phoenix without having to go around a statute or a law, right?

FREEH: Well, yes. But what he's asking for is a national investigation that would direct itself to thousands...

FREEH: ... and thousands and thousands of students who are from Arab countries who are taking flight lessons in the United States.

I don't -- again, I wasn't -- I'm not privy to the information your staff is privy to. From what I've read and heard and talked to, I don't see how that memo, unfortunately, gets you to prevent the horror of September 11th. I just don't see it in any logical, nonspeculative way.

ROEMER: I'm not sure that it prevents 9/11 either, but it sure points out two or three things that could have been done more efficiently.

GORTON: Mr. Freeh, you heard just before your testimony the staff report on matters relevant to this hearing. The facts outlined in that staff report are almost certain to find their way into our final report unless someone shows us that in some part they are irrelevant.

GORTON: I want to read you the one paragraph, it was the subject of Bob Kerrey's question, and ask you whether or not it is accurate.

The staff report reads, "The FBI's inability or unwillingness to share information reportedly frustrated White House national security officials. According to the former national counterterrorism coordinator Richard Clarke, the National Security Council never received anything in writing from the FBI whatsoever.

Former Deputy National Security Adviser James Steinberg stated that the only time that the FBI provided the National Security Council with relevant information was during the millennium crisis. Clarke told us that Attorney General Reno was notified that the National Security Council could not run an effective counterterrorism program without access to FBI information."

I can't speak for the frustration of other people, but with respect to sharing information, you know, I didn't provide written memos to Sandy Berger or the president or anybody else at the NSC, but as I said before, the attorney general and I, every two weeks, almost like clockwork in the last 14 or 15 months of our overlapping tenure, sat with Sandy Berger in his office for at least an hour, perhaps two hours, and went over every single piece of counterterrorism, counterintelligence case that we have.

By the way, Dick Clarke was never present at any of those meetings. Why Sandy Berger didn't want him there, I don't know.

But we had detailed discussions of all those matters on a bi- weekly basis. So the notion that we weren't sharing information is, as far as I am concerned, an incorrect characterization.

GORTON: The FBI is a unique institution in the United States of America. You had a fixed term. Because of various activities under your predecessor, J. Edgar Hoover, and attempts, sometimes successful, in earlier administrations to use the FBI for political purposes, there seems to be a certain divorce or distance between the FBI and the White House.

Did you feel an ability to go to the president of the United States or to someone else in the White House during the Clinton administration, freely? Did you feel that the White House felt free to contact you and communicate with you and ask you for information, in a normal manner, outside of the realm of politics, during the Clinton administration? How many people in the White House did you ever see or communicate with?

And then would you answer the same question with respect to the current Bush administration?

FREEH: Yes, I will. I don't feel that I had any restriction or any prohibition or -- certainly no reluctance to discuss and communicate with anybody appropriately in the White House, in the State Department and the Defense Department, with respect to any of the matters we've been talking about today, or any other FBI matters.

There was certainly no distance or separation between the attorney general and I.

FREEH: And we had -- I had in both administrations I think the same relationship. I never felt any restrictions or inhibitions about communicating things. I don't think they did either. And they never expressed any to me at the time.

GORTON: One final question like the first question; another paragraph in the staff report.

"The Department of Justice inspector general found that when the FBI designated national and economic security as its top priority in 1998, it did not shift its human resources accordingly. According to another external review of the FBI, by 2000 there were twice as many agents devoted to drug enforcement matters as to counterterrorism. On September 11th, 2001, only about 1,300 agents, or 6 percent of the FBI's total personnel, worked on counterterrorism."

FREEH: No, they're accurate but, again, I think they have to be balanced with the discussion we've had here today about resources.

And with all due respect to the congressional appropriation process, in 2000, which was the last counterterrorism budget year that I testified for, you know, I asked for $860 million -- I'm sorry, $360 million, 890 positions. I got five positions and $6 million. You can't fight a war with those kinds of resources.

So your report is accurate. I would hope the commission would expand a little bit on the executive director's brief, although accurate, statements about resources and legal authorities.

KEAN: Mr. Freeh, thank you very much. Thank you for your testimony. Thank you for your public service, sir.

KEAN: Our second witness today will be the Honorable Janet Reno, who served as attorney general of the United States during the Clinton administration.

KEAN: Madam Attorney General, we are very pleased to welcome you today before the commission. Would you please rise and raise your right hand?

Do you swear or affirm to tell the truth, the whole truth and nothing but the truth?

Madam Attorney General, your prepared statement will be entered into the record in full. We would ask you to summarize your opening statement and proceed.

It is a privilege to be here before you today because I believe this commission is performing a function of the utmost importance to our nation's future. I thank you for giving me the opportunity to give my perspectives based on my service as attorney general.

We understood from early on in the Clinton administration that terrorism posed a grave threat to Americans on American soil.

The bombing in the first World Trade Center case took place just before I came into office. I inherited that case. I had the opportunity to be briefed. I had the opportunity to meet with the prosecutors and the agents involved to understand the details and to follow through on the case as it expanded into further investigation involving Sheik Rahman. I even made the final decision to indict Sheik Rahman.

So it has been an issue that has been with me ever since I first became attorney general. And I've continued to think back to those days when I made that decision, did not know of the connection with Al Qaida, and watched it develop, so that by 1998 we understood that it was a terrible threat to this country and that we had to do everything we could to be prepared.

But what I think is important for me to do today, Mr. Chairman, is to try to come to the issues so that we can answer the questions of the families, so that we can provide the best advice we can on how we can prevent this for the future. Not talking about blame, not talking about partisan politics.

And this commission has done, I think, a wonderful job in terms of trying to get to the issues without the politics involved. I think we owe it to the American people.

I think as we -- just to set the background -- I came into office in March of 1993. There was a change in leadership to come in the FBI. We inherited a situation where there were budget difficulties. We had two major operations under way, systems being designed: The NCIC system and the IAFIS system that were to become very important to the FBI, but they were over budget and behind time.

Director Freeh had to face these situations, and there was much to do. But I think let us look at what needs to be done.

First of all, I am so proud of the FBI. The agents that I've worked with, I've seen so many in action. I've seen them do incredible things. I've seen them risk their lives. And I have a profound respect for all the people that I have worked with in the bureau.

But quickly, when I came into office, I learned that the FBI didn't know what it had.

RENO: We found stuff in files here that the right hand didn't know what the left hand was doing. And it was obvious that the development of a computer system and a system of automation would be very helpful to it.

But it was also important for people to begin to look at manually what they could do to find out what they had and what they didn't have, and we proceeded in that direction. Sometimes I thought we had made progress, but then we'd find something else that we didn't know we didn't have.

It was very difficult for the FBI to get that problem solved with Congress' concern about the over-run from the two major projects that preceded it.

Director Mueller has had the chance to develop the program. From what I've heard, it's coming online or is online. I'm not sure.

But the one recommendation I would make first is that he be given the congressional support and that we find the expertise if any further is needed to ensure that that system works correctly, to ensure that agents and others who utilize it know how to utilize it to its maximum capability, that we address the issue of security, and understand how we maintain this system, which will be the repository of probably more information than most any other agency could compile on such a diverse number of issues. And I just think that that would be extremely important.

Director Freeh has suggested that there were two other issues that were problems: resources and legal authorities.

RENO: I think it's important -- I checked yesterday with the department, and the best I can read, in the year 2002, he submitted a budget of over a billion dollars. I think I asked for an increase for $462 million, of which part of it was -- I can't go further on that.

As Director Freeh pointed out, everybody knows that we're competing for limited resources in the budget process and people ask for more than they know they're going to receive. But I worked very closely with Director Freeh to try to make sure that we properly pursued a request that reflected the needs of the bureau.

I checked, and an appeal was taken from two items. I think I approved both items. And what I think we need to do is make sure -- and Director Mueller may have already addressed this issue -- make sure that we provide the FBI with the financial expertise that is necessary in the budgeting process and in the technology process to make sure that we understand the process of the Congress and get it done right.

With respect to reprogramming, when I came into office, I was told that the FBI had come out of the Cold War.

RENO: They now had agents who needed something to do, and that they had been assigned to and were involved in fighting street crime.

Well, America has a lot of resources committed to fighting street crime now. Community police officers were hired, other steps were taken, crime is down, and state and local law enforcement can do that or at least do a very good job of it.

If we needed to reprogram, I told Director Freeh, let's do it and get these people into counterterrorism. We have a drug enforcement agency. If we need to do it, let's get these people into counterterrorism.

Yes, it's sometimes difficult to get reprogramming approval from Congress. But if we have people who work with the Department of Justice, do it the right way, come forward in clear statements, I think we can do a lot more in terms of reprogramming. And if Director Mueller needs support in that area, I think that's important.

With respect to sharing, one of the frustrations is that the bureau even when it finds that it has something doesn't share, and it says it doesn't share because the legal authorities prohibit it from sharing. But I haven't been able to find with respect to the one instance of the two who came into this country and how we just missed them, what prevented anybody from sharing.

Much of these issues -- many of these issues will or have been resolved by the passage of the Patriot Act or other statements. But I think it is extremely important that the director or whoever leads the FBI understands that you've got to repeat the message again and again.

RENO: And when you institute new programs -- then I've seen it now based on some of the steps that I took -- you've got to make sure that people understand and are trained in an effective, comprehensive way as to new proposals. Otherwise there tends to creep in a feeling that, "Well I don't have to do this," or, "That's too much trouble."

They say they can't exchange information with the CIA, but it's all in the context of cases where the FBI and the CIA have been exchanging information. What suddenly prevents them in one situation and not in the other? We can't be selective. Again we have got to change.

And the only two limitations that I have seen with respect to the transfer of criminal investigation material to the foreign counterintelligence effort is grand jury and Title 3.

It had been our impression that, with appropriate authority, then we could do that, and did that in a number of instances. But that's not an issue anymore. And if there are any issues that linger and remain that say we can't share because of legal authorities, then let's make sure that we've addressed those; and if we haven't addressed them, make sure that we take training steps to do it.

I'm not sure that I heard Director Freeh correctly, but one of the points that I think he made was to the effect that the 1995 direction that I gave by letter, that anybody who had reasonable suspicion that they had foreign counterintelligence information that would be relevant to a criminal investigation should take steps, through the letter that I sent, to make sure a contact was made with the Criminal Division.

RENO: Director Freeh says that shouldn't apply in counterterrorism cases, but if the FCI (ph) people have information that will go to the investigation, conviction immediately of the person we're trying to take out of the system, then it seems to me a good thing to do.

I don't blame anybody. I'm responsible. If somebody wants to be responsible, it's going to be me because I tried to work through these issues while I was attorney general and time ran out on me, and I want to do everything I can to make sure that we move forward in the spirit of cooperation and in a spirit of thoughtfulness.

If there are problems that develop then I think it's important that we address those and get those clarified.

RENO: A lot of talk about a new agency. Don't create another agency, or recommend it. The worst thing you can do is create another agency and then we'll be back talking about whether they can share here or there or what. Let's try to work through it.

Director Mueller has the competence of so many people. He is a wonderful person. He worked with me when he was the U.S. attorney in the Northern District of California. He is approaching things in a thoughtful way. Let's back him up and give him the best tools he can to get the job done.

GORTON: When Osama bin Laden declared war on the United States, did he have a position, in your view, of the law that protected him from assassination under the anti-assassination provisions of our laws and regulations?

RENO: I have not opined on that, and I would have to look at all the facts at the time of the fatwa to know.

GORTON: That's preliminary to a number of reservations or even complaints that we have heard directly or indirectly from people in the CIA, that your office counseled the White House against any memorandum of notification, which unambiguously allowed for the CIA simply to kill or to eliminate Osama bin Laden, and that that contributed to the fact that all of its plans inside of Afghanistan failed to come to fruition or were never ordered into execution.

Can you comment on that? Did the CIA, or did anyone in the White House ask your view as to whether that phrase could be unambiguous? And did you answer that question in the negative?

RENO: I was not asked whether they could assassinate him. I was asked whether they could capture or follow through with it.

GORTON: You were only asked if they could capture him or perhaps kill him in an attempt to escape or to resist that.

GORTON: You were never asked the question as to whether or not he could be killed unambiguously?

RENO: I need, Mr. Chairman, some direction. I don't know what the commission has done in terms of the declassification of these issues, and I want to be able to answer the question.

KEAN: Madam Attorney General, I think if there's any doubt in your mind, we should probably talk with you about it privately, rather than publicly, particularly on this subject, which is a very sensitive one.

You've heard Director Freeh speak of his relationships through you with the White House on these security issues. Would you characterize for me whether you felt that the president and the White House and the National Security Council felt any inhibitions about relationships, questions to or answers from the Federal Bureau of Investigation while you were attorney general by reason of the history of the sometime misuse of the FBI in previous administrations? Or was the communication free and open, as far as you were concerned, during the whole Clinton administration?

RENO: I think when Tony Lake was national security adviser, he came to the Department of Justice and we discussed exchange of information and the necessity to keep the national security adviser informed.

There was concern because these were criminal cases, and I think the bureau had some concerns. But I said, in any instance in which any investigation or any effort that the FBI was undertaking had an effect on national security, some of the top people on the National Security Council would be advised.

We were supposed to reduce that to writing. It never got reduced to writing, but it was always the governing principle that I had. It didn't get reduced to writing because people were concerned about the independence of the FBI and couldn't get the language straight. But I think the communication developed there.

GORTON: In fact, the relationship worked, as far as you were concerned, openly and freely?

RENO: There would be complaints made and that's the reason during the last year and a half, I went to a situation where we had regular meetings between Director Freeh and Sandy Berger and myself.

GORTON: And did you feel that your communication, your lines of communication with Director Freeh were free and open and that you always got the information from him that you needed?

RENO: I had a working relationship with Director Freeh where I could call him and say, "May I come see you and see exactly what's going on? Can we sit down and talk about it?" And I always felt that I got a very straight answer and had a good working relationship with him.

GORTON: One of the factual findings of our staff for this meeting here today says that -- you had already told us in private sessions that you were very concerned about the bureau's information sharing and intelligence capabilities.

And the staff statement goes on to say, "In 2000, Reno sent several memoranda to Director Freeh expressing these concerns. One memo stated that, quote, 'It is imperative that the FBI immediately develop the capacity to fully assimilate and utilize intelligence information currently collected and contained in FBI files and use that knowledge to work proactively to identify and protect against emerging national security threats,' end quote. Reno's requirements involved improved information sharing, improved counterterrorism training, a threat assessment and a strategy to counter that threat."

And then it goes on to say, "It is not clear what actions the FBI took in response to these directives from the attorney general."

RENO: What I think had happened -- and I'm not sure exactly of the time frame on it, Senator -- but what I think happened in the chronology is that Bob Bryant had started earlier to look at some of these issues with respect to how we organized and how we managed the information and how we assigned priorities and how we assigned tasks and how we made sure that we filled the gaps with respect to intelligence information.

I think we -- both men made real progress. And I think that much of what I hope has been done in the bureau has built on that progress. That's what I was trying to get at.

I sent the memo, along with other memos at about the same time, to make sure that we were absolutely on the same wavelength, because there had been -- for example, I kept finding evidence that we didn't have and didn't know we had. And I would talk to somebody and they'd say, "Well, just wait until we get automated." I said, "How do you know what you're going to automate unless you find it now? You're going to have to find it now, so let's start and get ready to go." And it was a push in that direction.

I think this is going to be -- when it's finally, totally implemented, it's going to be a tremendous tool for the bureau. It probably is now. I don't know. But that was my reasoning for it.

GORTON: So this was a long-range direction going well beyond the end of your term as attorney general, but you think progress was being made as a result of that memorandum?

RENO: I don't know whether it was as a result of the memorandum. They may say they were already doing it. But I did it to push it. And then when the attorney general invited me to have lunch with him after he was sworn in, I came up to Washington and we sat down and talked about issues that I thought were important and I gave him a set of the memos.

GORTON: Now I'd like, as my last question, to have it very open- ended and to get for us the benefit of your wisdom from eight years as attorney general and much deep thought on this subject with respect to the Patriot Act.

On page four of your written testimony, for example, you say, "We continued to seek additional authority, such as pen register authority under FISA, which we were not able to get passed during my tenure, but that ultimately became a part of the Patriot Act."

And Ms. Gorelick tells me you also asked for legislation lowering the FISA bar with respect to intelligence-sharing.

Your reflection now after several years, just in general terms on the Patriot Act, did it go too far? Did it not go far enough?

GORTON: Are there some of its provisions about which you have reservations and would not like to see renewed? Are there elements related to our national security that weren't included in it that you would recommend that Congress adopt when it deals with the renewal of the Patriot Act?

RENO: I have been asked about the Patriot Act and I have always said that the Patriot Act was, kind of, the umbrella that everything that everybody saw happen after 9/11 that they didn't like fell under.

But generally everything that's been done in the Patriot Act has been helpful I think while at the same time maintaining the balance with respect to civil liberties, except with respect to one matter.

And there has been so much discussion about it -- one of the things that I hope we might be able to do is to build on what the commission does and have an opportunity to sit down in a thoughtful, nonpartisan way and talk about the details of the Patriot Act so that people will have a better understanding of them.

But one issue is with respect to FISA searches. I don't have all the details with me, but that would be one area that I would like to learn more about in terms of the administration's perspective.

And it just seems to me a wonderful time when we can stop for a minute and say, "This is national security. This is where America should come together. This is how we should sit down, and let's address these issues and see if we can come up with a consensus that will have the confidence of the nation."

GORTON: So of all of the provisions of the act, the one that you believe requires the most discussion and concern without having a specific position is those search authorities?

GORTON: Now, are there things that you think would be helpful in promoting our national security that weren't included in the original Patriot Act that you would recommend in any successor act?

RENO: Where I think we've got to go -- it's important to cover the wish list, but where we've got to go is making sure we use our experience to make the system work.

It's not going to be resources. It's not going to be legislation necessary. It's not going to be legal authorities.

It's going to be people sitting down and starting to exchange information, starting to share, starting to trust each other, starting to end the culture that said, "This is mine; I've got to keep to me because it's my case."

GORTON: With respect to the way in which we deal with intelligence activities inside the United States, for national security, do you believe that the FBI is the proper agency for that or that it should be separated from the agency and handled in a different fashion?

RENO: I have seen the FBI do absolutely wonderful work. And I think if we can address the issues that I talked about in terms of resolving confusions, addressing points that need resolution, I think the FBI can do a wonderful job for this country.

GORTON: From your observation from the outside, do you think Director Mueller is moving in that direction?

RENO: I think he is. I have a great respect for him, and I think we should all back him up and help him get the job done.

Welcome, General Reno, and nice to see you again. And I appreciate your testimony to us.

You've mentioned several times that you hope to have a nonpartisan discussion between us and sit down and talk about these key national security issues. I hope that's what we can have here this morning: a very honest discussion. We may have a disagreement or two, but hopefully we can engage in that candid discussion.

Let me start by asking you about the memos that you sent to the FBI. One was on February the 29th, 2000. And you sent it to the FBI to, and I quote, "develop an implement a system to ensure the linkage and sharing of intelligence, evidence and other relevant information," unquote, among all components of the FBI, and stating that you wanted, quote, "the system in place by October 1, 2000," unquote.

In March, a March 8, 2000 letter, again to the FBI, you write, and I quote, "The bottom line is that we must develop a capacity within the Federal Bureau of Investigation in all fields to identify relevant information and share it internally, and then share it securely with other agencies as authorized by law and the attorney general guidelines," unquote.

And then May 2, 2000, memorandum to the FBI, you say you believe, "It's imperative that the FBI immediately develop the capacity to fully assimilate and utilize intelligence information currently collected and contained in FBI files, and use that knowledge to work proactively to identify and protect against emerging national security threats," unquote.

ROEMER: Pretty strong memos, memos that you shoot off almost every month for a four-month period. What prompts these concerns on your part about emerging national security concerns?

RENO: What prompted me is we had an opportunity, during the millennium investigation, in the process to led up to it, to come together, to work together. And I would ask about a specific matter: "Have you checked this to see if we have any additional information?"

RENO: What would trigger it is something I had learned before, where I'd discovered that they hadn't checked to see whether there was information in a certain district, though they knew they might have a person there, that might be involved.

And it was just going through that investigation, going through the long nights that we sat there and tried to put the pieces together, the meetings with the principals. It was, "We don't have it yet. And I don't want to leave this office without making sure that we are on track."

RENO: Louis response was -- and the reason I sent the one memorandum that says, "I realize that automation may be important," Director Freeh had said, "We need the automation."

And he's absolutely right. And it was very difficult for him to get that automation in light of the prior overrun systems that he didn't have real responsibility for.

ROEMER: Did you feel like you were frustrated in sending this series of memos to try to trigger this activity -- this proactive activity at the FBI?

RENO: I think they expressed a certain amount of frustration, but it was not so much frustration as to, "Let's get it understood. If we don't have the automation, what have we done to start finding what information we have?" And I think by the fall he had identified the retired IBM expert and we were on the way to getting it worked out. But I still think it has been a difficult process.

And I am not criticizing Director Freeh. I am talking about what I thought was essential at the time, and it expresses frustration. But more importantly, it's, "Hey, here's a vision; let's achieve it."

ROEMER: Did you lack confidence in the FBI's ability to accumulate information due to these technological problems?

RENO: I didn't lack confidence in its ability to accumulate it. It accumulated more information than -- I mean, it was...

RENO: Knowing my -- what I lacked confidence in was in knowing what it had. And the second thing was, if it knew what it had, sharing what it had.

ROEMER: Now, you said in your statement that, "Shortly after he took office, Attorney General Ashcroft invited me to lunch with him," and you gave him these same sets of memoranda.

Did you feel like there was some progress then, after you gave these same pieces of paper to General Ashcroft; that he was going to implement this change and do something different from what the FBI had done or not done leading up to that time?

RENO: I had obviously left office by that point and was no longer briefed or privy to what was going to be done, so I don't know what was done. And I apologize to everybody concerned if I've been presumptuous in suggesting what Director Mueller needs, because I haven't really been involved. But I'm giving my historical perspective of the time.

And I think Attorney General Ashcroft was very gracious and said, "This is very interesting." And I don't know what happened after that.

ROEMER: Let's stay on the topic of your relationship to the new attorney general. In the transition period, were you able to brief Attorney General Ashcroft as to your concerns on counterterrorism? And did Al Qaida come up in that briefing?

RENO: I don't know whether Al Qaida came up in the briefing or not. I cannot recall whether I specifically talked to him about Al Qaida.

But what I did talk about was reflected in the memos which I gave him, which is: If we don't put the pieces together and connect the dots, there's going to be something that happens. And there is so much information out there, it is so important that we get this done." And that's the reason I brought the memos with me.

ROEMER: Do you recall -- and excuse me for pushing you on this -- but do you recall mentioning Al Qaida, Osama bin Laden, domestic cells of terrorists in the United States to the new attorney general?

Do you recall being briefed on that type of domestic threat by FBI personnel some time in the 1990s?

RENO: Cells -- what I was briefed on was what the bureau had under way. I don't recall a briefing on cells in the United States.

ROEMER: So all throughout the 1990s, when you had people like Dale Watson or Director Freeh, your contacts with the National Security Council, they never briefed you on Al Qaida cells or a presences of Al Qaida in the United States -- '98, '99, 2000 -- some time in that period?

RENO: They briefed me on the presence of Al Qaida in the United States. But in terms of cells and where they were, I don't recall such a briefing.

ROEMER: And therefore, you had no specifics at that point, so you did not brief the new attorney general on something like that?

RENO: What I thought was important was with respect to all terrorism issues. I told him that it was, to me, one of the most important issues.

And one of the things that is critically important, I never focused just on Al Qaida, because I stood there and watched the Murrah building in rubble just as we saw it -- the beginnings of the Oklahoma bombing on CNN, and tended to jump to conclusions.

RENO: You can't jump to conclusions. You can't say that one thing is going to be our overriding issue.

I think one other recommendation I would make is we have got to be prepared for terrorism in any form. And a focus on one is going to make it difficult.

ROEMER: I want to push back a little bit on the Clinton administration here, and the priority on terrorism.

You say in your statement, priority of counterterrorism efforts, "Counterterrorism was a top priority for the Department of Justice. This priority was reflected in the department's strategic plan."

Now, if it's a top priority for you and your administration, wouldn't that be one of the first things that you briefed to the new attorney general: counterterrorism, Al Qaida, the domestic threat?

RENO: Which I did, and which I did in -- the point that I thought most important to make was if we were going to protect this nation's economic and national security, we had to be prepared at the bureau in terms of the information-sharing, organization, training of people, and that was the point I was making.

Let me come back to a time period when you seem, in the Clinton administration, seems to be working on Al Qaida and the millennium threat with meetings five and six times a week, maybe a couple a day, with principals involved in them during the millennium period in December of 1999.

Do you recall, General Reno, at all -- can you describe your personal role in this millennium threat period, tow often you may have sat down with the national security adviser, Sandy Berger, the president of the United States?

ROEMER: The Clinton administration has a great deal of success during this time period deflecting or foiling millennium plots. A great deal of this, in my humble opinion, my theory is because of this small group that is meeting at the top levels of government and pushing decisions down into the bureaucracy to get things done.

I want to know your recollection of this time period. How often were you meeting with the principals? How often were you meeting with the president? How involved were you in this? How involved were you with the FBI and the CIA?

Let me stress -- and I think it's important, because people have dismissed what happened during that time by saying it was because of an alert customs officer. I want to pay special commendation to the alert customs officer; she was sharp and right on target. And it was an extremely -- it wasn't a lucky break, it was a great break by a good officer.

But it is so important to be able to capitalize on this, to follow through; you have a window, you have an opening to see what's happening. And it was extraordinary to sit in that command center and to see the results come in and to follow it. And then during the height of the crisis, I literally sat at the Office of Intelligence Policy Review until the early hours of the morning to be prepared to sign it at the soonest time possible, to sign the FISA application.

RENO: And to see the whole network in operation is an extraordinary experience and something -- people told me when I came to Washington that there would be one area that would seem mysterious and would be new, and that was the intelligence function of the department.

You can't go to the university to really learn it, at least I haven't found the course that really teaches it. You've got to come in, you've got to be as prepared as you can to learn, to find the good people that can make the difference, find the people that make the link.

And sometimes you've got to sit together so I can say, "But, George" -- referring to Tenet...

RENO: Director Freeh would oftentimes be there. And the bureau did a wonderful job. But you can't -- I think it's important for the principals to be involved because they can cut through to the hard issues, they can cut through the red tape. It is very important.

Just to clarify one point then. You think the decision made by the guard on the border to get Ressam coming into our country to bomb the Los Angeles International Airport then was somehow related to the frenetic...

RENO: No. I think she did that -- I mean, I think that was just good police work, and it was a lucky break for us.

RENO: But you've got to capitalize on lucky breaks and understand better what you can learn from them.

ROEMER: Now, the fact that these principals are meeting does have an impact on bringing the CIA director, the FBI director and you and the president together to make decisions on a regular basis.

RENO: And you asked a question: How many times I met with the president? I don't know.

I agree with you: This intelligence business that I've been getting to learn is very mysterious. And nobody teaches it, I guess, outside of this town.

And the FBI to me is particularly frustrating, because everything I know -- everybody tells me it has wonderful, wonderful agents. And I know some of them and they are wonderful people -- totally dedicated. And there are totally dedicated people throughout the agency.

Yet the agency doesn't work very well, and hasn't worked very well for a long time. And you all tried to reform it. And now we have another effort of reform going on, and I guess the big question -- everybody talks about the word "culture." Some say you got to reform the culture of the FBI, otherwise it doesn't work -- won't work for the new era we are now in.

And I don't know how to change the culture, except that the present director is making a number of efforts.

And the question becomes: Can any one man or one administration change a culture, or do they just wait you out -- and when you leave it goes back to being the same old agency that hadn't worked very well before?

We can't afford that in this country. We can't afford to have an FBI that doesn't work. So you think one man, or one administration, or if we keep on with these reforms, that this agency is going to start to work?

RENO: One of the ways you make it work is not to give up and not to change the boxes and shift things around so that we have to learn a whole new procedure and spend our time doing the procedure.

RENO: I just -- I have great confidence in the director. I think he has built on what others have done -- what Louis, what Dale Watson, what Bob Bryant and countless agents have done. I think he knows that needs to be done. I think we should back him up and not give up.

And I think all of use who have been involved in the process care so much that it works that we should use our institutional knowledge, again, in a thoughtful bipartisan way, to sit down and say, "This isn't politics in America. This is the national security. This is our nation's safety. Let's work together to come up with something that works."

During the years that you were attorney general and before and after, right up till 9/11, there was an administration report issued every year called "Patterns of Global Terrorism."

And in it, the counterterrorism policy was described as, and I quote, "to treat terrorists as criminals, to pursue them aggressively, and to apply the rule of law."

Now, during your tenure at Justice, in various documents that dealt with terrorism, your priorities were laid out, number one, to obtain a successful prosecution of terrorists, and number two, to protect the rights of personal privacy.

LEHMAN: Were they accurate reflections of the priorities or did the priorities shift as time went on?

RENO: The priorities shifted almost immediately. I think Director Freeh made clear that we have got to start talking about how we prevent it and how we deter it and how we intervene with it. And I think that has been the important step.

At the same time it is important to understand what Director Freeh was saying, that one of the best ways to prevent it is to get hold of the information, follow it and make the arrest before it happens.

LEHMAN: But one of the problems of that perception, because I'm well aware of the long lag between the changing of official propaganda, which continued unchanged through three administrations, and the reality underlying it, is that other parts of the government view it very differently.

And I'd like to pursue on a strictly unclassified basis this issue of authorities to act, because we've spent a lot of time with the Pentagon and asking the question why we had eight years, following the '91 events and then the '93 events after that, to go after Al Qaida and bin Laden and there were very, very few attempts.

LEHMAN: And the recent book by Mr. Coll and the articles in The Washington Post and the book "Ghost Wars" quotes senior officials in CIA and the Pentagon, and indeed in the NSC, as follows.

And the reason I'm -- and I don't want to go outside of public documents, but the reason I'm quoting them is that we've got a lot of classified testimony that is not inconsistent with it.

"Attorney General Reno and her Justice Department were deeply invested in law enforcement as the approach to terrorism. And this translated into the Pentagon and CIA must make a good-faith effort to capture Osama for trial before targeting him as an individual."

Again, just asking your personal view, and not based on any classified information, is that an accurate reflection of your view?

LEHMAN: This was translated by both agencies as having to mount a full-scale, good-faith organizing logistics effort to capture him. And if he happened to get killed, fine, but you had to do that first. Is that an accurate reflection of it?

The other approach, apart from capturing or killing Osama, the Pentagon -- a number of senior Pentagon officials have written publicly. And I'll read from one of them, but again, it's not inconsistent with the classified testimony we have.

LEHMAN: And that is, quote, talking to what they perceived as the Justice Department policies that we just talked about, "If you declare terrorism a criminal activity, you take from the Defense Department any statutory authority to be the leader in responding.

"Whenever the White House" -- and they're talking about Clarke here -- "proposed using special forces against terrorists, it found itself facing a band of lawyers at Justice defending the turf. They would assert that the Pentagon lacked authority to use force and lawyers in the DOD would concur; they argued that we had no statutory authority because this is essentially a criminal matter."

LEHMAN: Do you think that's a wrong interpretation and just making excuses by people who didn't want to go in, put boots on the ground, anyway?

KERREY: Attorney General Reno, it's very nice to see you again. Thank you very much for coming and helping us try to figure this all out.

Later this afternoon Cofer Black -- who was the head of the CTC for, I think, a couple of years -- I think framed this whole thing very well when he says -- he's going to say it and I'm going to say what he's going to say, which is, "I come here to tell you what we did, what we tried to do and what we failed to do."

And it's in that last area that I'd like to focus some attention because I see three big failures -- mistakes -- that were made both in the Clinton administration and in the Bush administration.

The first is the failure to give the Department of Defense a leading role in dealing with terrorism. It wasn't in PDB 62, and it wasn't changed until after 9/11.

KERREY: I understand after '98, we knew that they were part of an Islamic army intending -- and we saw on the 7th of August, they had tremendous capability. We continued to allow them to come into the United States. We didn't put a full-scale effort on with consular offices and INS and FBI and all sorts of other people in the United States to try to prevent them from coming into the United States.

And the third is, I still can't get my head out of the idea that we were not at a high state of alert at our airports on the 11th of September.

And I'd like to start with PDB 62 because I asked the same question of President Clinton and National Security Adviser Berger, do you have any recollections of PDB 62 and why the military was not given primary authority to wage the war against terrorism?

RENO: No, sir, I was not. I'm not part of the security council except as it's within my jurisdiction, and I don't recall that.

KERREY: The PDB would not have been circulated through the attorney general's office?

RENO: I think it was circulated through the attorney general's office with respect to legal issues.

KERREY: Talk to me about the second thing. The second item is also equally perplexing.

I mean, Al Qaida wasn't just a group of terrorists. They were part of an Islamic army called the jihad against the people of the United States of America.

But was there ever any discussions between you and the president, between you and the national security adviser -- any internal discussions at all about saying, "We can't let this army inside the United States and we've got to make certain that we don't" -- either through a consular office or INS or any other sort of point of weakness -- "allow them to penetrate our soil"?

RENO: My conversations with Doris Meissner, who is commissioner of INS, were that she focused on the issue of how we build the database that gets the information with regards to terrorists. She found that working with the joint terrorism task forces and others were very important.

RENO: But the problem was you had to get the information to her, and I think we failed there.

KERREY: But it seems to me though that it would had to have occurred at a Cabinet meeting with the president saying, "Look, this is an army. We've got to figure out how to keep that army out of the United States." Did that ever occur at any Cabinet meeting?

I didn't have time earlier to follow up so in some ways this is not fair because I'm treating you as if you're Director Freeh.

KERREY: I didn't like his answer. He basically hid behind the Gore report. I mean, we didn't need the recommendations of the Gore report to be at a higher state of alert than we were.

I mean, we were at ease on the 11th of September. We were not prepared for a hijacking. How did that happen in your mind? I mean, you had significant authorities over the FBI and, you know, this thing could have happened in 2000 as easily as 2001. What did we miss? What happened that allowed us to be so relaxed on the 11th of September in our airports?

KERREY: No, no, I know. But we were just as relaxed as you were going out of office as we were on the 11th of September. I mean, this attack could have easily have happened on your watch. I mean, we were just as vulnerable while you were attorney general as we were when John Ashcroft was attorney general.

RENO: What I indicated to you and the commission at the outset of this session were the issues that I think that we had to address at the bureau. I gave my reasons for how they happened, what was necessary to address them, what had been done, what we could do to avoid it for the future.

RENO: I think in the meantime -- and I would also stress something that's very important.

I think people feel that because there is a strategy in place now, because there is a war, because we have come to a war footing, that we are somehow or another -- we don't have to have the heightened sense of urgency that we saw during the millennium, for example.

Somebody said we couldn't have sustained the millennium pace. But if the situation is such that the reports that I've seen -- and I have not been briefed on them, it's, again, what I've read in the papers -- you have got to be prepared in the best of circumstances and with the best of strategy for the people to meet who are the principals and work together to get the job done. And if it takes night after night, our soldiers fight night after night and day after day, and we ought to be able to do it here.

Let me start out by making an observation with respect to my friend Commissioner Lehman's questioning, that it is my understanding that the communication to CIA agents in the field with respect to kill or capture of Osama bin Laden was that they were told, pursuant to direction from the president, that they would be paid if they killed him or captured him, either way.

BEN-VENISTE: After Ressam is captured by the alert customs agent Diana Dean, for whom we all owe a debt of gratitude, there was follow up, as you have indicated.

And Diana Dean, like Agent Jose Melendez, who testified before us in an earlier hearing and who alertly prevented the entry into the United States at the Orlando port of entry -- the airport -- prevented Mohammad al-Qahtani, who we now believe was to be the sixteenth hijacker.

The work that was done after Ressam had been arrested by the alert customs agent was something which you had begun to discuss. And I would like you to have the opportunity to tell us about the cooperation among agencies in the follow up and how that may have resulted in the roll-up of operations in Brooklyn and Boston and elsewhere.

RENO: It was fascinating, Commissioner, to see how the pieces came together; working with authorities around the world, working with agents in New York, seeing how it came together.

RENO: To see the exchange of information, to have people who trusted each other so that somebody from OIPR was talking to somebody at the CIA, and another piece came together.

People have talked about data as they -- like water coming out of a fire hydrant. And sometimes it's just that one precious piece that can make the difference, but it all seemed to just open a door so that you can observe how something like this could happen. And it was based on trust and the fact that the principals were there. They were exchanging information. They were sharing. I think that made an important difference.

The principals were saying, "What about this? We need to get something translated." Well, get it to the Defense Department and they can get it translated. Cut through the red tape. Move it. I mean, we were in -- I put it to the equivalent of war. We do the best we can and the leaders should be there.

BEN-VENISTE: Let me ask you whether, in your briefing of the incoming attorney general, you elaborated on the terrorist threat from Al Qaida within the United States?

Being mindful of the millennium threat that you had just talked about, the bridge and tunnel threat, which had been interdicted and interrupted by the FBI, as Director Freeh had talked about, or unsuccessful attempt to prevent the first bombing of the World Trade Center, did you brief Director Ashcroft on the presence of Al Qaida cells in the United States and the potential for terrorist activity in this country?

RENO: No, I didn't. I'd talk about it in terms of terrorism generally, threats to our national security generally, and the need to develop the capacity in the bureau to collect the information, to manage it and to use it in the most organized way possible.

BEN-VENISTE: ... a final question. You heard perhaps from Director Freeh -- there are others who have commented on the FISA court interpretation of the restrictions on the dissemination of information. And the fact that Director Freeh, a former federal judge, others in the Justice Department, disagreed with the FISA court's narrow interpretation which was ultimately overturned by the appellate court.

Can you tell us why it was you did not seek to challenge the FISA court's interpretation during your term of office?

RENO: We were in a situation where it seemed to me we had need for FISAs at every moment. We were getting the FISAs. We felt like we were doing it the right way. We had, we thought, a good relationship with the court. And if we took an appeal, delay would occur and we were worried about what effect it would have on the court.

BEN-VENISTE: Could you not have taken an appeal on some matter of less urgency to try to get a clarification?

RENO: We looked sometimes for cases, but when you come to this crunch, it is usually the cases where you need the best facts to make the best law.

I'm very impressed -- I'm sure everybody's very impressed at the record that you've demonstrated of trying to acknowledge and fix issues within the FBI as you perceived them and tried to do it from within, by trying to urge the director to deal with some of the deficiencies as you saw them, and you just related those to us.

Did you ever advise the White House or the national security adviser or the president of those concerns about the bureau and/or the director?

RENO: When you say "concerns about the director," I had a good working relationship with the director. I mean, we might have disagreements, but concerns, that's -- it was common knowledge that one of the problems was that the bureau sometimes didn't know what it had and that it didn't share the information.

I think some of my frustration was urged on, if you will, by the National Security Council, and I told them what I was trying to do.

I told them of the problems we had, the problems with respect to automation. And I don't recall ever briefing the president on it.

I'm also very interested in the effectiveness of transitions. Because it seems to be, especially when it's a transition between different parties, there's a short period of time, and in the most recent one, even a shorter period of time. And especially in areas of national security intelligence, there's a very vulnerable moment when the baton is handed off and that period of time during a transition. And I think this is something that I hope that we will be looking at carefully as a commission.

But in your dealings with the attorney general-designate, or subsequently the attorney general, I was interested -- you said that after he became attorney general, you met with him. Was that the first time you met him do to any briefing or transitioning?

RENO: I had called him when I heard that he was nominated, offering to brief him. He said that he would wait until he got confirmed, and when he got confirmed he called me.

FIELDING: OK. Now, during that meeting with him, did you ever express to him your concerns about the severe technology problems and deficits within the FBI?

RENO: I expressed to him my concerns and I gave him copies of the memorandum, which outlined my concerns.

FIELDING: And how about your concerns and the problems with the wall, as we're calling it loosely, and legal authorities?

RENO: With respect to the wall, I told him that there was an issue with respect to -- arising out of the Wen Ho Lee report -- the attorney general's task force report, that Mr. Bellows conducted at my direction, and that there were concerns. It was important that the July -- the 1995 memorandum be updated. And Deputy Attorney General Larry Thompson updated it, in, I believe, August.

RENO: I told him that I had not made a decision, because we could not reach consensus within the department, and that it was important that they take a look at it as a follow-up. And I didn't want to make a decision that didn't have more consensus attached to it for the new administration that might want to pursue a different course.

RENO: I don't recall talking about the culture of the bureau. I talked about the need to share, the need to develop the capacity to share and to organize the information in an effective manner.

FIELDING: And was there any discussion about the personnel of the bureau, any discussion about the retention or possible retention of Director Freeh?

I think you were a bold and gutsy attorney general, and stood up for what you believed, and provided extraordinary leadership on many issues during your time. And I think the nation should be grateful for that.

THOMPSON: In today's hearing and in past hearings, there seems to be an undercurrent, or an assumption, or maybe even something more specific or direct than that, that there is some kind of reporting relationship, or ought to be some kind of reporting relationship, between the attorney general of the United States and the national security adviser, or the director of the FBI and the national security adviser.

The director of the FBI reports to you, as the attorney general. Is that correct?

THOMPSON: And you, as a confirmed Cabinet official, report to the president. Is that correct?

THOMPSON: And while there are undoubtedly many appropriate occasions for you to confer with the national security adviser or members of the NSC staff -- and you did, and other attorneys general have as well, and other directors of the FBI have as well -- the national security adviser is not some sort of "Super AG" or "Super Director," is that correct?

THOMPSON: In your prepared testimony on page 5, I think it's worth repeating these few lines -- because you weren't able to do it in your opening remarks -- "There are simply no walls or restrictions on sharing the vast majority of counterterrorism information. There are no legal restrictions at all on the ability of the members of the intelligence community to share intelligence information with each other.

"With respect to sharing between intelligence investigators and criminal investigators, information learned as a result of a physical surveillance or from a confidential informant can be legally shared without restriction.

"While there were restrictions placed on information gathered by criminal investigators as a result of grand jury investigations or Title III wire taps, in practice they did not prove to be a serious impediment since there was very little significant information that could not be shared."

THOMPSON: If you were to have used those words in a legal opinion directed to the members of the intelligence community and specifically to the members of the FBI and the CIA, according to a lot of what we have heard in public or in private, and certainly according to a lot of assumptions reported in the press, the members of the intelligence community would have been astounded. Or am I wrong about that?

I think it's again very important to understand -- and I think I learned from this how important it is when you announce a policy, when you try to do something, that you make sure you train, you get feedback from people.

And I think one of the things that I failed to do was to get feedback from them to understand exactly what their problems were with it, try to accommodate those interests and proceed to ensure a full exchange of information.

THOMPSON: In your answer to an earlier question you said that, I think I'm quoting you correctly and please correct me if I'm wrong, that you did not say something like this or talk about this subject near the close of your administration because you had failed to achieve consensus within the department on the issue.

THOMPSON: What did you mean by that? And why would you, as the attorney general of the United States, have needed consensus within the department before you issued your interpretation of what the law did or did not demand?

RENO: This obviously was a very sensitive issue, and to make a decision that I thought that would be binding -- obviously, they could change it -- I should have great confidence it seems to me before delivering to the next administration a decision.

I chose to let the next administration make the decision because -- no, you're right, I don't have to have consensus, but I've got to have a pretty clear idea of what's the right thing to do. Harry Truman said doing the right thing is easy; trying to figure out what it is is much more difficult. And it was very difficult for me in that situation.

You're unique in a sense because you've been a part of two transitions. It seems every year it takes every new administration that much longer to get its key personnel appointed and confirmed, and it involves White House procedures, it involves requirements of the United States Senate, it involves financial disclosures.

But every year the pile gets higher, and we're looking now at the Bush transition between your administration and their administration when it took six months or more for some of their key personnel to really get into place.

KEAN: Would you have any recommendations of any ways, particularly for key personnel, such as in your department or in a national security area, to speed up these transitions so that administrations will not be left lacking key personnel at very important times for this country?

RENO: I think it is absolutely critical that this nation sit down and come together and let the president of the United States, whoever he or she is, have the people that they think can best represent the interest of the administration that has just been elected and that continues to serve during the entire four years.

It is extremely frustrating to try to implement policy, to try to deal with these critical issues, to try to understand all these problems and not have somebody that's confirmed.

At this time, the commission will recess for one hour. Everybody should be back here. We'll start promptly at 1:30.

Wait a second. The chair has been asked to announce that the Capitol Police have asked that as you leave the room for lunch, please take all packages or bags with you because unattended items will disappear. They'll be confiscated.