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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.


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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25 thoughts on “The secret deal bringing an $11b US intel giant to Melbourne

  1. Kevin & Julie Harris

    Dear Andrew & Bernard

    Julie would like to know where this leaves the Vic and Federal Govts.

    Yes, we know that we have been given assurances by Dizzy Rizzy, that SAIC has not been retained by the latter for any services to the Vic Govt, but was n’t it the Vic Govt that coffed-up the Tax Payers money to invite them here in the first place? But on behalf of who then?

    Now, as i explained to Julie, the issue here is not hyphenated names. Perhaps it should be, because look at this…Richard Dalla-Riva, Gordon Rich-Phillips, Sacks-Davis and that other mysterious fellow, Vernon A Guidry Junior….ok, Vernon’s name is not hyphenated but very convoluting to say the least.

    Sorry boys, but Julie wants to butt-in here.

    Julie: FFSAIC Kevin, will you get to the point.

    Kevin: Get to the point? How can I get to the point when my emails and texts are constantly being scrutinized and my phones been bugged by an Intel organization sponsored by my own state govt.


    Yours Sincerely

    Kevin & Julie Harris

  2. lindsayb

    A US company with ties to their military and intelligence, with convictions for fraud and demonstrated incompetence, developing information systems for our parliament and assisting our government with “cyber security”. What could possibly go wrong?
    With “friends” like these, who needs enemies?

  3. izatso?

    here’s the thing. SAIC. your mother. with spades.that should do it.

  4. kennethrobinson2

    Looks like the stars and stripes will be Australias flag, the turncoate in Canberra, have sold us out. just for the HONOR?? of a pat on the head by Obummer.

  5. Muttonkennedy

    “Hoovered”? With a capital H?

  6. Indiana Jones

    3 things. If they start advertising for Test Subjects, don’t respond. If you work there and they have a “Bring your Daughter to Work Day” chuck a sickie and stay home.

  7. zut alors

    Uh oh, first Darwin now Melbourne, the pincer move which began in Canberra. We’re done, folks – it was nice knowing you, Australia.

  8. Sally Jones

    There’s 2,500 marines in Darwin, as we speak and that’s only the first installment. The Australian government is still dredging the waters between Garden Island and the mainland in WA to make access for even bigger aircraft carriers and nuclear submarines. And now one of the major tentacles of the US Intelligence Services has set up shop in Melbourne. This article is practically a smoking gun and I wonder these days how our elected representatives actually keep a straight face.

  9. scottyea

    Yeah! What did the Americans ever do for us, eh?

  10. Sally Jones

    Like the Romans, they gave us aquaducts. Saw it on the Life of Brian.

  11. izatso?

    NBN …. Asia Pacific Hub…. Cyber Security …… ergo Sol Trujillo’s mates ……. this is gonna be an extremely expensive exercise in experiencing externalization in a big way ….. these Jokers dont do Cheap ……

  12. Sally Jones

    Seriously, was n’t it Bob Carr, the Australian Minister for Foreign Affairs, who once compared the USA to a latter day Roman Empire? It’s true, he said exactly that. I wonder how he ratifies that today given his new position and greater awareness of external and internal security issues.

  13. zut alors

    Sally Jones,

    I believe Carr ‘borrowed’ that comparison from his good pal, Gore Vidal, the US writer/intellectual who wrote a book on the subject.

  14. AR

    Did anyone notice the small item last week of the agreement to remove the 90,000 US troops from Okinawa? Any guesses where they’ll be redeployed?
    The old phrase re “US hemispheric interests – you gotta hemisphere, we’re interested in it!”
    For those with long memories, think back to the Cross in the 60/70 with US troops on R&R from Vietnam.

  15. McBride Glen

    yes, Hoovered because “Hoover” is a proper-noun.

  16. Malcolm Street

    Absolutely frightening. Sounds like a bunch who can be relied on for both conspiracy and c*ck-up. Just who do our governments think they are working for?

    Oh that’s right, our Great and Powerful Friend…

  17. Policeman MacCruiskeen

    Thanks to Crikey for bringing this to attention. Fornicate off Yankee c0cks*ckers. File that comment with the lube, boys.

  18. Julian Fitzgibbon

    Just looked SAIC up on Wikipedia

    “In January 1999, new SAIC consultant Steven Hatfill and his collaborator, SAIC vice president Joseph Soukup, commissioned William C. Patrick (a retired leading figure in the old U.S. bioweapons program) to report on the possibilities of terrorist anthrax mailings in the United States. (There had been a spate of hoax anthrax mailings in the previous two years.) Barbara Hatch Rosenberg said that the report was commissioned “under a CIA contract to SAIC”. However, SAIC said Hatfill and Soukup commissioned it internally—there was no outside client.

    Patrick produced his 28-page report in February 1999. Some subsequently saw it as a “blueprint” for the 2001 anthrax attacks. The report suggested the maximum amount of anthrax powder—2.5 grams—that could be put in an envelope without producing a suspicious bulge. This was just a little more than the actual amounts—2 grams each—in the letters sent to Senators Tom Daschle and Patrick Leahy. But the report also suggested that a terrorist might produce a spore concentration of 50 billion spores per gram. This was only one-twentieth of the actual concentration—1 trillion spores per gram—in the letters sent to the senators.[8]”

    Well, this is going to be a significant advantage in the Sydney-Melbourne wars!!!

  19. Simon Mansfield

    AR – the way things are in Asia at the moment – the US could auction off the rights to host the 90,000 troops from southern Japan and be over subscribed 10 times. The Philippines, South Korea, Taiwan would all happily take them. The only friends China currently has left in Asia – are Cambodia and Laos and I guess a few downunder – such as Clive Palmer and Joe Hockey.

    The US troops from southern Japan won’t be coming to Australia as it’s too far from the main area of engagement. Currently they are meant to be going to Guam. But in reality they will probably stay in Japan as Tokyo really does not want them to leave.

    BTW – the Japanese taxpayer pays a pretty penny for hosting them – which is about the only real reason they would ever agree to letting them be moved out of Japan. Otherwise the geopolitics of Asia today is very very different to what it was 20 years ago, and most east Asian countries are more than happy to host US military bases. Just wait for Vietnam to do a deal with the US during Obama’s second term. They’ll probably have a virtual US naval base back there by 2015.

  20. AR

    SimonM – interesting PoV. And thanks for the research on SAIC.

  21. Glenn Brandham

    I find it hilarious that SAIC, Stratfor and the galaxy of private spy organisations could exist and yet not one of them could un-cover the Al Qaida threat to the twin towers, nor could they find Bin Laden for 10 years. What exactly do they provide to the community? It can’t be security…can it?

  22. kennethrobinson2

    Spot on, in 1968, their ancestors, informed us that they thought that the Viet Cong, were going to break the TET, truce, they with all their whizbangs, didnt know that uncle Ho had placed over onehundred thousand North Vietnamese regular troops, in the South, waiting for the order to attack, SUPRISE, SUPRISE, I certainly was suprised when they hit.
    So much for these so called INTELLIGENCE types!!!

  23. zut alors

    Kenneth and Glenn,

    Not to overlook the fall of the Berlin Wall or the dissembling of the USSR, the US ‘intelligence’ didn’t have a clue on either of those. For the sake of their intelligence agents let’s hope their salaries aren’t results-based otherwise they would be living in penury.

  24. Glenn Brandham

    In the UK, these same sorts of organisations are the tools of choice for media moguls ala rupert murdoch, my questions are, do we, as citizens of Australia have any protection from these organisations or are we the grist for the mill? Does each trip to Victoria come complete with a detailed dossier of your movements and conversations as well as expentitures? You know, the sort of information detailed exquisitely by Martin Hickman and Tom Watson in their book, Dial M for Murdoch. Is Australia the last resort for exploitation by murdoch and others like him? The UK is opening itself up to 12 separate inquiries into phone hacking, illegal data retrieval and assorted other spying practises by murdoch’s News International. It seems that the pollies are aligning themselves with the outraged population and will move to strengthen privacy laws in the UK. So why are these organisations being permitted to set up shop over here? Having read that book, I can tell you that at no time did Stratfor nor SAIC, nor any other of that galaxy I mentioned earlier, ever un-cover any wrong doing by News International, ever. Wow, aren’t they on the cutting edge???

  25. AR

    Zut, ken & Glenn – back in the daze of antiwar & hippies 60-70s, it was always a great comfort to know how inept the alphabet soup agencies were.
    Pity that cretinous incompetence extended to doing… you know… real stuff of some worth to the community paying their salaries.


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