But perhaps because of his cozy ties to the Washington press corps and the media’s obsession with Plamegate, very little has been written about Armitage’s extensive business dealings. In fact, Armitage is one of the most successful capitalists in Washington. He has successfully parlayed his experience in covert operations and secret diplomacy into a thriving career as a consultant and adviser to some of the biggest players in America’s Intelligence Industrial Complex — corporations that are working at the heart of U.S. national security and profiting handsomely from it.

Armitage, currently an adviser to presidential candidate John McCain, had once been Colin Powell’s closest ally during the bitter disputes inside the Bush administration over the invasion and occupation of Iraq. According to the Washington Post’s Bob Woodward, Armitage advised Powell on more than one occasion to tell the neocons to “go fuck themselves,” and, at one point, even refused to deliver a speech about Iraq drafted for him by Vice President Dick Cheney’s office.

Yet, three years after those epic battles, Armitage is enjoying life as a stakeholder in a dozen private companies that are making money directly from the war started by his former nemeses.

Over the past decade, contracting for America’s spy agencies has grown into a $50 billion industry that eats up seven of every 10 dollars spent by the U.S. government on its intelligence services. Today, unbeknownst to most Americans, agencies once renowned for their prowess in analysis, covert operations, electronic surveillance and overhead reconnaissance outsource many of their core tasks to the private sector. The bulk of this market is serviced by about 100 companies, ranging in size from multibillion dollar defense behemoths to small technology shops funded by venture capitalists.

Nearly every one of them has sought out former high-ranking intelligence and national security officials as both managers and directors. Like Armitage, these are people who have served for decades in the upper echelons of national power. Their lives have been defined by secret briefings, classified documents, covert wars and sensitive intelligence missions. Many of them have kept their security clearances and maintain a hand in government by serving as advisers to high-level advisory bodies at the Pentagon, the Central Intelligence Agency, the National Security Agency and the White House. Now, with their government careers behind them, they make their living by rendering strategic advice to the dozens of information technology vendors and intelligence contractors headquartered along the banks of the Potomac River and the byways of Washington’s Beltway.

Ever since the 1950s, with the rise of America’s modern military-industrial complex, high-level U.S. officials and military men have moved between the government and private sectors. But what we have today with the intelligence business is something far more systemic: senior officials leaving their national security and counterterrorism jobs for positions where they are basically doing the same jobs they once held at the CIA, the NSA and other agencies — but for double or triple the salary, and for profit. It’s a privatization of the highest order, in which our collective memory and experience in intelligence — our crown jewels of spying, so to speak — are owned by corporate America. Yet, there is essentially no government oversight of this private sector at the heart of our intelligence empire. And the lines between public and private have become so blurred as to be nonexistent.

Shortly after leaving government in 2005, Armitage was recruited to the board of directors of ManTech International, a $1.7 billion corporation that does extensive work for the National Security Agency and other intelligence collection agencies. He’s also since advised two private equity funds with significant holdings in intelligence enterprises. Veritas Capital, where Armitage served as a senior adviser from 2005 to 2007, owns intelligence consultant McNeil Technologies Inc. and DynCorp International, an important security contractor in Iraq. For a time, Veritas also owned MZM, Inc., the CIA and defense intelligence contractor that was caught — before the Veritas acquisition — bribing former Republican Congressman Randy “Duke” Cunningham.

In 2007, Armitage, along with several Veritas executives, moved over to DC Capital Partners, an intelligence-oriented buyout firm with some $200 million in assets. One of its first acquisitions after Armitage came on board was Omen Inc., a Maryland company that provides information technology and consulting services to the NSA. The fund has since combined Omen with two other intelligence contractors to form a new company called National Interests Security Company LLC, which has 850 employees, more than half of them holding top secret or higher security clearances.

Through his own eponymous consulting firm, Armitage has lobbied on behalf of L-3 Communications Inc., one of the nation’s largest intelligence contractors, to help it sell anti-submarine surveillance systems to Taiwan. L-3, like ManTech, is also heavily involved in Iraq. (Further topping off Armitage’s investment interests in the war: He sits on the board of directors of ConocoPhillips, which is aiming to become a major player in Iraq’s energy industry through a joint venture with Russia’s Lukoil.)

In these jobs, former high-level officials like Armitage continue to fight terrorist threats and protect the “homeland,” as they once did while working in government. But by fusing their political careers with business, these former officials have brought money-making into the highest reaches of national security. They have created a new class of capitalist policy-makers that is bridging the gap between public policy and private business in ways that are unprecedented in American history.

Take the case of George Tenet, who retired in 2004 from his service as President Bush’s CIA director. As he was writing his memoirs and preparing for a new career as a professor at Georgetown University, Tenet quietly began cutting deals with companies that earn much of their revenues from contracts with the intelligence community. And, as I was the first to report a year ago in Salon, Tenet began to make big money off of the Iraq war. By the end of 2007, he had made nearly $3 million in directors’ fees and other compensation from his service as a director and adviser to four companies that provide the U.S. government with technology, equipment and personnel used for the war in Iraq, as well as in the broader war on terror.

Those companies include L-1 Identity Solutions Inc., an intelligence and biometric conglomerate that holds a near-monopoly on software that identifies people by their fingerprints and facial characteristics; Guidance Software, a Pasadena, Calif., supplier of investigation and forensic software to the FBI and the Intelligence Community; and the Analysis Corp., a Fairfax, Va., intelligence contractor founded by Tenet’s former chief of staff, John Brennan. Brennan himself went into the spy business after serving as chairman of the National Counterterrorism Center — which is one of the Analysis Corp.’s biggest clients.

In Tenet’s most prestigious position, he was the only American director of QinetiQ, the British defense research company that was privatized in 2003 and acquired by the well-connected Carlyle Group. Earlier this year, Tenet left QinetiQ’s UK parent to join the board of QinetiQ North America, the company’s U.S. subsidiary and one of the fastest-growing contractors in the U.S. intelligence market. There, Tenet is working with CEO Duane P. Andrews, a former assistant secretary of defense who was the chief intelligence adviser to Dick Cheney when he was Secretary of Defense in the early 1990s. (Prior to joining QinetiQ, Andrews would have had plenty of contact with Tenet, as Andrews was a senior executive with Science Applications International Corp., a major CIA and NSA contractor.)

In January, QinetiQ North America expanded its intelligence network by hiring Stephen Cambone, who was the assistant secretary of defense for intelligence under Donald Rumsfeld, as its vice president for strategy. That appointment came just days after the company won a $30 million, five-year contract to provide unspecified “security services” to the Pentagon’s Counter-Intelligence Field Activity office, a controversial domestic security agency that was created by Rumsfeld and Cambone in 2002 and later took heat from Congress for illegally spying on antiwar and religious activists.

One of the most spectacular transitions from intelligence to business took place at Blackwater USA, the security contractor infamous for its trigger-happy soldiers in Iraq. One of Blackwater’s first major contracts, negotiated by founder Erik Prince, was a secret no-bid $5.4 million deal with the CIA signed shortly after the September 11 terrorist attacks. Shortly thereafter, Blackwater hired as its vice chairman Cofer Black, the CIA’s former top counterterrorism official who was dispatched by Tenet in the days after 9/11 to brief President Bush and his advisers on the CIA’s plans for overthrowing the Taliban in Afghanistan. Rob Richer, the CIA’s former Associate Deputy Director of Operations and, before that, head of its Near East division, became Blackwater’s Vice President of Intelligence, and later went to work for a private intelligence company.

Appointments like this, observes intelligence expert Steven Aftergood, reflect the “incestuous” relationships that exist between former officials and private intelligence contractors. “It’s unseemly, and what’s worse is that it has become normal,” he told me after the news broke about Stephen Cambone’s move to QinetiQ. “The problem is not so much a conflict of interest as it is a coincidence of interests — the Intelligence Community and the contractors are so tightly intertwined at the leadership level that their interests, practically speaking, are identical.”

Former high-ranking officials bring tremendous value to a government contractor seeking new work or a private equity fund looking for companies to buy. “You understand the decision-making process inside the Beltway, and that is liquid gold,” says Roger Cressey, who worked in President Clinton’s National Security Council as deputy director of counterterrorism and is now a partner in Good Harbor Consulting, a company he founded with his former boss at the NSC, Richard Clarke. Cressey, who is a terrorism consultant for NBC News, adds that the influence of a retired official lasts only a limited period of time after he or she leaves office. “You have 18 to 24 months to translate your rolodex into real services,” he says.

But the value of a CIA director or national security official goes much further than a rolodex. Because high-ranking officials have been privy to classified and top-secret information for years — and sometimes, in the cases of people like Armitage and Tenet, decades — they have details about intelligence programs, classified operations and the internal affairs of other countries that few others can claim.

Armitage, who was a senior Pentagon official during the Reagan administration, was deeply involved in covert operations in Vietnam as a Navy officer and, shortly after September 11, flew to Pakistan on behalf of the Bush administration to deliver a stark message to its military president, Pervez Musharraf, that drastic measures would follow if Musharraf did not support the war on terror. He also led an influential group of U.S. officials who quietly pushed the Japanese government to adopt a more militaristic role in global affairs over the last seven years.

In all of these tasks, Armitage would have had access to the most classified intelligence available to U.S. officials, including telephone intercepts provided by the NSA. That kind of experience is extremely valuable to a company like ManTech, which sells and operates signals intelligence systems to the NSA and provides “cyber and physical security” for U.S. embassies and consulates around the world. According to ManTech CEO George J. Pedersen, who also employed Armitage as an adviser during the 1990s, Armitage was brought on as a director for his “enormous insight into our corporation’s capabilities and operations.” (Armitage did not respond to a written request for an interview.)

Tenet is even more connected: With the former CIA director on board, L-1′s CEO Robert LaPenta told analysts last year, “a phone call gets us in to see whoever we want.” Tenet, of course, has extensive knowledge about intelligence services in Saudi Arabia, the UK and Pakistan as well as secret operations in Iraq, Afghanistan and Somalia. His insights have already helped L-1 in its acquisition strategies. Shortly after Tenet joined L-1′s board, the company acquired one of the CIA’s hottest contractors, SpecTal, which has 300 employees with top-secret security clearances who work extensively in Afghanistan. Months before, during a 2006 meeting with L-1 executives about SpecTal’s potential business in that country, Tenet urged company executives to “call the SpecTal guys” because “they know everybody in every one of these ministries that you need to go talk to,” according to LaPenta. L-1 not only called them; it bought them out, and has since combined SpecTal with its latest acquisition, Advanced Concepts Inc., a systems engineering firm holding contracts at the NSA. Tenet, through a spokesman, declined to comment.

Power also flows out of a former high-ranking official’s presence as a policy-maker. During the 1990s, when Armitage was building his reputation as a private consultant and defense industry adviser, he was a member of President Clinton’s Defense Policy Board. Although Armitage, like any board member, was prohibited from divulging contents of meetings with his clients, the internal discussions and access to classified documents helped shape the advice he gave his clients. That’s certainly the impression one gets from officials at CACI International, a key intelligence contractor where Armitage served on the board of directors during that time. During his tenure as a director in the 1990s, CACI officials wrote in 2001, Armitage provided “valuable guidance on CACI’s strategic growth plans and the federal government and Defense Department markets.”

The same can be said of many of Armitage’s contemporaries in the defense and intelligence industries who advise their clients while holding positions in government advisory boards at the Pentagon, the CIA and the NSA. One of Armitage’s fellow directors at ManTech, for example, is Retired Admiral David E. Jeremiah. He is a member of President Bush’s Foreign Intelligence Advisory Board and a paid adviser to the National Reconnaissance Office, the super-secret agency that manages the nation’s spy satellites. A third ManTech director, Richard J. Kerr, a 32-year veteran of the CIA, led a 2005 study for the CIA into the agency’s prewar assessments of Iraq and its weapons of mass destruction.

One of the most representative figures in America’s new private intelligence elite is Joan A. Dempsey. She is currently a vice president of Booz Allen Hamilton, where for the last three years she has worked alongside former CIA director Jim Woolsey and more than 1,000 other former intelligence officers. Dempsey, a steely-looking blonde, began her career as a naval technician listening to Soviet bomber and submarine traffic at Misawa Air Base in Japan, a key NSA listening post. Over the years, she slowly worked her way up the intelligence chain of command at the Pentagon, from Naval Intelligence to the Defense Intelligence Agency. In 1997, she was appointed deputy assistant secretary of defense for intelligence and security in the Clinton administration, the highest civilian intelligence position in the Department of Defense at the time. There, she had responsibility over the NSA, the NGA and the NRO, the three national collection agencies controlled by the Pentagon, as well as the DoD’s tactical command, control, communications and intelligence (C3I) efforts.

By 1999, Dempsey had become George Tenet’s representative to the rest of the Intelligence Community as the CIA’s director of community management. In that position in 1999 she won the everlasting support of the Intelligence Community — and its growing army of contractors — when she led negotiations with the Republican-led Congress that added $1.2 billion to the intelligence budget. That figure still remains one of the largest single-year increases in the history of the National Foreign Intelligence Program. Five years later, partly in recognition of this feat, Dempsey was given the William O. Baker award for meritorious intelligence service by the Security Affairs Support Association (SASA), which from 1979 to 2005 represented the largest prime contractors at the NSA and the CIA. Her remarks at that ceremony serve as a kind of leitmotif for the outsourcing phenomenon in intelligence.

In her acceptance speech, Dempsey paid effusive praise to the corporations she had known over the years, many of whom had purchased tables for the event: General Dynamics, Essex Corporation, Oracle Corporation, Computer Sciences Corporation, AT&T Government Solutions, ManTech and Lockheed Martin. She thanked her “Pentagon friends” from L-3 Communications, with whom she had worked “on my favorite program of all time, the U-2” spy plane. She spoke of her pride in working with the Boeing Company on the Future Imagery Architecture, a $4 billion project by the NRO and the NGA to build and operate the next generation of imagery satellites (the project was cancelled in 2005). At the CIA, Dempsey said, she had “benefited enormously” from her work with Booz Allen Hamilton and SAIC.

Then she went slightly off-script: “I like to call Booz Allen the shadow IC,” she said, using the common acronym for the intelligence community, because it has “more former secretaries of this and directors of that” than the entire government. That must have caused some chuckles at the lead table, where Woolsey was sitting. But Dempsey, of course, got the last laugh. Fifteen months later, she joined the “shadow IC” herself as a vice president. In her job at Booz Allen, she “provides strategy consulting services to the US government, including the national security and civil sectors, as well as commercial industry,” according to company spokesperson George Farrar. Then, in January 2007, Dempsey’s joke came full circle when Mike McConnell, her boss at Booz Allen, was appointed Director of National Intelligence. In the space of a few years, Booz Allen had been transformed from a “shadow” intelligence community player into the real thing.

It was most intriguing, then, to hear what Dempsey is actually doing in her new job at Booz Allen. In the spring of 2006, Dempsey was invited to speak to a seminar on intelligence reform at Harvard University. In a remarkably candid speech, Dempsey disclosed that her office at Booz Allen was evaluating the entire decision-making process within the intelligence community. Under her supervision, she said, Booz Allen was “studying the implications of the many decisions that are being made on a daily basis right now all over the intelligence community,” including by the staff of the Office of the Director of National Intelligence. “No one has thought through the implications of those decisions in a strategic or aggregate sense for the future,” she added. So Booz Allen is helping out by “trying to forecast” what these decisions “mean for the intelligence community of the future — what it’s going to look like, how it’s going to operate — along a trend line.”

It was a remarkable circumstance: Booz Allen was conducting a study for the DNI, a position that was about to be filled by one of the company’s own — Mike McConnell. The shadow IC was now helping the real IC prepare for an immediate future when the real IC would be led by the shadow IC. This was more than a revolving door: The private and the public sides of intelligence were now sharing the same room.

Because of their involvement with Al-Haramain, Al-Buthe and Seda were also entangled in a lawsuit filed against dozens of prominent Saudis by families of victims of the Sept. 11 terrorist attacks. During the call, Al-Buthe and his attorneys talked about the funds needed for his legal defense. “We had a problem of transferring money,” he says, “so we were thinking of new ways” of getting funds to Washington.

The phone call proved fateful. Unknown to its three participants, the conversation, and at least one other between them in April 2004, was monitored by officials from the National Security Agency at the behest of senior Bush administration officials. The surveillance that day — apparently conducted without a warrant and later exposed when the government accidentally released a highly classified document to Al-Haramain’s attorneys — would become a key piece in the sprawling debate over extrajudicial spying inside the United States after 9/11. The surveillance would also have profound consequences for Al-Buthe — who is considered a terrorist supporter by the Bush administration — and others connected with the Al-Haramain Foundation in Oregon.

Ever since a New York Times report uncovered warrantless domestic spying by the Bush administration, the issue of NSA surveillance and the 1978 law governing it has been intensely scrutinized and debated. Until now, however, little attention has been paid to dubious activities directly connected with the domestic spying. The Bush administration has used expanded national security powers to undermine the legal rights of people in the United States who are identified as al-Qaida supporters, but who are not charged with terrorist-related crimes. The U.S. Treasury Department and other agencies investigating domestic organizations and U.S. persons rely on the NSA to spy and collect evidence for them — a fundamental shift from the past, when the NSA’s vast eavesdropping powers were used only for foreign intelligence gathering. And in the name of protecting national security, the Bush administration has regularly withheld what it claims is key evidence against those accused — insisting, essentially, that the public accept without question its private conclusions about the suspects’ guilt.

The Al-Haramain story, based on a two-month Salon investigation that included a series of interviews in Riyadh, Washington, D.C., and Oregon, sheds light on the consequences of these Bush policies. Ultimately it is a story of real people in real communities caught up in the global maelstrom unleashed by Islamic militancy, the horror of the 9/11 attacks and America’s powerful — and at times crude and undemocratic — counterattack against an elusive enemy.

Six months after the NSA surveillance of Al-Buthe’s call, based in part on information gleaned from it, the Treasury Department’s Office of Foreign Assets Control branded Al-Buthe and another Saudi director of the Oregon foundation as “specially designated global terrorists.” The foundation, its assets now frozen, was shut down, and Al-Buthe, Pete Seda and others were thrown into deep legal and financial jeopardy. Soon, some people in the Ashland community started looking at each other with worry and distrust — were terrorist operatives living in their midst?

Bush officials maintain they know of direct links between the Oregon branch of Al-Haramain and Osama bin Laden’s terrorist organization, but have handled the case in deep secrecy. In February of this year, in response to a lawsuit filed in 2007 by Al-Haramain’s attorneys challenging the terrorist designation, the Treasury Department finally announced charges, alleging that the foundation had provided “financial, material, and other services and support to Al Qaeda.” If the government had it right, a respected Islamic center that attracted an eclectic mix of hippies, rednecks, and African and Middle Eastern immigrants to the bucolic community of Ashland had been deeply connected to a web of terrorist groups reaching from Pakistan to North America.

The Oregon foundation strongly denies the charges. Lynne Bernabei, Al-Haramain’s lead attorney in Washington, contends that the terrorist designation was based on the government’s “misinterpretation” of what it heard in the warrantless surveillance, and on information compiled from dubious public sources or selectively culled in the government’s favor. “All they gave us was junk and smoke and mirrors,” Bernabei says of the documentation the Treasury Department used to buttress its case. The Bush administration, meanwhile, has refused to make any of the classified evidence it claims to have about Al-Haramain, or even summaries of it, available to the accused and their attorneys. And until Bernabei and her colleagues filed the lawsuit in 2007, she says, the Treasury Department never informed the organization about any specific reasons for its terrorist designation, or the provisions of U.S. law or presidential executive orders it may have violated.

The government’s secretive, “trust us” approach to the case was made explicit as far back as the February 2004 raid that precipitated the shutdown of the Al-Haramain Foundation. David Berger, a close friend of Pete Seda’s who served as the foundation’s lawyer for many years, was present for the raid, which was led by Special Agent David Carroll from the FBI’s Medford field office. According to Berger, as they were leaving the compound that day he remarked to Carroll that he would be surprised if the government found anything incriminating in the material it had seized. “If you only knew what I knew,” Carroll shot back.

Berger was perplexed — not least because Seda and his attorneys had voluntarily approached the FBI long before, in the days after 9/11, offering to help the FBI with any information it wanted. Moreover, the day before the raid, Berger, as Seda’s attorney, had met with the FBI and turned over what he says were “eight feet of file boxes” to comply with an FBI subpoena. One purpose of the next day’s raid, he believes now, was to find out if the foundation had withheld any documents. (Calls to Carroll at the FBI’s Medford field office were not returned; an FBI spokesperson in Portland, citing the “ongoing investigation” of Al-Haramain, declined to comment.)

Critics say the entire process for identifying “specially designated global terrorists” — a program originally conceived in the 1970s to penalize foreign governments targeted by the United States — has been abused by the Bush administration. “When you have a tool of nation-to-nation diplomacy and turn that into the power to blacklist individuals and groups, it raises very serious questions about First Amendment and due process rights,” says David Cole, a professor of constitutional law at Georgetown University, who has been working with Bernabei and other lawyers on the Al-Haramain Foundation’s case. To this day, Cole says, there has not been a single hearing wherein the Oregon foundation could have been presented with the evidence that led to the 2004 raid, the freezing of its assets, and its designation as a supporter of terrorism. For four years, the Treasury Department, by freezing the charity’s assets, blocked it from using its own funds to pay for its legal defense.

“You can be designated without an evidentiary finding that you ever actively engaged in or supported terrorism,” says Cole. “This is a guilt-by-association process.”

Despite the U.S. government’s alarming statements about Al-Haramain, neither Al-Buthe nor Seda have ever been charged with crimes of terrorism. Instead, in February 2005, almost a year after the Oregon raid and the warrantless surveillance, the U.S. government charged Al-Buthe and Seda with tax fraud in connection with a $180,000 donation they made in 1999 to an Islamic charity in Chechnya. U.S. officials further claimed the charity was a front for radical Islamists. Al-Haramain’s lawyers deny these charges, too, and have produced affidavits from the governments of Saudi Arabia and Russia explaining that the organization that received the donations was a legitimate charity.

In Ashland, many people were baffled that an Islamic center they believed was a force for good in their community could have been a front for terrorism. “I don’t think Pete would ever do anything promoting violence; he was a peace-loving man,” says David Zaslow, an Ashland rabbi who has known Seda for more than 17 years and often shared the stage with him at ecumenical events involving Muslims, Christians and Jews. But the government raid still nags at him. “Maybe there was a hidden agenda we didn’t know about,” Zaslow told me.

Such twinges of doubt are magnified by the government’s secrecy about the case. Barring an opportunity to examine all the alleged evidence, it ultimately remains impossible to determine whether the accused have any real ties to terrorism.

But from the publicly known information to date, claims of a link between Al-Haramain in Oregon and al-Qaida seem farfetched. For example, Bush officials in part relied on questionable information from a self-styled counterterrorism expert named Daveed Gartenstein-Ross to build its case against the charity. A former Ashland resident with a Jewish background who had converted to Islam, Gartenstein-Ross worked at Al-Haramain in Oregon from 1999 to 2000 and wrote a book based on his experience, “My Year Inside Radical Islam.” He focused primarily on inflammatory language in the Korans distributed by the foundation and what he claimed was Seda’s generic support for Islamic jihad. But he has never produced any evidence of terrorist connections at Al-Haramain. Nevertheless, Gartenstein-Ross, who is now director of research at the Foundation for the Defense of Democracies, a neoconservative think tank in Washington, is set to testify as a government witness at Seda’s trial, scheduled to begin in October. (Citing the upcoming trial, Gartenstein-Ross declined to speak to Salon on the record.)

Some of the unclassified material submitted by the Treasury Department to Al-Haramain’s attorneys has even less credibility. In a recent filing, Treasury cited government arguments from Seda’s 2007 detention hearing to make the case that he might be linked to terrorism — but failed to mention that two federal judges had rejected those arguments and ordered Seda released. Treasury’s material also cited the 2004 federal indictment of Sami Al-Hussayen, a Saudi computer programmer charged with aiding terrorists, but left out the fact that Al-Hussayen had been acquitted of the charges by a jury in Boise, Idaho. Other media articles cited by Treasury discuss allegations against Al-Haramain affiliates in Kenya, Bosnia and elsewhere, but make no connection between those affiliates and the Al-Haramain Foundation in Oregon.

“Nothing in the record shows they’re terrorists,” says Bernabei.

Both Al-Buthe and Seda have paid a price since being designated as terrorist supporters. Seda, who became a U.S. citizen after coming to Oregon as a child, spent three years living in self-imposed exile in the Middle East during the investigation of Al-Haramain. As he awaits his trial, he is living in Portland, and he must wear a GPS ankle bracelet when he travels. (He has been advised by his attorneys not to talk to the media.) His once-thriving Islamic center sits empty and abandoned, a tattered For Sale sign posted near the field where Seda’s pet camel used to graze.

Al-Buthe, a Saudi national who traveled frequently to the United States in the late 1990s, today works as the general manager of the Riyadh Municipality Environmental Health Department. His lives comfortably, but his bank accounts are frozen, his reputation is tainted, and he is barred from traveling overseas. He has appealed his terrorist designation to the United Nations and remains puzzled and angry over the U.S. government’s actions. By shutting down charities that “work for the benefit of poor people in need,” he told me recently in Riyadh, the U.S. government “is helping to increase terrorism, not to decrease it.”

Soliman Al-Buthe is a tall, engaging man with a long beard who wears traditional kaffiyehs and tears around Riyadh in a GM Tahoe SUV. Despite his current predicament, he seems to take genuine delight in Americans and their culture. The son of a Saudi diplomat, he apparently acquired his fondness for America while a member of the kingdom’s basketball team in the 1980s. (He still plays, and pretty well, from what I observed one night at a Riyadh sports club.) He is a generous host. When I arrived in Riyadh one night in mid-March after a five-hour flight from London, Al-Buthe, accompanied by his Portland attorney, Tom Nelson, met me at the airport. He whisked us away in his SUV, all the while chattering on his cellphone or shouting jokes over his shoulder to us, en route to his family compound in central Riyadh, where he likes to entertain visitors in a spacious open-air tent.

There, over several nights, we drank endless cups of sweet mint tea, munched on fruit and cookies, and ate chicken, lamb and other local delicacies. We talked about his case, U.S. policy and the Middle East long into the night. Most of the time his television was blaring loudly, tuned to either NBA basketball — usually the Lakers — or to Chris Mathews’ “Hardball” on MSNBC. On some nights, his two brothers came; on others, friends dropped by. (The steady stream of visitors was all male — during my five days in Saudi Arabia, I didn’t meet a single woman.) One evening Al-Buthe posed for a picture inside the tent, smiling broadly as he held two of his favorite American possessions: a recent book on the CIA by New York Times reporter Tim Weiner, and a bumper sticker reading “Impeach Bush.”

It was hard to imagine Al-Buthe as a terrorist. In conversation, he frequently denounces al-Qaida and expresses sorrow over the 9/11 attacks on New York and Washington. His accusers might see that as duplicitous, but if he was known to work for al-Qaida it is unlikely that he’d also be working as a civic leader for the Saudi government, which is a top target of the terrorist organization. (As a city environmental official, Al-Buthe oversees regulatory enforcement over all restaurants and food-processing plants in Riyadh, a city of 3 million.) One of his close friends, an American-educated Saudi entrepreneur named Tawfig N. Almouteb, runs the Digi Group, a computer-services company that works with the U.S. Embassy in Saudi Arabia and large U.S. defense contractors such as Booz Allen Hamilton. (“Soliman is a very good man,” Almouteb assured me one day while escorting me, at Al-Buthe’s request, through Riyadh’s old city.) If Al-Buthe is indeed a terrorist supporter, why has the U.S. government apparently shown zero interest in his associations with the U.S.-connected Saudi elite? It’s also curious that the American Embassy in Riyadh invited Al-Buthe, despite his apparently being a threat to national security, to an embassy function last fall. (His invitation was rescinded after it was reported in the Portland Oregonian.)

One thing is clear about Al-Buthe: He was part of one of the largest overseas missionary movements in modern times. Since the 1980s, Saudi Arabia has invested billions of dollars around the world to popularize Wahhabism, the strict form of Sunni Islam practiced in Saudi Arabia and endorsed by its monarchy. Much of this money — estimated at over $75 billion in total — has gone to charities such as Al-Haramain, which built hundreds of mosques, schools, health clinics and orphanages in war-torn places like Somalia and Bosnia, as well as in developed countries such as the United States and Britain.

Until the 1990s, the U.S. government quietly supported the Saudi government-backed missionary efforts. The kingdom was, of course, a key ally and supplier of oil in a region crucial to U.S. national security. For decades, the spread of Wahhabism was viewed by U.S. officials as a way to counter the spread of communism in the Middle East and, after 1979, the influence of radical Shiite Iran. In 1995, Al-Haramain officials approached Al-Buthe, who was well-acquainted with the West, about starting an English public relations arm that would help the charity make contacts in America. Al-Buthe readily agreed and, working as a volunteer, built Al-Haramain’s first English-language Web site and began sending Korans and other material to interested Muslims in the United States and elsewhere.

By the late 1990s, a visiting American told Al-Buthe a compelling story about Pete Seda and the Islamic center in Oregon. After growing up in Iran, Seda had moved in the 1970s to Ashland, a beautiful town at the foot of the Cascade and Siskiyou Mountains where hippies and New Agers had long gravitated. After graduating from college in Ashland, Seda, an arborist, built a successful tree-care business. During the 1980s, he converted to Sunni Islam and eventually founded an Islamic center, called the Quran Foundation, where local Muslims could worship and interested outsiders could learn about the religion. By the 1990s, his foundation was sending hundreds of Korans a year to prisoners around the United States. When Al-Buthe heard about this, he says, “I thought it was a big opportunity for Al-Haramain to establish something in the U.S.” In 1998, he traveled to Ashland and spent $187,000 in Al-Haramain funds to help Seda purchase a large plot of land and a two-story house in Ashland.

For the next few years, with the influx of funds from Saudi Arabia, the renamed Al-Haramain Islamic Foundation became a flourishing center that drew dozens of visitors from the surrounding region. Seda frequently participated in interfaith events promoting cultural awareness and religious tolerance in southern Oregon. He and his fellow Muslims had a float every year in Ashland’s Fourth of July parade and staffed a booth at nearby Medford’s annual Multicultural Fair. He spoke frequently at local synagogues and churches, stressing tolerance and his abhorrence of terrorism. “Every word I ever heard Pete say was about cooperation and coexistence,” says Jim Bauermeister, the president of the Medford-based Multicultural Association of Southern Oregon, which sponsors the fair.

Like most Americans, Seda was deeply affected by the events of Sept. 11, 2001, according to those close to him. Four days after the attacks, Seda offered to meet with the FBI to discuss any questions it may have had about Al-Haramain and its local operations. At Seda’s request his attorney, David Berger, sat in on the conversation. Two FBI agents from Medford, including David Carroll, the agent who led the raid in 2004, showed up. “Pete did most of the talking,” Berger told me in early April when I met him in Ashland. “He sincerely wanted to help however he could.” But his offer was never taken seriously by the government.

Instead, he soon realized he was under surveillance. One day in 2002 Seda brought Berger to his compound and showed him a video camera that had apparently been planted near the front gate by federal agents. “They could see everyone coming and going,” says Berger. In 2003, Seda began complaining that his mail was being intercepted, according to Berger and others. And as word spread in southern Oregon about the presence of a potentially dangerous Islamic group, some people in the largely white working-class area began to harass Seda and other Muslims (as well as Latinos and other people they thought were Muslims).

Seda continued to seek ways to promote peace. In 2003, he asked David Zaslow, the rabbi, for help in contacting the Israeli consulate in San Francisco so he could carry out a project to bring humanitarian aid to Palestinians living in the West Bank. Although the Israeli government eventually refused to approve the project, the two men communicated with the Israelis at length. “We sat here with the counsel general of Israel,” Zaslow said, pointing to a couch in his Ashland office. “A Muslim extremist would never do that.”

Feeling depressed that his attempts at interfaith dialogue had failed, Seda temporarily left the country.

By the mid-1990s, U.S. officials began to believe that the Wahhabi organizations they once saw as a bulwark against the Soviet threat and Iranian radicalism were secretly funding anti-American terrorist groups. From the beginning, Al-Haramain, as Saudi Arabia’s largest charity, was a prime suspect. In 1998, after al-Qaida operatives bombed the U.S. Embassies in Kenya and Tanzania, the CIA and FBI uncovered evidence leading them to believe that Al-Haramain officials and employees in East Africa had been involved in the planning of the attacks, and the agencies shared that intelligence with the Saudi government. U.S. focus on the charities greatly intensified after the 9/11 attacks, which were carried out by a gang of 19 al-Qaida operatives, 17 of whom were Saudi citizens.

The investigations into terrorist financing were managed by an interagency committee within the National Security Council that was chaired by the Treasury Department and included the CIA, the NSA, the FBI and three other law enforcement agencies. In 2003, the committee issued an important document that was, strangely, called a “nonpaper.” It still remains classified. Based almost exclusively on U.S. intelligence on Bosnia and Somalia, the “nonpaper” laid out Al-Haramain’s ties to terrorism and suggested that many charity field offices, as well as the headquarters in Saudi Arabia, “appeared to be providing important support to Al Qaeda,” according to a government summary of the report. It was presented to the Saudis in 2003 by Cofer Black, a top U.S. counterterrorism official. (Black, who famously declared in congressional testimony that “after 9/11 the gloves come off,” is now vice chairman of the notorious security and intelligence contractor Blackwater.)

In December 2003, the U.S. and Saudi governments jointly designated a Bosnian organization tied to Al-Haramain as a supporter of terrorism. Then, in January 2004, a month before the raid on the Ashland center, Washington and Riyadh took the unprecedented step of holding a joint press conference to announce that Al-Haramain branches in Indonesia, Kenya, Tanzania and Pakistan had been designated as terrorist financiers. The Saudi headquarters of Al-Haramain stayed off the list, but it was quietly closed by the Saudis in 2004.

Throughout these investigations, Al-Haramain officials argued that the charity had no control over how funds or supplies might be distributed in countries like Bosnia or Pakistan and that, with the exception of the well-funded Oregon branch, overseas affiliates operated independently from Riyadh. When the reports surfaced about the possible involvement of Al-Haramain’s East African affiliates in the 1998 embassy bombings, “it was for us a shock,” Al-Buthe said. “We had no idea about Kenya and Tanzania, and no connections to offices overseas except in the U.S.” From his voluminous files, Al-Buthe also produced an affidavit from Kenya’s Directorate of Security Intelligence stating that a Kenyan investigation had concluded that Al-Haramain “never supports or supported any Islamic terrorist group.” (The document’s authenticity could not be confirmed.)

The designation system that snared Al-Buthe and the Al-Haramain Foundation originated with the 1977 International Emergency Economic Powers Act. Passed by Congress to set guidelines for economic sanctions and trade embargoes, the act gave the president wide powers to deal with any “unusual and extraordinary threat” from abroad by confiscating property and prohibiting financial transactions with specific countries contributing to that threat.

The powers were first used against individuals by President Clinton, when his National Security Council designated several Palestinian and Israeli opponents of the Camp David agreements as terrorist supporters. Later, use of the tactic expanded greatly under President George W. Bush.

In the days after 9/11, Bush signed an executive order giving the Treasury Department the power to blacklist individuals and organizations believed to be supporters of or “associated with” terrorists. The order specifically gave Treasury the power to blacklist and freeze the assets of people in the United States entitled to rights under the Constitution — even before those people are accused of any crime. The dangers of the process were noted in 2004 by the National Commission on Terrorist Attacks Upon the United States, better known as the 9/11 Commission. Using the 1977 law against domestic organizations, the commission warned in a 2004 report on terrorist financing, “raises significant civil liberty concerns because it allows the government to shut down an organization on the basis of classified evidence, subject only to a deferential after-the-fact judicial review.” That proved to be a prescient concern.

For those caught up in it, the designation process is a legal nightmare. David Cole and other lawyers who focus on the problem say there is no clear procedure for appealing the terrorist designation, let alone getting removed from the blacklist. Moreover, nowhere in the 1977 law or the Bush administration’s post-9/11 counterterrorism edicts is the term “specially designated global terrorist” defined. And because there are no standards for what constitutes a “specially designated global terrorist” who is not charged with a crime, people like Al-Buthe and organizations like Al-Haramain are left to guess why the terrorism charges were made against them. As Bernabei and its other attorneys wrote in a May 8 legal brief, the Oregon foundation “had to defend itself entirely in the dark.”

The Treasury Department provided a written statement to Salon on May 2 responding to criticisms of its designation process. Every terrorism designation, the statement said, “undergoes multiple levels of review to ensure that there is a reasonable basis to conclude that the designee meets the criteria” of President Bush’s 2001 executive order. Moreover, the Treasury Department “provides designated persons who challenge their designation in court with copies of all releasable information upon which the designation is based.”

The agency added that “there has not been a successful judicial challenge to a designation, which we believe is a direct result of the rigor of the designation process, which ensures that sufficient evidence supports every designation.”

Yet in a number of cases when the U.S. government has tried alleged terrorists or terrorist supporters, juries have refused to convict. That’s what happened in the case of the Texas-based Holy Land Foundation, which was the nation’s largest Muslim charity until it was designated a financial front for Hamas, the militant Palestinian group, and shut down by President Bush. In October 2007, a judge declared a mistrial in the Dallas trial of five Holy Land suspects after the charity’s top two executives were acquitted on all counts and the jury deadlocked on the other defendants. By that time, of course, the charity had been shut down.

A similar outcome transpired in the case of Sami Al-Hussayen, the Saudi computer programmer who was acquitted in 2004 on charges that included his being the mastermind behind a network of Web sites — including the Al-Haramain Foundation’s — that allegedly promoted terrorism. While on trial, Al-Hussayen spent more than 17 months in solitary confinement, and he and his family were later deported.

When I met him in Riyadh in March, Al-Hussayen, remarkably, expressed no bitterness about his ordeal. But he voiced fears that the United States was on its way to becoming a police state. “I hope your country doesn’t end up like Russia,” he said. “America is still young. Don’t let Bush and Cheney destroy it so quickly.” That may sound extreme from the citizen of a country that still holds public executions; but it also comes from a person who, like Pete Seda, organized vigils and prayer services in his local mosque to express solidarity with America and the victims of 9/11.

Oddly, the Al-Haramain case has not drawn much attention from leading human rights groups, perhaps due to its complexity and murkiness. When I contacted Human Rights Watch to see if it had investigated the government’s crackdown on Al-Haramain in Oregon, Christopher Wicke, a New York-based specialist on Saudi Arabia, said no. “Do we see a heavy-handed shutdown of an NGO [nongovernmental organization] and the freedom of civil society being suppressed? I don’t quite see that being the case.”

“I find that very disturbing,” David Cole, the constitutional lawyer, said when hearing of the response. “Of course this is a human rights issue. Due process — the right to be told why the government is taking action against you, and to have an opportunity to defend yourself — is about a basic a human right as there is.” Similar sentiments are starting to appear in Europe, where several governments, and the United Nations, have adopted the U.S. designation system to go after alleged terrorist supporters. In April, a High Court judge in London declared that unilaterally sanctioning suspects without evidence was “absurd, unfair and a breach of human rights.”

The fallout is not limited to the individuals who are blacklisted. In Oregon, the government’s crackdown on the Al-Haramain Foundation has palpably affected attitudes toward Muslims. “It has given this community the impression that all Muslims are terrorists,” Bauermeister, of the Medford Multicultural Association, told me when we met in a downtown Medford coffee shop. “We had a real opportunity after 9/11 to bring people together and isolate the radicals.” But by attacking Pete Seda, a man who tried to break down religious barriers, “the government blew it,” he said. “I don’t think Pete posed any threat at all,” he added. “The investigation was a complete waste of time.”

Moreover, under the Bush policy, any organization that provides legal or monetary support to a blacklisted group like Al-Haramain risks being labeled an accessory to terrorism. “Technically we’d be classified as a terrorist organization if we speak out,” said Bauermeister. That violates the Medford Multicultural Association’s First Amendment rights “to associate with who we want and deprives a nonprofit of freedom of speech, association and religion,” he said. (The group is now party to the Al-Haramain Foundation’s lawsuit against the U.S. government.) Bauermeister looked out the window for a moment before adding, “This is a really dark era we’re in right now.”

Two years later, some of these areas are still distressed. One reason for the lack of attention paid to the Gulf Coast may be the massive investments made in the region by casino, hotel and real estate interests. That has created the appearance of a recovery that business promoters say has brought, and will continue to bring, enormous growth to the area. But many locals say that the casino-led development has done little to alleviate post-disaster conditions for most residents, including the 37 percent of the population — approximately a half million people — who earn below what federal guidelines deem low to moderate income. Moreover, maneuvering in Washington by the state’s Republican leaders has diverted aid money away from some of the people who need it the most.

Hurricane Katrina “leveled everybody” on the Gulf Coast, says Reilly Morse, a civil rights lawyer from Biloxi who works for the Mississippi Center for Justice, a statewide organization that provides legal assistance to low-income residents. “For a very short while, everybody had the same experience, and that spawned a sense of community that I don’t think ever existed before.” But since the aid money began flowing, said Morse, “there’s really been two recoveries here: one that generally favored homeowners with resources, and another one that basically priced the poor out of the housing market.”

Katrina’s impact is still visible from U.S. Highway 90, which hugs the coast from New Orleans to the Florida panhandle. The two Mississippi bridges destroyed in the storm have been rebuilt. But a visitor driving east from Gulfport to Pascagoula encounters mile after mile of empty lots where homes, motels and retail outlets used to be. The slow pace of reconstruction is evident from the many housing trailers provided by the Federal Emergency Management Agency still peeking through the trees.

“We’ve still got a mighty tall mountain in front of us,” Haley Barbour, the state’s Republican governor, admitted this week after releasing an otherwise upbeat report on Mississippi’s recovery. The official story is that Mississippi is back, thanks to nearly $24 billion in federal aid negotiated by Barbour, a former Washington lobbyist. The federal funds, he claims, have benefited all citizens in the stricken area and allowed most people who lost their homes to rebuild. As a result, only about 17,000 people remain in FEMA trailers today, down from about 36,000 less than one year ago. That is little consolation, however, to those who must still endure the cramped quarters and toxic fumes that permeate the trailers.

The $23.5 billion in federal funding that Mississippi’s governor and its two Republican senators managed to obtain was unprecedented in scope for a state recovering from a natural disaster. But the distribution of the $4 billion the state obtained specifically to help residents rebuild their housing, thanks to Barbour, has been badly skewed toward wealthy homeowners.

Under the Department of Housing and Urban Development’s Community Development Block Grant program, 70 percent of the funds are supposed to be allocated to low- and moderate-income people. But the governor successfully lobbied to waive that requirement, undercutting its impact on Katrina survivors. As a result, only 25 percent of the money has reached the poorer segments of the population. Renters, who make up 40 percent of the population in some sections of the coast, have received nothing. “Only a minuscule fraction has actually gotten into the hands of those that need it most,” said Morse.

Meanwhile, Mississippi officials are touting the spectacular return of the casino industry to the Gulf. In November 2005, Barbour called the state Legislature into a special session to pass a law allowing casinos, once restricted to barges, to be built on land within 800 feet of the coast. The new law — which the gaming industry had been seeking for years — sparked a flood of investment from casinos, hotels and condominium developers. Since Katrina, nine casinos have opened for business on the coast. Eight of them are in Biloxi, whose mayor, A.J. Holloway, has relentlessly promoted the industry.

State officials predict casinos will bring in a record $3 billion in revenue to the state this year, 10 times what it was in 2006, when they earned a little over $300 million. “I hate to think where we would be today in this post-Katrina world were it not for the revenue and jobs created by this industry,” Holloway declared last week.

The first casino to open after the storm was the spectacularly garish Beau Rivage Resort and Casino, a subsidiary of MGM Mirage. Badly damaged during Katrina, it was quickly rebuilt in time for Labor Day 2006, at a cost of $1.3 billion. The latest project to get off the ground is “Margaritaville,” a $700 million joint venture between soft-rocker Jimmy Buffett, who was raised in nearby Pascagoula, and Harrah’s Entertainment. When it opens in 2010, it will include a 420-room hotel, a spa and a convention center, all spread along Biloxi’s publicly owned beach.

But to many locals, the casinos — and the hotels, shopping malls and condominiums that accompany them — are hardly the answer to the region’s devastation and economic crunch. They believe that the Biloxi model for development has made it difficult for many local residents to remain in the area, and they chafe at the idea that the post-Katrina emergency is over.

“We’re still a long way to recovery, maybe 30 percent [there],” says Bill Stallworth, the only African-American on Biloxi’s City Council and the driving force behind the East Biloxi Coordination and Relief Center, a local advocacy organization founded after the disaster struck. Instead of casinos and high-rise condominiums, local organizations are advocating for low-income housing and daycare centers that would make life easier for casino workers and local residents. “There’s a shortage of affordable housing, but we see boutiques, stores, rich houses and casinos being built,” says Sharon Henshaw, a Biloxi native who launched another group, Coastal Women for Change, after Katrina. “We want the people to understand that we are nowhere near recovery.”

During the 19th century, Biloxi was a resort town for wealthy white families from New Orleans and other Southern cities, and the center of a booming seafood and canning industry that rivaled Baltimore’s in size and influence. Those industries, built initially on slave labor, also brought in thousands of Eastern Europeans and created unusual inroads for the Catholic Church in a largely Protestant state. But the city was strictly segregated until 1963, when Gilbert Mason, a prominent doctor and a longtime member of the state NAACP, organized a series of “wade-ins” to integrate the city’s public beaches.

African-Americans soon became an important political and economic force in the city. Biloxi’s population was further transformed in the late 1970s, when the seafood and shrimping industry recruited thousands of Vietnamese who had left their homeland in the wake of the Indochina War. During the 1990s, Biloxi’s economic base expanded with the construction of several casinos, which the state Legislature had legalized with the stipulation that they confine their gambling to vessels and barges.

But Katrina’s wrath wrecked everything within a mile of the coastline and laid waste to much of the city. The surge sent tons of water into the bay north of the peninsula, flooding the inland township of Turkey Creek, a historic community founded by former slaves in the 1860s. Television pictures captured much of the devastation, including the casinos yanked off their moorings and thrown crazily across nearby highways. Altogether, 238 people lost their lives in the area, and more than 3,000 homes and commercial structures in Biloxi were wiped out.

Because of its proximity to the water, the area around East Biloxi, the district represented by Stallworth, has become ground zero for the casino and real estate boom. Almost immediately after the storm, developers literally began walking around offering large sums of money to people willing to sell their property; some, despairing of putting together the resources to rebuild, took the money and left.

The developers “want to make the place so inundated with casinos that Biloxi becomes a little Las Vegas,” says Jackie Washington, an East Biloxi resident who lost her home in the storm. “All the way around the water, they’re trying to box us in.” Like her, many of East Biloxi’s other residents have chosen to stay and have banded together with local environmental activists, clergy and Vietnamese citizens’ groups to seek a more balanced approach to recovery. They have found a champion in Stallworth.

To keep the casinos at bay, Stallworth and the activists at the East Biloxi Coordination and Relief Center came up with an interesting strategy: They began helping people buy scattered plots of land near their homesteads and organized volunteers to repair and rebuild houses. Once locals created a “checkerboard” of their properties, Stallworth says, condo developers could no longer come in and buy everything out. The strategy appears to be working; the pressure from the casino interests “is starting to abate,” Stallworth says. So far, he says, volunteers working through the relief center have repaired 500 homes and built around 18 new structures.

Local activists say they have been forced to take matters into their own hands because the state has made it so difficult for low-income people to tap into government funds. Many of the initial aid beneficiaries were people who owned palatial homes on the waterfront. Yet even today, thousands of low-income applicants are still waiting for help. Washington is one of them. She applied for assistance in May 2006, and received her first response from the state two weeks ago. But the notice didn’t say how much she might receive or give a date when she might expect a check. “The red tape to get it — that’s what really and truly hurts,” she said.

Meanwhile, residents of other cities on the coast have watched Biloxi’s influx of casinos with a mixture of fear and envy. Most of Biloxi’s neighbors, including the city of Gulfport, Mississippi’s second largest, adopted “smart growth” plans after the storm, designed to balance business development with the housing needs of residents. (Biloxi, under the leadership of the pro-gambling Mayor Holloway, did not.) They are concerned not only about the economic impact of casinos but also about the potential environmental effects of development.

In the town of Bay St. Louis, west of Biloxi, a group of residents have gone to the state’s supreme court in a bid to overturn a decision by the Hancock County Council, made before the storm, to rezone 1,100 acres of coastal wetland to permit large-scale condominium development, without any height or density restrictions.

Coastal Community Watch, the local environmental group behind the lawsuit, has voiced concern that further destruction of wetlands on the coast can only increase the state’s vulnerability to storms like Katrina. More recently, a commission of citizens recommended a ban on any new construction of casinos in Bay St. Louis, which has one gaming establishment. In the wake of Katrina, “everybody realizes we have to change,” said Bob Davis, a member of that commission. “But a lot of us don’t want Bay St. Louis to become a little Biloxi.”

But the aircraft that took off that September morning wasn’t headed overseas to spy on America’s enemies. Instead, for the next six hours it flew directly over the U.S. Gulf Coast, capturing hundreds of high-resolution images as Hurricane Katrina, one of the largest storms of the past century, slammed into New Orleans and the surrounding region.

The U-2 photos were matched against satellite imagery captured during and after the disaster by the National Geospatial-Intelligence Agency. Relatively unknown to the public, the NGA was first organized in 1996 from the imagery and mapping divisions of the CIA, the Department of Defense and the National Reconnaissance Office, the agency that builds and maintains the nation’s fleet of spy satellites. In 2003, the NGA was formally inaugurated as a combat support agency of the Pentagon. It is responsible for supplying overhead imagery and mapping tools to the military, the CIA and other intelligence agencies — including the National Security Agency, whose wide-reaching, extrajudicial spying inside the United States under the Bush administration has been a heated political issue since first coming to light in the media nearly two years ago.

The NGA’s role in Hurricane Katrina has received little attention outside of a few military and space industry publications. But the agency’s close working relationship with the NSA — whose powers to spy domestically were just expanded with new legislation from Congress — raises the distinct possibility that the U.S. government could be doing far more than secretly listening in on phone calls as it targets and tracks individuals inside the United States. With the additional capabilities of the NGA and the use of other cutting-edge technologies, the government could also conceivably be following the movements of those individuals minute by minute, watching a person depart from a mosque in, say, Lodi, Calif., or drive a car from Chicago to Detroit.

Prior to Katrina, the NGA had been used sporadically during domestic crises. Its first baptism of fire came after the 9/11 terrorist attacks, when the agency collected imagery to help in the recovery efforts at the World Trade Center and the Pentagon. But the storm of 2005 triggered NGA activity on a scale never before seen inside the borders of the United States. “Hurricane Katrina changed everything with what we do with disasters,” John Goolgasian, the director of the NGA’s Office of Americas, told Salon. In New York after 9/11, the NGA had only a handful of people on the ground, but “with Katrina, we put a lot of people down in the theater,” he said, using a term usually reserved for overseas military battlegrounds. The agency now deploys its staff on a regular basis to hurricane zones and also provides assistance to law enforcement agencies during events such as the Super Bowl, the baseball All-Star Game and political conventions.

On one level, the engagement of the NGA and the U-2 flights over the Gulf Coast during Katrina were commendable efforts to use America’s vast surveillance powers for the safety and support of its citizens. But at the same time, the incident apparently marked the first time in history that U.S. intelligence agencies created to spy on foreign countries were deployed to collect extensive information on the U.S. “homeland.” Their role during Katrina is just one aspect of an enormous domestic surveillance infrastructure put in place by the Bush administration ever since the Sept. 11 terrorist attacks sparked a radical restructuring and expansion of America’s intelligence system. Although the full scope of domestic surveillance under Bush remains elusive, we now know from press accounts, lawsuits, and Attorney General Alberto Gonzales and other top Bush officials’ descriptions and denials that the NSA has been involved in multiple domestic surveillance programs — in apparent violation of federal law — including spying on Americans’ telecommunications and Internet traffic, as well as data mining.

In December 2004, the NSA and the NGA announced the signing of an agreement to share resources and staff and to link their “sources, data holdings, information infrastructure, and exploitation techniques.” The document spelling out the agreement itself is classified. But in a press release the NGA explained that the pact allows “horizontal integration” between the two agencies, defined as “working together from start to finish, using NGA’s ‘eyes’ and NSA ‘ears.’”

The collaboration makes it possible for the agencies to create hybrid intelligence tools that enhance the ability of U.S. forces in combat. By combining intercepts of cellphone calls with overhead imagery gathered by unmanned aerial vehicles (UAVs), for example, intelligence analysts can track suspected terrorists or insurgents in Iraq in real time. Last November, NGA director Robert B. Murrett disclosed that it was through such technology that the U.S. military was able to locate and bomb the safe house where Abu Musab al-Zarqawi, the leader of al-Qaida in Iraq, was staying in June 2006. “Eventually, it all comes down to physical location,” he told reporters. When NSA and NGA data are combined, he added, “the multiplier effect is dramatic.”

Nine months prior, during Hurricane Katrina, the NGA’s sophisticated surveillance tools, which can create three-dimensional maps, helped first responders identify hospitals, schools and areas where hazardous materials were stored in the Gulf Coast region. And in an unprecedented move, the NGA distributed thousands of unclassified images of stricken areas, via the Internet, to the public. “People could actually see their houses,” said retired Air Force Gen. James R. Clapper, the NGA director at the time of Katrina. In an interview with Salon before his appointment in April as undersecretary of defense for intelligence, Clapper said that the NGA’s work during the hurricane was “the most graphic example in my 40 years of intelligence of coming to the direct aid of people in extreme circumstances.”

The purpose and utility of such intelligence tools in a disaster area, or in a war zone, are clear. But given the Bush administration’s highly secretive, aggressive policies in the war on terror, what’s to stop the NGA and the NSA from collaborating on other types of real-time surveillance at home?

This past Saturday, Congress approved legislation expanding the ability of the National Security Agency to eavesdrop, without warrants, on telephone calls, e-mail and faxes passing through telecommunications hubs in the United States when the government suspects terrorists may be involved. The legislation, which expands the 1978 Foreign Intelligence Surveillance Act, or FISA, was negotiated between the White House and lawmakers in response to a federal court ruling this summer determining that the NSA’s past eavesdropping had violated the law. Mike McConnell, the retired Navy admiral who was appointed last January as the nation’s second director of national intelligence, told Congress that the ruling drastically reduced the ability of the NSA to track terrorists, while Bush warned that, because of the ruling, the government was “missing a significant amount of foreign intelligence that we should be collecting to protect our country.”

The fear of Democratic leaders that their party might be further accused of being soft on terrorism apparently prompted them to vote for the new FISA legislation — handing new unilateral surveillance powers to the executive branch while significantly diminishing judicial oversight. Civil liberties groups and lawmakers opposed to the legislation believe the changes will make it easier for the government to spy on U.S. citizens, because the more loosely defined FISA statute now allows warrantless surveillance of people communicating with others who are “reasonably believed to be outside the United States.” During the House debate last Saturday night, Rep. Zoe Lofgren, D-Calif., described the bill as an enormous loophole that will grant the attorney general the ability to “wiretap anybody, any place, any time without court review, without any checks and balances.”

President Bush signed the measure into law on Sunday.

The NGA, which has a staff of 14,000 and an estimated budget of about $2.5 billion (the actual amount is classified), buys most of its imagery from commercial satellite vendors, but it also relies on highly classified overhead photography captured by the National Reconnaissance Office’s fleet of military satellites. According to David H. Burpee, the NGA’s director of public affairs, the agency operates under strict oversight rules that ban it from collecting imagery over the United States without a formal request from a “lead” domestic agency coordinating efforts during a disaster. In the case of Katrina, the NGA’s assistance was requested by the Federal Emergency Management Administration. In a statement to Salon, Burpee said that the NGA collects intelligence “in accordance with Constitutional law, federal law, and executive policies such as Executive Order 12333.” (That order, signed in 1981 by President Reagan, includes a mandate for federal agencies to cooperate with the CIA and other intelligence agencies.) Any questions involving domestic operations would have to be directed to the lead agency requesting NGA support, Burpee added.

It is unclear how the latest changes to FISA might affect other intelligence agencies besides the NSA. But the zeal with which McConnell and Bush pursued the new legislation unbridling the NSA — which could presumably tap the NGA for assistance with operations at home, just as it does in the war zones — raises stark questions about the administration’s intentions with domestic intelligence.

A close look at the NSA programs suggests that the Bush administration is casting the widest net possible. To date, President Bush and administration officials have acknowledged only a narrow aspect of domestic spying — referred to as the Terrorist Surveillance Program — which they admitted, in the wake of media reports, included the warrantless wiretapping of phone calls. But in May 2006, USA Today reported on a program that involved the NSA’s gaining access to huge customer databases maintained by AT&T and other telecommunications providers. In another alleged program, discovered by AT&T technician Mark Klein and disclosed in a lawsuit against the telecom provider filed by the Electronic Frontier Foundation, the NSA attached what amounts to an electronic hose to AT&T Internet data lines in San Francisco and other cities and diverted global Internet traffic and phone calls to a special room, where calls and messages were analyzed with powerful computers to find clues to terrorist cells. A Salon report in June 2006 uncovered what appeared to be a nexus for such activity in a secret room at an AT&T facility in St. Louis.

Then, last month, the New York Times disclosed that a dispute in 2003 between the White House and the Justice Department over NSA operations involved a potential fourth program using “computer searches through massive electronic databases” that contained the records of tens of thousands of domestic phone calls and e-mails. McConnell acknowledged multiple programs, albeit without specifics, in a July 31 letter to Arlen Specter, the ranking Republican on the Senate Judiciary Committee. “A number of these intelligence activities were authorized in one order” by Bush shortly after 9/11, McConnell wrote. With regard to the administration’s Terrorist Surveillance Program, he added: “This is the only aspect of the NSA activities that can be discussed publicly, because it is the only aspect of those various activities whose existence has been officially acknowledged.” Many FISA experts, such as James Dempsey of the Center for Democracy and Technology, have concluded that the NSA was running at least three domestic surveillance programs, including data mining. “I think the TSP was an after-the-fact name given to an activity, or a set of activities, or a whole subset of activities” by the NSA, Dempsey said.

After 9/11, the paradigm for domestic law enforcement shifted radically, by making it the duty of the government to use its intelligence resources to help law enforcement agencies preempt attacks before they happened, beyond the traditional practice of gathering evidence to prove that a crime had already occurred. The idea that the U.S. homeland was now a battleground (or a “theater”) first took hold in 2002, when the Pentagon established the U.S. Northern Command in Colorado to provide command and control of military efforts within U.S. borders. Northcom was given two primary responsibilities: providing military security during national emergencies, including terrorist attacks and natural disasters; and protecting important U.S. military bases in the 50 states. As part of the Pentagon’s domestic security mission, former Secretary of Defense Donald Rumsfeld created the Counter-Intelligence Field Activity (CIFA) in 2002. But CIFA soon became a weapon against anyone suspected of harboring ill-will against the Bush administration and its policies. CIFA was caught spying on antiwar groups, Quakers and other organizations. Even though Clapper and his boss, Secretary of Defense Bob Gates, have expressed concerns about CIFA’s reach, the agency remains an integral part of the Pentagon’s counterterrorism efforts.

The link between Pentagon-driven intelligence operations and the homeland was underscored during the Katrina crisis by the NGA’s deployment to New Orleans of a special vehicle called a Mobile Integrated Geospatial-Intelligence System, or MIGS, which is loaded with equipment that allows NGA analysts to download intelligence from U-2s and U.S. military satellites. The vehicles were first deployed by the NGA in Iraq and Afghanistan, and later to the Gulf Coast. “They’re pretty much the NGA in a Humvee — very military,” said Goolgasian, the NGA official. “But it kind of sticks out like a sore thumb if you’re driving into an urban area” in the United States. As a result, the NGA has painted its domestic vehicles blue and renamed them Domestic MIGS, or DMIGS.

Military, intelligence agency and police work is also coming together in numerous “fusion centers” around the country in a joint program run by the Department of Justice and Department of Homeland Security that has received little public attention. At present, there are 43 current and planned fusion centers in the United States where information from intelligence agencies, the FBI, local police, private sector databases and anonymous tipsters is combined and analyzed by counterterrorism analysts. DHS hopes to create a wide network of such centers that would be tied into the agency’s day-to-day activities, according to the Electronic Privacy Information Center. The project, according to EPIC, “inculcates DHS with enormous domestic surveillance powers and evokes comparisons with the publicly condemned domestic surveillance program of COINTELPRO,” the 1960s program by the FBI aimed at destroying groups on the American political left.

It doesn’t take much imagination to see how powerful technologies, when combined with secretive, growing interagency collaboration, could be misused in a domestic context. In recent years many U.S. cities have deployed sophisticated video cameras throughout their downtown areas that track activity 24 hours a day. And U.S. intelligence and law enforcement agencies now have at their disposal facial recognition software that can identify one person among thousands in a large crowd. Combine that with the awesome eavesdropping power of the NSA and the ability of the NGA to capture live imagery from satellites and UAVs, and the result could be an ability to track any individual, in real time, as he or she moves around.

John Pike, the director of GlobalSecurity.org, said the NGA is unlikely to be called upon for surveillance of an individual inside the United States. “NGA imagery is not what you would use to track people,” he said. But as the intelligence infrastructure, including the kinds of local camera-surveillance systems that proved so useful in identifying the perpetrators of the London subway bombings, expands in the United States, it raises the specter of a nationwide surveillance web. “These networks are going to get denser and going to cover more area over time,” Pike said. “At some point in time somebody’s going to drop in an automated face-print recognizer, and then they’re off to the races. Anybody who is currently wanted by the authorities, well, there’s just going to be parts of the country where such a person could not enter.”

The expanding role of U.S. intelligence agencies on the home front raises serious issues, according to Army Lt. Gen. Russel L. Honoré, the commanding general on the scene in the Gulf Coast during Hurricane Katrina. Last fall, during a national conference on geospatial intelligence, he said, “Most of our capability [in the military] is kept on the classified side because that’s the best way to fight the enemy.” But the situation in the Gulf Coast, as the lines blurred, was complicated by conflicting policy directives. There were some people in government saying, “You’re not going to use the intel stuff on us,” Honoré recalled, while others were saying just the opposite: “Why aren’t you using that intel stuff to tell us what’s going on down there?” And then, there were people sitting back, saying, “They can’t do that inside the United States,” he said, adding, “This is one of the things government has to work out.”

In light of the mounting revelations about the Bush administration’s domestic spying, civil libertarians no doubt strongly agree.

The DNI figures show that the aggregate number of private contracts awarded by intelligence agencies rose by about 38 percent from the mid-1990s to 2005. But the surge in outsourcing has been far more dramatic measured in dollars: Over the same period of time, the total value of intelligence contracts more than doubled, from about $18 billion in 1995 to about $42 billion in 2005.

“Those numbers are startling,” said Steven Aftergood, the director of the Project on Government Secrecy at the Federation of American Scientists and an expert on the U.S. intelligence budget. “They represent a transformation of the Cold War intelligence bureaucracy into something new and different that is literally dominated by contractor interests.”

Because of the cloak of secrecy thrown over the intelligence budgets, there is no way for the American public, or even much of Congress, to know how those contractors are getting the money, what they are doing with it, or how effectively they are using it. The explosion in outsourcing has taken place against a backdrop of intelligence failures for which the Bush administration has been hammered by critics, from Saddam Hussein’s fictional weapons of mass destruction to abusive interrogations that have involved employees of private contractors operating in Iraq, Afghanistan and Guantánamo Bay, Cuba. Aftergood and other experts also warn that the lack of transparency creates conditions ripe for corruption.

Trey Brown, a DNI press officer, told Salon that the 70 percent figure disclosed by Everett refers to everything that U.S. intelligence agencies buy, from pencils to buildings to “whatever devices we use to collect intelligence.” Asked how much of the money doled out goes toward big-ticket items like military spy satellites, he replied, “We can’t really talk about those kinds of things.”

The media has reported on some contracting figures for individual agencies, but never before for the entire U.S. intelligence enterprise. In 2006, the Washington Post reported that a “significant majority” of the employees at two key agencies, the National Counterterrrorism Center and the Pentagon’s Counter-Intelligence Field Activity office, were contractors (at CIFA, the number was more than 70 percent). More recently, former officers with the Central Intelligence Agency have said the CIA’s workforce is about 60 percent contractors.

But the statistics alone don’t even show the degree to which outsourcing has penetrated U.S. intelligence — many tasks and services once reserved exclusively for government employees are being handled by civilians. For example, private contractors analyze much of the intelligence collected by satellites and low-flying unmanned aerial vehicles, and they write reports that are passed up to the line to high-ranking government officials. They supply and maintain software programs that can manipulate and depict data used to track terrorist suspects, both at home and abroad, and determine what targets to hit in hot spots in Iraq and Afghanistan. Such data is also at the heart of the National Security Agency’s massive eavesdropping programs and may be one reason the DNI is pushing Congress to grant immunity to corporations that may have cooperated with the NSA over the past five years. Contractors also provide collaboration tools to help individual agencies communicate with each other, and they supply security tools to protect intelligence networks from outside tampering.

Outsourcing has also spread into the realm of human intelligence. At the CIA, contractors help staff overseas stations and provide disguises used by agents working under cover. According to Robert Baer, the former CIA officer who was the inspiration for the character played by George Clooney in the film “Syriana,” a contractor stationed in Iraq even supervises where CIA agents go in Baghdad and whom they meet. “It’s a completely different culture from the way the CIA used to be run, when a case officer determined where and when agents would go,” he told me in a recent interview. “Everyone I know in the CIA is leaving and going into contracting whether they’re retired or not.”

The DNI itself has voiced doubts about the efficiency and effectiveness of outsourcing. In a public report released last fall, the agency said the intelligence community increasingly “finds itself in competition with its contractors for our own employees.” Faced with arbitrary staffing limits and uncertain funding, the report said, intelligence agencies are forced “to use contractors for work that may be borderline ‘inherently governmental’” — meaning the agencies have no clear idea about what work should remain exclusively inside the government versus work that can be done by civilians working for private firms. The DNI also found that “those same contractors recruit our own employees, already cleared and trained at government expense, and then ‘lease’ them back to us at considerably greater expense.”

A Senate Intelligence Committee report released on Thursday spells out the costs to taxpayers. It estimates that the average annual cost for a government intelligence officer is $126,500, compared to the average $250,000 (including overhead) paid by the government for an intelligence contractor. “Given this cost disparity,” the report concluded, “the Committee believes that the Intelligence Community should strive in the long-term to reduce its dependence upon contractors.”

The DNI began an intensive study of contracting last year, but when its “IC Core Contractor Inventory” report was sent to Congress in April, DNI officials refused to release its findings to the public, citing risks to national security. The next month, a report from the House Permanent Select Committee on Intelligence rebuked the DNI in unusually strong language, concluding that U.S. officials “do not have an adequate understanding of the size and composition of the contractor work force, a consistent and well-articulated method for assessing contractor performance, or strategies for managing a combined staff-contractor workforce.”

U.S. intelligence budgets are classified, and all discussions about them in Congress are held in secret. Much of the information, however, is available to intelligence contractors, who are at liberty to lobby members of Congress about the budgets, potentially skewing policy in favor of the contractors. For example, Science Applications International Corp., one of the nation’s largest intelligence contractors, spent $1,330,000 in their congressional lobbying efforts in 2006, which included a focus on the intelligence and defense budgets, according to records filed with the Senate’s Office of Public Records.

The public, of course, is completely excluded from these discussions. “It’s not like a debate when someone loses,” said Aftergood. “There is no debate. And the more work that migrates to the private sector, the less effective congressional oversight is going to be.” From that secretive process, he added, “there’s only a short distance to the Duke Cunninghams of the world and the corruption of the process in the interest of private corporations.” In March 2006, Randy “Duke” Cunningham, R-Calif., who had resigned from Congress several months earlier, was sentenced to eight years in prison after being convicted of accepting more than $2 million in bribes from executives with MZM, a prominent San Diego defense contractor. In return for the bribes, Cunningham used his position on the House appropriations and intelligence committees to win tens of millions of dollars’ worth of contracts for MZM at the CIA and the Pentagon’s CIFA office, which has been criticized by Congress for spying on American citizens. The MZM case deepened earlier this month when Kyle “Dusty” Foggo, the former deputy director of the CIA, was indicted for conspiring with former MZM CEO Brent Wilkes to steer contracts toward the company.

U.S. intelligence agencies have always relied on private companies for technology and hardware. Lockheed built the famous U-2 spy plane under specifications from the CIA, and dozens of companies, from TRW to Polaroid to Raytheon, helped develop the high-resolution cameras and satellites that beamed information back to Washington about the Soviet Union and its military and missile installations. The National Security Agency, which was founded in the early 1950s to monitor foreign communications and telephone calls, hired IBM, Cray and other companies to make the supercomputers that helped the agency break encryption codes and transform millions of bits of data into meaningful intelligence.

By the 1990s, however, commercial developments in encryption, information technology, imagery and satellites had outpaced the government’s ability to keep up, and intelligence agencies began to turn to the private sector for technologies they once made in-house. Agencies also turned to outsourcing after Congress, as part of the “peace dividend” that followed the end of the Cold War, cut defense and intelligence budgets by about 30 percent.

When the National Geospatial-Intelligence Agency was created in 1995 as the primary collection agency for imagery and mapping, for example, it immediately began buying its software and much of its satellite imagery from commercial vendors; today, half of its 14,000 workers are full-time equivalent contractors who work inside NGA facilities but collect their paychecks from companies like Booz Allen Hamilton and Lockheed Martin. In the late 1990s, the NSA began outsourcing its internal telecommunications and even some of its signals analysis to private companies, such as Computer Services Corp. and SAIC.

Outsourcing increased dramatically after 9/11. The Bush administration and Congress, determined to prevent further terrorist attacks, ordered a major increase in intelligence spending and organized new institutions to fight the war on terror, such as the National Counterterrorism Center. To beef up these organizations, the CIA and other agencies were authorized to hire thousands of analysts and human intelligence specialists. Partly because of the big cuts of the 1990s, however, many of the people with the skills and security clearances to do that work were working in the private sector. As a result, contracting grew quickly as intelligence agencies rushed to fill the gap.

That increase can be seen in the DNI documents showing contract award dollars: Contract spending, based on the DNI data and estimates from this period, remained fairly steady from 1995 to 2001, at about $20 billion a year. In 2002, the first year after the attacks on New York and Washington, contracts jumped to about $32 billion. In 2003 they jumped again, reaching about $42 billion. They have remained steady since then through 2006 (the DNI data is current as of last August).

Because nearly 90 percent of intelligence contracts are classified and the budgets kept secret, it’s difficult to draw up a list of top contractors and their revenues derived from intelligence work. Based on publicly available information, including filings from publicly traded companies with the Securities and Exchange Commission and company press releases and Web sites, the current top five intelligence contractors appear to be Lockheed Martin, Northrop Grumman, SAIC, General Dynamics and L-3 Communications. Other major contractors include Booz Allen Hamilton, CACI International, DRS Technologies and Mantech International. The industry’s growth and dependence on government budgets has made intelligence contracting an attractive market for former high-ranking national security officials, like former CIA director George Tenet, who now earns millions of dollars working as a director and advisor to four companies that hold contracts with U.S. intelligence agencies and do big business in Iraq and elsewhere.

Congress, meanwhile, is beginning to ask serious questions about intelligence outsourcing and how lawmakers influence the intelligence budget process. Some of that interest has been generated by the Cunningham scandal. In another recent case, Rep. Rick Renzi, a Republican from Arizona, resigned from the House Intelligence Committee in April because he is under federal investigation for introducing legislation that may have benefited Mantech International, a major intelligence contractor where Renzi’s father works in a senior executive position.

In the Cunningham case, many of MZM’s illegal contracts were funded by “earmarks” that he inserted in intelligence bills. Earmarks, typically budget items placed by lawmakers to benefit projects or companies in their district, are often difficult to find amid the dense verbiage of legislation — and in the “black” intelligence budgets, they are even harder to find. In its recent budget report, the House Intelligence Committee listed 26 separate earmarks for intelligence contracts, along with the sponsor’s name and the dollar amount of the contract. The names of the contractors, however, were not included in the list.

Both the House and Senate are now considering intelligence spending bills that require the DNI, starting next year, to provide extensive information on contractors. The House version requires an annual report on contractors that might be committing waste and fraud, as well as reviews on its “accountability mechanisms” for contractors and the effect of contractors on the intelligence workforce. The amendment was drafted by Rep. David Price, D-N.C., who introduced a similar bill last year that passed the House but was quashed by the Senate. In a statement on the House floor on May 10, Price explained that he was seeking answers to several simple questions: “Should (contractors) be involved in intelligence collection? Should they be involved in analysis? What about interrogations or covert operations? Are there some activities that are so sensitive they should only be performed by highly trained Intelligence Community professionals?”

If either of the House or Senate intelligence bills pass in their present form, the overall U.S. intelligence budget will be made public. Such transparency is critical as contracting continues to expand, said Paul Cox, Price’s press secretary. “As a nation,” he said, “we really need to take a look and decide what’s appropriate to contract and what’s inherently governmental.”