Austin American-Statesman (Texas)

July 30, 2003, Wednesday

SECTION: News; Pg. A3

LENGTH: 518 words

HEADLINE: Amid political outrage, Pentagon drops terrorism futures market

BYLINE: George Edmonson, WASHINGTON BUREAU

BODY:
WASHINGTON -- Facing a firestorm of criticism, the Pentagon killed a program
Tuesday in which traders would have been able to speculate on the prospect of
future political events, including terrorist acts.

The end of the program, which envisioned a Web-based futures market that Defense
Department officials had said could help forecast catastrophic events, came only
a day after it was revealed by Democratic Sens. Ron Wyden of Oregon and Byron
Dorgan of North Dakota, who opposed the plan.

Congressional reaction was strong from both parties.

Sen. John Warner, R-Va., chairman of the Senate Armed Services Committee, said
he and Sen. Pat Roberts, R-Kan., who heads the Senate Select Intelligence
Committee, agreed that "this program should be immediately disestablished."

Sen. Barbara Boxer, D-Calif., called the futures program "bizarre and morbid"
and "a sick idea."

Deputy Defense Secretary Paul Wolfowitz, while calling the agency that developed
the program "brilliantly imaginative in places where we want them to be
imaginative," said it might have gotten "too imaginative." He added that he
learned of the program while reading the newspaper Tuesday morning.

At the Pentagon, Tony Tether, director of the Defense Advanced Research Projects
Agency, which was responsible for overseeing the program, issued a statement
saying "it simply did not make sense to continue" the effort "in light of the
recent concerns."

Warner said he had called Tether to impress on him the need to stop the program
immediately.

Democrats said the cancellation of the program was not enough and that those
responsible should be fired. Attention immediately turned to retired Rear Adm.
John Poindexter, a key official involved in developing the plan. Poindexter
first gained notoriety in the Iran Contra scandal during the Reagan
administration and more recently was involved in a controversy over a Pentagon
program for extensive electronic surveillance of records in the search for
terrorists.

"That is two strikes now," Warner said. "Do you have to throw a third strike?"

The concept of the program, called Policy Analysis Market, was to use the
knowledge and abilities of the traders to assist in predicting future events.
Investors were to begin registering Friday and trading was to start Oct. 1.

Critics of the idea were missing the point, said Charles Polk, president of Net
Exchange, the San Diego company that designed and developed the program. "The
idea is that markets focus information," he said, noting that contracts would
not have been much different from questions debated in the media. For example,
Polk said, a contract might ask whether the United States would recognize
Palestine in the second quarter of next year.

But John Damgard, president of the Futures Industry Association, is skeptical.

"It presumes that the people who are causing these events to take place are
doing it for reasons of making money, and there's no evidence to suggest that,"
he said. "They're fanatics."

gedmonson@coxnews.com

This article contains material from other wire services.

GRAPHIC: Paul Wolfowitz: Official says research agency might have gotten 'too
imaginative.'