New anti-smuggling center uncovers internal surprises

WASHINGTON (Reuters) - FBI counter-espionage agents had spent years investigating an American suspected of smuggling aerospace components to China, when they got word late last year that other law enforcement agents were about to arrest the man.

The heads-up came from a nascent and somewhat secretive government anti-smuggling program marking its first anniversary this week. It is called E2C2, shorthand for Export Enforcement Coordination Center, and 18 law enforcement and intelligence agencies use it to find links between their targets and other investigations.

The Chinese case was no anomaly, a White House official said. E2C2 checks also prevented Commerce Department inspectors overseas from spoiling an active Homeland Security sting, and Pentagon officials from wasting time investigating a suspected night-vision smuggler who was in fact an undercover Homeland Security agent.

In the first year, the White House official said, E2C2 comparisons of target names and other data, such as phone numbers, have turned up ties to other investigations or relevant records 60 percent of the time.

"It was a shocker for us," said the White House official. "Based on anecdotal evidence from the field, we knew we had a problem, but we didn't anticipate numbers like this."

The E2C2, part of the Obama administration's export overhaul, was established in part to fix the overlap and conflicting priorities among multiple U.S. agencies that try to stop equipment with military uses and other banned items from being shipped overseas.

A Commerce Department briefing paper described the current mix of export law enforcement agencies as "confusing... disjointed and inefficient."

CLASH OF CULTURES

The E2C2 was created by presidential order in 2010, but the collaboration has evolved slowly. According to a Government Accountability Office report, the E2C2 opened nine months late, in part because of "some difficultly" between agencies over how the center would operate.

The initial clash of cultures was not surprising, officials said. FBI comes to smuggling from a counter-espionage point of view. The Commerce Department focuses on licensing enforcement. Many Homeland Security agents are former customs officers.

The three agencies do not even use the same smuggling nomenclature. The FBI calls it "technology transfer." The Commerce Department calls it "export enforcement." The Homeland Security Department calls it "counter-proliferation."

Each agency enjoys unique powers. Only FBI agents can deploy Foreign Intelligence Surveillance Act wiretaps. Only Commerce Department agents can issue administrative sanctions. Only Homeland Security agents can search packages at the border without a warrant.

FBI deputy assistant director Vincent Lisi said the E2C2 can help turn these differences into advantages. He cited the Chinese smuggling investigation in which his agents combined forces with the Commerce Department to bring a stronger case.

A match occurs whenever one agency reports that it has some information on another agency's target, ranging from a full-fledged parallel investigation to a thin file with a relevant phone number or email address.

Lisi was surprised by the 60 percent match rate on E2C2 checks. "I don't know that anyone ever anticipated that it would be that high, especially when you consider the number of proliferators around the world today," he said. "But again, proof's in the pudding: right there is why we need the E2C2."

Douglas Hassebrock, the senior federal law enforcement official at the Commerce Department, cited a case in which his agents were preparing to inspect an Asian port, when he received an urgent text message from Craig Healy, the E2C2's director: Please stand down, a company involved doesn't know it's under investigation by Homeland Security.

"We stopped it immediately," Hassebrock said. "In the past, it would have taken multiple bureaucratic steps."

TARGETING NETWORKS, TOO

The Obama administration's export overhaul also includes merging multi-agency export computer systems, licensing protocols and lists of restricted items and entities. The goal is to simultaneously boost exports of U.S. goods, while ensuring banned items do not get to U.S. adversaries.

Two-thirds of the criminal export cases involve smuggling on behalf of the Chinese or Iranians, records show. Although other statistics are not made public, the smuggling pace has remained consistent, officials said.

"We have seen no decline in the appetite of rogue regimes, terrorist organizations and others for restricted U.S. technology," said Steven Pelak, deputy chief of the Justice Department's Counterespionage Section.

The E2C2 is situated in Northern Virginia. Its budget and the number of its employees are not public.

The project is also designed to help the government target networks of high-tech and military smugglers. Most criminal investigations target individuals one at a time, not networks.

"The networks are killing us," said Healy, the E2C2 director. "With limited resources we have in government these days, this is an attempt to work smarter."

Working smarter means working together, which does not always come naturally in law enforcement.

"There are a lot of entrenched agencies and big personalities involved," said Kasia Mendelsohn of the National Nuclear Security Administration, which provides expertise to stop the smuggling of atomic-bomb components. "It's hard to break away from the mindset of 'That's how we've always done it.'"

(Editing by Warren Strobel and Mohammad Zargham)