Thursday, August 29, 2019

The Secret is Out - E-Systems, Inc.


THE SECRET'S OUT: COVERT E-SYSTEMS INC. COVETS COMMERCIAL SALES


By John Mintz
Washington Post
October 24, 1994

If Big Brother ever took control of the United States, E-Systems Inc. would surely be its prime contractor. Consider:

* E-Systems designs spy satellite gear that can snap photographs of automobile license plates from space and capture electronic communications, from phone calls to rocket telemetry.
* E-Systems software can analyze those spy satellite photos to see if anything has changed -- a Russian tank moved or an Iraqi missile site built -- since the last shots were taken.
* E-Systems can build "electronic fences" to police borders. It helped build one such network of sensors to monitor drug traffickers along the U.S. border with Mexico, and the company says it hopes to build a more sophisticated one for Saudi Arabia.
* And E-Systems hardware can help federal drug enforcement agencies track cocaine planes and tap drug dealers' telephones.

In short, E-Systems' technologies, part of the central nervous system for the nation's intelligence community, are regarded as brilliant by intelligence agencies and Wall Street.

But the firm's closets also contain some classified skeletons. Critics say in some ways the company is almost indistinguishable from the CIA because it operates so secretly, lacks accountability and is loaded with retirees from the CIA and other intelligence agencies. E-Systems' critics say it has lied in legal proceedings to protect its interests. {Details, Page A10.}

E-Systems, which is based in Dallas but has a strong presence in Falls Church, is a company with an identity crisis. For decades a fixture in classified work, it is accustomed to selling its wares only to the intelligence community -- and doing it secretly.

But now, with competition increasing for a declining number of classified contracts, E-Systems is desperate to change. For the first time in its history, it wants to communicate with outsiders, loosen its military-like corporate culture and become more entrepreneurial. The firm also is trying to transform its secret technologies into things it can sell to the public. One problem is that most of its classified gear is so capable and expensive it must be "dumbed down" to be sold to outsiders.

"We don't have a clue how to market commercially," said Lowell Lawson, chairman of E-Systems. Added company spokesman John Kumpf, "When we try to break out and commercialize, people don't know who the hell we are."

Some industry analysts say E-Systems must merge with a large defense firm to ensure its survival, and there is speculation among defense industry analysts that such a merger may be in the works. Bethesda-based Martin Marietta Corp. often has been mentioned as a suitor, as has fast-growing Loral Corp., whose chairman, Bernard Schwartz, effusively praised E-Systems in a recent interview.

"It's a neat fit with Loral ... and has a great technology base," Schwartz said.

The firm has one asset that could be worth billions to any partner: the trust of the nation's intelligence establishment. Elliott Rogers, a defense industry analyst with Cowen & Co., a New York-based brokerage firm, says that when he asks intelligence officials which firm they consider most reliable and discreet, the usual reply is E-Systems. "It is viewed as so key partly because it keeps its mouth shut," he said.

'We Didn't Want to Talk ...'

E-Systems recently allowed the first visit ever by a reporter to its headquarters and its plants after seven months of negotiations. Security was so tight that on a tour of the firm's plant in Garland, Tex., a company official kept track of what was said on not one, but two tape recorders.

"We didn't want to talk to you," said Lawson, a 29-year E-Systems veteran, in his wood-paneled office, filled with paintings of the Old West. "I may not do this again ... The customer doesn't want us talked about."
"The customer" is a term E-Systems employees use often, as in "the customer is disappointed," to refer to the CIA, the National Security Agency and other hush-hush agencies.

Classified contracts furnished $1.8 billion of E-Systems' $2.1 billion in 1993 revenue, or 85 percent of sales -- the highest percentage of any large firm. The firm wants the ratio to be half classified, half unclassified by the year 2000.

With 15,625 employees, E-Systems has pared its work force nearly 18 percent from its 1988 high of 19,000 people. It has 3,300 employees in the Washington area, mostly in Falls Church at its Melpar division, which makes the reconnaissance gear used in spy planes to take pictures and capture electronic signals.

The central problem for E-Systems, its officials said, is a lack of experience in designing products or services for public customers, known by some in the firm as the "white" world, as opposed to those in the secretive intelligence environment, often referred to as "black."

As one Air Force official put it, E-Systems "has been black so long it doesn't know how to operate any other way."

Even so, all the firm's divisions are dreaming up new commercial ventures. For example, a machine the company designed for the NSA now makes it possible for a police officer to tap 16 phone lines at once.
E-Systems also is seeking new uses for CIA-sponsored computer technology that can process, enhance and compare spy satellite photos. By filtering out clouds, fog, soot and snow, E-Systems computers can discern subtle changes in the pictures -- such as a hatch door that's ajar at a Russian missile base -- and help interpret the meaning, perhaps a missile launch.

Now the firm is adapting these computers to spot differences over time in human tissue -- to note, for example, tiny breast lumps that may be cancerous.

E-Systems also is commercializing gear it made years ago to let the NSA store vast amounts of computer data -- the phone calls and electronic bleeps recorded by spy satellites.

An E-Systems division called EMASS sells this technology to oil companies keeping large quantities of seismic data, as well as to banks and video archives. Linking several phone booth-sized EMASS computers, it is possible to store 5 trillion pages of text -- a stack of paper 150 miles high -- and retrieve any page with lightning-fast speed.

Commercial uses might be found too for the company's once-secret sensor gear, which could be valuable in detecting vehicle traffic volume, for example, or mapping the Earth's underground strata.

Some E-Systems employees, fearful about sharing secrets with outsiders, were uncomfortable in 1992 when the company hired former Xerox Corp. executive Mike Allred to market EMASS to commercial firms, industry officials said.

"A lot of walls have come down" since then, Allred said.

Marketing Secrecy

E-Systems, founded by Texas aviation engineers in the 1940s, specialized in aircraft electronics and was known as Temco. In 1960 it was snapped up by James J. Ling, an audacious Dallas wheeler-dealer who built a motley conglomerate called LTV Corp.

By 1968 LTV was teetering under a debt load Ling had accumulated. Soon LTV's board sacked him, but on his way out Ling placed the financially failing Temco division, renamed LTV Electrosystems, in the hands of his corporate planner, economist John W. Dixon.

Dixon was a visionary who quickly assigned his engineers to work on a lucrative new business: extremely high-tech electronics and computers for classified spy craft and surveillance systems.

LTV Electrosystems was a market leader from the start. It was the dawn of the computer age, and the federal government was just starting to build the classified computer networks that now, billions of dollars later, handle much of the data collected by the U.S. intelligence community.

"We were there just at the right time," James Crowley, now E-Systems' general counsel, said of the firm's early work. "There were only one or two other firms there too."

LTV Electrosystems was extremely secretive. One of the few news stories about it concerned a lawsuit filed against the division by the widow of an Electrosystems employee killed in the 1971 crash of an Air Force plane on a classified mission in the South Pacific. It emerged that the plane had been sent there to spy on a French atomic explosion.

There was little public notice too in 1972, when LTV spun off Electrosystems, now renamed E-Systems, by selling its stake in Electrosystems to investors.

In the early 1970s E-Systems won several key contracts, such as installing communications gear on Air Force One, that helped established its position in the secret world. The company has held on to this and other classified contracts for decades.

An episode from the mid-1970s suggests the trust the government had in E-Systems.

For decades the CIA had owned "proprietary" airlines to help it conduct secret operations around the world. By 1975 the agency had little need to continue the practice, since the Vietnam War was over and the airlines' covers had been blown.

The CIA asked E-Systems and Lockheed, another trusted contractor, to buy Air America and Air Asia, two CIA-owned airlines. The firms weren't interested in Air America, known for swashbuckling airdrops and other derring-do.

In 1975 E-Systems bought Air Asia, the assets of which included a huge aircraft repair facility in Taiwan, for $1.9 million. E-Systems said it lost money on the deal, but critics said the price was low because audits showed Air Asia was worth $3.2 million.

The company's ties to the government have been laced tighter over the years as it hired hundreds of CIA, NSA and military retirees as employees or subcontractors.

For years its board of directors included retired Navy admiral William F. Raborn, father of the Polaris missile program and CIA director under President Lyndon B. Johnson. Another former high-ranking CIA official, Lloyd K. Lauderdale, was E-Systems' vice president of research for years. Oliver Kirby, a former deputy director at NSA, helped run one of the company's divisions in the 1980s, and Peter Marino, a 16-year CIA veteran, is chief of another.

CIA employees who are experts in high technology are "automatic hires" for the firm, a former CIA official said. "E-Systems made it a point to say, 'When you retire, come work for us.' ... E-Systems has one of the more unique relationships with the agency," he added, calling it "chummy."

A staff member of a congressional intelligence committee said E-Systems is "virtually indistinguishable" from the agencies it serves.

"Congress will ask for a briefing from E-Systems, and the {CIA} program manager shows up," he said

 "Sometimes he gives the briefing. They're interchangeable."

Safeguards

It's not easy divining what goes on at E-Systems.

For years, employees at E-Systems' closely guarded Greenville, Tex., airfield have compared notes about various aircraft stored at remote hangars. Employees said they often are asked to repaint the identifying numbers on the planes' tails -- leading them to suspect they are being used on covert missions.

"Nothing illegal is going on there," Lawson said.

Former employees said that for years E-Systems has copied a tactic used by intelligence agencies: It sets up bogus secret contracts, with phony code names and paperwork, to mislead potential snoopers inside and outside the company. When asked about it, Lawson suggested that a reporter "drop it."

Congressional and Pentagon investigators, former E-Systems employees and an ex-CIA official said the government gives E-Systems latitude to shift funds and secret equipment among classified intelligence contracts in ways most contractors can't.

Lawson denied this. "We have an arm's-length business with the CIA," he said. "They jump on us if we do anything wrong. ... There are no secret kitties or diversions of funds. There's clear accountability."

Lawson acknowledged that federal investigators and even some company employees think the company gets special handling because the intelligence community gives trusted classified contractors slack in following paperwork and manufacturing specifications. This is done to ensure success of a mission, such as getting a spy plane in the air quickly, he said.

Lawson agreed that the arrangement is "tailor-made" to nurture suspicions among reporters and federal investigators that E-Systems is a CIA front. However, Lawson said, "we weren't, aren't, never have been" a CIA front.

The firm believes such suspicions helped prompt a number of disgruntled former employees to file lawsuits against E-Systems, as well as spurring a four-year federal investigation of allegations that the company overcharged the government or inflated bids on contracts.

The company denies the allegations and says it believes the probe is dormant. But knowledgeable sources say it is ongoing. The Justice Department declines to comment. E-Systems officials say they have cooperated fully with government officials and have provided more than a million documents.

Nonetheless, for a company that makes keeping secrets a key marketing tool, lawsuits and federal investigations are deeply disturbing.

"We're a real quiet company," Lawson said. "I don't want to see myself on Forbes's cover."

E-Systems:
* Chief executive: A. Lowell Lawson
* Headquarters: Dallas
* Divisions:
Garland, Tex.
Greenville, Tex.
Melpar in Falls Church
ECI in St. Petersburg, Fla.
* Work force: 15,625.
* Recent successes:
Landed contracts worth as much as $850 million to upgrade U.S. and Australian submarine- hunting aircraft.
* Recent setbacks:
Lost bid to computerize federal student loans; and the German government delayed execution of E-Systems contract to build surveillance planes.
* Main competitors: Lockheed Corp., Martin Marietta Corp., Hughes Aircraft Co., Loral Corp., Rockwell International Corp., TRW Inc.

FINANCIAL PICTURE

REVENUE IN BILLION (Chart not available.)
1993 SALES IN PERCENT
Reconnaissance and surveillance: 60%
Aircraft maintenance and modification: 18%
Command, control and communications: 16%
Navigation and controls: 6%

PROJECTS
E-Systems develops software and hardware used by the CIA and NSA to take pictures and eavesdrop from spy satellites and planes. Its gear also is used to gather and analyze the data at secret facilities. Among its other projects, E-Systems:
* Installed the electronics and communications systems in Air Force One and other White House aircraft.
* Fitted jets with communications gear for use by past or present heads of state of Romania, Israel, Iran, Saudi Arabia, Nigeria and Malaysia.
* Built the E-4B, nicknamed the "Doomsday Plane," an airborne command post for the White House and Pentagon in a nuclear attack. It has a miles-long trailing antenna to communicate with the U.S. submarine fleet.
* Helped develop ground stations in China that eavesdrop on Soviet missiles in flight. The United States shared the data with China.
* Equipped C-130 transports with special radar and engines. They descend to low altitudes to drop and pick up commandos on sabotage or hostage rescue missions. Launched after a failed U.S. hostage rescue attempt in Iran.
* Developed satellite systems to verify Soviet and Russian compliance with nuclear arms treaty agreements.
* Packed 707 jets with high-tech gear (photo of RC-135, below) that fly from the Aleutian Islands and collect electronic signals and snap photos under code names such as Cobra Ball. In 1983, the Soviets shot down a Korean airliner, and killed 269 people, mistaking it for a Cobra Ball jet.
* Makes, installs and runs electronic gear used by law enforcement agencies to monitor drug dealers in this country and overseas. Maintains Customs Service planes for surveillance of drug planes and ships.

CODE NAMES
A sampling of the code names E-Systems uses on classified projects.
Rivet Joint
Comfy Bugle
Seek Bandit
Have Shell
Have Xray
Have Eyes
Credible Falcon
Senior Deb
Senior Guardian
Senior Quest
Quest Junior
Creek Window
Big Safari
Cobra Ball
Cobra Eye
Cobra Dane
Cold Helmet
Operation Stallion
Woodstock
Desert Tea
Desert Wind
Big Apple
Leader Store
Combat Sent
Burning Wind


No comments:

Post a Comment