Pentagon market in terror crashes

Lawrence M. O'Rourke
News & Observer Washington Bureau

30 July 2003
The News & Observer
A1

WASHINGTON -- Before the first bets were placed, the Pentagon on Tuesday 
abruptly killed its stock market-style plan to have investors sink dollars 
into predicting events such as assassinations, terrorist strikes and coups.

"It is being terminated," Deputy Defense Secretary Paul Wolfowitz announced 
as he appeared on Capitol Hill in front of senators ready to pounce on a 
Pentagon scheme that seemed to have shot its sponsors in the foot.

The plan called for creation of a futures trading market in which an initial 
group of 1,000 speculators would place bets through the Internet.

Under the Pentagon's auspices, the speculators would gamble on the chances 
and timing of terrorist attacks and assassinations of leaders such as King 
Abdullah of Jordan and Palestinian Authority Chairman Yasser Arafat.

If the plan had not been ended before it got started, participants might 
have been able to predict dates for nuclear war with North Korea or 
cataclysmic political events in Russia, China, Syria, Turkey or other places 
where the United States has strategic interests. The Pentagon told Congress 
that it was looking for predictions on whether Israel would be attacked with 
biological weapons.

Strategic retreat

The quick capitulation announcement by Wolfowitz came as Republican and 
Democratic senators lined up against the plan.

"This should be completely disestablished," said Sen. Ted Stevens, R-Alaska.

"This is just wrong," said Senate Minority Leader Tom Daschle, D-S.D., 
describing the plan as "an incentive to commit acts of terrorism."

Appearing on Tuesday before the Senate Armed Services Committee, Wolfowitz, 
the No. 2 official at the Pentagon, did not disagree with any of the hostile 
characterizations by senators.

Wolfowitz said the first he heard of the plan was when he read about it in 
the newspaper Tuesday during his car ride to Capitol Hill.

Making every effort to dissociate himself from the plan, Wolfowitz told 
senators, "I share your shock at this kind of program."

The Pentagon explained the plan as its latest effort to predict new acts of 
terrorism and to help the United States prepare for them.

Using acronyms that the Pentagon has made an art form, DARPA -- the Defense 
Advanced Research Projects Agency -- dubbed its tout board as FutureMAP, for 
Futures Markets Applied to Prediction. It could be found Tuesday on the 
Internet at www.darpa.mil/iao/FutureMap.htm.

DARPA statements said the betting scheme needed to remain "attractive enough 
to ensure full and continuous participation of individual parties ... [and] 
must also be sufficiently robust to withstand manipulation."

The DARPA Web site said that a private market futures scheme in which 
investors bet real money was a more accurate predictor of terrorism than 
U.S. intelligence analysts and think tanks.

Through the program, traders would have been able to buy and sell futures 
contracts on horrendous events.

If an event came true, those who predicted it and put money behind their 
gamble would have collected the proceeds from the Pentagon. The winnings 
would have been proceeds from those who guessed wrong.

Although the Web site did not put a limit on how much a participant could 
gamble, it said participants would be motivated to make accurate predictions 
by "prospect of profit" and "pain of loss." Trading was to begin Oct. 1.

Immediate outrage

"Can you imagine if another country set up a betting parlor so that people 
would bet on the assassination of an American political figure or the 
overthrow of this institution or that institution?" asked Sen. Byron Dorgan, 
D-N.D.

Dorgan and Sen. Ron Wyden, D-Ore., were among the first lawmakers to 
disclose the plan and oppose it. "The idea of a federal betting parlor on 
atrocities is ridiculous, and it's grotesque," Wyden said.

The Pentagon had spent $600,000 to develop the program and planned to spend 
more, Wyden said. He said the Pentagon requested $3 million for the program 
next year and $12 million for the following year.

Although the Pentagon did not publicly announce the main patron of the plan, 
it was reported to be retired Navy Adm. John Poindexter.

Poindexter was chosen by President Bush to head the Pentagon's Terrorism 
Information Program, a unit of the Defense Advanced Research Projects Agency.

Poindexter was national security adviser to President Reagan in the 1980s 
when the United States offered to sell weapons to Iran in exchange for a 
secret cash flow to the anti-Sandinista rebels in Nicaragua.