Newsday (New York)

               July 30, 2003 Wednesday NASSAU AND SUFFOLK EDITION

SECTION NEWS, Pg. A02

LENGTH 632 words

HEADLINE All Bets Off;
Amid furor, Pentagon halts terror market plan

BYLINE By Craig Gordon. WASHINGTON BUREAU; Staff writer Anne Q. Hoy contributed
to this story.

BODY

   Washington - The Pentagon decided yesterday that letting investors earn money
by accurately predicting assassinations and coups wasn't a good idea and
abruptly canceled an Internet market after Republicans joined Democrats in
calling it bizarre and repugnant.

   Pentagon researchers had hoped to use the stock-market-like Web site to help
them predict future terrorism by tracking which of the potential scenarios of
global gloom-and-doom were drawing the keenest interest from speculators.

   Investors who chose correctly - accurately predicting the overthrow of Jordan
's monarchy, a North Korean missile strike or a biological attack on Israel, for
instance - could "make a handsome profit," according to a Web site for the
program, the Policy Analysis Market, originally set to begin signing up
investors Friday.

   The Defense Department agreed to scrap the program after Republican senators
equated it to a terrorism "betting pool" and accused the Pentagon of misleading
Congress on the program's true nature in an $8 million two-year funding request.

   "This defies common sense. It's absurd," said Sen. Pat Roberts (R-Kan.),
chairman of the Senate Intelligence Committee, complaining that Pentagon
officials never notified Senate appropriators about the program. "It seems to me
that they are way off base, and somebody should bear that responsibility."

   Democrats called for a full investigation and the firing of whoever was
responsible for creating the program, saying that it could encourage terrorism.
Democratic senators said the program was the brainchild of a Pentagon office
headed by former Adm. John Poindexter, who was convicted of lying to Congress
about his role in the 1980s Iran-Contra scandal, though the conviction later was
reversed.

   This is the second controversy over a program from Poindexter's office, which
also created the Terrorism Information Awareness program, designed to predict
terror attacks by tapping computer databases - an idea that was scaled back
after civil libertarians equated it to "Big Brother" snooping into the lives of
Americans.

   Three Republican senators who criticized the market program yesterday stopped
short of calling for a full investigation or resignations but made no move to
defend Poindexter, who was President Ronald Reagan's national security adviser.
At the Pentagon, spokesman Lawrence DiRita told reporters that Poindexter was
still employed there "at the moment."

   Senators from both parties also expressed shock that an office inside the
Pentagon effectively could operate so secretly, bringing a program within days
of launching without anyone in Congress knowing enough about it to raise
objections. Even Republicans, often willing to grant the Bush administration
wide latitude in the fight against terrorism, showed that they are uncomfortable
at the notion of a Pentagon operation outside their scrutiny.

   It wasn't clear yesterday even whether top Pentagon policy-makers knew of the
program. Deputy Defense Secretary Paul Wolfowitz told a Senate panel that he
learned about it yesterday morning by reading a newspaper.

   Republican senators summoned the head of the Pentagon's future-projects arm
that funded the Web site, the Defense Advanced Research Projects Agency, to
Capitol Hill yesterday for a closed-door briefing on the project. Wolfowitz
earlier had defended the agency as doing worthwhile, "brilliantly imaginative"
research but acknowledged that on this project, "It sounds like maybe they got
too imaginative."

   The agency on Monday had defended the use of a so-called "futures market"
approach to predicting terrorism, saying that such markets often are even better
at predicting outcomes, such as election results, than the experts.

   Staff writer Anne Q. Hoy contributed to this story.

GRAPHIC AP File Photo - Facing bipartisan outrage, the Pentagon yesterday
halted a futures trading market that