All bets off as terror exchange is scrapped. By Amanda Harvey and James Robinson. 03 August 2003 The Express on Sunday 3 ITSOUNDS like a far-fetched storyline from a Hollywood movie: A former member of the US government comes up with a plan that allows punters to place bets on terrorist activity. The Pentagon backs the idea, believing it will help it discover where the next terrorist attack could take place. The Bush administration funds the venture but is forced to pull it at the last minute after opposition politicians accuse it of setting up "a market in death". But this is no off-the-wall Hollywood script. The former US government member is Admiral John Poindexter, national security adviser to former President Ronald Reagan. The system he devised is the "policy analysis market" - or PAM, to use its more sexy acronym - and the idea was just days from fruition when furious Democrat politicians, including Hillary Clinton, forced the Bush administration to abandon it. Poindexter was convicted for his role in the 1980s Iran-Contra scandal, although his conviction was later quashed. He also spearheaded a Pentagon programme set up to collect information about potential terror threats by forcing companies to reveal confidential information about their customers; such as flight details or bank statements. That idea has also run into problems because it contravenes America's privacy laws. The PAM website is now a blank page but early last week it contained a detailed explanation of how it hoped to apply the principals of the market to the shady and unpredictable worlds of intelligence and counter-espionage. The logic behind the idea is not as crazy as it first sounds. If people were able to bet on the likelihood of a September 11-style attack taking place in Chicago, or on the chance of Yasser Arafat being assassinated next week, then terrorists with inside information might be tempted to use their knowledge to win huge sums. Although the payouts might seem tasteless, the market would provide the intelligence community with invaluable information. A sudden surge of bets on a particular event could alert the authorities to a forthcoming terrorist attack. That information alone might not be enough to warrant immediate action but it could help the authorities to make better sense of the huge amount of information they receive every day. If it tallied with intelligence gathered by CIA agents on the ground, it may even prevent the next September 11. Ultimately, argue PAM's inventors, it could thwart terrorist attacks and save hundreds - if not thousands - of civilian lives. The US government is already offering huge rewards for information leading to the arrest of members of Saddam Hussein's regime - a policy that proved spectacularly successful last month when Saddam's sons Uday and Qusay were killed. But PAM could lead to the unedifying spectacle of a market, backed by the US government, offering odds on the chances of a major ally being attacked or killed. Before it was hastily removed last week, the PAM website featured sample bets, including one on Yasser Arafat's assassination. PAM is the latest idea dreamt up by the Terrorism Information Awareness office (TIA), a subsidiary of the Pentagon's Defense Advanced Research Projects Agency. TIA was charged with coming up with new ways of identifying potential terrorist threats in the wake of September 11. Its efforts to think "outside the box" came close to causing a diplomatic row between the US and Jordan last week. One of the sample bets on the PAM website described how traders would be invited to bet on Jordan's king being deposed, prompting its government to condemn the idea as "ludicrous". Soon after, deputy defence secretary Paul Wolfowitz announced the plan had been "terminated". Futures experts doubt PAM would have been effective if it had been allowed to proceed. One said: "Apart from the fact it is in bad taste, I don't think it would have been an effective mechanism for predictions anyway. "To draw clear predictions from the futures market, you need a clear demographic profile of the people [who are placing bets], such as their profession, age, sex and nationality. You need detailed information to produce sufficient predictions." Since some intelligence sources are more reliable than others, it is difficult to use betting patterns to determine where an attack might take place without knowing who is putting the money on and why. Since many of the people trading on PAM would presumably have terrorist connections, the idea they would willingly hand over their home telephone numbers to the CIA is a fanciful one - even by Hollywood's standards.