July 28, 2003 Monday

LOCATION: WASHINGTON, D.C.
 
SENATORS RON WYDEN AND BYRON DORGAN HOLD NEWS CONFERENCE ON A
TERROR FINANCING SCHEME
 
JULY 28, 2003
 
SPEAKERS: U.S. SENATOR RON WYDEN (D-OR)
U.S. SENATOR BYRON DORGAN (D-ND)
 
DORGAN: Ladies and gentlemen, first of all, thanks for being here. 
Senator Wyden and I, over the past six months or so, have been working 
on a project that the two of us created to take a look at government waste.

And it's sort of an ad hoc project just for the two of us. And we did 
it because we both believe very strongly in the possibilities of 
government. We believe that government does a lot of wonderful, good 
things that improves people's lives. 

But we also know that it is a big bureaucracy. The federal government 
is a big, unwielded bureaucracy. And from time to time you run across 
areas of government waste. And we've been trying to target some of those areas.

And so, on that note, we have discovered something that is going on at 
the Department of Defense, a relatively small program run by Admiral 
Poindexter that is almost unbelievable. In fact, when you describe it 
to people, they say, "Well this can't be the truth. I mean, obviously 
this can't be going on." But in fact it is.

And let me describe it to you briefly and then have my colleague, 
Senator Wyden, describe it as well.

In three days there will become operative on the Internet, stemming 
from the site of DARPA in the Department of Defense, something called 
the futures market. It's a futures market to predict future events in 
the Middle East. And the basis of it is apparently the Department of 
Defense believes, as they say -- you'll read this when you go to the 
Web site -- they believe that having the market system, people in the 
market system betting or buying and selling futures contracts, they 
will be able to develop information about what might or might not 
happen in the Middle East in the future.

So they're going to develop a program, and that program will buy and 
sell with individual investors futures contracts on a wide range of 
issues. And this is effectively a plan to bet on what might or might 
not happen in the Middle East.

This betting parlor on the Internet will include wagers, for example, 
as the examples on the Internet site put up by the Department of 
Defense, would include: Will Mr. Arafat be assassinated? Will there be 
missile attacks from North Korea? Will the king of Jordan be 
overthrown -- just as an example?

And it will become effectively an Internet casino so that individual 
investors can make bets on future events in the Middle East. And those 
predictive bets will then give intelligence presumably to the 
Department of Defense.

I think this is unbelievably stupid. It's not only -- that is a gentle 
thing to say about a program that is so devoid of value. It combines 
the worst of all of our instincts, in my judgment. It is a tragic 
waste of taxpayers' money. It will be offensive to almost everyone.

Can you imagine if another country set up a betting parlor so that 
people could go in -- and is sponsored by the government itself -- 
people could go in and bet on the assassination of an American 
political figure, or the overthrow of this institution or that 
institution? It is terribly wasteful in terms of wasting money. It is 
offensive. And it is, in my judgment, nearly useless.

Let me just, in a couple of seconds, tell you that we have Internet 
sites -- and this is now on the Internet and you're welcome to go to 
it. And this site is DARPA, which is a Department of Defense agency, 
and what they have is this -- they have this chart. It says 
"predicting hostilities." And you can see on this chart that they say 
the market method of predicting hostilities is the best method, much 
better than analysis reports, which I assume represents the CIA and 
traditional intelligence-gathering.

DORGAN: And if you go to the next page, you'll discover the -- the 
next page is the policy analysis market. It's called PAM. And this is 
what they're creating. And PAM, you'll see it has an example of 
special-event security on which futures markets would be established 
and futures contracts traded. And we'll show you -- that chart shows 
you what this is saying on this site. And you'll see "King Jordan 
overthrown," "North Korea missile attack," "U.S. recognizes 
Palestine," "Arafat assassinated" -- these would be examples of what 
would be bet on.

Because although they call it futures, and you go to the Web site, 
you'll see they're talking about a futures market. Futures markets 
almost always deal with a commodity -- corn, wheat, sow bellies. No 
commodity here. This is betting.

And so, let me again say that I find this a tragic waste of the 
taxpayers' money. But more than that, I think it's offensive, and I 
think the Defense Department ought to stop it. Senator Wyden and I 
have written them a letter saying, "Stop this, and if you don't stop 
it we intend to try to stop it in the appropriations process."

Let me call on my colleague Senator Wyden.

WYDEN: Well, Byron, thank you.

And just to pick up for a minute, I mean, the idea of a federal 
betting parlor on atrocities and terrorism is ridiculous and it's 
grotesque. It's a bizarre plan that we are describing today, and it is 
one that fritters away hard-earned dollars of our taxpayers, and it 
needs to be stopped immediately.

Although this program, when you look on the Web site, is hidden behind 
language like, quote, "using market-based techniques for avoiding 
surprise," unquote, the program's intent is clear. The federal 
government is encouraging people to bet on and make money from 
atrocities and terrorist attacks.

Now I sit on the Senate Intelligence Committee, and I can tell you 
without a doubt that there are real security threats to America that 
require a real response. But betting on bioweapons attacks isn't going 
to make America safer. And it's particularly true when you go to the 
Web site and you see that just about anybody can participate in this sick game.

The policy analysis market Web site -- and this is an important point 
-- says that all you have to do to become a trader is to create a user 
name and put your money down. So it seems that terrorists even may be 
able to be protected as they play.

The Web site assures bettors that DARPA is not going to have access to 
their identities or their funds. So we don't know the details. Maybe 
somebody else is going to get it, but it's not evident here.

So the question is: Why wouldn't terrorists just hop online and start 
betting if they couldn't either mislead American authorities about 
their plans or make money to fund more Al Qaida operations?

The Web site talks of having 10,000 traders by next January. You don't 
get the sense in this country that there are 10,000 experts on the 
Middle East at this point. And I'll tell you, as a member of the 
Intelligence Committee, I'm pretty concerned when you consider who 
some of those 10,000 traders might be.

Now DARPA says the project can save lives based on research in other 
fields, showing that markets can help to predict the future. But the 
evidence with respect to predicting the future by constructing markets 
is pretty sketchy at best. And getting into some kind of academic 
discourse misses the central point.

WYDEN: The two of us believe that betting on terrorism is morally wrong.

Now the 9/11 report last week proved that the basics of communications 
and follow-through ought to be the country's primary weapon against 
terrorism, that this country has a long way to go in getting the 
basics down. And as far as we're concerned, we ought to get out the 
basics before we start going after these fictional scenarios.

Now I realize that this is the Defense Department, the 9/11 report 
dealt with the intelligence community. But the real question is: 
What's a good way to use taxpayer's money? And creating office pools 
on atrocities that might help fund Al Qaida, and if terror has been on 
events that they know will happen and profit when they do, seems to us 
to be as wasteful as it is morally repugnant.

Now many of you that for many months now I have been trying to fight 
the excesses of the Total Information Awareness Program. I wrote the 
law that now stipulates that the program can't go forward without 
congressional approval. But frankly, this program shows that DARPA 
still doesn't get the message behind the law that I wrote. And it's 
time now to de-fund this program.

Senator Dorgan and I are moving today, first, because registration for 
this program will start in a few days. In a few days people can start 
actually registering for this program. It's designed to begin in the 
fall. And the two of us want -- because the Senate would de-fund this 
program, the House would not in the defense bill -- the two of us want 
to finally put the nail on the coffin of this ridiculous program. And 
the government ought to spend its tax dollars on concrete steps to 
find terrorism, not these pie-in-the-sky predictive scenarios.

And I have met with the people at DARPA, Mr. Poindexter's boss, now on 
several occasions. I have tried to caution them with respect to some 
of these outlandish proposals. They do not seem to get the message. 
And that is why Senator Dorgan and I, as part of our effort to root 
out waste, thought it was particularly important to alert people to a 
program that is just about as wrong headed as anything I have seen in 
my time in public service.

DORGAN: Ron, let me make one additional point. I serve on the Defense 
Appropriations Subcommittee. I have a great deal of admiration for the 
Department of Defense and the men and women who work there, and they 
do some very important things for our country. But it is the case, in 
my judgment, that this particular issue is a hair-brained scheme that 
is both wasteful, useless and offensive. And we need to stop it, in my 
judgment.

We'd be happy to entertain questions.

QUESTION: (OFF-MIKE)

WYDEN: Here's the state of the financing up till this point. Let me 
give you the exact number.

So far DARPA has spent $600,000 on the policy analysis market -- 
that's the PAM market. And they plan to spend $149,000, just about 
$150,000 more.

But what particularly concerns us is the president has proposed 
spending $3 million to continue Future MAP in the 2004 fiscal year, $5 
million in 2005. So money has been spent already in an effort to get 
the program off the ground.

But Senator Dorgan and I felt it was particularly important to trial 
to de-rail the program now because there is a request pending for $8 
million for the next two fiscal years.

QUESTION: (OFF-MIKE)

WYDEN: Well, let me kind of walk you through an example of really how 
this, you know, could work. And understand that they haven't laid out 
the details on this.

WYDEN: So it's basically if you believe an event is going to happen -- 
say, the assassination of a certain head of state -- then you buy 
futures on that event. The price of the futures contract goes up as 
the interest goes up.

For instance, you may think early on that Prime Minister X is going to 
be assassinated, so you buy the futures contracts for five cents each. 
As more people begin to think the person's going to be assassinated, 
the cost of the contract could go up to 50 cents.

The payoff if he's assassinated is a dollar per future. So if it comes 
to pass, and those who bought at 5 cents make 95 cents. Those who 
bought at 50 cents make 50 cents.

Now, we don't have all of the details here. But the bottom line on 
futures contracts is something that we know a fair amount about. And 
that is that the losers fund the winners.

Now, we're not saying here today that we can say that every trade is 
going to make an enormous amount of money. But clearly this is morally 
wrong. It's time for the federal government to draw a bright line and 
say that as we fight terrorism, let's deal with real events.

And 9/11 report shows that we aren't doing that well on the 
fundamentals. The 9/11 report -- as some of you heard from me -- 
indicated that some of our agencies weren't even reading what was in 
their files about hard evidence that we know. Let's go after that 
rather than get down this outlandish world of futures markets.

DORGAN: And I think we may have passed out a sheet that's from the Web 
site. If you go to your packets, that sheet describes the information 
on the Web site about how they envision this would work. We don't know 
all of the details, but we know enough -- having gone to the Web site 
that is published by DARPA, we know enough about how they intended to work.

So in three days sign-up starts for those who want to be engaged in 
trading. On October 1st, live trading begins. And they intend to have 
up to 10,000 traders. But I would just encourage anybody to go to 
their Web site and take a look at it.

QUESTION: (OFF-MIKE) do they expect (inaudible) businesses? Is it 
active policy analysts? And who did you talk to at DARPA (inaudible)?

WYDEN: I've had a briefing with respect to the overall programs that 
they had been doing. But we are basing today's statement on the Web site alone.

Now, the policy analysis markup Web site specifically says that DARPA 
is going to have no access to bidders' identities or their funds. 
That's their Web site. So clearly that would give the terrorists a 
pretty big wall to hide behind and to come on and bid on events that 
they know are going to happen. And we don't think it's appropriate to 
give them a chance to do that.

Now DARPA may come back and say that that's not their intent, they 
want to limit this to experts or something of that nature. That's not 
what their Web site says. Their Web site throws this open.

DORGAN: And let me just make one other point if I might.

You know, look, Jordan has been a pretty consistent ally of ours. How 
would you feel if you were the king of Jordan and learned that the 
Department of Defense and the United States is creating an online 
betting casino of sorts on futures contracts about whether or not 
you'll be overthrown in the next year? Or at least that's what they 
use as the example on their Web site. It seems to me its horribly offensive.

But even more importantly, you know, on the eve of receiving the 
report on 9/11 and the issues about our intelligence in this country, 
it seems to me that we ought to be deciding that we want to have the 
best intelligence capabilities in the world. And that doesn't come 
from creating this kind of online betting using market system and 
market-driven intelligence. It just does not improve our intelligence 
at all and in my judgment, detracts from what we really ought to be doing.

WYDEN: And if anybody has information, insider information that a 
terror attack is about to take place, then we think they ought to 
contact the FBI and our authorities rather than buying thousands of 
future contracts in order to profit from their knowledge. It's a 
question of whether you think this makes sense for the government to 
use its money.

QUESTION: (OFF-MIKE)

WYDEN: No, on their Web site you see the instructions. We put it in 
the materials we gave you. But with respect to how you get into this, 
all you've got to do is pick a user name and put your money down. When 
you look at the Web site -- it's in the materials we gave you -- there 
is no restriction in terms of who can participate.

QUESTION: (OFF-MIKE)

WYDEN: All we know is what's on their Web site. And on their Web site 
they say put your user name out there, and you're in.

QUESTION: (OFF-MIKE)

DORGAN: For every contract there's going to be a winner and loser 
because there's going to be both sides on a contract.

We use the term futures because that's what's on the Web site. Futures 
almost always relates to commodity trading in this country. There's no 
commodity here. It is simply wagering. It's no more complicated than 
that. It is wagering on future events in the Middle East.

WYDEN: Losers fund winners. I mean this is a basic sort of futures, 
you know, 101. And I guess the first day if somebody makes a bet that 
somebody's going to get assassinated and somebody makes a bet that 
they're not going to get assassinated and the person does get 
assassinated, the loser pays off.

QUESTION: (OFF-MIKE)

WYDEN: Well, let you talk to them. But I can tell you from my briefing 
generally, with respect to DARPA -- and why I have fought this program 
so aggressively over the last few months, and Senator Dorgan and a 
number of colleagues have helped -- they have this notion about the 
predictive capabilities of intelligence. And at some point you get the 
sense, as you listen to these, that they'd almost be open to 
collectively turning large groups of Americans upside down from the 
ankles and kind of shaking them to see if something falls out.

Well, I guess you could possibly try to go about the 
intelligence-gathering business in that way. We think it's absurd. We 
think when you look at what happened in 9/11, where you had all of 
this information on all of these specific individuals, that you ought 
to go on the basis of real evidence from the real world.

WYDEN: I mean, think about the Mohamed Atta situation. This fellow 
came in contact with scores of government agencies. He tried to learn 
how to turn an airplane in midair and force the plane down at the 
flight instruction school and got out of the airplane while it was running.

There's real evidence to work with. And I think the difference of 
opinion we have with the crowd up at DARPA is that they have these 
ideas about markets and predictive capabilities which are more a 
fantasy land then the reality of hard intelligence gathering.

QUESTION: (OFF-MIKE)

DORGAN: That's not our -- our intention is not that.

QUESTION: (OFF-MIKE)

DORGAN: Right, but that...

QUESTION: (OFF-MIKE)

DORGAN: We don't know where the bank is. What we are saying is, this 
is a Pentagon-initiated and sponsored activity, the policy analysis 
markets coming out of DARPA. We don't know the details. Who would hold 
the money? Where would be the clearinghouse?

We do know that this is created by the Pentagon, and we know that the 
purpose of buying and selling wagers, in effect, on future acts in the 
Middle East is nothing more than just that, wagering or gambling.

Look, on the details, you really need to go talk to DARPA, because 
three days from now you can send your name in and begin signing up. 
And if you're one of the 10,000 that they have on January 1, I mean, 
you'll be a trader. So then you can figure out from DARPA exactly what 
the details are.

WYDEN: The government is not paying the actual person...

DORGAN: Absolutely not.

WYDEN: ... who wins. I want to be clear on that. At least we don't 
have any evidence that the government is doing that. The loser funds 
the winner, just like any traditional bets. Let's say they start this 
program and, you know, two people bet that the guy's going to get 
assassinated. One person bets that, you know, he doesn't get 
assassinated. Depending on what happens, the loser funds the winner.

What the government is doing is making it possible for this kind of 
program to go forward.

And suffice it to say, I think we all know it is not a difficult thing 
today to transact market business on the Internet. You're going to 
have to ask them more of the details with respect to how it works.

QUESTION: (OFF-MIKE)

WYDEN: Let me answer that exactly. We did not know all of the details 
on this. Senator Dorgan and I have been digging into this in great 
detail over the last few weeks.

But I will tell you, I thought I won a very significant victory early 
in the year when we got the requirement that nothing could be used 
unless the technology was first approved by the Congress. I thought 
that was significant.

Then, of course, the research went forward and we got the report 
illustrating how absurd some of the research was. I wrote and asked 
for more details on that, including on this program, and I never got a 
response.

So Senator Dorgan and I, as part of our effort to root out waste, then 
spent a couple of weeks going at the site and looking at the specific 
comments. Those are all referenced, you know, what page number there 
are, what sites there are. And that's why we're making this push 
today. We're pushing today. Within a few days people can register. And 
this is pending in a conference.

The United States Senate has a chance to do the right thing and to 
finally put the nail in this program's coffin in the conference.

DORGAN: Let me answer it a slightly different way.

First of all, a number of us have been concerned about the TIA issue, 
but Ron has really led the way and I think had significant successes 
in trying to expose and then shut down that activity. And we felt, 
when we began work on the defense appropriations bill, because of 
Ron's work and the work of others, that we're going to have to address 
this. But then we learned that this was on the Internet, this was what 
DARPA was doing, and we began trying to get some information about it.

And you know, when you tell somebody about this, the first thing they 
say, "That's not true. You must be at the Onion site, you know. You're 
clearly...

(LAUGHTER)

"This cannot be accurate. Somebody's fooling you. You went to the 
Onion. And it's all very entertaining."

But, you know, if you go to this site, this Defense Department site, 
DARPA, you go to this site, and they will tell you that this is going 
to be profitable and it's going to be engaging. And I'll hold up the 
-- this is on their site.

DORGAN: Whatever a prospective trader's interest in PAM, involvement 
in this group prediction process should prove engaging and may prove 
profitable.

And let me make one final point. You ask, what's the potential value? 
I'll tell you a theory of the people who are pushing this: They say, 
"Well, the price of oil," with respect to the future, "is made by 
traders who speculate about what might or might not happen in the 
future." And if that's the case -- if traders come to one center and 
trade back and forth based on their speculation -- why not use that 
for predicting events of terrorism and assassination and so on and get 
the private market's assessment? Let the market system assess the 
prospect of catastrophic events, particularly focusing on the Middle 
East because the Web site says focusing on the Middle East, even 
though they've got an example of North Korea.

But I'm telling you, I think it is the most Byzantine thing I have 
ever seen proposed by a federal agency.

WYDEN: One last point. What kind of message does this send to 
America's children in particular? I have a 14-year-old daughter. And 
you see a Web site says anybody can become a trader. And this is what 
kids walk away (inaudible) the government's response is.

QUESTION: (OFF-MIKE)

WYDEN: We want to close this program in the conference. The Senate 
bill would do that. The House bill does not do that. We felt we won a 
big victory earlier in the year, but apparently DARPA didn't get the message.

Now what I've been struck by -- if you look at the TIA program which 
now the T stands (inaudible) for Total information, has now been 
renamed, you know, terrorism information -- they scrubbed a lot of 
stuff off the original Web site. But the proponent of these ridiculous 
programs, the hope still seems to beat in the chest. And they don't 
get the message, and that's why we're doing this.

DORGAN: Well, the first step is to have DARPA shut this down. I mean, 
it seems to me that when you get the disinfectant that comes from 
sunlight here that perhaps the American people will say, "Are you 
nuts? And what are you doing here?" This is taxpayer's money.

I mean, our first step is to say to them, look, shut this down. This 
makes no sense. And if they don't, of course, then we have to find a 
way in the conference to shut it down.

QUESTION: Do you have confidence in the (OFF-MIKE)?

WYDEN: I will tell you, I did not discuss anything specific with 
respect to his boss, Tony Tether and him being fired.

Clearly, when they put him in to run this program, that raised the bar 
with respect to how the agency ought to conduct itself. Given the fact 
that that alone should have set off warning lights with respect to 
privacy rights, this kind of thing, again, you have to say the agency 
doesn't get the message.

I think John Poindexter's boss, Tony Tether, is a responsible person. 
He's met with me twice. But substantively they don't get the message. 
They continue to offer in programs that's by the imagination. And they 
should have understood it.

We're going to put somebody like John Poindexter in there to run this 
program, that really raised the bar with respect to privacy issues and 
it's further indication they don't get the message.

QUESTION: (OFF-MIKE)

DORGAN: I think you ask those questions at DARPA.

WYDEN: We know that Future MAP, though, is run out of the Information 
Awareness Office. But John Poindexter is in charge of this. This is a 
program that is part of his bailiwick, and we think it ought to be shut down.

QUESTION: (OFF-MIKE)

WYDEN: DARPA says they're not going to have the information. Maybe 
somebody else will get it. And we don't know that from the Web site. 
You should take that up with them. But we do know that DARPA is not 
going to have access to any of that individual information.

DORGAN: It raises a lot of questions. But if you regulated with the 
Commodity Futures Trading Commission...

(LAUGHTER)

... will it run afoul of state and local gambling laws, future trading 
laws? I mean, it raises all kinds of questions. But this is a hair 
brain scheme that, you know, is something that ought to be shut down.

QUESTION: (OFF-MIKE)

WYDEN: We have not had discussions with the agency about this specific 
program. I've met with Poindexter's boss on two occasions now. I've 
told them that they have got to get out of never-never land and down 
to the reality of intelligence that focuses on specific individuals 
and specific threats.

After those discussions, I offered the legislation that we've been 
talking about that says you can't use any of this unless Congress 
approves it. They've been allowed to continue the research. Senator 
Dorgan and I are saying that just on the basis of the Web site alone, 
we believe they aren't getting the message. And we want to close this 
program immediately. We want to close the overall program, which we 
have a chance to do as part of the conference. That's why we called...

(CROSSTALK)

DORGAN: And you have a copy of the letter with which we've 
communicated with DARPA.

WYDEN: Thanks for coming.

DORGAN: Thank you very much.

END

NOTES:
[????] - Indicates Speaker Unknown
   [--] - Indicates could not make out what was being said.[off mike] 
- Indicates could not make out what was being said.