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VIC

May 1, 2012

The secret deal bringing an $11b US intel giant to Melbourne

The Victorian government won't reveal the amount of taxpayer funds spent on the set-up of a shadowy US military-linked intelligence operation in the heart of Melbourne. Andrew Crook and Bernard Keane report.

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The Victorian government has refused to reveal the amount of taxpayer funds spent on the set-up of a shadowy US military-linked intelligence operation in the heart of the Melbourne CBD.

A secret deal was hatched last month to expand the Australian footprint of the massive Science Applications International Corporation (SAIC), which rakes in $11 billion each year in revenue in its role as the private information arm of the US government.

An opaque press release issued by Ted Baillieu’s government two weeks ago — unreported by the mainstream media — stated only that the centre, employing 50 people, would “focus on global challenges in national security, energy and environment, health and cyber security” to protect the state from “cyber attacks”. Researchers in the Melbourne “will conduct advanced research in data mining and analysis systems”.

But the state government has refused to be drawn on the amount of support gifted to SAIC, telling Crikey only that the arrangements were “commercial in confidence”. Follow-up questions directed at ministers Richard Dalla-Riva and Gordon Rich-Phillips asking exactly what “data” SAIC planned to “mine” were ignored.

SAIC — the subject of a damning 2007 Vanity Fair article — is at the heart of the US military industrial complex. According to its 2011 annual report, the Fortune 500 firm, established in 1969, boasts more than 43,000 global employees and made close to a billion dollars on $11 billion in revenue last financial year, 70% of which was Hoovered from the pockets of American taxpayers.

It has also done very nicely from Australian taxpayers, too. Over the past three years SAIC has scored more than $4 million in contracts with Defence, Customs and the parliament — it was responsible, for example, for the decidedly clunky new parliamentary information system introduced in 2010.

SAIC has a long and controversial history as one of the most important players in the US security state. Its executives and board members regularly move between SAIC and key US military and intelligence positions. The company is a repeat participant in some of the most significant procurement debacles of recent years. Its highest-profile moments include:

  • It was a key advocate for war against Iraq on the basis of Saddam Hussein’s weapons of mass destruction; when no WMDs were found, SAIC helped staff the commission investigating the intelligence failure.
  • It won a contract to house, pay and then fly to Iraq about 150 Iraqi exiles hand-picked by Bush undersecretary for defence Douglas Feith, whose deputy was a former SAIC employee, to parachute them into the new Iraqi government.
  • In 1995 SAIC was fined over $US2 million for failing to produce a display screen system for fighter jets, after faking a prototype to show to Defence officials.
  • In 2006, a SAIC data project, Trailblazer, for the National Security Agency was cancelled after going several hundred million dollars over budget. An NSA whistleblower, Thomas Drake, who  revealed the extent of the debacle, was later prosecuted by the Obama administration, before charges were dropped amid intense criticism of the US government.
  • In 2005 the FBI wrote off over $US100 million on the “Virtual Case File” data management system developed by SAIC.
  •  SAIC didn’t complete the security system it was contracted to provide the Greek government for the 2004 Athens Olympics until 2008, almost in time for the Beijing Olympics.
  • The company has a long list of false claims and misconduct allegations against it over federal tenders, many of which it settled to avoid prosecution.
  • Most spectacularly of all, in March, SAIC agreed to repay $US500 million (yes, half a billion dollars) to New York City after what the company CEO admitted was criminal behaviour by employees on a contract.

These are only the most egregious examples of a long history of claims of misconduct against the company, ranging from the hundreds of millions of dollars down to employees using Wikipedia to attack the ACLU.

Crikey paid a visit to SAIC’s 91 William Street headquarters yesterday (there is no listed phone number), an office in the middle stages of set-up populated by what would charitably be described as a gaggle of IT coding nerds. The professional fit-out includes an impressive logo artifice in the foyer with workstations equipped for rapid deployment.

The bunker is being headed by veteran SAIC operative and former Maryland political candidate Steven Rizzi. Two SAIC business cards picked up from the foyer show that former RMIT Professor Ron Sacks-Davis is a “director” of the company. In 2006 RMIT sold its affiliated research centre InQuiron — of which Sacks-Davis was the principal — to SAIC. TeraText technology was then adopted for use by American “national security agencies”. Another employee, Philip Anderson, was a Pennsylvania-based SAIC software engineer before his relocation to Melbourne.

SAIC has had a below-the-radar presence in Australia since the mid-1990s and also maintains an outpost at 112 Bloomfield Street in the Brisbane suburb of Cleveland. It or its subsidiaries have offices in more than 140 cities worldwide. But last month’s announcement represents an unprecedented Antipodean expansion.

While the government stayed mum, Crikey understands that SAIC was given close advice by the Victorian and federal governments in how to effectively exploit research and development tax credits. Many of the firm’s technical staff are believed to have been poached from local universities. Under the government’s R&D tax offset, US firms are able to operate with a tax burden 88% less than if those same activities were being carried out stateside.SAIC has already spread its tentacles into the inner-most reaches of the federal government, recently producing the “news filtering application” based on Sacks-Davis’ TeraText for the federal Parliamentary Library, according to literature picked up at the SAIC office. A sample query illustrates how MPs and staffers can dig up the latest intel on climate change activists.

Greens communications spokesman Scott Ludlam told Crikey that “the real concern was the degree to which the tools and technology of counter-terrorism are now being turned on civil society organisations”.

“So at its most extreme, if you read the WikiLeaks emails from Stratfor, these private surveillance and intelligence outlets now deal with climate demonstrators, journalists and civil society with much the same attitude as they do with al-Qaeda and terrorist networks … I think you’ve got to question the judgment of the Victorian government to invite this outfit in given what’s in the public domain about their record. It makes for queasy reading and now their talents are going to be turned on the Victorian population,” Ludlam said.

Ludlam recently probed the activities of the secretive National Open Source Intelligence Centre, which has been monitoring the activities of climate activists in a “creepy” arrangement with the Australian Federal Police.

And last year, the House of Representatives passed a controversial Cybercrime Security Bill that allows the government to pry into personal emails, text messages and chat sessions. Last financial year, 250,000 requests were made by state and federal authorities (excluding ASIO) to intercept telecommunications devices.

A US-based SAIC spokesman, Vernon A Guidry Jnr, released a statement overnight explaining that SAIC “was a responsible company performing successfully every day on thousands of contracts for federal, state and local governments in the United States and for customers around the world”. Guidry defended the disastrous CityTime system, but admitted that “over time the program became a vehicle for fraud involving two former employees”:

“SAIC accepted responsibility, held managers accountable, reached a settlement with the City of New York, and made extensive process improvements in the company to ensure that there will not be a recurrence of CityTime.”

Rizzi lists himself as a “conservative Democrat” who ran for the Maryland house of delegates in 2002 in a majority-white district outside of Annapolis. He was rolled by two Republicans for the state seat, despite receiving formal endorsement from the Baltimore Sun.

He told Crikey this morning that “SAIC has not been retained by the Victorian government to deliver any cyber security-related products or services for the state of Victoria. Hopefully that clarifies the other questions that you had.”

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