The Power of Indirection-- Military Units Financed and Controlled by the CI

Chp 2, Part II : Understanding The Secret Team in the Post-World War II Era

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The Power of Indirection --
Military Units Financed and Controlled by the CIA

Prouty: This business of the inner team of workers, all actually operating within the law (once in a while there was some aberration, but we usually found it and brought it to Mr. Dulles' attention -- but, generally working within the law) could get rather phenomenal things done.

For example, one day I got a call from the agency. They had heard of the capability of a new aircraft that had been designed at MIT and they wanted to know if the Air Force had an interest in it. The Air Force hardly knew about it. I had seen a picture of it in the newspaper. The plane was the Helio Courier manufactured by the Helio Aircraft Co. And I said, `Let me find out what we can do about that.' I called the company. A small company -- but it had very preeminent people including Dr. Koppen from MIT and Dr. Bollinger from Harvard Business School, as well as a lot of very good aircraft designers and builders. So, the company was solidly on the ground but it was very small. I told the man I was talking to that I was a Colonel in the Air Force, that we had an interest in this small plane for certain special activities, and that I would send a representative of my office up there to talk with them.

I called in a CIA man -- the same man that had called me -- and said, `Look, you're from my office, here's some credentials -- you go up there, you see this company. You know what you want.' I didn't know whether they'd really want the plane or not. But they decided they did. In fact, they wanted hundreds of them -- something that company had never heard of before, orders in that number. We bought hundreds of those airplanes for the CIA, technically for the Air Force. The Air Force had no concern with this because the CIA money paid for it -- it didn't cost us anything -- and we didn't go through the Air Force procurement procedures at all. We were just like a civilian company buying airplanes.

The CIA was delighted with the plane. They used so many of them in Southeast Asia that there was a flyer's handbook for what were called Heliostrips. In other words, air landing grounds that only the Helio airplane could land on, because it could land in a very short space, and it was under full control right down to the ground. Some of these little runways were hardly suited for helicopters but this little Helio plane was operating regularly.

Millions and millions of dollars were poured into that exercise -- a lot of people were involved in it -- and it never went through any Air Force procurement. However, the cleared individual -- the man in the team -- in the procurement offices, made papers that covered up this gap. There were papers in the files but they had never been worked on -- they were simple dummy papers. We could do things like that with no trouble at all. The U-2 was started like that. That's how the U-2 got off the ground. Ostensibly, purchased by the Air Force, but not paid for by the Air Force, and so on.

So when I say that this team was quite effective, it was very effective, very strong, handled a lot of money, worked all over the world, thousands of people were involved. Once when I was speaking to the Chairman of the Joint Chiefs of Staff (at that time General Lemnitzer) he said, "You know, I've known of two or three units in the Army that were supporting CIA. But you're talking about quite a few. How many were there?" At that time, there were 605. General Lemnitzer had no idea. It's amazing -- here's the top man in the military and he had no idea that we were supporting that many CIA units. Not true military units -- they were phony military units. They were operating with military people but they were controlled entirely and financed by the CIA. Six hundred and five of them. I'm sure that from my day it increased. I know it didn't decrease.

People don't understand the size and the nature of this concealed activity that is designed for clandestine operations all over the world. It goes back again to things we've spoken of earlier, that each activity must be under somebody's control. There is no law for the control of covert operations other than at the National Security Council level. If the National Security Council does not sign the directives -- issue the directives -- for covert operations, then nobody does. And that's when it becomes a shambles as we saw in the Contra affair and in other things.

But when the National Security Council steps in and directs it and maintains that control, then things are run properly. During the last decade we've seen quite a few aberrations where they were talking about Iran or Latin America or even part of the Vietnam War itself. In fact, it was in the Vietnam War when the situation really began to come apart -- it just outgrew itself and the leadership role disintegrated. We see the results of the worst of it in the Iran-Contra affair.

Secret Team Growth:
Focal Point Personnel Assuming Broader Roles

Ratcliffe: Following on from that you write about Dulles being able to "move them up and deeper into their cover jobs."[1] Would this be a function of them being there longer than the people who would be promoted to something else in time?

Prouty: Yes. When we put them in other departments and agencies, they might be somebody's assistant. Then they've been there for three years and the man who was above them, who was probably a political appointee, leaves. That agency might move this man up. Or when a newer political appointee comes, he has no knowledge that this man is really from CIA. He's just a strong person in his office and he gives him a broader role.

Sometimes these people were working in another agency so long we nearly forgot them. One man I know was in FAA and we needed his work to help us with FAA as a focal point there. He'd been there so long the FAA had him in a very big, very responsible job, where probably 90% of his duties were regular FAA work. A very effective individual. When we needed him to help us with some of our activities on the covert side of things, he was in a much better position to handle this than he had been originally.

This happened with quite a few of them. That's why I say in the case of Frank Hand, he had been in the Defense Department so long he was able to handle major operations that weren't ever visualized at the time he was assigned. This carries over into many other areas. I pointed out that the Office of Special Operations under General Erskine had the responsibility for the National Security Agency as well as CIA contacts, and the State Department, and so on. And as we filled up these positions, some of them became dominant in some of those organizations, such as NSA.

Early people in this program have created quite a career for themselves in other work. For instance, a young man in this system was Major Haig. Major Al Haig. He went up through the system. He was working as a deputy to the Army's cleared Focal Point Officer for Agency support matters who was the General Counsel in the Army, a man named Joe Califano -- a very prominent lawyer today. Later when the General Counsel of the Army was moved up into the office of Secretary of Defense -- in McNamara's office -- he carried with him this then Lieutenant Colonel Al Haig. During the Johnson Administration, Califano and Haig both moved to the White House. Then during the Nixon time, Haig with all his experience in this highly classified system, and already having been in the White House, worked with Kissinger.

You can see that it was this attachment through the covert side which gave Haig his ability to do an awful lot of things that people didn't understand, because he had this whole team behind him. To be even more up-to-date, there was a Major Secord in our system. And Major Secord is the same General Richard Secord you've been reading about in the Iran-Contra business.

A lot of these people worked right up into the White House. And there were these same assigned people even at the White House level that actually were working on this CIA covert work rather than the jobs that they seemed to hold, that the public understood was the job that they were working for. It's a much more effective system than people have thought it was.

Ratcliffe: In the last sentence you said:

Today, the role of the CIA is performed by an ad hoc organization that is much greater in size, strength, and resources than the CIA has ever been visualized to be.[2]

(You alluded to this before.) What is your sense of what this ad hoc organization encompasses today?

Prouty: There is no law, there is no structure, for covert operations. The Government didn't confront that in 1947 when they wrote the law. There has been no revision of the law to accommodate that. There have been decisions by the National Security Council which do assign covert operations, primarily to CIA but, on a time-to-time basis.

In fact, one of the strongest of these papers -- the designation was NSC 10/2 -- was in my files early in the business back in 1955. And I remember that on the side of the paper -- written in pencil and in his own hand, President Eisenhower had written that any time a decision had been made for the Defense Department to support the agency with arms, equipment, money, people, bases, etc., that the equipment was to be limited to that one time only and afterwards withdrawn. He did not want the CIA to create a capability that was on-going. He was very specific about it.

That was 1955. Those things change with the times. And they got more powerful and more powerful. And because of that kind of growth, you don't have the legal structure, you don't have the approved structure to deal with it. It's an ad hoc creation. Probably the strongest ad hoc creation in our government today.

Ratcliffe: Again focusing on this Dulles-Jackson-Correa report you write:

The CIA has the authority, or at least it is given the authority by other Government agencies, to create cover organizations within other parts of the Government. This is one of the key tasks that the old Dulles-Jackson-Correa report set out to accomplish.[3]

How is it that other Government agencies give the CIA the authority to create CIA cover organizations within themselves?

Prouty: It's more simple than you visualize. All of the Government is willing to cooperate with and work with other parts of the Government at any time. If it was the Department of Agriculture, we'd never have any trouble working with them, and so on. So we understand that -- that's a given, in the beginning. But, what we would do is have a top-level meeting either with Allen Dulles or somebody like Dick Helms or Frank Wisner or one of those people. We'd pay a call directly on the head of this department and since I've mentioned it before, I'll say the FAA.

We might go to the Administrator for the Federal Aviation Administration and say, `Look, it's necessary from time to time that the CIA has to operate aircraft perhaps a little differently than your regulations specify because we're doing a clandestine operation. Or perhaps we have to have two aircraft with the same number on them at the same time; so that one can cover another during a covert operation. So if that ever turns up on one of your control towers that an airplane lands this morning and its tail number is l234; another plane comes in this afternoon of the same type and its tail number is 1234, don't do anything about it. It's a covert operation that we're operating.' And they would agree to it. They'd say, `Fine.'

Then Mr. Dulles would say, `I'd like to assign a person to your administration as a Focal Point Officer, so that if anything comes up like this, anybody in the FAA will contact that man or vice-versa, he'll contact them ahead of time to say, We're running this kind of a covert mission, and you people will know about it.' We never ran into a problem with that. And if the workload was heavy, we'd augment that man; he'd have two people, three people. Or if it was something that was going to last for three months, or six months, we might put ten people there and when we went to take the ten people back, we might take five back and leave five there.

In this way, over a period of years, what had started as just a simple Focal Point office became a very large one. When I created Team B in the Air Force as a Focal Point office, I had one assistant and one secretary, In short order, I had several thousand people around the world. Such activities grow by the job.

Obtaining Everything Money Can Buy:
The CIA Act of 1949 and
Secretary of Defense Johnson's paper on Covert Operations

Ratcliffe: This is tied in with all the rest as of course discussions of the CIA would be: concerning the fact that the National Security Act of 1947 was quite strict with reference to money for the CIA, please discuss the impact of the CIA Act of 1949 which made it possible for the Agency to have "no trouble at all getting adequate funds."[4]

Prouty: The secret of covert operations is the control of money. And that begins with having a good-sized account. This includes the ability to use it throughout the Government. By 1949, the CIA was able to convince Congress that many of the things it was doing were perfectly legitimate and that many of these legitimate activities cost money because they were paying for people in other Government agencies, they were paying their salaries. As I said when General Lemay promoted Lansdale to be General, it didn't cost the Air Force anything. His paycheck came from CIA. The Air Force paycheck would be torn up. It would go to a certain office where they would destroy it so it didn't cost the Air Force anything.

In 1949, the then-Secretary of Defense, a man named Louis Johnson, wrote a very important paper with respect to covert operations. He said that the Department of Defense would fully support the CIA in any of its approved covert operations, provided that the CIA would reimburse the Department of Defense for all `out-of-pocket' costs. They wouldn't have to reimburse for the purchase price of an aircraft because the Air Force had already spent that money. But they would have to reimburse for the cost of operating that aircraft, for the cost of any other facilities required, and even for the salaries of crews that were assigned to that aircraft over a period of time.

This philosophy of reimbursement is very important in covert operations because it keeps bills from appearing in public that would stir up questions about why this money spent was when it wasn't spent for the line items in the budget. Thus when we created the Tab-6 system we worked this reimbursement system in throughout so that you never saw the spending of any money. The Air Force never spent any money on the CIA operations, technically. The money was immediately transferred through a comptroller's office arrangement up in the office of the Comptroller of the Secretary of Defense. And that expenditure was, actually, Agency money.

Within a few years, the Agency was able to point out to Congress that a lot of money was flowing in that channel because, effectively, they were paying for the utilization of very high cost equipment: aircraft, submarines, even aircraft carriers in a few places. Very expensive things to operate on a reimbursable basis. So based on that, the agency began to get a much larger budget.

Then when they went into the U-2 and the space programs that budget grew considerably. And it was a completely classified budget and almost non-accountable as the DCI has the authority to spend that money simply on his signature. He doesn't have to account for it. It's a rare thing in the budget process, but the Congress goes along with that, for the CIA.

As a result, because of the law of 1949 which permitted this activity, and the letter from Secretary Louis Johnson -- the policy statement that we would carry out all our work on a reimbursable basis with other departments and agencies of the government then following that procedure -- the Agency was allocated considerable amounts of money after 1949 and it was under their own control.

Employing the System of Reimbursement
To Fund Unaccountable Activities

Ratcliffe: Could you comment on the fact then, that, quoting from the book:

. . . more important than the dollars the Agency gets is what it can do with those dollars to make them cover all sorts of research, development, procurement, real estate ventures, stockpiles, and anything else money will buy, including tens of thousands of people who do not show on any official rosters.[5]

Prouty: One of the most interesting developments with the use of this horizontal application of money, or reimbursement, is that it can be used to pay salaries without explaining that it was for salaries -- it was just an expenditure of money. The DCI would sign it off as an "expense", but it might have paid for the salaries of a hundred people. I don't know how familiar you are with the way the Government handles its people, but each department and agency has a certain stated number of people that are budgeted for because they have to be paid every year, their pensions have to be paid, some of them have insurance and other obligations of the Government, so they're very carefully monitored. This is one of the few places in the Government where money equals people. And if you're paying people, well say, $20,000 a year, and you spend $100,000 for five people, the CIA $100,000 did not say it was for five people whereas all the rest of the Government did. And this enabled us to put people into programs that were not visible.

If you carry it out to other things, the same way we were able to buy aircraft that were not visible, we were able to buy radars that were not visible. So that the money in this method of operation is truly concealed in a budget without anybody knowing -- Congress doesn't know where it is and I don't think they've ever made the attempt to try to find out where it is. They allocate a bulk sum and then just sit back.

There's no end to the things you can do with government money that way. The Agency, during my period of operation with them, for instance, had an account with the big banks on Wall Street that is like Cede Incorporated, "street name" accounts. I don't know whether you're familiar with that finance term or not, but one of the biggest of the street name accounts is Cede Incorporated, C-e-d-e. This is where money is that's between transactions on the stock market. It's got to be somewhere. So, they assign it to Cede and Company. Well, Cede is nobody; it's just under control of the major banks and the money's flowing. But while it's flowing, it has to belong to somebody, especially if it's in big numbers.

The CIA had, and may still have, a street name called "Suydam", S-u-y-d-a-m. When money was in the Suydam Account -- I don't think the financiers knew it, maybe a few did -- it was CIA's money. Because in order to cover some of the activities they did -- like for example, operating Air America -- they would have to do some overt commercial work as cover for their clandestine work. They had quite an income from this huge air line. And that money would be put into the Suydam account.

It interested me at one point, when I had a breakdown on the Suydam account, to find out that an awful lot of CIA money had been invested in a major supermarket chain in this country. In today's world, they might have been able to take over the operation of the supermarket. But it was just a quick place to put money that the CIA had made and would spend later in their own operations. And it got to be very large amounts of money at times. By law it ought to have been transferred to the U.S. Treasury.

If I were in Congress today, I'd take a look at that. Sometimes when you hear about large sums of money being handled for the "Contras" or received from the sale of items to the Iranians, you begin to realize there is an awful lot of potential for money to be handled without an accounting. We saw that back in the days when we did account for it. And I think people would be surprised to find out that it was such a large activity.

Post WWII War Plans -- CIA Begins Amassing
Its Own Stockpile of Military Equipment

Ratcliffe: This brings us to other ways of spending the money. One of the ways that the CIA apparently (from reading your book -- as far as my understanding goes) was able to develop these cover units around the world that would hold equipment earmarked for its own use (even though it might be labeled as a military unit), was through the CIA being able to involve itself in the war plans developed in the late forties and early fifties that attempted to combine nuclear strategies with conventional strategies. You write:

As a result of the war planning role of the CIA, it was easy for the CIA planners to enter in the plans of all armed forces, requirements for wartime equipment, vehicles, aircraft, and facilities that had to be earmarked and stockpiled for use by the Agency in the event of war. Once such requirements were listed in the war plans they could be requisitioned along with all other war-plan material. This meant that the cost of this equipment would be worked into the military budget, and then in due time each item would be purchased and delivered to the advance base site where war plan material was stockpiled. Warehouse after warehouse of "military equipment" is stored in the Far East, in Europe, and throughout the United States for the eventual use of the CIA. The cost of this material and of its storage, care, and conditioning is inestimable. . . . As the years passed and as the Agency's "military" role became more a matter of custom and generally accepted, Agency military cover units became so deeply covered that their neighboring military units did not know, or forgot, that the unit near them was not a regular military unit. By that time, requisitions from these CIA units were as readily acceptable as any others and the units became easily self-supporting without any Agency funding input.[6]

From this I'd like you to please discuss this rise and growth of the logistical global network of the Support side of the CIA, and how the existence of this relatively unknown component of the Support section is fundamental to the CIA's ability to engage in clandestine operations.

Prouty: This grew out of the natural war-planning function of the military. Right after World War II and on into the early fifties, we visualized that a war would begin with some attack, we'll say on the NATO lines, more or less like conventional World War II fighting. But that it would immediately elevate to the level of a nuclear exchange. It was planned that in that nuclear exchange, we would try to preserve certain areas in the target countries, say in the Soviet Union, that would not be hit and, judging by meteorological data, would not be covered by fallout which would be radioactive for years and years. And that in that area we would have the CIA create certain network agent functions and groups of Special Forces people that we could immediately send in by paradrop. This was the original Special Forces function, not the contrived one that grew out of the Vietnam War.

With this in the war plan, it then becomes included in the basic military budget each year. And with the CIA considered as a fourth force -- Army, Navy, Air Force, and CIA -- what the CIA needed for its war planning functions on behalf of the United States Government, the total Government, would then be treated as part of the military budget -- not the agency's budget. In the beginning, this amounted to trucks, aircraft, weapons, radios, and everything else that they visualized their function would require right after what we used to call the "post-strike" function.

The agency learned that this system worked in its favor. They had warehouses under their name, in the name of a military unit. For instance, we'd create a unit, the 234 Provisional Support Group. And the 234 Provisional Support Group in Germany, staffed with all military people -- of course, CIA people in military uniforms -- would begin to fill its warehouses. They'd have trucks and jeeps and guns and radios and ambulances and everything else the rest of the military had. So the agency was quick to see that if they visualized their post-strike function as bigger this year than it was last year, they'd have more things to put in the warehouse. Then, since NATO exercises are run every year to train in the war plan, they would have to have more and more equipment for the NATO exercises. They did a very good job of filling their warehouses and then in using this equipment, on "exercises", which really were covert operations.

So this was an area in this business of reimbursement we weren't able to keep up with. We knew it existed, we knew what they were doing, we supplied the equipment, and it was sort of an even exchange. We figured, `Well, we've told the agency they're to be the fourth force and they're going to do a job in wartime so we might as well let them use it and train themselves and everything else.'

So the first thing we knew, the agency was able, despite President Eisenhower's warning, to create quite a well-equipped military force. And they had a lot of aircraft of their own, they had trucks of their own, they had all this equipment and this was the way that they ran their business under the war plan.[7]

I don't know what has happened to that in today's world. I assume it has grown. I have never heard anything about it since the days when I worked on it regularly. I think if anybody looked into the war planning in the Far East or in Europe, they would find that this still exists under one cover arrangement or other.

This is the reason why the Agency is able to get equipment immediately for almost for any covert activity in any part of the world. Just as an example, when we heard a lot about the Nicaraguan-Contra-El Salvador problems in Central America during the last decade, I noticed that the plane that went down with a man named Hassenfuss on board was a C-123. That was one type of aircraft in the Agency's stockpile. It was an Air Force plane category and it was one used by the Agency -- I knew the designation. Very few people have ever heard of an airplane called a Chase. But the C-122 was designed by an airplane company called Chase Aircraft and the C-123 was a modification of that. With situations like that, you can see that the Agency is still operating within this same structure of the fourth force concept and d I imagine it still exists.

From the Chairman of the JCS On Down:
"where the CIA was concerned
there were a lot of things no one seemed to know&quot

Ratcliffe: You describe what seems to be a very enlightening day -- an event in 1960 or 1961 when you briefed "the Chairman of the JCS [Joint Chiefs of Staff] on a matter that had come up involving the CIA and the military."[8] As you described it:

The chairman was General Lyman L. Lemnitzer, and the Marine Commandant was General David M. Shoup. They were close friends and had known each other for years.

When the primary subject of the briefing had ended General Lemnitzer asked me about the Army cover unit that was involved in the operation. I explained what its role was and more or less added that this was a rather routine matter. Then he said, "Prouty, if this is routine, yet General Shoup and I have never heard of it before, can you tell me in round numbers how many Army units there are that exist as `cover' for the CIA?" I replied that to my knowledge at that time there were about 605 such units, some real, some mixed, and some that were simply telephone drops. When he heard that he turned to General Shoup and said, "You know, I realized that we provided cover for the Agency from time to time; but I never knew that we had anywhere near so many permanent cover units and that they existed all over the world."

I then asked General Lemnitzer if I might ask him a question. He said I could. "General," I said, "during all of my military career I have done one thing or another at the direction of a senior officer. In all those years and in all of those circumstances I have always believed that someone, either at the level of the officer who told me to do what I was doing or further up the chain of command, knew why I was doing what I had been directed to do and that he knew what the reason for doing it was. Now I am speaking to the senior military officer in the armed forces and I have just found out that some things I have been doing for years in support of the CIA have not been known and that they have been done, most likely, in response to other authority. Is this correct?"

This started a friendly, informal, and most enlightening conversation, more or less to the effect that where the CIA was concerned there were a lot of things no one seemed to know.[9]

Can you recount more of the details of this enlightening conversation for us?

Prouty: It astounded me, that day. I assumed that there were a lot things the Chairman of the Joint Chiefs of Staff was not aware of every day in the Air Force, in the Navy, and in the CIA. But I had never expected such a blanket answer, that he didn't know, and that General Shoup didn't. Now, what we were talking about was rather specific.

At the time of the rebellion in Indonesia in 1958 when the CIA supported tens of thousands of troops with aircraft, and ships, submarines, and everything else, in an attempt to overthrow the government of Sukarno, we needed rifles pretty quick to support these rebels and I called out to Okinawa and found out that the Army didn't have enough rifles for what we wanted. We wanted about 42,000 rifles and they had about 30,000. But that he said he thought he could get more -- General Lemnitzer was the Commander at that time in Okinawa. So he was right up close to this situation. He said that he'd have somebody call the Marine Corps and see what he could get from them. It just happened that General Shoup was the head of the Marine unit at Okinawa and he said, sure, he could provide the extra 12,000. So without delay, we had 4-engine aircraft -- C-54's -- flown by Air America crews but under military cover -- appearing to be military aircraft -- come into Okinawa, pick up these 42,000 rifles, prepared for an air drop in Indonesia. They flew down to the Philippines and then down to another base we had and then over into Indonesia and dropped these rifles.

We replaced those rifles. The General didn't know where they were going, we just borrowed them, and the unit that borrowed them was military and the call had come from the Pentagon. There was no problem with supplying the rifles. So years later, we replaced them. Then when I told him about that in the Pentagon, he said he never knew where those rifles went and General Shoup said, "You know Lem, when you asked me for 12,000 rifles, I thought you wanted them and, of course, being a good Marine, I gave you 12,000 rifles." He said, "You owe me 12,000." They were sitting there kidding but they never knew they went to Indonesia. They never knew they were part of a covert operation going into Indonesia.

This is true of a lot of the things that go on. We kept the books in the Pentagon. We covered that. We got reimbursement for it. That part of it was all right. And that's what kept it from being a problem because as long as General Lemnitzer's forces got the 30,000 rifles back and Shoup got the 12,000 back for the total of 42,000, they didn't complain to anybody. They had their full strength of rifles. That's the magic of reimbursement.

This kind of operation was run on an established basis -- the units are there. When I said there are 605 units, those are operating units. Now some of them may only be telephone drops, because that's their function, they don't need a whole lot of people, they're just handling supplies, or something like that.

But put this in present terms. When Colonel North believed that he had been ordered to take 2,008 T.O.W. missiles and deliver them to Iran -- there has to be some way that the supply system can let those go. You can't just drive down there with a truck to San Antonio at the warehouse, and say, `I want 2,008 missiles.' You have to have the authority. And 2,008 T.O.W. missiles -- I don't know what one of them costs, but it's an awful lot of money. Somebody had to prepare the paperwork for the authorization to let the supply officer release those. I'm sure they went to a cover unit that North was using for that purpose. But it appears from what we've heard from this that, unlike the way we used to run the cover operations, when those missiles got to Iran, these characters sold them for money. In fact, they sold them for almost four times their listed value.

This is the problem Congress has been having. What happened to the money they received from the Iranians after they got there? And you can see how the system developed. Originally, we developed it on this one-for-one basis. Also we never used this kind of supply, to deliver grenades to the Contras and charge them $9.00 a grenade or whatever it was. We just delivered the grenades. It was part of a Government program. And the CIA would reimburse the Defense Department. Everything came out even. We didn't sell anything. We never charged such cost to the "Contras" or other people we supported.

So I know how it worked in the fifties and sixties but I can't tell you how it's been working in the eighties. I'm just astounded by what has developed. Just like the General not knowing that we had so many units, in so many places around the world, in another case, we learned that a scientist (as I recall at CalTech) had learned how to interpret a radio transmission that was so brief that a whole paragraph would be a blip -- an electronic blip, a matter of milliseconds -- and he learned to stretch that millisecond blip into readable language. He did it with, I think what electronics experts would say -- and I certainly am not one of them -- is like this characteristic of a cathode tube, that when you turn the thing off that for a little while it still glows? This was called the Rambo Effect. And Dr. Rambo realized he could do that with a radio wave just as well as a cathode tube could do it. The Soviets were using this blip transmission on CW Wave, Constant Wave, like Loran to deliver secret messages.

When CIA heard about that, obviously they wanted to exploit the capability. We used an Air Force unit to go to one of the major radio suppliers, an electronics supplier for the Air Force, and by feeding CIA dollars into that on-going contract, and without raising any eyebrows at all, we had that company, over a period of about a year and a half, develop a super receiver capability that could listen to the CW tone, discover that millisecond blip the Soviets had concealed there, stretch the blip to readable language, and then get a translator to translate from Russian to American. That's a tremendous achievement when you think about it, because it broke the whole system of that kind of cryptology and it was done with dollars that never affected the Defense Department. But we used the Defense structure to do it so that the company that did it had no idea that they were dealing with CIA. They just thought it was part of an ongoing Air Force contract. That's one of the ways these things are done.

There's a major company in this country in the Fortune 500 listing called EG&G. It's full name is Edgerton Germeshausen and Grier. Most of their work is in a very highly classified area of operations for the U.S. Government. I'm not sure to this day that EG&G realizes that in their earlier days, when they were a somewhat smaller company, much of the funding that went into their company came through this channel: from the CIA, to the Air Force, and to EG&G. So that EG&G would actually develop these very, very special devices for covert operations -- not for Air Force, or Army. There are a lot of companies that have had those contracts. And this is not a small operation.

What bothered me then -- and it bothers me today -- was that there was no way to let the Chairman of the Joint Chiefs of Staff know this. I tried to do this when I could in my own role, since -- I had just been assigned to the Joint Chiefs of Staff -- in my work, I was five years with the Air Force and then two years with the Office of Secretary of Defense. And then Mr. McNamara decided to transfer that function to the Joint Chiefs of Staff. One of my functions there was to become a briefing officer for the Chairman so he would know what was going on. I think we served quite a purpose there because from that time on, every time we got into one of these situations, I would brief him right away. And that at least kept him alert to what the services and the CIA were doing.

I fail to see that function in this Iran-Contra era. I don't think anybody from National Security Council was going down to the Chairman or the Secretaries of the various departments of the military and saying `This is what we're doing,' just to keep them current. After all, they have the right to know all this. It's an important function. It's a much larger function -- a much more costly function -- than people realize and because of the odd way this country has decided to do covert operations, it's almost uncontrolled. Except for NSC. If NSC does not do their job, then it is uncontrolled. This is the big issue today, even after Ollie North's trial. The NSC members are sitting back and saying `We didn't do any of it.' It seems to me the jurors realize they did. They think Reagan was involved. Bush was involved. Weinberger and Schultz were involved. They had to be involved. They are the NSC and no one else.

This is the breakdown now. We're going to have a hard time restructuring this business again, because all covert operations require foreign alliances. They are all bilateral. You can't take an aircraft and make a paradrop in Tibet without letting the Indian Government know that you are using their airways to fly to Tibet for an illegal or covert drop. So we would notify the Indian Government. Or we'd notify the Pakistani Government. Or the Government of Thailand. And so on.

I can not think of any way to operate a covert operation without at least a bilateral agreement. If we don't have our agreements in order, how on earth can we work with these other people around the world? This is serious business. And this is why the other countries around the world have begun to lose faith in what we're doing because either we're not telling them, or we're getting them involved in something that they don't want to be involved in. They don't want to even be connected with it.

Ratcliffe: From the end of the previous excerpt: What was the sense among the three of you talking there about the implications that, "where the CIA was concerned there were a lot of things that no one seemed to know"?[10]

Prouty: My office had just been moved from the Office of the Secretary of Defense into the Joint Chiefs of Staff structure. It was a very formal structure. At that time it was legally controlled at 400 officers and even to move my small office down there, they had to increase the Congressional approval of the more-than-400-limit on the Joint Chiefs of Staff. So it was an important move when they made it.

Now although I may have joked a little bit about the Generals not knowing that such an enormous organization existed around the world in our support of CIA, they were very serious about it. They felt it was a real oversight, to have this sort of thing going on without review. And I am of the opinion that this is one of the real reasons why the Joint Chiefs of Staff and Mr. McNamara had agreed to establish this office of Special Operations within the Joint Chiefs of Staff: so that all the military forces would be treated equally in their supporting activities in the CIA, and so that the Chairman would always be briefed on what was going on in covert work. The support of covert work goes on every day. One covert operation might be ten days. But we were supporting them year-round. This was a serious business and they recognized it as such.

The Importance of the CIA's
Deputy Director of Support (DD/S) Side of the Agency
by the Time of the Bay Of Pigs

Ratcliffe: You write further on that

By the time of the Bay of Pigs operation, the CIA was part of a greater team, which used the Agency and other parts of the Government to carry out almost any secret operation it wanted. By that time this organization had the equipment, the facilities, the men, and the funds to carry out clandestine operations that were so vast that even on the basis of simple definition they were no longer truly secret, nor could anyone hope that they might be.

The availability of supplies and facilities made it possible for all of this to come about. The growth of the CIA and of the greater Secret Team has resulted more from the huge success of the DD/S side of the Agency than from either the DD/P or the DD/I.[11]

Please comment on the importance you ascribe to this DD/S side of the Agency.

Prouty: It's one thing to have approval to carry out a covert operation and then to be able to go to the Defense Department or any other part of the Government and get support for that operation. It's something else entirely to have warehouses full of equipment -- ships, aircraft, and people all over the world -- and be able to carry out covert operations on a regular basis. You've used a good point of reference -- the Bay of Pigs.

By 1960, when President Eisenhower approved the early actions that later led to the Bay of Pigs -- and these were very, very small matters -- the Agency itself was able to schedule a program that they knew was going to be a major program. Any of us in covert operations knows that 3,000 men in a program that led to putting -- what was it -- twelve hundred, thirteen hundred troops on a beach in a foreign country is not covert. You can't train 3,000 men in Guatemala, Nicaragua -- some unfortunately in Mexico by inadvertence -- and operate radio stations off islands in the Caribbean, etc., and call it covert. It's just a joke. The New York Times was reporting almost daily on the program. Castro was broadcasting about its threat almost daily. And yet, it was called a covert program. The thing that was against it's being covert was its size.

But, be that as it may, the CIA had the aircraft -- they had the B-26's. In fact, as I think I said earlier, we had created an Air Force for the Cuban exiles -- a tactical combat Air Force that was larger than any Air Force in Latin America at the time. All of that came from CIA assets. It was made up of their own aircraft. They were planes that had been used in the Indonesia business. They took planes back from the Vietnam theater. They used a lot of C-54's that Air America had provided.

As a matter of fact, it's very interesting what they did do. They even brought Philippine Army officers who had worked with General Lansdale in the Magsaysay campaign in the Philippines, back in the fifties -- they even brought some of those officers into Guatemala to do the training there. You see, they had the facilities that were world-wide even involving people from other governments. This is what they had gotten into existence in time to run something like this anti-Castro program.

Yet, when it started, the first request the Agency made to the Department of Defense, when they got the approval from Eisenhower to start this anti-Castro move, was for two Navy doctors. That's all they needed. They said, `We need two Navy doctors.' The Navy did not want to give up two doctors at that time. They didn't have two that they could give up because it was a long-term, indeterminate period. So the CIA men came to my office and they asked if could we get two Air Force doctors. Most of our doctors were flight surgeons -- we did not want to give them up. But I talked to our chief surgeon in the Air Force, and he had a few doctors at that time -- I think at Lackland Air Base in Texas -- that would be willing to do this on a voluntary basis, and that he could spare.

So it happened that we sent two Air Force doctors to begin the program -- that's all it was. They didn't ask us for anything else. Here's the anti-Castro program beginning and they wanted two doctors. Of course we asked them why, and the reason was they were going to put hundreds of Cuban exile men who were enrolled in the Army at a small military base that belonged to the U.S. -- it was used by the U.S. -- in Panama. And they needed doctors because the men would be in the base in Panama. They didn't ask us for equipment. They didn't ask us for airplanes, and rifles, and trucks, and everything else. They already had all that. So just by filling in with a few things they didn't have, they could be ready to go. And they were ready to go more than we thought. They had a lot of capability. Within a month or so, they were building a big air base over near Retalhuleu in Guatemala. They did this themselves -- bulldozers and every other darn thing they bought for the construction with their own money.

So by the time of the 1960s, the Agency could run major operations -- major warfare you might call it -- by themselves. This led to an interesting bit of political development because during the summer of 1960, we were using a primarily World War II transport aircraft, called a C-46, that could carry 40 or 50 people -- carry a pretty good-sized cargo. We'd fly it from Guatemala or Nicaragua to Cuba. We would not fly it from the United States. We didn't want any reference to the United States -- they still thought they were playing a covert game. And we'd make airdrops in Cuba. This was a touch-and-go game and many of the airdrops just disappeared -- they didn't drop to the right people, or Castro found out about it and intercepted it for them. But in any case, that's what they were doing: small airdrops, and mostly of equipment, weapons, communications gear to what they thought were people on the ground who would handle it in the anti-Castro movement.

That went on until the political campaign of 1960. And it was pretty active. The most active person on this -- from the Administration side -- was Richard Nixon and he was running for President against Kennedy. Within a week after that very close electio

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