Mitch Wade and the madness of spies

Well, I was wrong about nobody caring about yesterday’s post about defense contractor Mitch Wade. The Washington Post ran a story today on the sentencing memo, highlighting the congressional corruption angle.

Wade is being sentenced next month for paying $1.8 million in bribes to former Rep. Randy “Duke” Cunningham in return for government contracts. He’s one of the more interesting, but least known characters in the whole sordid saga.

Wade was once at the top of D.C.’s social strata. As outwardly successful as he seemed, Wade was inwardly troubled. He had classic symptoms of mania — he was equally smart, gracious, and charming as well as ruthless, relentlessly ambitious and control-obssessed.

At MZM Inc., his defense contracting firm, Wade opened mail addressed to his employees, screened employee e-mails and railed about those who received personal messages in their MZM accounts. No detail was too small for him to obsess about and nothing got done without his say-so.  As I wrote in my book:

It occurred to more than one employee that Wade had deep psychological problems. His paranoia, his compartmentalization, and his secrecy were all traits that many of his employees recognized from their experience in the intelligence world. Suspicion and paranoia were a job hazard, particularly in the spy-vs-spy of counterintelligence that was MZM’s specialty. Too many much time spent wondering if your colleagues were really your enemies did tend to make people a bit loony.

In a wonderful essay in The New Yorker, writer John Le Carre, a former spy himself, says that madness is endemic to the intelligence world “hard to detect and harder still to eradicate.” The most famous case was James Jesus Angleton, a “deranged CIA inpatient,” in Le Carre’s words, who nearly destroyed the spy agency in his quest for a Soviet mole that he could never find.

There were rumors that Wade was connected to some sort of covert intelligence network, which might explain all the paranoia. I heard stories of secret passageways, safehouses and nasty covert ops, but it was never clear to me that this was anything more than a product of Wade’s massive ego, a fantasy that he was playing at the spy world’s “great game” and not just acting like a shabby huckster.

At the same time, I’ve been thinking about the glowing fitness reports (here and here) Wade received from John McConnell, the director of national intelligence. And I can’t help but wonder whether the attributes in Wade that I think might earn him time on the psychiatrist’s couch might actually be viewed as useful traits in certain corners of the intelligence world.

Cunningham briber Mitch Wade pleads for mercy

Mitchell Wade, the man who bribed Randy “Duke” Cunningham and then did much to speed the congressman’s spectacular fall, is asking a judge to sentence him to a year of home detention for all the help he provided the government. Prosecutors don’t dispute that Wade was helpful, but they believe that four years in prison is more appropriate for $1.8 million in bribes.

Would Cunningham ultimately have been convicted without Wade? Probably, but Wade made it happen much, much faster.  He was debriefed 23 times by government investigators and supplied them a searchable electronic database of 150,000 documents, including the infamous “bribe menu.” And Wade’s cooperation didn’t stop with Cunningham. He provided damaging evidence against several others, including his testimony at the bribery trial of his former boss, Brent Wilkes, who’s now serving time in prison.

A 42-page sentencing memo filed by Wade’s attorneys says he aided the government in its investigation “of at least five other members of Congress” who were under investigation for “corruption similar to that of Mr. Cunningham.” These no doubt include Virgil Goode and Katherine “Pink Sugar” Harris. Wade wanted to open facilities in their districts and made $78,000 in “straw” contributions  to grease the wheels. Neither Harris nor Goode has been charged with wrongdoing.

Prosecutors drop tantalizing hints about an even bigger, ongoing investigation. Wade was debriefed in 2006 and provided “moderately useful” background information in another “large and important corruption investigation” that also has not yet resulted in any charges.

Wade ran a mid-sized defense consulting firm, MZM Inc., and was very well-connected in military intelligence circles. After college in 1985, he started out as program manager for a highly-secret Navy program, supporting Central American counterinsurgencies and counterintelligence work in Europe and Asia. He joined the Naval Reserves as an intelligence officer and was assigned to the Middle East/Africa desk at the DIA’s National Military Intelligence Center.

During the 1990 Gulf War and again in 1992, Wade’s supervisor was John McConnell, the current Director of National Intelligence. McConnell recommended Wade for accelerated promotion. “LTJG Wade is an outstanding officer, who will excel in the most demanding positions,” McConnell wrote. (Fitness reports 1 and 2) In 1992, McConnell was named NSA director. Wade started MZM Inc., his solo consulting firm, the following year, providing what his attorneys called “technical and programmatic assistance” to McConnell’s NSA.

So how did such a smart guy go so wrong?  In a letter to the judge who will be sentencing him next month, Wade wrote that he “lost sight of the concepts of integrity and fair play” and started cutting corners to get ahead. “I realize that it was my pride, ego, and desire for power that led me down this terrible path,” he wrote.

Wade has lost his job, his career, his reputation and his marriage, and his $2 million legal team at WilmerHale has done a tremendous job of making him seem like a man who is trying to pick up the pieces of his life. It’s quite a contrast to Cunningham’s sentencing memo, which was a portrait of a war hero who had deteriorated into a man who couldn’t even buy himself a friend.

Wade’s sentencing is set for Dec. 15. Will it even make the news? I doubt it. Look at what just happened to our financial system. These guys are amateurs.

Clarion Fund's GOP ties

There’s new information out about Clarion Fund. This is the group that released more than 20 million copies of a controversial anti-terror DVD called “Obsession” in battleground political states a few weeks before the election. (Background here and here.)

Clarion, which has released very little information about itself, just sent me its long-delayed 2007 tax return, IRS Form 990.

As a 501(c) organization, Clarion is not supposed to influence U.S. elections, but the 990 reveals that two of the fund’s unpaid directors in 2007 had strong GOP ties:

  • Peter Feaman, a Florida trial lawyer. He’s also the author of Wake Up America! about the dangers of fundamentalist Islam. Feaman has been active in GOP political circles. He has run for the Florida house and serves as the Republican state committeeman for Palm Beach County. He was a delegate to the 2008 GOP convention.
  • Nina Cunningham, founder of Quidlibet, a legal research consulting firm in Illinois. She has given more than $33,000 to GOP candidates and causes in the past three election cycles, according to the Center for Responsive Politics. She is the Illinois State chair of the Republican Jewish Committee’s women’s committee.

The other two directors were previous identified:

According to the 990, Clarion listed total revenue of nearly $2 million in 2007, about half of which came from direct public support. The contributors are not identified.

The fund’s biggest expense as $610,000 for film promotion and distribution. But Obsession earned Clarion more than $800,000 so the fund actually booked a small profit.

The fund’s distribution costs were much higher in 2008, but we won’t know the details for some time.

Hedge Funds

My piece on hedge funds is up now.

You’ve probably heard about hedge funds. Hedge funds are private pools of money, on the orders of billions of dollars. They are usually secretive. Ten thousand hedge funds are registered in the Cayman Islands. Why are they registered in the Caymans? So they can be secretive and avoid taxes.

Journalists tend to be naturally suspicious of secrecy, but there are good hedge funds. Ones that have a very narrow strategy they pursue. That don’t borrow huge amounts of money, that don’t speculate and drive up the price of oil or drive down the price of Ford, and that generally don’t concentrate on investments that almost nobody understands.

But the bad ones can be really bad. Because they move so much (borrowed) money in and out of the markets, they are blamed for the extreme market gyrations we’ve seen in the past few weeks. They will speculate on anything. The spectacular collapse of Long-Term Capital Management in 1998 had much to do with its bets on volatility itself.

So why do people invest in hedge funds? Well, not everybody does. Minimum investment is $5 million or so. And 20 percent of all profits goes to the fund managers, some of whom earned $1 billion in a single year.

Even with those huge hurdles, hedge funds managed $2 trillion when things were going well. And they did extremely well for their investors.

Those who did invest in hedge funds were sometimes drawn in by the promise of absolute return. That hedge funds will use sophisticated trading techniques and will always make money. No matter what. Long-Term Capital Management was run by a Nobel Prize winner who convinced people that the fund’s mathematical models guaranteed returns. Until they didn’t.

Long-Term Capital Management lost $4.5 billion in nine months in 1998.  The Federal Reserve decided to intervene because it feared the fund’s collapse could trigger a full-blown panic.

Today, 10 years later, there are many more hedge funds.  They have been wildly successful over the past seven years, helped once again by Alan Greenspan’s cherished beliefs in cheap money and unfettered markets. And success is a very bad teacher, as Bill Gates says. Because it seduces smart people into thinking they can’t lose.

Bloomberg reports that hedge fund assets will fall to $1 trillion by mid-2009. Some hedge funds lost quite a bit of money. Quite a few investors cashed out and fled to safety. And if Citigroup is right, we should remain seated because the turbulence is going to with us for some time.

So, I’ll be learning and writing more about hedge funds in the coming weeks. As always, I welcome comments, thoughts, criticisms, and musings, anonymous or not.

More on "Obsession"

My piece last week on the “Obsession: Radical Islam’s War with the West” DVD that was handed out in political swing states a month before the election provoked some interest here and here.rent a car bulgariaТюмень ландшафт The Guardian, based in London, quoted me as saying:

“Clarion was thinking of more creative ways to use newspapers than newspapers were,” Seth Hettena, a reporter who investigated the film for the Columbia Journalism Review, said.

Hettena described the free DVDs as “fall[ing] into a grey area, at the very least”. He cited the timing of the newspaper adverts, their distribution to 14 US states where voters are split on the presidential race, and Clarion’s ability to keep its donors secret under the tax laws.

The Altantic Monthly’s Jeffrey Goldberg said that Aish HaTorah, the group behind “Obsession,” is “just about the most fundamentalist movement in Judaism today.”

I actually have another idea for a film: I would call it “Obsession” as well, but it would be about the poor souls who believe that Obama is a radical Muslim, that Israel has a right to expel Arabs from its lands, and that America should declare war on all of Islam.

Who paid to distribute 22 million copies of “Obsession” via newspaper? We still don’t know.