Counterintelligence Reform at the Department of Energy: Policy Issues and Organizational Alternatives

CRS Report for Congress
Counterintelligence Reform at the
Department of Energy: Policy Issues
and Organizational Alternatives
Updated March 8, 2005
Alfred Cumming
Specialist in Intelligence and National Security
Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

Counterintelligence Reform at the Department of
Energy: Policy Issues and Organizational Alternatives
Summary
Troubled by reported lapses in security and counterintelligence (CI) at the
Department of Energy (DOE), the Congress in 1999 established a semi-autonomous
agency — the National Nuclear Security Administration (NNSA) — to oversee
DOE’s national security-related programs (P.L. 106-65). Within NNSA, Congress
created the Office of Defense Nuclear Counterintelligence to implement CI policy at
NNSA facilities. DOE retained a separate Office of Counterintelligence, which
develops CI policy for DOE and NNSA, but, implements it only at non-NNSA
facilities. Though representing separate organizations, the two CI offices share
resources and personnel for some programs. Although DOE has taken steps to
strengthen CI practices, some observers have questioned whether the Department’s
bifurcated CI structure is the most effective in countering continuing efforts by
foreign intelligence services, friendly and hostile, to target DOE and NNSA facilities.
Several organizational approaches have been discussed, including the following.
One approach is to maintain the status quo. Proponents suggest that the current
structure is necessary if CI is to receive the attention it warrants. Opponents counter
that dual offices lead to inefficiencies that could undermine CI effectiveness.
Under a second approach, DOE and NNSA CI programs could be completely
separated. Proponents suggest that this approach would establish clearer lines of
authority. Opponents counter that this arrangement would produce chaos at the field
level and lead to coordination and communication problems.
A third approach would be to give NNSA authority to implement all CI
programming, while preserving for DOE all CI policymaking responsibility.
Proponents suggest that doing so would result in integrated and coordinated CI
operational activity. Opponents counter that this approach still would leave in place
two separate CI offices and lead to continuing confusion over roles and mission.
Finally, Congress could consolidate the two CI programs, either under the direct
control of the Energy Secretary, or under the supervision of the NNSA administrator.
Proponents of DOE control assert that the importance of CI argues for a consolidated
office that answers directly to the DOE Secretary. Opponents contend consolidation
within DOE would contravene Congress’s intent to maximize NNSA autonomy in
all areas, including CI, because of DOE’s perceived deeply rooted anti-security
culture. They recommend that all CI programs be consolidated, but under the NNSA
Administrator rather than the Energy Secretary.
Former DOE Secretary Spencer Abraham proposed consolidating the two CI
programs into a single office reporting directly to the Energy Secretary. Congress,
however, continues to support the bifurcated program. Energy Secretary Samuel W.
Bodman is reviewing various legislative proposals, including one that would
consolidate the two CI programs under DOE control. This report will be updated as
warranted.

Contents
In troduction ......................................................1
DOE CI Management Prior to the 1999 Reorganization................2
The Turning Point.................................................2
Policy Issues For Congress..........................................4
Are DOE and NNSA Accomplishing CI Missions?...................4
Is The Bifurcated Structure Most Effective?.........................5
Possible Organizational Alternatives...................................7
Alternative One: Maintain the Status Quo..........................7
Alternative Two: Completely Separate DOE and NNSA...............8
Alternative Three: Consolidate CI Implementation Under NNSA........8
Alternative Four: Consolidate All CI Within DOE ...................8

Counterintelligence Reform at the
Department of Energy:
Policy Issues and Options
Introduction
Lapses in the Department of Energy’s (DOE) security and counterintelligence
program have plagued DOE since 1977, when the Department was established
through the merger of 40 government organizations, including the Energy Research
and Development Administration and the Federal Energy Administration.¹ Some
policymakers expected the new agency to focus the government’s energy-related
enterprises almost solely on the energy crisis. Others saw DOE as an unsuccessful
attempt to fuse vastly diverse organizations, many with significantly different, if not
conflicting missions.
One legacy of its origin is that DOE has struggled to balance open scientific
inquiry with the security under which some of those scientific inquiries must be
conducted. This inherent tension has led many observers to question whether DOE’s
highly classified weapons-related program has received sufficient attention,
particularly with regard to counterintelligence (CI). Due to numerous problems with
the CI program, the Clinton Administration issued Presidential Decision Directive
61 (PDD-61), which fundamentally restructured DOE’s CI program. Among other
changes, PDD-61 mandated that the Federal Bureau of Investigation (FBI) assume
leadership of DOE’s CI program, an initiative which continues to this day. In 1999,
Congress took a further step and established the semi-autonomous National Nuclear
Security Administration (NNSA) to manage DOE’s national security-related
programs, including DOE’s sensitive weapons laboratories. Particularly concerned
about CI, Congress provided NNSA with its own CI office, but maintained a
separate CI office in DOE. Though representing separate organizations, the two CI
offices share resources, funds, and personnel for some programs.
DOE and NNSA facilities have been and will continue to be a major target of
foreign intelligence services, friendly, as well as hostile, according to the President’s
Foreign Intelligence Advisory Board (PFIAB).² Although Energy Department
officials are taking steps to confront this challenge, the current DOE and NNSA

¹ See President’s Foreign Intelligence Advisory Board,, Foreword, Science At Its
Best/Security At Its Worst, June 1999, pp. I-II.
² Ibid. p. 1-2.

bifurcated CI structure continues to raise questions about the effectiveness of such
an approach to address such threats to the U.S. national security.³
DOE CI Management Prior to the 1999 Reorganization
In 1998, President Clinton was so troubled by intelligence evidence that the
PRC had successfully stolen secrets from DOE’s weapons laboratories that he issued
Presidential Decision Directive (PDD) 61.⁴ In an effort to improve quality and
accountability, the Directive established for the first time in DOE’s history an
independent CI office under the direction of a senior FBI executive. Previously, the
Department’s CI effort had been highly decentralized and widely dispersed
throughout various program offices, and was, according to some observers, grossly
underfunded.⁵
PDD-61 stipulated that a senior FBI official (the FBI is the primary U.S.
government agency responsible for domestic CI) be named director of the office and
report directly to the Energy Secretary. The PDD also directed that existing DOE
contracts with the labs were to be amended to include CI goals and objectives, as
well as CI performance measures to evaluate compliance. Counterintelligence
oversight functions previously assigned to DOE operations and field offices were to
be consolidated under the Director’s control. Under a follow-on implementation
plan, issued in 1999, the Director gained authority over programming and funding as
well as personnel authority over counterintelligence activities at all DOE field offices
and laboratories. By 1999, however, a majority in Congress decided that Secretary
Richardson’s PDD-61 inspired reforms were insufficient.
The Turning Point
March 1999 marked a turning point in DOE’s CI program when Energy
Secretary Bill Richardson fired Los Alamos National Security Laboratory scientist
Wen Ho Lee because Lee allegedly had failed a polygraph.⁶ (Other allegations

³ See Commission on Science and Security, Science and Security in the 21^st Century, A
Report to the Secretary of Energy on the Department of Energy Laboratories, April 2002.
p. XII and p. 26. See also National Counterintelligence Executive, An Assessment of the
Effectiveness of the Division of the CI Programs at the Department of Energy and the
National Nuclear Security Administration, pp. 12-13.
⁴ For a comprehensive review of this issue, see CRS Report RL30143, China: Suspected
Acquisition of U.S. Nuclear Weapon Secrets, by Shirley Kan.
⁵ See President’s Foreign Intelligence Advisory Board, Foreword, Science At Its
Best/Security At Its Worst, June 1999, p. 15.
⁶ The most recent alleged espionage case with a DOE connection involves alleged PRC spy
Katrina M. Leung, who the FBI said was a 20-year Bureau informant they now suspect was
a “double agent” who provided classified material to the PRC. Leung allegedly had affairs
with two former FBI agents, including William Cleveland Jr., who, until he resigned his post
on April 10, 2003, was Director of Security, at DOE’s Lawrence Livermore National
(continued...)

included that Lee failed to notify officials about certain contacts with people in the
People’s Republic of China (PRC), to properly safeguard classified material and to
cooperate on security matters. Lee pled guilty to one felony count of unlawful
retention of national defense information; the government dropped 58 additional
counts.⁷) In May, a bipartisan House Select Committee released a declassified
version of its report charging the PRC with having stolen nuclear weapons secrets
from the United States. Finally, in June, the President’s Foreign Intelligence
Advisory Board (PFIAB), for the first time in its more than 38-year history of
providing the President counsel on intelligence matters, publicly released one of its
reports. It criticized DOE for the “worst” security record on secrecy that Panel
members said they had encountered.⁸ Although dismissing assertions of wholesale
losses of nuclear weapons technology through espionage, the PFIAB panel did
concur, on balance, with the Intelligence Community’s assessment that the PRC had
obtained by espionage classified U.S. nuclear weapons information that probably
accelerated its program to develop future nuclear weapons.⁹ In response, Congress
and the President approved legislation establishing NNSA¹⁰ to manage the
department’s national security-related nuclear programs.¹¹
As part of the restructuring, Congress proposed creating dual CI offices in DOE
and NNSA. Within DOE, the already-existing Office of Counterintelligence (OCI)
was codified and made responsible for developing CI policy for both DOE and
NNSA; but, was only authorized to implement that policy at non-NNSA facilities.
Within NNSA, the Office of Defense Nuclear Counterintelligence (NNSA/ODNCI)
was created to implement CI policy, but only at NNSA facilities. Conferees
stipulated in the statute that a presidentially appointed, Senate confirmed Under
Secretary for Nuclear Security was designated to serve as NNSA Administrator. The
NNSA Administrator would report to the Energy Secretary.

⁶ (...continued)
Laboratory. FBI officials reportedly have said that every PRC counterintelligence case
investigated by the Bureau since 1991 may have been compromised by Leung, including that
involving Wen Ho Lee. See Schmidt, Susan and Dan Eggen “FBI Assesses Potential
Damage From Spy Scandal,” Washington Post, April 13, 2003, p. A04.
⁷ See CRS Report RL30143, China: Suspected Acquisition of U.S. Nuclear Weapon Secrets,
by Shirley Kan, pp. 22-37.
⁸ See President’s Foreign Intelligence Advisory Board, Science At Its Best/Security At Its
Worst, June, 1999, p. 1.
⁹ Ibid. p.4.
¹⁰ NNSA facilities include the national security laboratories (Los Alamos National
Laboratory, Los Alamos, NM; Lawrence Livermore National Laboratory, Livermore, CA;
and Sandia National Laboratories, Albuquerque, NM and Livermore, CA); nuclear weapons
production facilities (The Pantex Plant, Amarillo, TX; Kansas City Plant, Kansas City, the
Y-12 Plant, Oak Ridge, TN, the tritium operations facilities at the Savannah River Site,
Aiken, S.C., and the Nevada Test Site, Nevada); and a service center at Albuquerque, NM.
Naval Reactors facilities also fall within the NNSA.
¹¹ See S. 1059; conference report, H.Rept. 106-301; and P.L. 106-65, signed into law on
October 5, 1999.

In urging reorganization, conferees cited the report by the President’s Foreign
Intelligence Advisory Board (PFIAB) that blamed poor organization and a failure of
accountability for DOE’s CI failures. The report also criticized DOE for being a
dysfunctional bureaucracy incapable of reforming itself.¹²
One result of this dual office is a partially bifurcated CI structure (the two
offices share resources, funds, and personnel for some programs¹³) that has sparked
debate over its effectiveness, particularly in light of emerging non-traditional
counterintelligence threats. Specifically, critics have warned that inadequate
communication and coordination between the two offices could threaten sensitive CI
investigations. Supporters argue that a separate, dedicated CI office within NNSA
is necessary if counterintelligence is to receive the focus it warrants.
Policy Issues For Congress
Observers have focused on two inter-related questions. First, are DOE and
NNSA accomplishing their CI missions? Second, is the current partially bifurcated
CI management structure within DOE and NNSA the most effective approach to CI
management?
Are DOE and NNSA Accomplishing CI Missions?
One study has questioned DOE’s managerial approach to CI effectiveness. The
Commission on Science and Security, established by then-Secretary Bill Richardson,
concluded in a 2002 report, that because of DOE’s continuing management
dysfunction, security, including CI, lacks clarity, consistency, and broad strategic
planning. Specifically, the Commission said DOE lacked a systemwide approach for
assessing risks to its assets and for determining priorities for the protection of those
assets; adequate investments in tools and technologies for its counterintelligence
programs; and sufficient priority for cybersecurity.¹⁴ With respect to CI, the
Commission said the dual office structure led to fragmentation and prevented the
establishment of a single, strong, CI program.¹⁵
Another study, however, points out that DOE and NNSA have made some
progress in their CI programs, although the current dual office structure exposes DOE
and NNSA to the possibility of future CI missteps. In January 2003, in a requested
unclassified report to the Senate Select Committee on Intelligence (SSCI), the Office
of the National Counterintelligence Executive (NCIX), an Intelligence Community
entity charged with monitoring CI policy across the Intelligence Community,

¹² See FY2000 conference report, H.Rept. 106-301, p. 927.
¹³ Those CI programs include analysis, cyber-counterintelligence, evaluations, inspections,
investigations, polygraph, and training.
¹⁴ See Commission on Science and Security, Science and Security in the 21^st Century, A
Report to the Secretary of Energy on the Department of Energy Laboratories, April 2002.
p. XII-XIII.
¹⁵ Ibid. p. 26.

concluded that DOE and NNSA were making progress in accomplishing much of
their basic CI mission, particularly in the areas of strategic planning, operating
procedures and implementation of information systems, but criticized the bifurcated
CI structure.¹⁶
NCIX blamed the current dual-office format for numerous day-to-day problems,
including duplicative and, at times, contradictory messages to field sites; mis-routing
of sensitive CI information related to investigations; uncoordinated communications
to the FBI and the Intelligence Community; and dual, sometimes, inconsistent,
tasking of program managers.¹⁷
Although manageable under the current structure, NCIX suggested that these
problems posed the potential for more fundamental missteps in the future. According
to one law enforcement officer cited by NCIX, the two-office configuration “might
some day lead the department to miss a serious CI breach or prevent the conduct of
an effective investigation.”¹⁸ The Directors of Central Intelligence and the Federal
Bureau of Investigation (FBI) endorsed the NCIX findings in separate letters to the
SSCI Chairman and Vice Chairman.¹⁹
Is The Bifurcated Structure Most Effective?
With regard to a bifurcated structure, two general views prevail. According to
one view, espoused by the PFIAB and others, real and lasting CI reform is
“unworkable within DOE’s current structure and culture. To achieve the kind of
protection that these sensitive labs (DOE’s national security laboratories) must have,
they and their functions must have their own autonomous operations structure free
of all the other obligations imposed by DOE management.”²⁰ The PFIAB, in 1999
recommended the establishment of a semi-autonomous agency within DOE, with its
own coherent CI structure.²¹
The contrary view holds that CI must be a unified, integrated DOE-wide
function. The Commission on Science and Security concluded:

¹⁶ See National Counterintelligence Executive, An Assessment of the Effectiveness of the
Division of the CI Programs at the Department of Energy and the National Nuclear Security
Administration, p. 9. The report was requested by the SSCI. See Senate Report 107-149 (p.

24), accompanying S. 2506, the FY2003 intelligence authorization bill.

¹⁷ Ibid. p. 10.
¹⁸ Ibid. p. 13.
¹⁹ See letters from Director of Central Intelligence George Tenet, June 9, 2003, and from
FBI Director Robert Mueller, July 11, 2003. Both letters were introduced into the record
during a July 13, 2004 hearing on DOE counterintelligence consolidation conducted by the
House Energy and Commerce Subcommittee on Energy and Air Quality.
²⁰ See President’s Foreign Intelligence Advisory Board,, Foreword, Science At Its
Best/Security At Its Worst, June 1999, p.46.
²¹ Ibid. p. 47.

Counterintelligence must be an enterprise-wide function, responsible for
counterintelligence issues anywhere within the DOE complex. Furthermore,
counterintelligence investigations, analysis, and all other counterintelligence
information must be developed within a unified organization and provided to the
Secretary and other senior officials without bureaucratic delays. This vital
function necessitates one organization with one chief of counterintelligence²²
reporting to the office of the Secretary.
NCIX, in its report, concluded, “‘this partial bifurcation’ of CI responsibilities
at DOE not only served to further complicate the formidable challenge of managing
CI at DOE, but also endangered the goals and implementation of an effective CI²³
program.” NCIX further noted that, “In light of the history of CI investigations that
foundered because of mis-communications within well-established agencies, the²⁴
two-office arrangement has raised the odds of missteps and problems.” NCIX
recommended that the two offices be consolidated under one senior CI officer with
DOE-wide responsibility for all aspects of the program and that would report directly
to the Secretary of Energy.²⁵
Former DOE Secretary Spencer Abraham, after completing his own review of
the bifurcated CI structure, concluded in 2003 that the structure was “not optimal”and
proposed to Congress that the Department’s two CI programs be consolidated
under DOE’s control, and that the combined office report directly to the Energy
Secretary.²⁶ Instead, however, the Senate Armed Services Committee, as part of the
fiscal year (FY) 2005 defense authorization bill, authorized the DOE Secretary to
consolidate the two offices, but under the control of the NNSA administrator.²⁷ The
House took no action in its version of the same bill. The Senate receded, and House
and Senate conferees retained the bifurcated structure, stating in the conference
report:
The conferees note that the NNSA was originally set up as a semi-autonomous
agency, in large part, to ensure that there would be adequate focus and priority
placed on counterintelligence activities. The conferees urge the

²² See Commission on Science and Security, Science and Security in the 21^st Century, A
Report to the Secretary of Energy on the Department of Energy Laboratories, April 2002.
p. 26.
²³ See National Counterintelligence Executive, An Assessment of the Effectiveness of the
Division of the CI Programs at the Department of Energy and the National Nuclear Security
Administration, 2003. p. 1.
²⁴ Ibid. p. 2
²⁵ Ibid. p. 3
²⁶ For a more complete discussion of DOE’s position on the issue of CI bifurcation, see
testimony presented by Linton Brooks, Administrator, National Nuclear Security
Administration, before the House Energy and Commerce Committee, Energy and Air
Quality Subcommittee, July 13, 2004.
²⁷ Section 3119, S. 2400, the FY2005 defense authorization bill.

counterintelligence offices at DOE and NNSA to work together to ensure
security of both DOE and NNSA programs and facilities.”²⁸
Possible Organizational Alternatives
Congress, of course, could choose to maintain the current organizational²⁹
structure. If Congress, however, ultimately decides to modify the structure, a
number of organizational approaches have been proposed. The range of alternatives
currently being discussed include the following: (1) maintain the status quo; (2)
completely separate DOE and NNSA; (3) consolidate CI implementation under
NNSA, and leave CI policymaking in DOE; and (4) consolidate all
counterintelligence — both policymaking and implementation — either within DOE,
or, conversely, within NNSA.
Alternative One: Maintain the Status Quo
DOE’s Office of Counterintelligence would continue to be responsible for
developing CI policy across DOE (including the NNSA) but implementing that policy
only at non-NNSA facilities. (NNSA/ODNCI) would continue to implement CI
policy at NNSA facilities.
Proponents of the status quo point to congressional concern in 1999 that DOE
was failing to focus necessary and appropriate attention on CI. The semi-
autonomous NNSA and its Office of Nuclear Counterintelligence, they argue, was
established for the express purpose of having one entity outside of DOE focus on,
and be held accountable for, implementing CI policy at DOE’s sensitive nuclear and
national security programs, including its weapons labs. The current structure, it is
suggested, accomplishes that goal while maintaining a reasonably close integration
of program activities. Opponents counter that the current structure produces
“inefficiency, confusion, unnecessary contention, and mis-communication.”³⁰ They
also suggest that in some areas, the NNSA structure within DOE has exacerbated the
general problem of too many layers in DOE, particularly with respect to
counterintelligence.³¹

²⁸ The 108^th Congress voted to retain the current bifurcated CI structure. See Conference
Report 108-767, p. 897.
²⁹ Congress in 2004 decided not to change the current bifurcated CI structure. See
Conference Report 108-767 (p. 897) accompanying H.R. 4200, the FY2005 defense
authorization bill.
³⁰ Ibid. p. 1.
³¹ See Commission on Science and Security, Science and Security in the 21^st Century, A
Report to the Secretary of Energy on the Department of Energy Laboratories, April 2002.
p. 26.

Alternative Two: Completely Separate DOE and NNSA
This approach is a complete separation of DOE and NNSA counterintelligence
programs, with OCI providing CI support to DOE, and NNSA/ODNCI providing CI
support to NNSA. Proponents suggest that this approach would establish clearer
lines of authority for CI within DOE and NNSA, which would improve
communication and coordination. Opponents counter that such an arrangement
would produce chaos at the field level and could lead to future problems of
redundancy, coordination, communications, and relations with law enforcement.³²
Alternative Three: Consolidate CI Implementation Under
NNSA
The third approach consolidates all DOE CI implementation under NNSA,
leaving DOE’s Office of Counterintelligence in charge of formulating all CI policy.
Proponents suggest that this approach would support an integrated and coordinated
CI operational activity and result in a more effective allocation of resources by
permitting NNSA to focus its resources on CI implementation and DOE to target its
efforts on policy formulation. They also argue that NNSA oversees the most
sensitive classified activities within DOE and therefore is best suited to implement
all CI activities across DOE. Opponents counter that this approach would leave in
place two CI offices, one with policymaking responsibilities and one with operational
responsibilities, thereby contributing to continuing confusion as to roles and mission.
Alternative Four: Consolidate All CI Within DOE
The final approach consolidates the two CI programs, either under the control
of the Energy Secretary, or under the control of the NNSA administrator.
Proponents of DOE consolidation assert that the importance of CI argues for a
consolidated effort controlled by the Energy Secretary. They also contend such a
consolidation would highlight CI as a department-wide mission that includes
protecting leading-edge technologies, critical infrastructure, and national nuclear
weapons secrets, as well as protecting DOE facilities against international terrorist
attacks. They point out that much of DOE’s national security-related work focuses
on issues other than just those related to nuclear weapons and, therefore, is not³³
limited to NNSA sites.
Opponents counter that consolidating CI under DOE control would be
inconsistent with Congress’ intent to maximize NNSA autonomy in all areas, and
particularly with regard to CI, because of DOE’s perceived deeply rooted anti-
security culture. They trace DOE’s anti-security bias to the longstanding tension

³² See National Counterintelligence Executive, An Assessment of the Effectiveness of the
Division of the CI Programs at the Department of Energy and the National Nuclear Security
Administration, 2003, p. 15-16.
³³ Ibid. p. 17.

between science and security, and assert that only a semi-autonomous agency such
as NNSA can establish a cultural environment that values security.³⁴
Although both sides dispute where a consolidated program should be housed,
neither proponents or opponents question that consolidation will improve
accountability, administration, communication, and coordination, all essential
qualities, they suggest of an effective CI program.³⁵

³⁴ See President’s Foreign Intelligence Advisory Board, Science At Its Best/ Security At Its
Worst, p. III.
³⁵ Ibid. p. 18.