Oct 31, 2013
Americans who grew up watching James Bond spy movies may remember Agent Q, the fictional British scientist who created all the high tech wizardry for James Bond. But what most Americans don’t know is the U.S. has its very own spy laboratory –In-Q-Tel, and yes the “Q” was named after the adored Bond character.
Watch San Diego 6 News segment here: http://www.sandiego6.com/story/in-q-tel-and-cia-20131027
Today, In-Q-Tel is worth billions of dollars and provides the CIA and other intelligence agencies first dibs on the latest software and spy gear from approximately 90 start-up firms.
“1999 was the year that the CIA launched In-Q-Tel, a venture capital firm in the Silicon Valley that launched at the height of the Dot Com bubble that has backed dozens of companies in the last 14 years including our site that was acquired by Hewlett Packard for a billion and a half, Keyhole was also acquired by Google and is now known as Google Earth. And they surely backed some of the technologies used by the NSA for in their cyber-spying program that’s been in the news the last few days and weeks,” according to Bloomberg West.
The “taxpayer/CIA” partnership hands In-Q-Tel execs roughly $50 million a year to find and nurture spyware tech firms. In return the quasi-governmental business is allowed to operate as a nonprofit, but executives can earn millions. The venture “catalyst” firm works secretly through the CIA while simultaneously operating in the public world. According to a military report, prospective start-ups must make the U.S. government their top priority, something the seductive lure of the CIA readily supplies. And according to former Secretary of Defense Donald Rumsfeld, In-Q-Tel must keep its wares top-secret.
For the “intel” community, having an “in” inside the Silicon Valley not only provides the CIA with high tech spy gear, but gives the private sector an opportunity to partner with the CIA via a venture-capital firm giving them a glimpse inside the ultra secretive intelligence community.
“If you want to keep up with Silicon Valley, you need to become part of Silicon Valley. The best way to do that is have a budget because when you have a checkbook, everyone comes to you,” said Jim Rickards, an adviser to the U.S. intelligence community and In-Q-Tel.
According to In-Q-Tel, the firm was originally started to fill a void inside the CIA, but today it has grown and now supports many of the agencies within the U.S. intelligence community, including the National Geospatial-Intelligence Agency (NGA), the Defense Intelligence Agency (DIA) and the Department of Homeland Security Science and Technology Directorate (DHS).
The high-tech geek firm has certainly grown from its 1999 inception and last year provided an undisclosed – but estimated 50 – employees a staggering $22.07 million in salaries. Among the power players running the tech firm are alums from government, military, as well as Wall Street. Currently Christopher Darby, a former Intel executive makes a reported $1.96 million a year to run In-Q-Tel. However, because the company is treated as a private firm the typical public reports and a limited number of financial statements remain undisclosed.
The company also claims the advantages of the In-Q-Tel model are significant: “lower initial and long-term costs, faster development, and ongoing product enhancements to meet intelligence community mission requirements. IQT’s team of in-house subject matter experts vets each technology against mission needs, compares alternative approaches, and rigorously validates technical claims. At the same time, IQT’s strategic investments team examines the company’s commercial potential, analyzes its business plan, and evaluates the management team to gauge the potential for long-term success in the market.”
One thing is certain; In-Q-Tel’s business investor model is unique. “Our investments accelerate product development and add mission-critical capabilities with the sole purpose of delivering these cutting-edge technologies to IC end users quickly and efficiently. By focusing on commercial technologies and investing side-by-side with venture firms, we leverage outside funding to help develop sustainable technologies using off-the-shelf products instead of custom-built solutions. On average, for each dollar that IQT invests in a company, the venture capital community invests more than nine dollars.”
The quasi-governmental firm’s primary point of engagement with the intelligence community operates through the In-Q-Tel Interface Center (also known as the QIC), located at the CIA compound. The portal is comprised of CIA officers that provide a direct connection to the IC’s technology leaders and end users. In-Q-Tel explains, “Each partner agency sponsors a similar team of interface staff tasked with helping to facilitate relevant technology deployment, transition, and acceptance within the respective agency.”
Nevertheless, the public/private spy firm does have critics. Those critics say the lack of government oversight has led to bloated compensation schemes that blurs the line for those leaving public service and entering the billion dollar world of venture capitalism.
In fact In-Q-Tel has never undergone a Government Accountability Office review. And a Washington Post exposé on In-Q-Tel found questionable compensation practices. “Although In-Q-Tel is a nonprofit organization funded by taxpayers through the CIA budget, its estimated 50 current and 35 former employees get to profit from its successes. Employees are required to contribute 20 percent of their pay to a fund that invests with In-Q-Tel in each equity deal. When In-Q-Tel cashes out of a winning investment, its employees cash out as well. Any losses in the fund are also shared by employees.”
These same employees are making tons of money using government financing while public employees are not afforded the same deal. Also of concern is the “secrecy and oath” factor most intelligence agency employees must abide. And without sufficient oversight, it remains unclear how prospects are selected, financed, and profits and losses are handled and whether taxpayers are reimbursed on gains.
Another critical story of In-Q-Tel that offers additional insight is found in the New York Post and titled “Penny Stock Spies.” Christopher Byron wrote the article and it was seemingly scrubbed from the Internet. The story focuses on questionable business practices of the public/private venture catalyst firm and despite being referenced in two books, the article was difficult to locate and research.
Here is a portion of the story that is critical of the business practices at In-Q-Tel. “Another cautionary tale from the pump-and-dump annals of the penny stock market? In fact, it’s a lot more than that, for behind last month’s bailout at Arizona-based Ionatron Inc. lies an astonishing tale of taxpayer-financed intrigue on capitalism’s street of dreams. Shares in a high-flying penny stock called Ionatron Inc. had been climbing for months on a steady flow of press releases about the company’s opportunities at the sword’s point of high technology in the post-9/11 world of homeland defense.”
“Then suddenly, on March 18, with Ionatron’s shares having climbed to a high of $10.41, the company’s stock was hit with an avalanche of insider selling, as more than 50 Wall Streeters privy to Ionatron’s innermost secrets bailed out of nearly every share of stock they held, knocking more than 30 percent off the price in the days that followed. But that’s nothing compared with the profit of more than 1,000 percent they’ve reaped on In-Q-Tel’s investment in Ionatron Inc. — another quick killing in a deal set up by the employees for the ostensible purpose of helping the CIA stay up-to-speed on developments in high technology.”
“They accomplished this by buying shares for themselves in a separate and parallel “for profit” entity called the “In-Q-Tel Employees Fund LLC.” Using the cash contributions from the employees, the LLC there upon took equity stakes on their behalf simultaneously in each of the three companies in which the not-for-profit fund was itself buying shares — an arrangement almost identical to the so-called “Raptor” partnerships through which top officials at Enron Corp were able to cash in personally on investment activities of the very company that employed them.”
Is In-Q-Tel another war profiteering brainchild of the intelligence community?
Perhaps former disgraced CIA Director General David Petraeus summed it up best, at a speech to In-Q-Tel CEOs; “I strongly support the In-Q-Tel model, and I am one of its biggest boosters. So, thanks for what you and your firms do in helping the Agency to be diabolically clever, and thanks for helping to keep America’s Intelligence Community at the forefront of global innovation.”
Some might agree … diabolical indeed…
Email Kimberly: Kimberly.email@example.com
Link to story on San Diego 6 News: http://www.sandiego6.com/story/Kimberly_Dvorak-20130915
Past breaking news story: http://www.examiner.com/article/did-cia-and-state-department-run-illegal-arms-trafficking-benghazi-1
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