Pentagon ditches 'terror futures market'. By PETER SPIEGEL, DEFENCE CORRESPONDENT. 29 July 2003, Financial Times (FT.Com) 30 July 2003, Financial Times, 1 SUMMARY: The Pentagon is abandoning plans to set up an online futures exchange that would have allowed traders to bet on terrorist activities The Pentagon will abandon a controversial plan to set up an online futures exchange that would have allowed traders to place bets on forthcoming terrorist activities, Paul Wolfowitz, the deputy defence secretary, said on Tuesday. The decision was made after John Warner, the powerful Republican chairman of the Senate armed services committee, phoned the director of the Defense Advanced Research Projects Agency (Darpa), the Pentagon's cutting-edge research laboratory, to complain. Mr Warner and Tony Tether, Darpa's director, "mutually agreed that this thing should be stopped", Mr Warner said. The futures market - which critics said was under the control of the Pentagon's information awareness office, headed by retired admiral John Poindexter - would have allowed speculators to buy futures on potential attacks and other destabilising events, such as assassinations, through internet accounts. The programme would have focused at first on the Middle East. Two Democratic senators discovered the futures market proposal and sent a letter of complaint to Mr Poindexter on Monday. Darpa officials had believed the so-called Policy Analysis Market would help raise information on potential attacks, since similar markets, including the oil futures trade, have proved efficient in predicting regional events. In a report to Congress, its developers discussed "market-based techniques for avoiding surprise and predicting future events". But congressional critics, who publicised the obscure programme this week, called on the Bush administration to disavow the plan and apologise to the families of Americans killed on September 11 2001. "This programme could provide an incentive actually to commit acts of terrorism," Tom Daschle, the Senate Democratic leader, said yesterday. Mr Warner said he spoke to Mr Tether yesterday morning. Mr Tether reportedly told the senator that the Pentagon agency "didn't think through the full ramifications of the programme". Mr Wolfowitz said he learned of the programme only through media reports and he did not support it. "The agency that set this up can be very imaginative when we want them to be," he said, referring to Darpa. "It sounds like they got too imaginative in this area." Besides Darpa, the organisations helping to set up the exchange, which would have begun registering traders tomorrow and become active on October 1, were Net Exchange, which specialises in electronic markets, and the Economist Intelligence Unit, which is owned by the Economist Group. The Financial Times owns half of the Economist Group. Although the administration agreed to shut the exchange, some senators said the Pentagon should dismiss the officials who came up with the idea. "There is something very sick about this," said Barbara Boxer, a California Democrat. Mr Poindexter is himself a controversial figure. He served as national security adviser during the 1980s, when the Iran-Contra scandal hit the Reagan administration. He was convicted in 1986 for his role in the arms-for-hostages deal, but the conviction was overturned. Since returning to the Pentagon he has headed a new surveillance group, the Information Awareness Office, designed to set up a computer database that would track suspect individuals. In their Monday letter to Mr Poindexter, Ron Wyden of Oregon and Byron Dorgan of North Dakota, the two Democratic senators who uncovered the plan, called it a "wasteful and absurd use of taxpayer dollars". Additional reporting by the Associated Press, Washington. --------------------------------------------------------------- Terror futures ditched. ftft000020030730dz7u000cg 38 Words English (c) 2003 The Financial Times Limited. All rights reserved London Edition 1.