Source: New York Times, 2/1/00, (c) James Risen

Top officials of the Central Intelligence Agency impeded an internal investigation into evidence that the agency's former director, John M. Deutch, mishandled large volumes of secret material, a classified report by the agency's inspector general concludes.

The report details a series of actions by the agency's former executive director and general counsel that it says "had the effect of delaying a prompt and thorough investigation of this matter." It asserts that George Tenet, the agency's current director and Mr. Deutch's top deputy, should have done more to "forcefully ensure" that the case was properly investigated.

But the report also says that Mr. Tenet said he had given instructions that the investigation go forward unimpeded.

The report did not accuse Mr. Tenet or his aides of violating any laws in their handling of the incident. But at the inspector general's recommendation, the C.I.A. has set up a special panel to examine whether Mr. Tenet and other top officials handled the case appropriately.

The investigation of Mr. Deutch began in December 1996, just as he was leaving office. According to the inspector general's report, C.I.A. computer security specialists discovered he had placed large volumes of classified material on personal computers in his home, including information about some of the government's most sensitive covert operations.

This was a potential violation of both agency rules and federal law, but the report says an inquiry by security officials was effectively shelved after a few months. The C.I.A. did not tell the Justice Department about the case for more than a year. The inspector general did so in early 1998, after an agency employee complained to the inspector general's office that the inquiry had not been properly handled, according to officials knowledgeable about the investigation. Mr. Tenet learned of the possible security breach almost immediately but did not move to reprimand Mr. Deutch until the inspector general had notified the Justice Department of a possible violation and completed his report on how the case had been handled inside the C.I.A.

After reviewing the case, the Justice Department decided last April not to prosecute Mr. Deutch, who lost his security clearances. He issued a statement in August apologizing for his actions.

Running afoul of the government's elaborate rules for handling paper and computer files can be a serious matter. Wen Ho Lee, the former Los Alamos computer scientist who is being held without bail awaiting trial, has been indicted for what prosecutors say is the unauthorized downloading of massive amounts of nuclear secrets.

The inspector general's report discloses that just three days after Mr. Deutch learned that his computer practices were under review, he deleted more than 1,000 classified files from his personal computers. The report also says that Mr. Deutch declined to be interviewed by the C.I.A.'s security officials.

The inspector general found that there was no evidence that the classified material on Mr. Deutch's computers was obtained by another country, although there was no way to be certain. In the case of Dr. Lee, by contrast, the government has charged that he transferred and copied nuclear secrets with the intent of aiding a foreign country, although prosecutors say they have no evidence he committed espionage.

As the C.I.A. case unfolded in late 1996 and early 1997, the report says, it was closely watched by Mr. Tenet, Michael O'Neill, the agency's general counsel at the time, and Nora Slatkin, its executive director.

Frustrated by limits the report says were imposed on them, C.I.A. security officers concluded that senior officials were protecting Mr. Deutch and "washed their hands" of the case. One security officer told the inspector general that the "investigation had been one in name only."

The case raises anew a question that has plagued the agency for the last two decades: Can the C.I.A. police itself? Over the years, Congress has prodded the agency to appoint forceful inspector generals and included the director of central intelligence among the handful of top officials subject to investigation by an independent counsel. Lawmakers made it clear that agency officials who blocked or misled internal investigators should be harshly dealt with.

The inspector general's report on the Deutch case suggests that these safeguards depend on how the agency's leadership interprets the rules. Mr. Tenet and other senior C.I.A. officials did not immediately report Mr. Deutch's possible security lapses to the White House or Congressional oversight committees. Their delay in telling the Justice Department about the case allowed a one-year time limit on appointing an independent counsel to lapse.

"Application of the independent counsel statute was not adequately considered" by C.I.A. officials handling the case, the report says. "Given their failure to report to the Department of Justice on a timely basis, this in effect avoided the potential application of the independent counsel statute." The statute expired in 1999.

Agency officials said there was never any effort by anyone to constrain the inquiry and that the report, by Inspector General Britt Snider, was overly harsh in its interpretation of ambiguous events and remarks. In addition, they said, the security officials interviewed by the inspector general's office portrayed themselves as more assertive than they were in their investigation of Mr. Deutch.

The report specifically cites Mr. O'Neill and Ms. Slatkin for impeding the inquiry. It also criticizes Mr. Snider's predecessor as inspector general, Frederick Hitz, for failing to "ensure the timely and definitive resolution" of the case.

Only a few details about the Deutch case and the inspector general's classified report, which was completed in July, have previously been made public, and the report remains classified.

Mr. Deutch emphasized that he never tried to block the C.I.A.'s investigation. "I have cooperated fully with the inspector general's inquiry, and at no time did I do anything intended to impede or interfere in any way with any investigation into this matter," Mr. Deutch said through his lawyer.

Mr. O'Neill said in an interview that he believed he had acted properly. "I did not try to delay the investigation of Mr. Deutch," he said.

"This was a difficult circumstance," Ms. Slatkin said in a statement. "Our goal was to have a fair and thorough review and I think we did precisely that."

Mr. Hitz defended his actions as proper and said that in early 1998 he had notified the Intelligence Oversight Board, a White House panel, about the Deutch case and was preparing to notify the Justice Department but left the matter to his successor after he left the C.I.A.

Mr. Deutch joined the Clinton administration in 1993 as under secretary of defense for acquisitions and technology. In 1994, he was named deputy secretary of defense, the No. 2 post at the Pentagon. In May 1995, Mr. Deutch was confirmed as director of central intelligence.

When Mr. Deutch moved to the C.I.A., he named as deputy director Mr. Tenet, then serving at the White House as director of intelligence policy for the National Security Council. He also named Ms. Slatkin, then assistant secretary of the Navy, to be the C.I.A.'s executive director, the third-ranking position at the agency. Mr. O'Neill, a former Democratic Congressional staff member, was named Mr. Deutch's chief of staff in 1995. In 1996 he became the C.I.A.'s general counsel.

After taking over at the C.I.A., Mr. Deutch decided not to have a classified computer installed in his suburban Maryland home, and also declined to have C.I.A. security officers assigned there. One job of officers assigned to the home of a director is the securing of classified material the director has brought from work, the inspector general's report states.

According to the report, Mr. Deutch used unclassified Macintosh computers for classified work throughout his tenure as director. He chose not to conduct sensitive work on the classified computer system at the C.I.A. because he said he was afraid that other C.I.A. officials would see what he was writing, according to the report.

Mr. Deutch placed the most sensitive documents that he worked on while he was director on the unclassified computers in his home, the report found. Among the 17,000 pages of documents discovered in files on the computers were top-secret and "code-word" files about a wide range of C.I.A. activities, including presidentially approved covert action programs. The documents also included 26 volumes detailing his daily activities in his nearly two years as director and his previous time at the Pentagon.

After losing out on his bid to become secretary of defense in President Clinton's second term, Mr. Deutch announced in early December 1996 his intention to resign as director of central intelligence and return to academic life at the Massachusetts Institute of Technology, where he now teaches chemistry.

Within days of announcing he was leaving, Mr. Deutch talked with a top computer services official at the C.I.A. and told him that he wanted to keep the C.I.A.-owned Macintosh computers in his home after he left the government. Mr. Deutch explained that he wanted them because he was using them for his personal banking.

Eventually, Mr. Deutch was told by the computer official that he could keep the computers if he continued to work for the C.I.A. as a consultant or contractor.

Mr. Deutch then quickly arranged through Mr. O'Neill to obtain a no-fee consulting contract with the C.I.A. The terms called for him to retain three C.I.A.

computers. The inspector general's report indicates that the purpose of the contract was to allow Mr. Deutch to keep his computers.

On Dec. 17, a C.I.A. computer security official went to Mr. Deutch's home and found a large number of classified documents stored on his computers. He also found that Mr. Deutch had been accessing the Internet with the same computers, through unsecured services. He had Internet access through America Online, Citibank's personal banking Web site and a Defense Department service. The security official told his superiors what he had found.

Almost immediately, Mr. O'Neill and Ms. Slatkin were informed that classified material had been found on the computers. Mr. Tenet was soon told about the discovery by Ms. Slatkin.

On Dec. 20, 1996, Mr. Deutch began to delete files from his computers, including more than 1,000 that had been stored on one portable memory card. That day, Mr. Deutch called a C.I.A. computer specialist to ask for help because he was having trouble deleting the files, according to the report.

Meanwhile, officials from a C.I.A. special security unit were trying to open an investigation to determine whether Mr. Deutch had violated C.I.A. rules and United States laws by mishandling classified information.

By January 1997, the security officials were looking for the most critical evidence, particularly four portable computer cards that contained files from Mr. Deutch's computers. They were informed that Mr. O'Neill had the material in his office safe.

Mr. O'Neill rebuffed requests to turn the four cards over to the security staff, according to the report. In an interview, Mr. O'Neill declined to comment on the handling of the cards.

A security official complained to Ms. Slatkin that Mr. O'Neill "was dragging his feet," and that his refusal to turn the cards over "made it look like a cover-up."

At the same time, Mr. O'Neill said, he, Mr. Tenet and Ms. Slatkin held a series of discussions "over a period of several weeks" about the need to protect the privacy of the material found on the computers.

Mr. Deutch refused to be interviewed by the security staff, and senior C.I.A. officials allowed him to avoid being questioned, according to the report. Eventually, Ms. Slatkin, Mr. O'Neill and Mr. Deutch agreed to allow one security officer to review all the computer files gathered from Mr. Deutch's home. The four portable computer cards were finally turned over, but only after they had been held by Mr. O'Neill for about three weeks, the report states.

Without an interview of Mr. Deutch, the C.I.A.'s security unit "washed its hands" of the investigation, according to one security official interviewed by the inspector general's office. The security unit did finally write a report on the Deutch case, in the summer of 1997, but the report sat in the security office without further action.

Meanwhile, a C.I.A. security official asked Mr. O'Neill in 1997 why no referral had been made to the Justice Department about a possible crime. "We do it with everyone else," the security officer said. Mr. O'Neill said that he was waiting for the security office to complete its report before notifying the Justice Department, but did not receive it before leaving the C.I.A. himself in August 1997.

Mr. Tenet did not take action against Mr. Deutch before the inspector general's investigation began because he was not aware that the security office had completed its own inquiry. In the fall of 1997, in fact, the security office recommended to Mr. Tenet that Mr. Deutch be granted security clearances to serve on an outside commission on weapons proliferation.