        July 10, 1997, Associated Press:

        FBI Wants Computer 'Keys'

        WASHINGTON (AP) -- Law enforcement is in danger of being
        outwitted by criminals inside and outside the United States who are
        using computer data-scrambling devices to traffic in drugs and distribute
        child pornography, FBI Director Louis Freeh says. 

        He asked Congress to set up a system that would give developers of
        encryption technology incentives to deposit ``keys'' with a third party
        that can unscramble encoded computer messages that are all but
        impossible to decipher. 

        As with wiretaps, authorities would have to obtain court orders to use
        the keys, Freeh told the Senate Judiciary Committee on Wednesday. 

        ``Major drug dealers are now using encrypted communications, and they
        are using it to our distinct disadvantage,'' Freeh said. Without a key
        recovery system, ``the ability of law enforcement to investigate and
        sometimes prevent the most serious crimes and terrorism will be
        severely impaired. Our national security will also be jeopardized.'' 

        Freeh made his comments as the computer industry fights bills aiming to
        restrict the sale of sophisticated data-scrambling devices to foreign
        customers. 

        The same data-scrambling technology that is making the Internet a safer,
        more secure place to do business is causing headaches on Capitol Hill,
        where lawmakers are struggling with its regulation. 

        On one side are computer software and hardware developers trying to
        compete with companies operating abroad without restrictions. On the
        other side are enforcement authorities who say they do not want to tie
        the hands of U.S. businesses but need a way to eavesdrop on computer
        criminals. 

        Encryption technology is sold now without restriction inside the United
        States. 

        In an effort to keep pace with technology advancing at lightning speed,
        the Clinton administration relaxed export controls last year. The
        computer industry complained the loosening did not go far enough. 

        ``The current law is unacceptable. The status quo is unacceptable,'' said
        Sen. Bob Kerrey, D-Neb., co-sponsor of one of several encryption bills
        moving through Congress. 

        His bill would set up a key recovery system to give computer companies
        strong incentives to make keys available to investigators who obtain a
        court's permission. It would link companies' cooperation to quicker,
        easier export rules. 

        The Senate Commerce Committee approved the bill last month and
        recommended the full Senate pass it. A more liberal bill sponsored by
        Sen. Conrad Burns, R-Mont., and Sen. Patrick Leahy, D-Vt., fell by the
        wayside. 

        The Business Software Alliance, a coalition of computer businesses,
        promptly denounced the Kerrey-McCain bill as ``a step backward'' that
        would hurt American competitiveness. 

        ``Strong cryptography is exactly like a good safe,'' said Raymond Ozzie,
        chairman of Iris Associates, a subsidiary of Lotus Development and
        IBM Corp. ``The best safe in the world cannot protect you if the
        combination is written on a scrap of paper and left lying around or is
        otherwise known to the safe cracker,'' he said in testimony submitted to
        the Senate committee. 

        A House bill introduced by Rep. Bob Goodlatte, R-Va., would bar the
        government from requiring businesses to set aside keys. 

        The Clinton administration has criticized that bill. Its provisions, the
        administration said, would ``severely compromise law enforcements'
        ability to protect the American people from the threats posed by
        terrorists, organized crime, child pornographers, drug cartels, financial
        predators, hostile foreign intelligence agents and other criminals.'' 

----------

        July 9, 1997, Associated Press:

        House OKs CIA Funding

        WASHINGTON (AP) -- The House approved funding Wednesday for
        the CIA and other spy groups while admonishing the agencies to do a
        better job of analyzing the information they collect. 

        It also demanded more on-the-ground human intelligence gathering and
        more coordination among agencies in sharing information. 

        Congress never makes public the budget for the CIA and 11 other
        intelligence agencies, but it is estimated to be about $30 billion. The
        funding measure passed by voice. The Senate last month agreed to a
        different version, and lawmakers will next meet to work out differences. 

        As in past years, debate centered on whether current spending levels are
        justified in the post-Cold War era. Supporters argued that the growth of
        terrorism, regional conflicts and the threats from states such as Iraq and
        North Korea make heightened intelligence gathering crucial. 

        But Rep. Bernie Sanders, an independent from Vermont, asked whether
        it was ``appropriate to increase funding for an already bloated
        intelligence budget at exactly the same time that we propose painful
        cuts'' in social programs. He proposed a 5 percent cut in spending. His
        amendment was defeated 289-142. 

        Another proposal by Rep. Barney Frank, D-Mass., to reduce funding by
        0.7 percent, to the level requested by the administration, also was
        defeated, 238-182. 

        As in past years, lawmakers said there was no compelling reason to keep
        the overall budget number secret, but an amendment by Rep. John
        Conyers, D-Mich., to disclose the aggregate figure was defeated
        237-192. 

        While protecting budget levels, House members were critical of
        intelligence agency performance, particularly in the area of analyzing and
        making useful the mountains of information collected. 

        ``We have to get better balance,'' said Intelligence Committee Chairman
        Porter Goss, R-Fla. ``If we spend all our money collecting and none of it
        analyzing, we will be awash in information that isn't going to do us much
        good.'' 

        The committee's report on the bill also complained of ``bureaucratic
        barriers'' that prevent one agency from knowing what another is doing,
        and the continued pouring of ``vast amounts of money into expensive
        high-tech collection platforms.'' 

        It said clandestine human intelligence -- agents and spies on the ground
        -- remains a single digit percentage of the national foreign intelligence
        program budget. 

        Of the total budget, only a small percentage goes to the CIA. Much is
        for agencies such as the Defense Intelligence Agency, the National
        Security Agency and the National Reconnaissance Office that operate
        military satellites and other high-tech spying equipment. 

        The lawmakers approved, by voice, an amendment by Rep. Bill
        McCollum, R-Fla., that requires the CIA and FBI to produce both
        classified and unclassified annual reports on China's intelligence
        activities, including any efforts to gain political influence in the United
        States. 

        They also agreed to an amendment by Rep. Maxine Waters, D-Calif.,
        requiring the CIA's inspector general to prepare a study on the CIA's
        knowledge of Iraq's chemical weapons use during the Persian Gulf War.

----------
