The Defense Department is planning to let its military intelligence officers trade in their uniforms for undercover roles as businessmen in search of profits abroad.
The Senate Intelligence Committee has approved legislation that would allow the Pentagon "to engage in commercial activities" in order to provide security for intelligence collection work overseas.
The Bush and Reagan administrations have been seeking commercial cover for military spies for the past five or six years, according to committee officials. This year, the senators said in their report on the 1991 intelligence authorization bill, "there is a legitimate, albeit limited, need for such authority."
A committee spokesman said the military services, primarily the Army's Intelligence and Security Command (INSCOM), want to enter the business world.
Under the bill, either the secretary of defense or the deputy secretary of defense -- but no one else -- could order the creation of corporations, partnerships or other legal, money-making entities whose real purpose would be the conduct of intelligence collection or counterintelligence activities abroad.
The businesses would be exempt from various federal laws and regulations that might be "inconsistent with" or that might "compromise" the operation. For instance, the Senate committee's general counsel, L. Britt Snider, said there are laws prohibiting the Defense Department from incorporating businesses without acts of Congress, from entering into lease agreements for more than a year, and from depositing money in banks without specific authority.
The CIA and the FBI already have statutory authority to establish commercial cover arrangements that, as the Senate panel puts it, "would withstand scrutiny from the internal security services of foreign governments that may be hostile to the United States."
Defense Department intelligence officers are rarely placed in situations that require them to pose as businessmen, the committee said, but occasionally their duties require it "when essential intelligence requirements cannot be met."
Having commercial cover would not only "enhance the security of DOD intelligence operations," the committee said, "but they should permit greater access to essential information."
Snider said there is no law prohibiting military intelligence officers from pretending to be businessmen -- a favorite routine of old comic strip hero Buz Sawyer -- "but the problem is there is nothing to backstop them," no legally organized front company they can call their own.
Under the Senate bill, CIA Director William H. Webster would have veto power over such undertakings if he decides they would conflict with other U.S. intelligence or foreign policy objectives "or if he does not consider them operationally sound."
In addition, FBI Director William S. Sessions could disapprove any of the Pentagon's undercover business activities within the United States.
The law would allow those in charge of the commercial operations to engage in domestic activities only to the extent "necessary to support intelligence activities abroad." But activities here could extend from incorporation of a company to setting up U.S. offices of the firm to joining various trade and business organizations.
The Senate committee said it was aware commercial cover operations, "could, if not adequately coordinated and regulated, lead to abuses and improprieties," or to situations "politically embarrassing to the United States."
But the report said such problems had come up only rarely at the FBI and the CIA, and that the approval and oversight provisions of the bill should provide adequate safeguards.
The report said Defense Secretary Richard B. Cheney will be expected to give the House and Senate Intelligence panels advance notice of the creation of any business entity, of any anticipated financial transactions with a value of more than $100,000, and of any projected intelligence operation "with a high risk of exposure."
Cheney will also be required to provide for frequent audits and inspections and to submit to Congress each Nov. 1 an annual report describing all commercial activities of the past year as well as the expenditure of any appropriated or non-appropriated funds.
The Defense Intelligence Agency (DIA) will set up a single office to implement and supervise all operations. The businesses will be allowed to make enough money "to offset necessary and reasonable expenses" but any income beyond that is to be deposited in the U.S. Treasury "as often as may be practicable . . . as miscellaneous receipts."
The House intelligence subcommittee on legislation headed by Rep. Matthew F. McHugh (D-N.Y.) held a closed hearing on the proposal last week and is expected to act soon. Senate counsel Snider said the bill was "not intended" to permit intelligence collection in this country and was drafted to exclude "covert action" here and abroad.