Congress Investigates Secrets Of National Spy Satellite Office Slush Fund, Lavish Spending Bring Downfall Of Chief, Deputy

The two top officials at the super-secret National Reconnaissance Office, which controls the nation’s spy satellites, were ousted Monday in the wake of allegations of financial mismanagement.

The agency, which was founded in 1960 but not officially acknowledged until 1992, built up what members of Congress called “a slush fund” of more than $1 billion before the unspent money was traced last year. In addition, the agency also built a lavish new headquarters in Virginia at the cost of $310 million, provoking an earlier round of criticism for giving Congress only the briefest outline of its plans.

The NRO director, Jeffrey K. Harris, and his deputy, Jimmie D. Hill, were fired Monday. In announcing the departures, Defense Secretary William J. Perry and the CIA chief, John Deutch, said in a statement: “This action is dictated by our belief that NRO’s management practices must be improved and the credibility of this excellent organization be restored.”

The ouster of the two officials followed a Senate intelligence committee hearing last week into the secrecy of the national intelligence budget. The budget, estimated at about $28 billion, covers such agencies as the CIA and the Fort Meade-based National Security Agency, as well as the NRO.

During the hearing, the committee chairman, Sen. Arlen Specter, a Pennsylvania Republican, described the financial mismanagement at NRO as an example of the “flagrantly excessive amounts of money which have been accumulated because of our secrecy.”

The NRO accumulated its so-called “slush fund” by not spending money authorized by Congress but accumulating it in a reserve account. There was no allegation of fraud. The money has now been given to the Pentagon and will help pay for the U.S. peace-implementation force in Bosnia and for other programs.

The NRO, which runs spy satellites and planes, is credited with helping the United States and its allies win the Cold War by monitoring communications and military developments in Soviet-bloc nations. More recently, according to testimony on Capitol Hill, it identified the North Korean nuclear program, tracked Saddam Hussein’s violations of the terms of the Persian Gulf war cease-fire and supplied intelligence that helped U.S. diplomats negotiate the Dayton, Ohio accords on Bosnia.

“The NRO is the most secret, most sensitive component of our Cold War defense establishment,” said Loren B. Thompson, a defense analyst with the Alexis de Tocqueville Institution, a Virginia think tank. “What this indicates is that secrecy is not as important as it used to be, and accountability is more important.

“There was a time when people would have tolerated some of the things that have gone on recently and said, ‘It’s just too sensitive to open up.’ That time has passed.”

Harris, who became director in 1994, and Hill, appointed deputy director in 1982, will be re-assigned to other unspecified jobs within the intelligence community.