The Biggest Little CIA Shop You've Never Heard Of

NEW YORK, NY - OCTOBER 9: A man walks along Wall Street in Manhattan on October 9, 2012 in New York City. State Comptroller Thomas DiNapoli will release his annual report on employment and earnings October 9, in New York' City's financial industry, one of the worlds largest. While employment is still down thousands of positions since the economic crisis of 2008, DiNapoli has said that last year the sector employed 166,600 people in hedge funds, investment banks and securities trading firms. (Photo by Spencer Platt/Getty Images) Spencer Platt/Getty Images

A few years ago, an American company placed a want ad for an aerospace engineering consultant in an Asian newspaper. It quickly drew a flurry of applicants - one of whom was just the kind of person the company was looking for: someone who worked in that country's missile program, someone who was a little sleazy, someone looking to make a little cash on the side.

This was a CIA front operation, and soon that eager applicant was supplying the spy agency with details on his country's ballistic missile program.

That kind of covert activity is a specialty of the CIA's National Resources Division, a little-known, U.S.-based component of the agency's National Clandestine Service.

The CIA's main business is sending operatives abroad to recruit spies and, especially since 9/11, chasing down terrorists for its target-hungry drone pilots. But NR, as it's known, is the agency's stay-at-home division. It's nothing like Homeland, however, with operatives running about with guns in the D.C. suburbs (though its 1960s-era predecessors once spied on antiwar and civil rights activists and recruited Cuban exiles to harass Fidel Castro). It also works with the FBI and NSA in bugging foreign diplomatic missions there.

Think of it as a more cuddly CIA. Its main business is to openly gather information from Americans who've traveled to places the CIA is interested in, particularly hard targets like North Korea, and to inveigle foreigners in the U.S. - officials, scientists and students - into spying when they return home.

For the men (and women) of the CIA's principal espionage corps, working abroad under cover, often in some of the world's nastiest neighborhoods, National Resources looks like the country club of Spy-Ville, a 9-to-5 domestic job, free of risk and stress, a refuge for the lazy, the incompetents and the burnouts.

"We look down on NR: You're a slacker, you're going home every night and watching TV, while I'm here in Moscow with the Russians looking up my ass with a microscope. We're not working for the same organization," says one veteran overseas operative, echoing a common view. "In Moscow, Beijing, Delhi, whatever, I'm not only living in rotten conditions, I've got a hostile intelligence service following me around."

Says another: "The problem is - they'll deny it - but NR's recruitments [of spies] are not to the same standards" as the rest of the clandestine service. "They're under the gun more than others to recruit by the numbers. They'll recruit a Moroccan because he's a Moroccan, not because he has access. And it's a crapshoot when they go back home.... In general, their recruitments are not viewed that positively." (The CIA declined comment for this story.)

NR's operations also irritate the turf-conscious FBI, which is in charge of domestic counterintelligence and counterterrorism and also recruits foreigners here as spies. Others argue that its intimate relations with top U.S. corporate executives willing to have their companies fronting for the CIA invites trouble at home and abroad.

All of which makes a few spy veterans question how valuable the NR is.

NR swelled with new CIA recruits after 9/11, but it wasn't supposed to be that way. At a time when then-CIA director George Tenet was boasting about dispatching CIA spies around the globe to hunt down terrorists, scores of new hires were suddenly showing up in NR's domestic offices, far from the action of places like the Middle East, Pakistan, or North Africa. As recently as 2010, a former CIA operative who writes under the pseudonym Ishmael Jones told me, "more than 90 percent" of the agency's clandestine corps were living and working "entirely within the United States."

Why? According to Jones, the agency chickened out, targeting Chinese, Russians, Pakistanis, Saudis, and other foreigners for recruitment while they were visiting the United States, rather than in their own countries where the secret police are ubiquitous.

That's half-true, says a former CIA executive with extensive foreign experience, who says the new recruits landed in NR out of a bureaucratic screwup, not because the CIA was risk-averse: "What happened was, we hired a massive amount of people, and it occurred to nobody that we needed State Department plus ambassadorial approval to assign these people to overseas embassies [under diplomatic cover]. Say you tell an ambassador we're going to assign six new people to his embassy. How is he going to explain to the local interior minister that his staff is going from 12 to 18?"

He can't, the former official says. And if he could, the local secret police would quickly take notice of the new embassy staff, putting everyone else new to the embassy under scrutiny. "So State said, 'F**k that. We have no space.'" (The problem was eventually eased by shunting undercover operatives into other U.S. facilities, he adds.)

Thus hundreds of new case officers - the agency's term for spy recruiters and handlers - were pushed into NR.

Today, according to knowledgeable sources, NR has offices in about a dozen cities, down from about three times that two decades ago because of cost-cutting, sources said. Naturally, they're located in places where foreign officials, military officers, scientists and students - as well as Americans who travel abroad on business - congregate, cities like New York, Boston, Washington, Los Angeles, San Francisco, Chicago, Detroit (where there's a large Arab population nearby) and Denver, which is such a hotbed of U.S. military and intelligence activity that the CIA considered moving NR there entirely in 2005. After much criticism, it stayed put.

In any event, since some CIA case officers discovered along the line that they weren't suited for - or really disliked - learning foreign languages and spying in hostile territory, NR was the perfect job for them.

"At a Christmas party once," recalls a retired CIA operative with extensive overseas experience who did a stint in a Midwestern city, "a guy let me know he had no interest in working in the clandestine world - 'I don't do dark street corners at night,' he said. Well, I loved dark street corners at night.... In that same office, you have people going out to meet academics and so forth and people going out the same door under an alias to recruit sources."

The FBI is said to despise the CIA's domestic recruiting operations. According to a 2005 account by The Washington Post's Dana Priest, the two sides had "highly contentious" negotiations over who could do what, "with the FBI saying that it should control and approve the CIA's domestic activities.... " That wasn't going to happen, so in the end, the two sides just promised to play nice.

But that hasn't always happened.

"There are a lot of problems with NR and the FBI," says a former senior CIA executive. "You have good one-on-one relationships, but you have terrible [FBI]-field-office-to-[CIA]-station relationships. The FBI guards its turf jealously...and NR just in general hasn't handled those relationships well." It's not uncommon for NR offices "to lie" to the FBI about operations they have going, the former CIA official says. And vice versa.

In New York City, NR operatives work with the FBI and NYPD on counterterrorism cases - the head of NYPD's intelligence division, David Cohen, is a former NR chief - but they also cultivate their own sources on Wall Street, especially looking for help keeping track of foreign money sloshing around in the global financial system, while recruiting companies to provide cover for CIA operations abroad. And once they've seen how the other 1 percent lives, CIA operatives, some say, are tempted to go over to the other side.

"New York has a particular problem, and that's attrition," says this former CIA executive. "They get a pretty nice housing allowance and all that, but you've got an officer who, as part of his portfolio, he's supposed to be meeting with Joe Blow at Morgan Stanley or Goldman Sachs. And after a year or two of this, it begins to fray. And you've got these people at Goldman Sachs who take a look at you and say, 'You know, you're a good guy, you've got all the skill sets we need, and, oh, by the way, we'll basically triple your salary.' And it's, you know, 'When do I start?' So attrition is a big problem."

Any conversation with operations veterans about NR begins with a 30-minute litany of its supposed shortcomings. But eventually, they'll grant that it has value.

The best thing NR does, they say, is "finding and cultivating contacts in the local business world," says another former CIA executive. "They look for guys who have been to China, Mongolia, Vietnam, or whatever to debrief - all the way up to arranging with a company to provide cover for us."

Former senior U.S. government officials are happy to share information with the CIA from their foreign travels, they explain. George H.W. Bush, a former CIA director who until his recent illness continued to meet with prime ministers, had "a standing appointment with the Houston station," recalls another former CIA executive. "He'd say, 'When I come back, I'll tell you everything I got.' "

And that's another reason NR stays in regular contact with top Wall Street and other corporate executives.

It also knows some titans of finance are not above being romanced. Most love hanging out with the agency's top spies - James Bond and all that - and being solicited for their views on everything from the street's latest tricks to their meetings with, say, China's finance minister.

JPMorgan Chase's Jamie Dimon and Goldman Sach's Lloyd Blankfein, one former CIA executive recalls, loved to get visitors from Langley.

And the CIA loves them back, not just for their patriotic cooperation with the spy agency, sources say, but for the influence they have on Capitol Hill, where the intelligence budgets are hashed out.

One New York commercial real estate tycoon, who the source asked Newsweek not to name, was "a regular contact." In exchange, he was "kept happy by bringing him down to the Farm" - the CIA's training facility in Virginia - "and letting him shoot off weapons, [and] see some of the things we're doing down there.

"And everyone," he says, "went away happy."

Jeff Stein is a Newsweek contributing editor in Washington.