Pentagon Kills Plan for Terror Futures Market

By Tom Detzel, The Oregonian, Portland, Ore.
Knight Ridder/Tribune Business News

30 July 2003
The Oregonian (KRTBN), Portland

Jul. 30--WASHINGTON--Pentagon officials on Tuesday abruptly scrapped plans 
to open a futures market on Mideast events after outraged senators said 
traders could cash in by predicting coups, terrorist attacks and 
assassinations.

"I'm very pleased that the Defense Department is junking this outlandish, 
garish, immoral idea," said Sen. Ron Wyden of Oregon, one of two Democrats 
who publicized the little-known plan at a news conference a day earlier.

The resulting publicity ignited bipartisan condemnation on Capitol Hill for 
the so-called Policy Analysis Market, conceived as a way to predict 
significant events based on the trades of experts with a direct financial 
stake in the outcome.

Senate Armed Services Chairman John Warner, R-Va., said he was assured the 
program would be canceled after he objected to Anthony Tether, director of 
the Defense Advanced Research Projects Agency, which proposed it.

Separately, Deputy Defense Secretary Paul Wolfowitz told the Senate Foreign 
Relations Committee the program would be killed, even as he defended the 
research agency as sometimes "brilliantly imaginative."

"It sounds like maybe they got too imaginative in this area," Wolfowitz 
said, confiding that he learned of the program only by reading the morning 
papers.

The defense research agency budgeted $8 million over two years to create the 
Web-based market under its Terrorism Information Awareness program, run by 
retired Adm. John Poindexter, former national security adviser to President 
Reagan.

As described by the agency's Web site, 10,000 traders would be invited to 
participate. The market would function like commodity futures markets, but 
instead of pork belly prices, traders would bet on the odds of Mideast events.

Before it was altered Monday, the agency's Web site showed a sample 
"portfolio" of such security events that served as grist for some of the 
most stinging criticism of the program, especially from Democratic senators.

The samples -- "Jordan King Overthrown," "N. Korea Missile Attack" and 
"Arafat Assassinated" -- led critics to charge the program promoted illegal 
activity and to wonder whether it could lead to bets on U.S. terrorist attacks.

Senate Democrats interrupted debate on an energy bill early Tuesday to 
attack the program, complete with visuals captured from the Web site.

"I actually thought it was a hoax," said Senate Minority Leader Tom Daschle, 
D-S.D. "I couldn't believe we would actually commit $8 million to encourage 
investors to bet" on the likelihood of terrorist attacks or assassination.

Sen. Hillary Clinton, D-N.Y. called it "a futures market in death," while 
Sen. Barbara Boxer, D-Calif., said, "I think there is something very sick 
about it."

Republican Sens. Warner, appropriations Chairman Ted Stevens of Alaska and 
intelligence Chairman Pat Roberts of Kansas said at a news conference that 
they would never have supported the program had they known about it.

"This defies common sense. It's absurd," Roberts said.

A spokesman for the defense research agency, John Jennings, declined to 
elaborate beyond a news release saying the program "has been withdrawn."

The program was part of the agency's overall effort to prevent terrorist 
attacks, the release said, contending that similar futures markets have been 
effective at predicting events such as elections results.

Quoting the director, Tether, the news release said the program faced 
"daunting technical and marketing challenges."

"Reconsidering those challenges in light of recent concerns surrounding the 
program, it became clear that it simply did not make sense to continue our 
participation in this effort," Tether said in the release.

The program was to start signing up traders on Friday and begin operating in 
October.

The rapid retreat marked a victory for Wyden and Sen. Byron Dorgan, D-N.D., 
who appeared with Wyden at Monday's news conference and derided the futures 
program as an "unbelievably stupid" idea.

Poindexter was a major figure in the Iran-Contra scandal under Reagan.

His conviction for lying to Congress about illegal arms sales to Iran was 
ultimately reversed because he had immunity when he testified.

Wyden has been a persistent critic of the Terrorism Information Awareness 
program out of concern that it threatens privacy and civil liberties.

In February, he won an amendment requiring congressional approval before the 
agency can carry out plans to mine travel, financial, e-mail and other data 
bases to identify security threats and stop terrorists.

The Senate stripped money for the Terrorism Information Awareness program 
from next year's defense budget, but the House didn't. Wyden said he will 
push to kill the financing when negotiators meet after the summer recess.

The Bush administration had proposed spending $54 million on the program 
through 2005.

"There is an awful lot more to do to rein in this runaway horse that is such 
a wasteful expenditure of tax dollars," Wyden said.

The Associated Press contributed to this report.