LA spy case: taking fresh look at corporate security

Southern California, with the greatest concentration of classified government contracts of any area in the nation, is a prime target for espionage activities The June 28 arrest of two men on espionage charges illustrates the point and serves as "a prime example of what can happen," according to the Federal Bureau of Investigation (FBI).

Local FBI agents who conduct counterintelligence investigations meet periodically with representatives of Los Angeles area corporations holding federal contracts to "keep them abreast of the fact that the threat is there, and not to let their guard down," FBI spokesman John Hoos says.

The latest incident involves the arrest of a Hughes Aircraft Company radar engineer accused of selling classified information about military and space radar projects to a suspected Polish intelligence officer, who was also arrested here June 28.

FBI spokesmen said the aerospace firm had "cooperated fully" and in no way suggested that the corporation had been lax in its security procedures. "We're dealing with professionals here," said spokesman Hoos.

The arrests highlight one of the major concerns facing firms that hold contracts for classified federal projects -- security.

All corporations that do business with the US Defense Department and some other government agencies are required, as part of their contracts, to have a security program that protects classified and secret projects. Inadequate security can lead to cancellation of a contract and the subsequent loss of millions of dollars in government business.

"It's a very serious situation," says Richard Healy, a security expert who was director of security and safety for the Aero- space Corporation for nearly 20 years before retiring to become a private consultant. "[Companies] are serious about it. They know if they don't behave, it could be very costly."

According to Mr. Healy, all the major corporations that do business with the government -- including Hughes, Lockheed, and TRW -- have stringent security programs enforced by full-time security directors and staffs. Measures include employee education programs that explain how confidential a given project is, and how an employee is expected to protect the documents he is working with -- whom he is allowed to talk to about the project, where to lock his work up at night, and how to transport documents.

Despite these security measures, says Healy, "It's a very difficult thing if you have somebody that's intent on violating the rules."

"You just can't have enough security people to be around watching everybody," he continues. "Hopefully, if it's a company that has an education program, there should be some signal that this individual isn't behaving right. Management people should be alert for these signals," which he says include "a person asking for something he shouldn't have."

It is impossible, Healy says, to determine the implications of an espionage incident -- although "the image of a company can be tarnished" in a way that might hurt its credibility.

"Hughes, TRW, and Lockheed are all on an equal footing in contract bidding with the government," he says. "But in some competitive contract negotiation that [the arrest of an employee on espionage charges] might have an effect that nobody knows about."