1998 Congressional Hearings
Intelligence and Security

	1999 Budget Request

Statement of Louis J. Freeh, Director
Federal Bureau of Investigation

Before the Senate Appropriations Subcommittee
for the Departments of Commerce, Justice, and State,
the Judiciary, and related Agencies

Washington, D. C.
March 3, 1998

Good morning, Mr. Chairman and members of the Subcommittee. I am very pleased to appear before you today to discuss the 1999 Budget Request for the FBI.

At the outset, I would like to acknowledge the strong support of the Subcommittee for the FBI in the 1998 Justice Appropriations Act, especially with regard to funding provided for counterterrorism activities, fighting drugs along the southwest border, and overseas expansion. I am also very grateful for your support in providing us with additional authorities to become more competitive in recruiting, hiring, and retaining individuals with critical skills.

CHALLENGES FACING THE FBI

Just a few short months from now, in June 1998, the FBI will celebrate its 90th Anniversary. Since its beginning in June 1908, the FBI has built a distinguished record of serving the American people by effectively responding to the crime and national security challenges of our times -- the gangsters of the 1920's and early 1930's, the rise of interstate crime, the cold war era, the unrest of the 1960's, the emergence of international crime, and the uncertainty of the post-Cold War world. Each of these challenges required the FBI to respond to new crime and national security problems. As I look ahead toward the challenges that face the FBI as it approaches the turn of the century, I am confident that our past will serve as a guide toward our future.

There are many challenges facing the FBI as it approaches the 21st Century. Changes in national and world politics, economics, technology, and social conditions complicate efforts to reduce crime. These are formidable challenges, but not insurmountable. As old threats diminish and new ones appear, the FBI must meet each challenge with a flexible, proactive response. I would like to highlight several of the challenges facing the FBI today and in the future.

Espionage and Intelligence Activities. The fall of communism has not reduced the level or amount of espionage and other serious intelligence activity conducted against the United States. We still facing a deadly, serious foreign interest in traditional intelligence activities. New challenges in the realm of intelligence and national security are emerging. To meet these challenges, the FBI must be able to counter threats posed by intelligence activities committed by non intelligence personnel, maintain the integrity of the Nation's critical information and physical infrastructures, and counter technologically sophisticated adversaries exploiting advanced technologies to commit espionage.

Terrorist Threat. The threat posed by both international and domestic terrorists against Americans and United States national interests will continue for the foreseeable future. With your help, the FBI and the United States Government is in a better position to deal with this threat. Despite recent successes, such as the rendition of Mir Aimal Kasi from Pakistan and his conviction on charges of capital murder, the conviction of Sheik Omar Rahman for conspiracy, the convictions of Timothy McVeigh and Terry Nichols, and the conviction of Ramzi Ahmed Yousef, mastermind of the 1993 World Trade Center bombing, the Nation must remain vigilant. Terrorism is perpetrated by individuals with a strong commitment to the causes in which they believe. An action in one location can bring about a reaction somewhere else. As the United States develops a stronger investigative and prosecutive response to terrorists, the Nation may witness more attempts at reprisal at home and abroad.

Weapons of Mass Destruction. The FBI views the proliferation of weapons of mass destruction as a serious and growing threat to our national security. During 1997, the FBI initiated over 100 criminal investigations involving nuclear, biological, and chemical threats or incidents. Many of these threats were determined to be non-credible; however, the number of investigations has increased three-fold over the previous year. The ease of manufacturing or obtaining biological and chemical agents is disturbing. Available public source material makes our law enforcement mission a continuous challenge.

In partnership with the Department of Defense and other federal agencies, the FBI is participating in the Nunn-Lugar-Domenici Domestic Preparedness Program that trains local first responders to contend with the consequences associated with an incident involving weapons of mass destruction. With this Committee's support, we are also upgrading the FBI's own weapons of mass destruction capabilities, including equipment and training.

Emerging Criminal Enterprises. Where the FBI's posture against traditional adversaries, such as organized crime, remained stable and predictable over a number of years, the current environment is characterized by emerging crime issues and groups which are less clear, more numerous, and which often transcend the FBI's traditional program management and investigative structure. For example, Russian crime groups are not only involved in typical organized crime activities, such as loan sharking, extortion, and prostitution, but also in such activities as medical fraud, tax evasion, and bank fraud. Asian criminal enterprises are not only trafficking in illegal narcotics, but they are also involved in the theft of computer and high technology components. No longer can law enforcement easily categorize the illegal activities of organized criminal enterprises.

Encryption. One of the most difficult challenges facing all of law enforcement is how rapidly terrorists and criminals adopt advanced technologies to thwart law enforcement's ability to investigate those who wish to do harm to our Nation and its citizens. That is why encryption is one of the most important issues confronting law enforcement. Law enforcement remains in unanimous agreement that the widespread use of robust non-recoverable encryption will ultimately devastate our ability to fight crime and terrorism. Uncrackable encryption allows, and will continue to allow with increasing regularity, drug lords, terrorists, and even violent gangs to communicate about their criminal intentions with impunity and to maintain electronically stored evidence of their crimes impervious to lawful search and seizure.

Convicted spy Aldrich Ames was told by his Soviet handlers to encrypt computer file information that was to be passed to them. Ramzi Yousef, convicted with others for plotting to blow up 11 United States owned commercial airliners in the far east, used encryption to protect files on his laptop computer. A major international drug trafficker recently used a telephone encryption device to frustrate court-authorized electronic surveillance. The FBI is encountering a growing number of cases where 56 bit Data Encryption Standard (DES) and 128 bit "Pretty Good Privacy" encryption are being used for protection by criminals.

As Congress continues its work this session towards a balanced approach to the important issue of encryption, I urge you to consider public safety and national security concerns regarding encryption products and services manufactured for use in the United States or imported into the United States.

Strategic Management Focus. The 1999 budget is the first to be submitted in compliance with the Government Performance and Results Act. The FBI is continuing its efforts to integrate strategic planning and budget processes through an extensive strategic management focus under the leadership of the Deputy Director.

FBI investigative and intelligence strategies must reflect the FBI's best judgement concerning the nature of the threat posed to the American people and the FBI's capacity to respond at both the national and local levels. Over the past several months, key managers responsible for the FBI's Criminal Investigative and National Security Programs have been developing operational, intelligence, technology, state and local assistance, and management strategies to guide the FBI as it enters the 21st century. At the heart of these strategies will be the core values and strengths that have served the FBI so well over the past 90 years. These strategies, which are still being completed, will also identify sound approaches for responding to the challenges associated with the dynamic nature of emerging crime problems and national security environment.

1999 BUDGET SUMMARY

The 1999 budget helps position the FBI along this roadmap to the future. For 1999, the FBI is requesting $3,014,654,000 in direct budget authority and 28,834 permanent and reimbursable positions, including 11,677 agents. To carry out several priority initiatives, including those in the areas of counterterrorism and cybercrime, information sharing and Indian Country law enforcement, the FBI is requesting program increases totaling $94,004,000 in direct budget authority and 340 permanent and reimbursable positions, including 146 agents. Within the Department of Justice General Administration programs, additional funding is proposed to support new and continuing initiatives related to counterterrorism, cybercrime, narrowband radio communications, and telecommunications carrier compliance. All of these programs will directly support FBI operations in 1999.

COUNTERTERRORISM AND CYBERCRIME

The criminal exploitation and illegal electronic intrusion into public and private sector computer networks is rapidly escalating into a major crime problem. The national and economic security of the United States relies extensively on a National Information Infrastructure (NII) that is vulnerable to disruptive forces. These forces include natural events, mistakes, technical failures, and malicious acts by hackers, disgruntled employees, criminals, industrial spies, foreign agents, and terrorists. The advent of complex computer and communications networks has produced a tandem capability for the potential of illegal information retrieval, disruption and/or destruction from various sources. White collar criminals, economic espionage agents, organized crime members, foreign intelligence services, and terrorist groups have all been identified as "electronic intruders" with the potential to have immediate and severe consequences for every facet of government and industry.

The United States is increasingly reliant on complex, networked infrastructures for its national and economic security and the welfare of its citizens. The movement of the United States towards an information-based economy, and the rapid expansion of electronic commerce, has greatly increased dependence upon the NII. Any protracted loss of critical infrastructure would severely impact national security and the national welfare. In recent years, unknown intruders have penetrated telecommunications carriers, Internet service providers, and other government, private and university systems. Lists of Frequently Asked Questions (FAQs) outlining the specifics of system vulnerabilities are widespread. "The Unofficial Web Hack FAQ," "The Hacker FAQ," and "How to Hack a Website" are popular, accessible, and easily downloaded from the Internet. Knowledgeable observers and recent surveys predict that malicious acts directed against the NII will only increase in frequency and sophistication, and will continue to pose grave consequences and potential harm.

The challenge facing the FBI today in the area of cybercrime is building the requisite capabilities to address this rapidly growing and evolving problem. Technology exploitation is an emerging problem which touches virtually every area of the FBI's mission, including white-collar crime, counterterrorism, foreign counterintelligence, violent crime, organized crime and drugs. The FBI must act now to identify, train, equip and deploy investigative resources to stay abreast of the growing caseload, as well as meet its responsibilities for infrastructure protection. We are building this capability at two levels: through specialized and highly trained field squads; and, the operation of a national-level center that supports field investigations and coordinates with other federal, state and local agencies and the private sector.

CITA Squads. One of our strategies for establishing a cybercrime investigative capability is the staffing of Computer Investigation and Infrastructure Threat Assessment (CITA) squads. Currently, there are three squads located in Washington, D.C., New York City and San Francisco. New squads are being established this year in Chicago, Dallas and Los Angeles.

For 1999, the FBI requires $11,607,000 and 124 positions, including 75 agents, to staff, equip, and train 6 additional CITA squads in Atlanta, Boston, Charlotte, Miami, Minneapolis, and Seattle. This would provide a total of 12 CITA squads by the end of 1999.

National Infrastructure Protection Center (NIPC). In July 1996, the FBI established the Computer Investigations and Infrastructure Threat Assessment Center (CITAC) to support our network of field CITA squads by providing in-house support to criminal and national security investigations and related activities. Since its establishment, CITAC has played critical roles in the successful resolution of several significant criminal and national security intrusion cases. Recent case experiences have underscored the importance of interagency collaboration when responding to the range of threats and incidents affecting the nation's critical infrastructure. Unfortunately, the intentions of intruders into critical information systems is not usually known at the outset of an event. Consequently, law enforcement agencies, the intelligence community, and the United States military must work together with private sector owners and operators in determining the appropriate government response to intrusions and attacks against the critical infrastructure.

In recognition of the broad range of the threat to critical infrastructure, and to bring about an interagency capability to detect, assess, and act upon threats and intrusions, the Department of Justice and the FBI developed a plan in late 1997 to expand the scope of the CITAC into the National Infrastructure Protection Center (NIPC) that would provide more advanced analysis and warning, emergency support, training, and outreach capabilities than the current CITAC. The Attorney General has approved this plan and the CITAC is now the IPC. As proposed, the NIPC would be jointly staffed with other participating federal agencies, including the Department of Defense, and the private sector. I envision the NIPC as a national resource that supports cyber emergency response efforts and helps determine if an incident, or series of incidents, is either a criminal or terrorist act, an effort to collect intelligence, or, in fact, a hostile attack initiated by a foreign power.

The NIPC concept was presented to the Administration for consideration as it makes policy decisions regarding the findings and recommendations of the President's Commission on Critical Infrastructure Protection. These decisions are currently being weighed by the Administration.

Within the FBI's 1999 budget request, an increase of $10,412,000 and 9 positions is requested for the operations of the NIPC at FBI Headquarters. These additional positions will allow the FBI to expand its present cyber and infrastructure watch and warning capability. This funding will also be used to develop a comprehensive and secure indication and warning system, acquire equipment for the new field squads, provide training programs and expand communications and sharing of investigative techniques and detection tools.

Under the Counterterrorism Fund, $33,603,000 is requested for implementing Administration policies adopted to address the findings and recommendations of the President's commission on Critical Infrastructure Protection. This funding could be used to support the expanded roles and responsibilities proposed for the NIPC.

State and Local Preparedness. As I indicated earlier, The FBI continues to work closely with the Department of Defense and other federal agencies to train state and local communities for contending with the consequences of weapons of mass destruction. For 1998, this Committee was instrumental in providing funding under the Attorney General's Counterterrorism Fund for first responder training and to allow States and localities to acquire basic personnel protective gear and detection, decontamination, and communications equipment that is necessary for responding to terrorist incidents involving chemical or biological agents or nuclear materials. We are working with the Office of Justice Programs to set up the framework for a grant program to make these equipment funds available to states and other appropriate local units of government.

The President's 1999 budget request for the Counterterrorism Fund includes $16,000,000 to continue this multiyear effort to improve state and local capabilities for incidents involving weapons of mass destruction. I encourage the Committee to again support funding for this important initiative.

INFORMATION SHARING

When I first became Director of the FBI in 1993, I set in motion the linking of the FBI's and DEA's drug databases so that agents and analysts from each agency could benefit from the sharing of case and intelligence information. That effort, called Drug-X, now extends to the Treasury Department's TECs database. Similarly, in 1995, I established the FBI Counterterrorism Center to facilitate the sharing of intelligence and law enforcement information on terrorism among federal, state, and local agencies. As I look toward the future, I clearly see a continuing need for these and similar efforts among law enforcement to share case and intelligence information. Yet, as I look at where the FBI is today in terms of its own information technology capabilities, I must admit that we are several years and many dollars away from possessing the critical information technology infrastructure that will allow the FBI to realize the full benefits from its own case and intelligence information, much less be able to share that information electronically with others.

One of the most recurring and critical needs cited by FBI managers in their operational strategies is for improved information technology and information systems that better serve the day-to-day case management and intelligence processing requirements of our street agents, intelligence analysts, and support staff.

In order to bridge the gap between current automation and case management capabilities and the functionalities our managers believe are critical to successfully meeting the crime problems ahead of us, we are proposing a three-phase, multi-year Information Sharing Initiative to build a comprehensive computing infrastructure for the FBI. Our initial emphasis, for which $50,000,000 and 20 positions is requested for 1999, will be on upgrading existing equipment, networks, and software to support FBI-wide document/image management capabilities. Key features of the first module are the ability to store all investigative and administrative data in an electronic format and the ability to access and share this information between FBI locations. Communications services and capacities will be increased to permit the transmission of all types of data and graphics. Implementation of this capability would take approximately 18 months.

Once our baseline information technology infrastructure is upgraded, we will focus upon improving analytical capabilities (phase 2) and providing multi-level security that would allow sharing of information with other federal, state, and local agencies, consistent with a need to know such information (phase 3).

Over the past several years, the Congress has generously supported major FBI information technology investments, such as the Integrated Automated Fingerprint Identification System and NCIC 2000. These systems will greatly improve the exchange of information between state and local law enforcement and ensure those vital criminal justice information services remain effective as we enter the 21st Century. I ask your support for the first phase of the Information Sharing Initiative so that FBI field offices around the country can benefit from the application of information technologies which will enhance our internal case management capabilities.

INDIAN COUNTRY LAW ENFORCEMENT

While we can be encouraged that communities around the nation are experiencing reduced levels of crime, that is not the case for communities in Indian Country. For example, the murder rate nationwide declined 20 percent between 1992 and 1996; however, murders in Indian Country have risen 87 percent over the same period. A 1996 Indian Health Service report found that an Indian male is three times as likely to be murdered as a white male. Reported crime in Indian Country is twice as likely to be violent as compared to crimes reported elsewhere in the United States, yet there are fewer than half as many law enforcement officers per capita in Indian Country than elsewhere in the United States. Violent Indian gangs, many with juvenile members, are a frightening new reality on many reservations. Drug abuse has added to problems caused by alcohol abuse. The basic law enforcement protection and services that we often take for granted in many of our communities are severely inadequate for the more than 1.4 million people who live on or adjacent to Indian reservations, allotments, and dependent Indian communities governed by federally-recognized tribes.

The federal government has a unique responsibility for providing for the safety of individuals living in Indian Country. For most of Indian Country, federal law enforcement is the only protection for victims of violent felonies. Between 1994 and 1997, 83 percent of the crimes on Indian reservations cases opened by the FBI involved either crimes of violence (47 percent) or the sexual or physical abuse of a minor child (36 percent). While 31 FBI field offices have some degree of Indian Country investigative responsibility, 90 percent of the cases opened between 1994 and 1997 were in just 8 field divisions located in western states.

For 1999, the FBI requests an increase of 50 positions, including 30 agents, and $4,657,000 to improve the delivery of law enforcement services in Indian Country. These agents will be assigned to FBI offices covering reservations and supporting task forces in Arizona, Colorado, Idaho, Minnesota, Nevada, New Mexico, North Carolina, North Dakota, Oklahoma, South Dakota, Utah, Washington, and Wyoming. These resources will allow us to add two more Safe Trails Task Forces and provide task force coverage to four additional reservations. Safe Trails Task Forces are interagency working groups that leverage the resources of the FBI, United States Attorneys, other federal agencies, state and local law enforcement and prosecutors, Indian Tribal police, and Bureau of Indian Affairs (BIA) investigators. We believe these task forces can be as effective in Indian Country as FBI Safe Streets Task Forces have been in communities across the nation. We will also continue training BIA and Indian Tribal police officers to develop the necessary basic and advanced investigative, evidence recognition and collection, and management skills needed to perform their duties and serve their communities.

An important facet of our commitment to improving the full range of law enforcement services in Indian Country is victim/witness services. We are requesting an increase of $3,352,000 to hire 31 full-time victim/witness coordinators who will be assigned to key FBI resident agencies in Indian Country. These coordinators will work closely with FBI Agents and Safe Trails Task Force participants responding to and investigating crimes committed in Indian Country.

HATE CRIMES AND CIVIL RIGHTS ENFORCEMENT

The consensus among law enforcement professionals, academicians, and community groups is that the hate crime problem is far more pervasive than currently recognized. The most recent Uniform Crime Report for 1996 reported nearly 11,000 hate crime incidents. These crimes involved murder, non-negligent manslaughter, forcible rape, aggravated assault, simple assault, intimidation, arson, and destruction, damage or vandalism of property. Participation among reporting law enforcement agencies is increasing -- 1996 data represents agencies covering approximately 86 percent of the Nation's population. Regrettably, law enforcement analysts recognize that further work is needed before a clear and reliable picture of the number of hate crimes in the United States is available.

For 1999, we are requesting an increase of 3 positions (1 agent) and $196,000 to enhance the civil rights analytical capability at FBI Headquarters. These individuals will research and analyze civil rights and police misconduct cases to identify their causes, trends, and develop possible solutions to prevent further incidents.

As the lead investigative agency for criminal violations of federal civil rights statutes, the FBI must be viewed by all stakeholders involved in these types of cases, including minority communities, special interest groups, and police agencies, as an honest, unbiased and aggressive force in the area of civil rights. At the field level, the FBI will be emphasizing its outreach programs to targeted audiences in order to build cooperative partnerships that will create a climate of trust between law enforcement and minority groups that encourages victims to come forward. As the Attorney General indicated last week, the FBI plans to redirect, within existing base resources, 40 agents for Hate Crime investigations.

We are equally committed to providing training to police agencies to raise their recognition of events and actions that will result in civil rights violations committed under the color of law, with the goal of preventing such acts from occurring.

FBI ACADEMY IMPROVEMENTS AND CONSTRUCTION

Over the past several years, I have sought your help in ensuring the FBI's infrastructure is strong and solid. Congress has responded by supporting the construction of a new FBI Command Center, a new FBI Laboratory facility, and other important infrastructure investments. The 1999 budget proposes several increases for infrastructure projects and activities at the FBI Academy, located in Quantico, Virginia.

FBI Firearms Range Project. The existing outdoor firearms ranges at the FBI Academy have been in use and are virtually unchanged since the early 1950's. These ranges need modernization due to the stress from heavy new agent, in-service, and other training demands from both the FBI and Drug Enforcement Administration. There are associated environmental concerns resulting from the accumulation of lead in surrounding land and the potential for ground water contamination. In 1996, Congress provided the FBI with funding for the first phase of a firearms range modernization project. Those funds have allowed us to acquire architectural and engineering services, begin lead abatement efforts, and relocate and modernize three existing outdoor ranges.

For 1999, $10,000,000 is requested for the second phase of this project which includes plans for completing the lead abatement effort and the construction of an all-weather outdoor range and an obstacle and combat training facility.

FBI Academy Master Plan. An increase of $2,859,000 is requested to acquire architectural and engineering services to update the FBI Academy Master Plan. The plan will allow us to gather the information required for planning necessary improvements, maintenance, and future expansion required by existing facilities at the FBI Academy. It will also guide us in the most effective and efficient use of available land, space, and facilities at the complex to meet the needs of our Critical Incident Response Group and Engineering Research Facility. To support the activities of the FBI Academy Construction and Facilities Management staff, a direct increase of 3 positions and $141,000 is requested. Additionally, we are requesting 11 reimbursable support positions to provide operations and maintenance support for the new Justice Training Center which is expected to become operational in 1999.

TELECOMMUNICATIONS CARRIER COMPLIANCE

I am very appreciative of the efforts of the Committees on Appropriations to move along the Communications Assistance for Law Enforcement Act (CALEA) initiative. Preserving the ability of federal, state, and local law enforcement to lawfully conduct electronic surveillance continues to be one of my top priorities. For 1999, $100,000,000 is requested in the Department's Telecommunications Carrier Compliance Fund to reimburse telecommunications carriers and others for eligible costs incurred in modifying equipment and facilities to comply with the CALEA.

NARROWBAND RADIO COMMUNICATIONS

The FBI operates the largest civilian land-based mobile radio system in the United States which provides clear and encrypted radio communications for 56 field offices and nearly 400 resident agencies. The fixed infrastructure for this system includes base stations in each field office and larger resident agencies, more than 12,000 mobile or vehicular radios, over 12,000 portable or hand-held radios, and nearly 4,000 leased antenna microwave repeater and antenna sites and data communications links. The FBI also operates specialized radio communications systems that support national security operations, task forces, and other activities.

By January 1, 2005, we are required to change-over from the current 25 megahertz radio bandwidth technology to more spectrally efficient 12.5 megahertz bandwidth equipment. To comply with this mandate, it will be necessary to implement an entirely new radio system. None of the existing wideband equipment can be upgraded or retrofitted with narrowband technology.

In order to comply with the narrowband radio communications mandate, the FBI is proposing a five-year effort to plan, design, and implement a single nationwide communications system that will replace the existing nationwide and specialized systems. Within the Department's Narrowband Communications Fund, the FBI is requesting a total of $64,079,000, of which $60,220,000 is new funding, to begin these processes. Additionally, direct FBI funding totaling $780,000 is requested to hire 7 engineers and specialists to serve on the FBI project team for the Narrowband Radio Communications project.

CONCLUSION

Mr. Chairman, I would like to again express my gratitude for the Committee's strong support and confidence in the FBI. Both you and Senator Hollings should take pride in the leadership shown in the areas of ensuring counterterrorism preparedness and protecting our children from sexual predators and pedophiles. I believe your approach of balancing targeted increases in FBI investigative resources and capabilities in select areas with an emphasis on training for State and local law enforcement, encourages partnerships and cooperation that are the keys to an effective response to crime. I know that with your continued support, the FBI can build upon its successes and serve the American people proudly and effectively as the Nation moves into the 21st Century.

This concludes my prepared remarks. At this time, I would like to respond to any questions that you may have.