The Puzzle Palace: Inside the National Security Agency, America's Most Secret Intelligence Organization

669 Pages·1983·1.03 MB·English

by  James Bamford

The Puzzle Palace

James Bamford

FROM THE KOREAN AIRLINES INCIDENT TO THE IRAN-CONTRA AFFAIR
TO THE GULF WAR - NEW DETAILS ON THE NSA'S SECRET ROLE

In this remarkable tour de force of investigative reporting, James
Bamford exposes the inner workings of America's largest, most secretive,
and potentially most intrusive intelligence agency. The NSA has long
eluded public scrutiny, but The Puzzle Palace penetrates its vast
network of power and unmasks the people who control it, often with
shocking disregard for the law. Now extensively revised and updated
to include information on the NSA's secret role in the Korean Airlines
disaster, Iran-Contra, the Gulf War, and other major world events of
the 1980s and 1990s, this is a brilliant account of the use and abuse
of technological espionage.

"There have been glimpses inside the NSA before, but until now no one
has published a comprehensive and detailed report on the agency....
Mr. Bamford has emerged with everything except the combination to the
director's safe."
—THE NEW YORK TIMES BOOK REVIEW
WINNER BEST INVESTIGATIVE BOOK OF THE YEAR AWARD, INVESTIGATIVE
REPORTERS AND EDITORS, INC.

James Bamford, who holds a Juris Doctor degree, is the Investigative
Producer for ABC's World News Tonight with Peter Jennings in Washington.
He has also written extensively on a wide range of investigative topics,
including cover stories for The New York Times Magazine on the
Iran-Contra affair, The Washington Post Magazine on the Korean Airlines
shootdown, and the Los Angeles Times Magazine on the Mafia.

Copyright © V.James Bamford, 1982, 1983
LIBRARY OF CONGRESS CATALOGING IN PUBLICATION DATA
Bamford, James.
The puzzle palace.
Bibliography: p.
Includes index.
1. United States. National Security Agency. I. Title.
UB251.U5B35 1983 327.1'2'06073 82-24608 ISBN 014
00.6748 5

FOR NANCY who endured my puzzle and sacrificed her palace

Any sound that Winston made, above the level of a very low whisper,
would be picked up by it. . . There was of course no way of knowing
whether you were being watched at any given moment. . . You had to
live—did live, from habit that became instinct—in the assumption that
every sound you made was overheard and, except in darkness, every
movement scrutinized.
—George Orwell, 1984

Secrecy is the first essential in affairs of the State.
—Armand Jean du Plessis
(Cardinal de Richelieu),
chief minister to King Louis XIII

The King has note of all that they intend, By interception which they
dream not of.
—William Shakespeare, Henry V, Act II, Scene 2
Contents

Acknowledgments - 11
1. Birth - 15
2. Prelude - 20
3. Anatomy - 82
4. Penetration - 158
5. Platforms - 203
6. Targets - 302
7. Fissures - 356
8. Partners - 391
9. Competition - 426 10. Abyss - 458
Afterword - 479
Appendix - 533
Notes - 537
Acronyms and
Abbreviations - 619
Index - 627
Acknowledgments

I AM DEEPLY grateful to the many people who gave unselfishly of their
time, knowledge, and ideas in order to help me with this book. General
Marshall S. Carter, Frank Raven, Dr. Solomon Kullback, Frank Rowlett,
Edna Yardley, Raymond Tate, Wesley Reynolds, Richard Floyd, Dr. William
O. Baker, Clark Clifford, General Preston Corderman, and others who
will remain unnamed but not unthanked all patiently endured my endless
questions and offered me their kind hospitality and a piece of the
puzzle.
Others helped me arrange the pieces in their proper place. David Kahn
was the source of a wealth of helpful advice and kindly took the time
to review a final draft of the manuscript. John E. Taylor of the National
Archives constantly found time in his busy schedule to help me locate
the most obscure government documents. Linda Melvern of London's Sunday
Times provided me with continued support and assistance. Mark Lynch
of the American Civil Liberties Union brought his considerable legal
talents to my aid in a tug of war with the government over several
documents. Tony Crawford and John Jacob of the George C. Marshall
Research Library frequently went out of their way to assist me. And
Claire Lorenz of the Margaret Clapp Library at Wellesley College, where
I did much of my research, was never without a kind word and friendly
smile as she pointed me to the right stack of Senate hearings or House
reports. My appreciation also to Charles Sullivan, Gerald Everett, and
the rest of NSA's D4 staff, who suffered through my torrent of Freedom
of Information Act requests with professionalism and good humor.
Finally, I want to thank my editor, Robie Macauley, for the personal
attention he has consistently shown to me and this project; Senior Vice
President Richard McAdoo for his continued encouragement and patience
over the years; my copy editor, Frances L. Apt, for her eagle eye in
decrypting my manuscript; and all the other fine people at Houghton
Mifflin who contributed to The Puzzle Palace.
THE PUZZLE PALACE

1

Birth

AT 12:01 ON the morning of November 4, 1952, a new federal agency was
born. Unlike other such bureaucratic births, however, this one arrived
in silence. No news coverage, no congressional debate, no press
announcement, not even the whisper of a rumor. Nor could any mention
of the new organization be found in the Government Organization Manual
or the Federal Register or the Congressional Record. Equally invisible
were the new agency's director, its numerous buildings, and its ten
thousand employees.
Eleven days earlier, on October 24, President Harry S Truman scratched
his signature on the bottom of a seven-page presidential memorandum
addressed to Secretary of State Dean G. Acheson and Secretary of Defense
Robert A. Lovett. Classified top secret and stamped with a code word
that was itself classified, the order directed the establishment of
an agency to be known as the National Security Agency. It was the birth
certificate for America's newest and most secret agency, so secret in
fact that only a handful in the government would be permitted to know
of its existence. Even the date set for its birth was most likely
designed for maximum secrecy: should any hint of its creation leak out,
it would surely be swallowed up in the other news of the day—the
presidential election of 1952.
Thirty years later Mr. Truman's memorandum is still one of Washington's
most closely guarded secrets. Those seven pages remain "the foundation
upon which all past and current communications intelligence activities
of the United States government are based," according to a senior
official of the National Security Council. And in its defense against
a 1976 lawsuit seeking access to the memorandum, the NSA argued
successfully against the release of even one word: "This Memorandum
remains the principal charter of the National Security Agency and
is the basis of a number of other classified documents governing
the conduct of communications intelligence activities and operations,
functions [and] activities of the National Security Agency."
Even a congressional committee was forced to issue a subpoena in order
to obtain a copy of the directive that implemented the memorandum.
Three decades after its birth the agency itself remains nearly as
secretive and mysterious as when it emerged from the presidential womb.
Its name is no longer classified information, but virtually all other
details concerning the agency continue to be.
Newsman Daniel Schorr, in his book Clearing the Air, referred to the
NSA as "one of the deepest secrets"; former CIA official Victor Marchetti
has called it "the most secretive member of the intelligence community";
and Harrison E. Salisbury, the Pulitzer Prize-winning former editor
and correspondent for the New York Times, has written that "not one
American in 10,000 has even heard its name." Even Moscow's Literary
Gazette once noted: "It has been observed that even the mouths of those
in the 'intelligence community'. . . and literally of everyone, shut
automatically at the slightest mention of NSA's secret operations,
and their faces acquire a vacant look."
As a result of this overwhelming passion for secrecy, few persons outside
the inner circle of America's intelligence community have recognized
the gradual shift in power and importance from the Central Intelligence
Agency to the NSA. Thus, it was to a surprised Congress that the Senate
Intelligence Committee reported: "By the budget yardstick, the most
influential individual [in the intelligence community] is the Director
of NSA (DIRNSA), who, including his dual role as Chief of the Central
Security Service, manages the largest single program contained in the
national intelligence budget."
Victor Marchetti and John D. Marks, in The CIA and the Cult of
intelligence, reported that former CIA director Richard Helms was so
frustrated by his lack of real authority within the intelligence
community that he concluded, "It was unrealistic for any DCI [director
of Central Intelligence] to think that he could have a significant
influence on U.S. intelligence-resource decisions or the shaping of
the intelligence community." According to Marchetti and Marks, Helms
once observed to his staff that "while he, as DCI, was theoretically
responsible for 100 percent of the nation's intelligence activities,
he in fact controlled less than 15 percent of the community's assets—and
most of the other 85 percent belonged to the Secretary of Defense and
the Joint Chiefs of Staff."
Even with that bleak assessment, however, Richard Helms overestimated
his true influence. According to the Senate Intelligence Committee,
"as Director of the CIA, the DCI controls
less than 10 percent of the combined national and tactical intel-
ligence efforts." The committee went on to say, "The remainder
spent directly by the Department of Defense on intelligence ac-
tivities in FY 1976 was outside of his fiscal authority." Then,
pouring salt on the wound, the committee added, "The DCI's
influence over how these funds are allocated was limited, in
effect, to that of an interested critic."
So where, then, is the real power base in the U.S. intelligence
community? Again, according to the Senate Intelligence Com-
mittee, in terms of both budget and size "the most influential
individual is the Director of NSA."
Soon after his appointment by President Carter, CIA director
Stansfield Turner realized how emasculated the position of DCI
had become. He created a storm of controversy, shortly after
his arrival at Langley, by suggesting the establishment of what
amounted to an "intelligence czar," with absolute power over
the sprawling intelligence community. The suggestion sparked
a bitter battle with Secretary of Defense Harold Brown, who
opposed any takeover of what he considered primarily defense-
oriented agencies.
The dispute was resolved on January 24, 1978, with the is-
suance of Executive Order No. 12036, which reorganized the
intelligence community and established greater restrictions on
collection techniques. The order rejected Turner's concept and
left overall control of the NSA and the other defense intelligence
organizations with the Secretary of Defense, although it did give
the DCI greater control over both assignments and the budget
for the entire community.
Yet despite Turner's increased position in the intelligence
community, the role of the CIA as a major intelligence collector
continued its downward trend as a result of the continuing growth
of technical intelligence and a corresponding decline of that
gathered by human effort. James R. Schlesinger, the tough, or-
ganization-minded manager President Nixon picked in 1973 to
replace Helms, arrived at CIA headquarters with a pipe in one
hand and an ax in the other. During his brief five-month tenure
Schlesinger chopped more than two thousand employees from
the payroll. On taking office in March 1977, Admiral Turner
picked up Schlesinger's bloodied ax and slashed away another
820 employees, thus nearly causing what one former agency
official called "the CIA's first mutiny." Actually, Turner had
been kind; he had inherited a Ford administration recommen-
dation to cut from twelve hundred to fourteen hundred people.
By 1978 the CIA's Operations Division had been reduced from
a peak of eight thousand during the Vietnam War to less than
four thousand.
Although the NSA had also suffered cutbacks, particularly
once the Vietnam War ended, by 1978 it still controlled 68,203
people—more than all of the employees of the rest of the in-
telligence community put together.
Despite its size and power, however, no law has ever been
enacted prohibiting the NSA from engaging in any activity. There
are only laws to prohibit the release of any information about
the Agency. "No statute establishes the NSA," former Senate
Intelligence Committee chairman Frank Church reported, "or
defines the permissible scope of its responsibilities." The CIA,
on the other hand, was established by Congress under a public
law, the National Security Act of 1947, setting out that agency's
legal mandate as well as the restrictions on its activities.
In addition to being free of legal restrictions, the NSA has
technological capabilities for eavesdropping beyond imagina-
tion. Such capabilities once led former Senate Intelligence Com-
mittee member Walter F. Mondale to point to the NSA as "possibly
the most single important source of intelligence for this nation."
Yet the very same capabilities that provide the United States
with its greatest intelligence resource also provide the nation
with one of its greatest potential dangers. Noted Senator Church:
"That capability at any time could be turned around on the
American people and no American would have any privacy left,
such is the capability to monitor everything: telephone conver-
sations, telegrams, it doesn't matter. There would be no place
to hide." America had secretly constructed the eavesdropping
equivalent of the H-bomb. Now the question was where to use
it.
It was a difficult and dangerous road, a road that had its
unlikely beginning in the small southern Indiana town of Wor-
thington during the pastel, sunlit days before America's first war
to end all wars.
2
Prelude
HERBERT OSBORNE YARDLEY was a dreamer. Terrestri-
ally, the borders of his world were the small southwestern In-
diana towns with such descriptive names as Coal City, Clay
City, and Freedom. He was born on April 13, 1889, in Wor-
thington, where the Eel River flows gently into the mightier
White. He was the son of a railway telegrapher, and the rum-
bling thunder of an approaching train was more than simply a
reminder of where his father worked; it was the sound in his
dreams that led to distant cities and exotic lands with intriguing
names.
He was the archetypical high school success—the boy with a
talent for doing everything right. He was popular and outgoing;
he was intelligent; he was an amusing talker. It was almost in-
evitable that he would become the president of his high school
class, editor of the school paper, and captain of the football team.
It was not quite so predictable that he would become one of the
most addicted poker players in town.
In 1912 at the age of twenty-three, Yardley decided to get on
that train which would take him into the bigger world of Wash-
ington, D.C.—a trip that eventually would bear him into history
as the world's most famous cryptologist, the father of the first
codebreaking organization in the United States, and one of the
founders of the codebreaking bureaus of Canada and the Re-
public of China.
All that was some distance in the future, however. Yardley
landed at Union Station in the quiet, prewar days when the
United States was on the verge of becoming a world power—
with all the complicated interests in communications that such
power brings with it. On November 16, the young man from
Worthington got a job as a $900-a-year code clerk and telegra-
pher in the State Department. His dreams had begun to come
true, and, for him, the stuttering telegraph key on his desk was
the sound of history being made.
It was, at least, the raw material of history—all of these de-
partment messages that flowed across his desk—but before that
it was still the confidential information on which we based our
foreign policy. Yardley worried. He knew that other countries
employed "decipherers" to solve the puzzle of coded foreign
messages, so why not the United States? "As I asked myself this
question," he later wrote, "I knew that I had the answer ... to
a purpose in life. I would devote my life to cryptography."
When he went to the Library of Congress and was able to find
no more than a few titles on the subject, most of those in foreign
languages, he began to educate himself in the dark art. He prac-
ticed trying to decipher State Department messages; at the same
time, he began to obtain copies of the coded diplomatic messages
of some of the foreign embassies in Washington. Where and
how he managed to filch these secret texts will probably always
remain a mystery. In his later accounts, he simply alluded to
"friendly connections previously established," presumably a co-
conspirator in the telegraph company.
One quiet night in May 1916, the wire between the cable office
in New York and the White House began to come alive. Ordi-
narily the State Department code clerks would pay little atten-
tion, since such transmission was direct to the White House and
in an unfamiliar code; it simply passed through the equipment
used in the Code Room. Yardley copied the coded message as
the five hundred words began flashing across the wire. The cable
was to President Wilson from his aide and personal represen-
22
THE PUZZLE PALACE
tative, Colonel House, who had just come from speaking with
the German Emperor. If ever there was a challenging code on
which to test his ability, surely this must be it: a personal message
to the President from his top aide.
To Yardley's amazement, he was able to solve it in less than
two hours. Whatever respect he had for the American codes
instantly vanished. He knew that messages from Colonel House
traveled over cables that passed through England and that the
Code Bureau in the Royal Navy intercepted all the messages.