Australian Intelligence

Confronting the past for a safer future

Article written by former ASIS officer Warren Reed & academic Dr Christopher J. Ward. Originally published in the Winter 2008 edition of the National Observer.

A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments; he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to fear.
- Marcus Tullius Cicero (106 BC-43 BC).

The release a few months ago of declassified papers from Australia's Royal Commission on Intelligence and Security (1974-77) attracted only the most superficial commentary in the media and, as usual, the opportunity was used to berate the Australian Security Intelligence Organisation (ASIO). We await with anticipation a thorough examination of the Royal Commission papers by scholars and writers in the intelligence field, especially in academia. Regrettably, however, the intelligence community as a whole has been let down in this regard in the past, often suffering unwarranted criticism while garnering little in the way of public support. It is our opinion that the findings of the commissioner, the late Justice Robert Hope, deserve much closer scrutiny, especially with respect to the problems he encountered in conducting his inquiry and against the backdrop of remarkably strong statements of concern that he received about Australian security from overseas agencies with which ASIO had close contact.

As co-authors with a background at either end of the intelligence spectrum--intelligence-gathering and counter-intelligence/counter-espionage--we will attempt to bring a broad-ranging perspective to our examination of this matter from, if you like, a combined team of the poacher and the gamekeeper.

We believe that this needs to be done because of the great changes that have occurred in the global community since the Hope Royal Commission took place. The rise of China and its impact on Australia are possibly the major challenge. But that posed by a wealthy energy giant in the form of a resurgent Russia, whose levels of espionage in the West have increased exponentially since the end of the Cold War, and the continuing threat of Islamic fundamentalism, are also likely to be of the highest priority. For Australia to survive in this new era, with anything like the destiny to which it believes and assumes it is entitled, it will have to be able to cleanse its intelligence agencies of bad elements. Mateship, cronyism and the political wish to avoid embarrassment over serious cases of disloyalty should no longer be indulged at the expense of the nation's well-being. In the same way that a woman can't be half pregnant, a country's national interest can't be protected if betrayal is tolerated within. And ASIO is--or was intended to be--Australia's prime cleansing agency by virtue of its counter-intelligence function.

These issues should have been dealt with responsibly and effectively decades ago, and the reasons why they haven't reveal an unflattering psychological profile of Australia that most people would prefer not to confront. It is not a classical conspiracy theory that is involved here. Rather, there is a disposition that, over long years, has led to individual cases being buried as they occur, with each regarded as an ad hoc, unrelated challenge to the government of the day. With time, an accretion of events has formed into a pattern of behaviour that is almost impossible to eradicate without major surgery. To a degree, it has given rise to an ongoing network of contacts, which coalesces whenever things need to be covered up. Call it what you will, the result is devastating. And it manifests itself in behaviour that is unacceptable from a national security viewpoint.

Opposition to the establishment of ASIO

To go back to Justice Hope's report, the most startling observation, at a first reading of his recently released papers, is his assertion that the United Kingdom and United States authorities, in particular, were concerned in the mid-1970s about penetration of various Australian government agencies, including ASIO, by hostile foreign powers. In the main, the then USSR and its Warsaw Pact allies (known in the intelligence world as the satellite states) had carried out the penetration. Several times, Justice Hope stated that he was not empowered to investigate these claims. There is an eerie resemblance here to the years after World War II, when these same two allied powers, the UK and the US, were urging the establishment in Australia of a security service. The then Chifley Labor Government, however, faced great hostility in doing so from within the labour movement, the ALP and especially from the Minister of External Affairs, Dr H.V. Evatt, and the then head of the Department of External Affairs, Dr John Wear Burton, Jnr. Both the implicit and explicit threat from our allies was that, unless Australia got its house in order and weeded out those who had succumbed to Soviet espionage, there would be no information exchange with the UK and US.

Desmond Ball and David Horner have covered these aspects exhaustively in their book, Breaking the Codes, which is basically the Venona story, (Operation Venona is the description of the decryption by the Western allies, principally Britain and the US, of Soviet signals intelligence (SIGINT) traffic. Full details were kept a closely guarded secret until the end of the Cold War. The material contained in the book by Ball and Horner demonstrates quite conclusively the extent of Soviet intelligence operations in this country, and the fact that UK and US fears about Australian security and the leakage of classified information were entirely justified.) and Andrew Campbell has carried out extensive research into the personalities involved in the anti-ASIO drive.

In his introduction describing the establishment of ASIO in 1949, Hope set out the original reasons for setting up the organisation, citing the words of Prime Minister Ben Chifley who said, "A great increase in Australian security tasks and responsibilities has made it necessary to re-establish a separate security service." In his speech to parliament at the time, Chifley announced that Justice Geoffrey Reed of South Australia would be the body's first Director-General. Hope referred to two separate ASIO charters, one given to Reed and the other to his successor, Colonel (later Brigadier Sir) Charles Spry, who became Director-General in 1950.

ASIO's objectives

It is important to note that these charters were subsumed by the ASIO Act of 1956-76 and that the Hope Royal Commission was called by the Whitlam Government in 1974 after a raid on ASIO's national headquarters, then in Melbourne, by the then Attorney-General Lionel Murphy QC and the dismissal of ASIO's Director-General Peter Barbour by the Prime Minister. The objective of the Royal Commission was to examine the effectiveness of Australia's intelligence services, especially ASIO. According to the terms of reference, as cited in the Royal Commission's Fourth Report (para.7), the purpose of the inquiry was:

in light of past experience, and having regard to the security of Australia as a nation, the rights and responsibilities of individual persons and future as well as present needs, to make recommendations on the intelligence and security services which the nation should have available to it and on the way in which the relevant organisations can most efficiently and effectively serve the interests of the Australian people and government ....

Hope took the view that, apart from a number of particular matters specified in his letters patent, his terms of reference required him to undertake an overall review of ASIO. He looked at the role that a security service played in a liberal democracy and resolved that striking a balance between individual rights and the preservation of the country's security was no easy thing to achieve. But, in the final analysis, public safety and individual liberties should sustain each other.

One of his early conclusions was that ASIO's management left a lot to be desired. He wrote that "over a number of years its management was not as good as it should have been". He went on to suggest, "If Australia needs a security service--and I shall show that it does--then it must be well run. Those working in it must have high personal qualities." Hope stated quite specifically that intelligence assessment is not a routine, simple activity but a "highly skilled and subtle task". He also reported that he "saw little evidence in ASIO that the qualities of mind and expertise needed were recognised or available in any large measure", although he noted at one stage that he found in ASIO "a large number of most capable and intelligent members, many of them junior or middle rank, of whom a large number came to the commission with information and advice which I found most helpful".

By inference and observation, it was evident that the capacities and the capabilities he had in mind were not found in the senior ranks of ASIO management. Hope described the necessary qualities of an intelligence officer as possessing a good education, sound practical sense, with an insight into people, with good research skills, and an ability to think and write clearly.

Hope Report's indictment

Stripped of its veneer, the 1977 Hope Report must surely rate as one of the most damning documents in the history of intelligence. The royal commissioner found many problems with ASIO, but we intend to deal here only with the most serious. In so doing, we feel it is important to mention that some documents pertaining to the commission's inquiry have not been released, and anecdotal (and apocryphal) information strongly suggests that they should remain restricted for another 25 years. We also accept that there was good reason to excise passages in the released papers and it would be irresponsible to second-guess the content of those omissions.

Seen from our point of view as former intelligence officers (one in ASIO) who served during the period of the Royal Commission, the Hope report contains both an accurate and painful summation of conditions then evident in the organisation, and many of the recommendations could be described as long overdue at the time.

In 1976, ASIO officers were told by the organisation's new administration under Justice Sir Edward Woodward, with the late T.H. (Harvey) Barnett, an Australian Secret Intelligence Service (ASIS) officer, as his Deputy Director-General, that a line had been drawn under the "excesses and irregularities of the past". It was said that a new start had been made. From time to time, those comments were reiterated, along with the statement of Justice Woodward that abolition of ASIO had been considered, but that the discontinuity expected to ensue would have placed more strain on Australian security than any thoroughgoing and comprehensive reform.

In many respects, ASIO did become a more effective organisation. Justice Hope's recommendations on the recruitment of staff, on finance and on modelling the conditions of ASIO officers on those of public servants were introduced swiftly and relatively painlessly.

It was inevitable that some of the old guard felt that the new regime was the beginning of the end. But Woodward, for the most part, presided over a transformation of the organisation into a 20th-century intelligence service, far removed from the quasi-military structure he had inherited.

One of Hope's major criticisms had focused on the arbitrary and often highly idiosyncratic promotion system. His descriptions of management generally and of personnel practices in particular--including the prevalence of nepotism, cronyism and cliques, as well as other manifestations of ad hoc policy making--were harsh. Most of the Woodward reforms were fair to staff, the most important being promotion on the basis of merit and the internal advertising of vacant positions. Interviewees for those jobs faced strong and rigorous scrutiny and, while it could be said that mistakes were made, more square pegs were placed in appropriate holes than hitherto.

One of the most profound reforms was the introduction of management by objectives, which was applied to the intelligence-gathering process within ASIO and which provided for regular efficiency audits and regular reports to government. This was a difficult process that took time to implement and it had its weaknesses, which were manifested and rectified much later. An example was the chaotic nature, described by Hope, of the organisation's records system and the separate existence of a number of different registries. Each registry produced duplicate files, and these, coupled with unfiled "floating papers", created a nightmare for analysts, especially those engaged in the painstaking task of creating timelines and establishing the chronological order of certain events and reports.

The reorganisation that combined the intelligence-gathering and analytical functions of the agency meant that, for the first time, analysts had access to prime material from various sources. The chaos in the records and filing system, however, was never brought up to an acceptable standard. This was demonstrably so when Hope under-took the 1983 Royal Commission into what became known as the Combe-Ivanov Affair. Here, for the first time, ASIO files were exposed to the harsh light of day and the weaknesses still in the system were revealed publicly through examination by politicians, lawyers and the media.

Counter-intelligence recommendations

There are two features that distinguish the 1977 Hope Royal Commission report which have been consistently overlooked by sensationalist media coverage.

One is the primacy of ASIO in ensuring the security of Australia, its government, public service and what is now known as the intelligence community. The other, which is arguably the more important and which constitutes the focus of this paper, is the organisation's duty to guarantee its own security; that is, to ensure that, as a crucial cleansing mechanism of government, it is itself inviolable. Hope concluded that fears voiced by allied overseas security intelligence services that cooperated with the inquiry--not to mention suspicions expressed to him by ASIO officers--that ASIO had been penetrated by hostile intelligence services, were well founded.

He adduced from a variety of sources that it was possible to detect "indicators" of penetration of ASIO by hostile foreign services, based on information received, as well as from the consistent run-down of the counter-intelligence function within the organisation. Lamentably, that conclusion came with a robust statement that he did not have the necessary powers to conduct further investigations into the matter. Consequently, Hope made a number of recommendations relating specifically to enhancing ASIO's demonstrably ramshackle capability in this key area. Those recommendations were accepted by the government of the day (a Liberal-Country Party Coalition Government led by Malcolm Fraser) and by the then Director-General, Justice Woodward. Here is how Hope put it:

I therefore recommend that ASIO should take urgent steps to:

a) Establish procedures for the proper security of its people, documents and locations.
b) Establish procedures for reviewing the security of its operations.
c) Assess each of the indicators listed above to establish what degree of penetration there might have been or be.
d) Assign a high priority to counterintelligence matters within ASIO itself.
e) Open up close consultations with US, UK and other services of friendly countries, with a view to enhancing ASIO's CI efforts.
f) Stand ready to adopt a more aggressive and sceptical attitude toward CI work. By aggressive, I mean that ASIO has to go out and look for the evidence; by sceptical I mean that ASIO has to face the possibility that all of its officers may not be completely reliable.

This must surely constitute not only a devastating indictment of existing procedures and operational activity in the field of counter-intelligence (CI) but also a firm prescription for action to follow. Because the full report that contained these recommendations was accepted by government as well as by ASIO management under Justice Woodward, the real question must be: to what extent were those recommendations ever acted upon?

It can be stated here that, for reasons unknown, the Woodward-Barnett management team signally failed to act on the counter-intelligence recommendations that should have been accorded the status of holy writ. To an extent, Justice Hope had over-estimated the efficiency of the counterintelligence section of ASIO--D5. It is worth noting that, in another part of his report, he regarded that section as the nucleus upon which a robust, aggressive and effective CI function could be built. Deplorably, it was not. Numbers in the renamed Security Review Branch (SRB) dwindled sharply and rarely exceeded five officers, with the primary focus directed to security checking of new recruits.

The logical corollary of the foregoing is to ask why nothing was ever done to reorganise and strengthen ASIO's counter-intelligence function, which Hope had envisaged would deal not only with the organisation's own internal security but also that of government, its agencies and departments and matters connected with the overall security of the nation. The basic problem was that his recommendations were never placed on the public record and hence there was no need for the government to acknowledge that it appreciated the significance of what it had accepted. Nor was it obliged to outline any plan of action. It could be hypothesised that Justice Hope, seeing the acceptance of his recommendations, believed that robust CI investigations were carried out and any results reported in secret to the government of the day, either in the classified copy of the ASIO's annual report to the Prime Minister or in a separate document.

Disappointingly, it is obvious that successive Directors-General and their deputies either had--or succumbed to--the mindset that has plagued ASIO since its inception: that it is incomprehensible to them and the upper echelons of the organisation that hostile foreign intelligence forces could have penetrated ASIO. Nothing more clearly epitomises that mindset than the often-uttered words: "It can't happen here; this is Australia." But it could, and it did, as subsequent events clearly demonstrated.

Soviet KGB penetration of ASIO

In short, for many years ASIO was in a state of denial, which was a disposition that infected the rest of the intelligence community as well as government as a whole. With the benefit of defector information during and since the Cold War, it is known that ASIO was indeed penetrated by the Soviet KGB, virtually from its inception. We have no way of knowing if it still is, at least by the KGB's successor organisations, the Russian FSB and SVR, or by the Chinese or by anyone else.

Not for Australia the uncovering and imprisonment of traitors like Robert Hanssen in the United States, who had worked for the FBI--ASIO's rough equivalent--for 27 years, 17 of them for the Russians. He's now serving life in a federal penitentiary. Nor have we caught any big fish in any other part of our system. All Australia has to its credit are two minnows. One was Simon Lappas, employed at the Defence Intelligence Organisation (DIO) in Canberra. In July 2000, he tried to sell classified material to foreign powers through a Sydney prostitute. The other was Jean-Phillipe Wispelaere, a French-Australian citizen caught in 2001, when he was in his late 20s, trying to sell in Asia US intelligence that he had acquired during six months working in the DIO. Nabbed by the Americans--not by ASIO--in an FBI sting operation after being lured to the United States, he is also serving out a long sentence in a US federal penitentiary.

Yet it is a matter of public record that important information concerning the penetration of ASIO was passed to the Australian government, above and beyond what has been revealed by retired KGB Major-General (and head of the KGB's worldwide foreign counterintelligence) Oleg Kalugin (now resident in Washington); by a former KGB chief-of-station in London, Oleg Gordievsky; and, latterly, via former senior KGB archivist Vasili Mitrokhin.

Kalugin's assertion in his book and in television interviews, that traitors in Australian intelligence in Canberra had long been selling top secret material to the Soviet Union, was confirmed by critical information on Australia provided from the Mitrokhin archive, which, perhaps understandably on security grounds but infuriatingly for researchers, has not been publicly released. Such was the nature of the leads provided that ASIO found itself in the unique and unenviable position in the 1990s of being the subject of an unprecedented investigation (Operation Liver), conducted by the Australian Federal Police. This, in turn, led to the Cook Inquiry of 1993-94, the findings of which have never been released, nor has any meaningful statement been made on its contents, even to Parliament. The only prosecution resulting from the investigation was an abortive trial of George Sadil, a Russian translator working for ASIO in Canberra. Many former officers consider that the overall job of cleaning out the Augean stables was never completed.

It does not require any great insight to realise that, once again, Australian security was being seen as deficient, with the security service penetrated by hostile intelligence agencies, especially by the KGB. It could be inferred that, given the events that led to the establishment of ASIO in 1949, augmented as they were by doubts expressed in the 1974-77 Hope Royal Commission and by Soviet defector information, the US and the UK would have been amply justified in permanently severing intelligence links with Australia--a case of "one, two, three strikes and you're out". But such is Australia's position within the Western intelligence alliance, and as a major ally of the US, that a firm guarantee of remedial action must have been demanded and agreed upon.

However, it is noticeable, on looking back through unclassified ASIO annual reports, that counter-intelligence barely rates a mention. Organisational charts clearly show a CI function, but little detail is provided--not that it could be explicit. It is to be hoped that, with the immense culture shock that resulted from being the subject of a federal police probe, ASIO now has its counter-intelligence house in order. Not to have done so would constitute a betrayal of a considerable number of loyal former officers, let alone of the nation as a whole.

On the other hand, should the CI function once again be allowed to deteriorate to the shameful level that prompted the basis of Justice Hope's 1977 recommendations, the entire Australian intelligence community would be at considerable risk. Judged on previous performance, it is difficult to have any confidence in Australia now possessing an efficient and effective review mechanism for ensuring that its security agency is "clean". Nor has there ever been any evidence of a new and healthy approach to such matters.

Failure to investigate security breaches

That, of course, is fine with those who have something to hide, whether it is their own traitorous acts or the interest they have in covering up somebody else's. Imagine an officer in ASIO's senior ranks who, in a previous incarnation, has worked alongside a known traitor protected by people in high places. Such an officer could have gained promotion by helping cover up that mentor's nefarious activities, and his or her top priority on joining ASIO would be to discreetly remove any evidence of a threat to national security that was not acted upon.

There have been occasions when threat assessments on individuals have gone to the highest level of government for action, only to be rejected, then to gather dust in the ASIO's archives. No greater evidence is required of the organisation's inability or disinclination to cleanse itself and the rest of the government system than its track record of negligible achievement in tackling these issues.

Two television programs, screened in November 2004, highlighted Australia's ongoing incapacity and unwillingness to grapple with these realities in the way that other nations do.

One, an ABC television Four Corners documentary, examined Soviet penetration of ASIO and featured former senior officers of the Attorney-General's Department, who declared--full face to camera--that the US had cut off intelligence flows to Australia until Washington was assured that ASIO's act would be cleaned up. The program also stated unequivocally that the British Secret Intelligence Service (SIS), more popularly known as MI6, had briefed the then ASIO Deputy Director-General on the Mitrokhin revelations of penetration of ASIO and that, as a consequence, he had selected a hand-picked team to investigate the problem and code-named the operation "Jabaroo".

The other program, Channel Nine's Sunday program, featured General A.M. Hendropriyono, the then head Indonesia's national intelligence agency (BIN), who boasted in English that his agency had penetrated the Australian government system. He even named specific areas. It was by any measure an extraordinary performance.

Neither program elicited a response from the Australian Government or prompted the media, parliament or the community as a whole to demand that the claims be appropriately investigated. How can a country that has been warned by so many overseas governments so many times about its slipshod security practices expect to withstand the challenges posed by rising powers like China, by a reinvigorated Russia and by the representatives of militant Islam in this country?

The future

Recent articles in The Australian have highlighted changes in the international balance of power. Paul Kelly, a perceptive writer on globalisation, noted the reality of Russian power manifested in the conflict in Georgia and the implications of expanding Chinese power. He concluded:

The moral for Australia is that realpolitik never died. Yes, the Rudd Government's multilateral dreams should be pursued, but they need to be hedged against the possibility that competition, not co-operation, will define the coming disorder.

A few days later, the same newspaper carried an article by Paul Dibb, emeritus professor of strategic studies at the Australian National University. After considering the recent Russian clash with Georgia, he concluded bluntly:

... an authoritarian Russia, as well as an authoritarian China, is on the move. And they both perceive America to be a weakened and distracted power. That should have important implications for our forthcoming defence white paper.

Dibb is a former Deputy Secretary of the Department of Defence and Director of the Joint Intelligence Organisation (now DIO) and has been a key adviser to government. The fact that The Australian article had already been published in the US journal The American Interest some 20 months previously is an indictment of a self-obsessed, navel-gazing Australian media and a lazy Parliament.

This is the same mentality outlined at the beginning of our article, namely, that serious matters of national security and international relations are too often trivialised by a media seemingly intent on "dumbing down" issues. Equally unhelpful is a tertiary education sector that has abdicated much of its responsibility in these same areas. (24) Indeed, words attributed to the Greek philosopher Aristotle have a resonance here: "Tolerance and apathy are the last virtues of the dying society."