SPEAKER:
CHAIRMAN

LOCATION: WASHINGTON, D.C.

WITNESSES:

ELEANOR HILL, JOINT INQUIRY STAFF
GEORGE TENET, DIRECTOR, CENTRAL INTELLIGENCE AGENCY
ROBERT MUELLER, DIRECTOR, FEDERAL BUREAU OF INVESTIGATIONS
LIEUTENANT GENERAL MICHAEL HAYDEN, DIRECTOR, NATIONAL SECURITY AGENCY

BODY:

HOUSE AND SENATE INTELLIGENCE COMMITTEES HOLD JOINT HEARING
ON PRE-9/11 INTELLIGENCE FAILURES

SPEAKERS:
U.S. SENATOR BOB GRAHAM (D-FL)
CHAIRMAN
U.S. SENATOR CARL LEVIN (D-MI)
U.S. SENATOR JOHN D. ROCKEFELLER IV (D-WV)
U.S. SENATOR DIANE FEINSTEIN (D-CA)
U.S. SENATOR RON WYDEN (D-OR)
U.S. SENATOR RICHARD DURBIN (D-IL)
U.S. SENATOR EVAN BAYH (D-IN)
U.S. SENATOR JOHN EDWARDS (D-NC)
U.S. SENATOR BARBARA MIKULSKI (D-MD)

U.S. SENATOR RICHARD C. SHELBY (R-AL)
RANKING MEMBER
U.S. SENATOR JON KYL (R-AZ)
U.S. SENATOR JAMES M. INHOFE (R-OK)
U.S. SENATOR ORRIN G. HATCH (R-UT)
U.S. SENATOR PAT ROBERTS (R-KS)
U.S. SENATOR MIKE DEWINE (R-OH)
U.S. SENATOR FRED THOMPSON (R-TN)
U.S. SENATOR RICHARD LUGAR (R-IN)

U.S. REPRESENTATIVE PORTER J. GOSS (R-FL)
CHAIRMAN
U.S. REPRESENTATIVE DOUG BEREUTER (R-NE)
U.S. REPRESENTATIVE MICHAEL N. CASTLE (R-DE)
U.S. REPRESENTATIVE SHERWOOD L. BOEHLERT (R-NY)
U.S. REPRESENTATIVE JIM GIBBONS (R-NV)
U.S. REPRESENTATIVE RAY LAHOOD (R-IL)
U.S. REPRESENTATIVE RANDY "DUKE" CUNNINGHAM (R-CA)
U.S. REPRESENTATIVE PETER HOEKSTRA (R-MI)
U.S. REPRESENTATIVE RICHARD BURR (R-NC)
U.S. REPRESENTATIVE SAXBY CHAMBLISS (R-GA)
U.S. REPRESENTATIVE TERRY EVERETT (R-AL)

U.S. REPRESENTATIVE NANCY PELOSI (D-CA)
RANKING MEMBER
U.S. REPRESENTATIVE SANFORD BISHOP JR. (D-GA)
U.S. REPRESENTATIVE JANE HARMAN (D-CA)
U.S. REPRESENTATIVE GARY CONDIT (D-CA)
U.S. REPRESENTATIVE TIM ROEMER (D-IN)
U.S. REPRESENTATIVE SILVESTRE REYES (D-TX)
U.S. REPRESENTATIVE LEONARD BOSWELL (D-IA)
U.S. REPRESENTATIVE COLLIN PETERSON (D-MN)
U.S. REPRESENTATIVE BUD CRAMER (D-AL)

*

GRAHAM: Call the meeting to order. This is the ninth public hearing of our inquiry into the events surrounding the terrorist attacks of September 11th. We have also held 13 closed sessions. Under our current schedule, this will also be the last public hearing. And I would like to take this opportunity to thank the members of the House and Senate committees for their commitment to this very important process.

I am especially grateful for the cooperation of our co-chairman and my good friend, Representative Porter Goss, as well as the outstanding and cooperative relationships with Congresswoman Nancy Pelosi and my Senate colleague, Richard Shelby. I would also like to express my personal gratitude for the outstanding work of our exceptional staff of investigators, led by Ms. Eleanor Hill. We will hear another presentation from Ms. Hill in just a few moments.

As we contemplate our next step in this inquiry, the writing of our final report, I would like to say how important I believe the experience of conducting this inquiry in a joint manner, the first time in the history of the Congress that such an enterprise has been undertaken, will be to our final report. The value will be that when we make our recommendations for reform, both House and Senate members will do so, having heard the same testimony, shared the same information, listened to the same discussions. Based on that, we will make our recommendations.

These recommendations will be the most important legacy of our hearings, launching reforms that will assure the American people that our first line of defense against terrorism, our intelligence agencies, are doing all that they can to detect, deter and disrupt schemes against our homeland and American interests abroad. As we heard at our last public hearing on October 8, there have been a succession of reports recommending reforms to the intelligence community. The majority of those were issued prior to September 11, 2001.

What most of those reports have in common, sad to say, is that relatively little has been adopted from them. I am hopeful that, as a result of this joint process, our recommendations will be taken more seriously and will have a greater impact on the intelligence community in the 21st century.

I look forward to working with all the members of the House and Senate committees on these recommendations in the weeks to come.

Today's hearing will be in two parts. First, we will hear from Ms. Eleanor Hill, who will review the major issues that have been identified in the course of the inquiry.

We will then hear from a panel of distinguished witnesses, consisting of the director of Central Intelligence, the director of the Federal Bureau of Investigation and the Director of the National Security Agency. Among the questions that we look forward to exploring today: what the intelligence community in general, and the CIA, FBI and NSA in particular, have learned from September 11 regarding what should be done to improve our counterterrorism programs.

And in addition to learning what should be done, what are they actually doing and planning to do in order to improve the effectiveness of their programs? We will also discuss with our witnesses what the president and the Congress should do to assist them in these reforms.

I will now ask my colleagues, starting with Congressman Goss and then Vice Chairman Shelby and Ranking Member Pelosi, if they have any opening comments for today.

Chairman Goss?

GOSS: Thank you very much, Chairman Graham. I just wanted to add briefly a couple of points to the very kind opening remarks you've made.

I think that these public hearings have been a very helpful window into the intelligence community to help Americans appreciate a little better the men and women and the extraordinarily tough jobs that they do for our national security. And I think for that, it has been extremely helpful as a sidebar to our other stated mission.

I think trying -- for all of us -- trying to understand terrorism better and how we must fight it is something of a national challenge. And I think these public hearings have been very useful in awareness and alertness areas.

I am very grateful for the participation of the members. I believe that everybody has participated fully and gotten involved and done their homework and asked questions and been very much a part of this, which was our hope from the beginning, as you know. And I do take away from this that there is a possibility of a happy marriage between the Senate and the House.

We'll inevitably have some bad days. But I think that it's reassuring to the American public that, in fact, we do work together.

There's a part of this that the American public has not seen; it's what's going on behind the scenes, which we can't talk about entirely because of the protection of sources and methods and plans and intentions and matters that deserve to be held closely at this time because of ongoing investigations and other legitimate reasons. In time, those will be revealed as well, for the most part, I suspect, as is usually the case.

So in many ways, this is openers, what we are doing. And there will be follow on. We all know that. And we think that we have created a springboard for that. And the rest of the work that our staff has done under the very able leadership of Eleanor Hill is, I think, remarkable and will serve those who come after us in this process very well.

I think it is very clear that our oversight work for these two committees in the future is going to be very vigorous and very required. And when Ms. Hill makes her remarks this morning, which I've had the privilege of seeing, I think it's an excellent blueprint of the problem and some of the solutions that might be out there and some of the places we're going to have to direct our attention. So I urge people to pay attention to her statement this morning.

And I would also point out, it's not just intelligence oversight. It's going to be oversight of many of the committees of Congress as well. So I think we have served not only our purposes in the narrow area of our responsibilities of intelligence, but a broader picture for the responsibilities of Congress to try and understand better the events of 9/11.

Thank you, Mr. Chairman.

GRAHAM: Thank you, Congressman Goss.

Senator Shelby?

SHELBY: Thank you, Mr. Chairman. First of all, Mr. Chairman, I want to thank you for your kind personal remarks. I've served with you when you were the vice chairman, as I am now, and when I was the chairman. And I'm serving now as your vice chairman and you are the chairman.

I prefer to be the chairman. But I've enjoyed working with you as the vice chairman.

(LAUGHTER)

Having said this, Mr. Chairman, this is probably our last public meeting together, the two of us, and other members of this committee. And while this may be our last public hearing before the Congress adjourns, too, for the year, I believe it's important to point out, Mr. Chairman, that our work will continue until the 107th Congress comes to an end.

We will continue to ask questions and review documents until we are compelled by the calendar to conclude the fact-finding phase of this inquiry. We will then begin the process of drafting a report.

I'm hopeful, Mr. Chairman, that we will reach a consensus. But I'm also cognizant of the difficulty of such an undertaking.

Mr. Chairman, while our work will ultimately end, the process that we have begun must not. If we have learned anything here, it is that nearly every day brings a new revelation, a new bit of information or a new line of inquiry. That, Mr. Chairman, is why the leadership of these committees have determined that a commission must be established to continue and to expand upon the work that we're doing here.

I believe, Mr. Chairman, the American people should know that we've been limited by time here, by resources and yes, by scope. We have been at work for a little over six months, with a small staff examining only the performance of our intelligence community.

The story of 9/11 and our inability to detect and prevent it extends far beyond, I believe, our intelligence agencies. The American people, Mr. Chairman, must know that the full story is yet to be told.

Mr. Chairman, we've learned many lessons. But there are many yet to be learned. We have answered many questions. But there are many yet to be answered.

I believe our work has been useful and constructive in this joint inquiry. We have discovered many instances where our intelligence agencies failed to perform as we expect them to. We've also discovered, Mr. Chairman, many more examples of dedicated and tireless Americans, performing their duties with distinction and honor. The American people should know that the latter is the rule, not the exception.

Often, I hear commentators refer to our work as an effort to discover what caused the events of September 11. I think we can report safely to the American people that we have no doubt what caused 9/11. It was the twisted actions of a network of murderers, dedicated to killing Americans.

What these committees are endeavoring to determine is why we were unable to detect and to stop this plot. That work is ongoing and I believe must continue if we are to ensure that this never happens again.

Mr. Chairman, I look forward to today's testimony. But I do so knowing full well that this is not the end of our work or the work that must still be done for the American people.

Thank you.

GRAHAM: Thank you, Senator Shelby.

Congresswoman Pelosi?

PELOSI: Thank you very much, Mr. Chairman. I want to join in commending you and Mr. Goss for your leadership as chairmen of this joint inquiry since the beginning of this year. I think it provides a model for how we can work not only, Mr. Chairmen, in a bicameral way, but in a bipartisan way for the benefit of the American people.

But the American people were well served by the two of you in the chairmanship roles. And I know that Mr. Shelby said that he would rather have been chairman. And I associate myself with those remarks in my own case.

(LAUGHTER)

In any event, when we came together to announce this joint inquiry, our statement of intent said, in our preamble we said, "To reduce the risk of future terrorist attacks, to honor the memories of the victims of the September 11th terrorist attacks, by conducting a thorough search for facts to answers to the many questions that their families and many Americans have raised and to lay a basis for assessing the accountability of institutions and officials of government." I believe that included the Congress of the United States.

"The Senate Select Committee on Intelligence and the House Permanent Subcommittee on Intelligence adopt this scope of joint inquiry that we pursued."

Before I go into how I think that we have honored that charge, I want to say to Director Mueller, who I know -- hope -- is within earshot, as we welcome our distinguished witnesses today, I want to express my condolences and those of all whom I work with for the loss suffered by the men and women of the FBI in the loss of their colleague in the tragic events of Monday night.

The murder of Linda Franklin is another reminder that dealing with acts intended to instill fear, regardless of whether the individual or group committing them has roots at home or abroad, is our greatest security challenge. I hope that the director will convey condolences of our joint inquiry committee to his colleagues.

Four months ago, we began the hearings phase of our joint inquiry with these same witnesses in closed session. Since that time, we have been very well served by Ms. Hill, Mr. Sincagranna (ph), her deputy, and the joint inquiry staff. I think that -- well, I'll say more about that later.

Although it was necessary to take much of the testimony on the September 11th attacks in secret, it was clear that there was a portion of the story that could be -- in fact, had to be -- made public. Through the open hearings of the past four weeks, that part of the story has been told.

I want to commend our staff director again, Eleanor Hill, her deputy Rick Sincagranna (ph) and the joint inquiry staff for the effort that has gone into these public hearings. In my judgment, they have contributed significantly to increasing the understanding of the American people about the events that led up to the attack.

As the hearings have made clear, with respect to at least some of the hijackers, their associates and people who may have been their associates, signs were missed, opportunities were not seized and legal procedures were misunderstood. Had those mistakes not been made, would the outcome of September 11th been any different? We will never know.

Perfection is a difficult standard to which to be held. With respect to counterterrorism activities, however, it is the only one that can apply -- if not as something that can be reasonably attained, then as something that must always be the goal.

Our witnesses have had the difficult jobs of trying to explain the unexplainable. It's not enough to say that we did not have enough money or enough people. No one does. It's always the case.

It's about establishing priorities. It's about deciding what is most important from a host of important requirements and ensuring that, from available resources, those sufficient to do the job are assigned to it.

It's about recognizing where improvements are needed in ways in which business is done and making them. And it's about making certain that information that appears insignificant to one agency is shared as widely as possible with others on the chance that it has an importance beyond what is apparent on the surface.

One of our chief objectives, as was mentioned in our preamble, in this inquiry has been to contribute to making the American people safer than they were on September 11th. Our witnesses today have a chance to describe how things have changed in the past year, how agencies are working more closely together and how the cooperative efforts of the International Anti-Terrorism Coalition have contributed to successes against the Al Qaida.

I hope they will advise us whether our chances of preventing another attack on the United States are any better today than they were last September. And if not, why not?

I look forward to their testimony and agree with some of the comments of Mr. Shelby that, while we focused on the intelligence community mostly in this, that some of the answers go well beyond this. And we have to seek the truth, wherever it is.

I think that speaks to the need for an independent commission to build on the very excellent work that this joint inquiry has already produced.

With that, I commend the two distinguished chairmen, once again, and say that it has been an honor to be associated with their leadership and their work in this regard, as well as that of Mr. Shelby. And I think he's perfectly appropriate in the role that he has now.

(LAUGHTER)

Thank you very much, Mr. Chairman.

GRAHAM: Thank you very much, Congresswoman Pelosi.

Before hearing from Ms. Hill and our witnesses, I would like to present several administrative matters to the committees for consideration and action. At several earlier hearings, we have provided for supplementation of the record. We have done this without objection.

As we prepare to bring our hearings to a conclusion, it would be desirable to extend that authority to supplement to our hearing record on a general basis. Accordingly, I ask unanimous consent that one, classified staff statements be placed in the classified portion of the hearing records, where appropriate.

Is there objection? Without objection, so ordered.

Two, that Chairman Goss and I, acting jointly after consultation with Ranking Member Pelosi and Vice Chairman Shelby, be authorized to place in our hearing records classified and unclassified exhibits that are designated for inclusion by any member of the two committees or by the staff director of the joint inquiry.

Is there objection? Without objection, so ordered.

Second, our practice throughout these hearings has been to invite witnesses, by a joint invitation of the two chairmen, Vice Chairman Shelby and Ranking Member Pelosi. In the event that we determine that the full record of the proceedings should be amplified by additional witness statements for the record, I ask unanimous consent that the four of us, acting jointly, be authorized to invite and place in the record, written statements by additional governmental or private organizations or persons.

Is there an objection? Hearing none, it is so ordered.

Finally, on June 18th, the committee heard testimony in a closed session from the director of Central Intelligence, the director of the Federal Bureau of Investigation and the Director of the National Security Agency about what the intelligence community now knows about the September 11th plot. We then asked the directors to declassify their testimony, to the extent consistent with national security.

The director of the FBI has previously submitted his declassified statement, which was then included in our open record. The director of Central Intelligence has now submitted his declassified statement for the record. I ask unanimous consent that his declassified statement also be made part of the open record of these proceedings.

Is there objection? Hearing none, so ordered.

Ms. Hill, please proceed.

HILL: Thank you, Mr. Chairman. I have one additional administrative item before beginning my statement, and that is the members may recall that on September 24th, we held an open hearing, at which I presented a staff statement regarding the FBI's handling of the Phoenix electronic communication and the investigation of Zacarias Moussaoui prior to September 11th.

At the time of that hearing, we presented a statement that had been in part redacted, due to concerns about the ongoing criminal case with Mr. Moussaoui. At that hearing -- or right before that hearing -- we received an order from the judge in that case, which then allowed us to pursue with the Justice Department and the FBI expanding or eliminating some of the redactions that we had made in the initial statement.

Last night, we received back from the CIA and also having gone through the Justice Department and the FBI, a revised version, expanded version of what we presented at the September 24th hearing. I'd like to offer this as part of the record, in that it has added more information from the original classified version that has now been cleared for public release.

GRAHAM: Is there objection. Without objection, so ordered.

HILL: Thank you, Mr. Chairman.

Chairman Goss, Chairman Graham, members of this joint inquiry, good morning. Over the course of the last few months, these committees have considered a great deal of information, obtained both through witness testimony and through extensive documentary review. This morning's testimony by the senior leadership of the intelligence community will bring to a close this series of open hearings.

What has been perhaps unprecedented, at least in terms of the intelligence committees, is the extent to which a good portion of this review has been accomplished through open, public hearings. That effort was driven by both the magnitude of September 11th and your recognition of the American public's need to better understand the performance of their government and particularly the intelligence community, with respect to the events of that day.

Beyond the events of September 11th, however, we believe these open hearings have also served to educate the public on the ongoing policy debate about the future path of the intelligence community. The considerable factual record that is now before these committees touches on a wide range of issues that are critical to that debate.

Ultimately, many of those issues will be considered and will be addressed in even greater depth, as these committees deliberate on what will become the final report of this joint inquiry. At this point, however, the staff has been asked to briefly review the most important elements of the factual record, as well as key questions that we believe have been raised through the course of these public hearings.

Beginning with the initial public hearing, the record describes, in considerable detail, the situation confronting the U. S. intelligence community with respect to the terrorist threat posed by Osama bin Laden prior to September 11, 2001. Key facts include: Osama bin Laden's public fatwa in 1998 authorizing terrorist attacks against American civilians and against military personnel worldwide -- U.S. military personnel; information acquired by the intelligence community over a three-year period indicating in broad terms that bin Laden's network intended to carry out attacks within the United States; the director of Central Intelligence's statement in December 1998 that -- quote -- "we are at war" -- close quote -- with bin Laden and that no resources should be spared by the intelligence community in that regard; information accumulated by the community over the course of a seven-year period indicating that international terrorists had, in fact, considered using airplanes as weapons; and numerous indicators of a major impending terrorist attack detected by the community in the spring and summer of 2001.

Although those indicators lacked the specifics of precisely where, when or how the attack would occur, the community had information indicating that the attack was likely to have dramatic consequences for governments and cause mass casualties. While the specifics of the September 11th attacks were not known in advance, relevant information was available in the summer of 2001. The collective significance of that information was not, however, recognized.

Perhaps as a result, the information was not fully shared in a timely and effective manner, both within the intelligence community and with other federal agencies. Examples include: in January 2000, the Central Intelligence Agency succeeded in determining that bin Laden operatives Khalid Almihdhar and Nawaf Alhazmi were in Malaysia and in obtaining important information about them.

While some information regarding the two was provided to the FBI at an early point, the weight of the evidence suggests that the CIA apparently did not transmit information regarding Almihdhar's possession of a U.S. multiple-entry visa and the likelihood of travel by the two to the United States, despite various opportunities to transmit all or part of that information in January 2000, March 2000 and June 2001. And on that point, Mr. Chairman, I do want to note, I note in Mr. Tenet's statement for the record this morning, he refers to the -- there is a January 2000 CIA message, indicating that that information was passed to the FBI.

I just want to make clear for the record that we are fully aware of that message. We have referenced it in our previous staff statement.

But we are also aware of the fact that there is considerable other evidence -- or, I should say, lack of evidence -- on this point, to the effect that the information was not passed, which in my recollection includes interviews of the author of the message, who cannot remember the information being passed, interviews of other CIA and FBI individuals who also have no recollection of it being passed and contemporaneous e-mails, both within the CIA and the FBI, that indicate while briefings of other issues were provided to the FBI regarding those individuals, that there was no mention of the visa or the information about the possible travel to the U.S.

So my statement is based not simply on the one message, but on the weight of all that evidence taken as a whole.

Going on, it was not until late August 2001 that the CIA watch- listed Almihdhar and Alhazmi and advised the FBI of their likely presence in the United States. FBI efforts to locate them through the New York and Los Angeles FBI offices proved unsuccessful. Other potentially useful federal agencies were apparently not fully enlisted in that effort. Representatives of the State Department, the FAA and the INS all testified in hearings of this joint inquiry, that prior to September 11th , their agencies were not asked to utilize their own information databases as part of the effort to find Almihdhar and Alhazmi.

An FAA representative, for example, testified that he believes that, had the FAA been given the names of the two individuals, they would have picked them up in the reservations system".

The FBI did not grasp the significance of a July 2001 electronic communication from the Phoenix field office identifying a pattern of Middle Eastern males with possible terrorist connections attending flight schools in the United States. Apparently, no one at FBI headquarters connected that idea to previous FBI concerns about the topic or to the increasing threat of a terrorist attack in the summer of 2001. The communication generated no broader analytic effort on the issue nor any special alert within the intelligence community. Despite its relevance to civil aviation, the FAA did not receive the communication until it was brought to the agency's attention in 2002 by the joint inquiry staff.

HILL: Also in the summer of 2001, agents in an FBI field office saw in Zacarias Moussaoui a potential terrorist threat, were concerned about the possibility of a larger plot to target airlines and shared those concerns with both FBI headquarters and the DCI's Counterterrorism Center. Neither FBI headquarters nor the CTC apparently connected the information to warnings emanating from the CTC about an impending terrorist attack or to the likely presence of two Al Qaida operatives, Almihdhar and Alhazmi, in the United States. The same unit at FBI headquarters handled the Phoenix electronic communication, but still did not sound any alarm bells.

No one will ever know whether more extensive analytic efforts, fuller and more timely information sharing or a greater focus on the connection between these events would have led to the unraveling of the September 11 plot. But it is at least a possibility that increased analysis, sharing and focus would have drawn greater attention to the growing potential for a major terrorist attack in the United States involving the aviation industry. This could have generated a heightened state of alert regarding such attacks and prompted more aggressive investigation, intelligence gathering and general awareness based on the information our government did possess prior to September 11.

Aside from a considerable factual record relating to the September 11th attacks, the hearings before these committees have also identified systemic problems that have impacted and will, if unresolved, continue to impact the performance of the intelligence community. Witnesses have, for example, complained about the lack, prior to September 11th, of sufficient resources to handle far too many broad requirements for intelligence, of which counterterrorism was only one.

While requirements grew, priorities were often not updated. As we reported last week, to much of the intelligence community, everything was a priority. The U.S. wanted to know everything about everything all the time.

A lack of counterterrorism resources has been a repeated theme through the course of these hearings, particularly in the testimony of witnesses from the intelligence community. There has also been some debate about the exact number of analysts at the FBI and the CIA that are dedicated to bin Laden and Al Qaida -- that were dedicated to bin Laden and Al Qaida -- after the DCI's declaration of war on bin Laden in December 1998.

The CIA has disagreed with the numbers previously reported by the staff for full-time UBL analysts within the DCI's Counterterrorism Center. The staff was originally given those numbers in interviews with representatives of the CTC. Recently, we have received additional figures on this point from the CIA indicating that, as of August 2001, there were a total of 48.8 FTEs, or the equivalent of about 49 analysts, focused on bin Laden throughout the entire CIA.

Regarding their resource issues, the FBI has emphasized that FBI headquarters had a number of operations analysts, in addition to the one strategic analyst which we had been told of originally by FBI officials and which was noted in our previous staff statement. Our statement, which also noted that some of the FBI's strategic analytic capability on Al Qaida had been transferred to -- quote -- "operational units", does not dispute that point. Our focus had been on the FBI's ability to perform strategic, as opposed to operational, analysis of Al Qaida.

Beyond those specific points, however, I do believe that the staff, the CIA and the FBI are all in agreement that the resources devoted full time to Al Qaida analysis prior to September 11th paled by comparison to the levels dedicated to that effort after the attacks. As a CIA officer testified during the September 20th joint inquiry hearing, both CIA and FBI personnel working on bin Laden were -- quote -- "simply overwhelmed" -- close quote -- by the workload prior to September 11th.

Resource issues were not, however, the only systemic problems facing the intelligence community. Even aside from the case of Almihdhar and Alhazmi, a number of witnesses have described their own experiences with various legal, institutional and cultural barriers that apparently impeded the community's ability to enhance the value of intelligence through effective and timely information sharing.

This is critically important at several levels: within the intelligence community itself; between intelligence agencies and other components of the federal government; and between all those agencies and the appropriate state and local authorities.

Finally, the loss in potential intelligence from a lack of information sharing cuts both ways. We heard from representatives of state and local authorities that, when confronting the threat of terrorist activity within the United States, intelligence obtained at the local level can be critically important.

In the course of these hearings, we also learned of issues that transcend the community and involve questions of policy. In the aftermath of the Cold War, U.S. counterterrorist efforts confronted the emergence of a new breed of terrorists practicing a new form of terrorism, different from the state-sponsored, limited casualty terrorism of the 1960's, 1970's and 1980's.

U.S. counterterrorist efforts faced a host of new challenges, including the rise of bin Laden and Al Qaida and the existence of a sanctuary in Afghanistan that enabled Al Qaida to organize, to train, to proselytize, to recruit, to raise funds and to grow into a worldwide menace. As bin Laden and his army flourished within this sanctuary, the United States continued to rely on what was primarily a law enforcement approach to terrorism. As a result, while prosecutions succeeded in taking many individual terrorists off the streets, the masterminds of past and future attacks often remained beyond the reach of justice.

Finally, the record suggests that, prior to September 11th, the U.S. intelligence and law enforcement communities were fighting a war against terrorism largely without the benefit of what some would call their most potent weapon in that effort: an alert and a committed American public. One need look no further for proof of the latter point than the heroics of the passengers on Flight 93 or the quick action of the flight attendant who identified shoe bomber Richard Reid.

While senior levels of the intelligence community as well as senior policymakers were made aware of the danger posed by bin Laden, there is little indication of any sustained national effort to mobilize public awareness of the gravity and the immediacy of the threat prior to September 11th. In the absence of such an effort, there was apparently insufficient public focus on the information that was available on bin Laden, his fatwah against the United States and the attacks that he had already generated against U.S. interests overseas.

As Kristen Breitweiser suggested in her testimony during the first public hearing, could -- and I quote -- "the devastation of September 11th been diminished in any degree" -- close quote -- had the public been more aware, and thus more alert, regarding the threats we were facing during the summer of 2001?

In sum, the record now before these committees raises significant questions for consideration by policymakers, in both Congress and the executive branch, as they chart the future path of the intelligence community in the war against terrorism. For purposes of this public hearing, these include: does the director of Central Intelligence have the power and the authority necessary to marshal resources, to instill priorities and to command a consistent response to those priorities throughout the entire intelligence community?

When the DCI identified the existence of a war against bin Laden, what prevented full mobilization on a war footing throughout the community? What, if any, structural changes are needed to ensure greater responsiveness to established priorities and improved collaboration on counterterrorist efforts through all parts of the community?

What can be done to significantly improve the quality and the timeliness of analytical products throughout the intelligence community? Do we have the resources, the training, the skills, the creativity and the incentives in place to produce excellence in analysis, at both the strategic and the tactical levels? Are analysts now focused not only on individual events, but also on the collective significance of the bigger picture? Do we need to create a kind of all-source "fusion center" to maximize our ability to connect the dots in the future?

What can be done to insure that the community makes the full and the best use of the range of techniques available to disrupt, preempt and prevent terrorist operations? For example, can we improve and increase our use of human intelligence, signals intelligence, liaison relationships with foreign intelligence and law enforcement services, renditions of terrorists abroad for prosecution in U.S. courts and covert action? Do our intelligence personnel have the training, the resources, the tools and the incentives needed to use those techniques effectively?

Is the community adequately equipped to address the full range of the terrorist threat, both at home and abroad? Has the Community made the adjustments needed to succeed against global terrorist organizations that now include the domestic United States within their range of targets? Have we established clear channels to facilitate enhanced communication and collaboration between our foreign and domestic intelligence capabilities?

Can the FBI effectively shoulder the responsibility of addressing the threat within the United States, including the analysis, collection and sharing of intelligence? Is the traditional law enforcement focus on individual prosecutions compatible with a broader, more proactive focus on intelligence and prevention?

If so, what can we do to strengthen the FBI's ability to meet the challenge? If not, where should responsibility for addressing the domestic threat lie?

Can the intelligence community requirements process be revamped to reflect more accurately legitimate priorities, to simplify the tasks facing collectors and analysts and to establish a clearer and more credible basis for the allocation of resources? How can we ensure that both community requirements and resources keep pace with future changes in the terrorist threat?

Do our counterterrorist efforts have full access to the best available information? How can we maximize information sharing within the community, both between agencies and between field operations, management and other components of individual agencies? In the aftermath of September 11th, can our counterterrorist efforts rely on full access to all relevant foreign and domestic intelligence? Have we finally overcome the walls that legal, institutional and cultural factors had erected between our law enforcement and intelligence agencies?

How do we bridge the informational gap that often exists between the community and other federal, state and local agencies? What can be done to improve the timely dissemination of relevant intelligence to customer agencies? How do we ensure that analytic and collection efforts fully benefit not only from information held within the community, but also from the great wealth of information that already exists in other government agencies, as well as the private sector?

Can we better harness the benefits of technology to strengthen U.S. intelligence and counterterrorist efforts? When will the FBI be ready to implement technological solutions that will end its longstanding database problems? What, if anything, can be done to speed up that process? Is the intelligence community on course to fully utilize data mining and other techniques to greatly improve its collection and analytic capabilities? How can we ensure that the community makes the most of future advances in technology as they occur?

Should the intelligence community play a greater role in focusing policymakers not only on intelligence but also on those areas where the intelligence suggests defensive or other action may be called for? How can we better ensure that future efforts to harden the homeland -- in areas such as tightening border controls and strengthening civil aviation security -- will be identified and will be implemented before, and not merely after, attacks of the magnitude of September 11th?

And finally, how can we ensure that the American public understands and fully appreciates the significance and the severity of whatever threats may confront this country in the years ahead? How do we balance legitimate national security concerns about the release of intelligence information with the need for the American public to remain alert and committed in efforts as critical as the war against terrorism? How do we maintain, over the long run, a threat warning system that remains both responsible and credible in the eyes of the American people?

How can our government, and the intelligence community, best explain to the American people, not only what happened on September 11th, but also what they can expect to face in the future?

Those are, in our view, legitimate and relevant questions, based on the factual record of this inquiry. The extent to which effective responses are developed and ultimately implemented could significantly impact the future course of counterterrorist efforts, both within and beyond the boundaries of the intelligence community.

With that in mind and with a view towards the future, we have asked the witnesses today to address the following: first, if the intelligence community could replay the years and months prior to September 11, 2001, would the community do anything differently the second time around? Second, what lessons has the community drawn from the September 11th experience? And third, what will the intelligence community do, in specific terms, to improve future performance?

Mr. Chairman, that concludes my statement. Thank you.

GRAHAM: Ms. Hill, thank you for another outstanding presentation, which has brought a high level of insight and analysis to complex questions. Your service and your colleagues on our joint inquiry staff have performed a great national service, for which we are deeply indebted.

HILL: Thank you, Mr. Chairman.

GRAHAM: Before introducing Directors Tenet and Mueller and General Hayden, at our request, the heads of two other important components of our intelligence community have submitted statements for the record. The statements are from Lieutenant General James Clapper, United States Air Force, Retired, the director of the National Imagery and Mapping Agency, and Rear Admiral Lowell Jacoby, the acting director of the Defense Intelligence Agency. I ask unanimous consent that their statements be made part of the record.

Is there objection? Without objection, so ordered.

In addition, General Clapper and Admiral Jacoby have each designated a representative to be in attendance today, in the event that any member of the committee has a question for their agencies. The representatives are: Ms. Jennifer Haley (ph), chief of NIMA's Counterterrorism Special Operations; and Mr. Pat Ducy (ph), head of the Joint Intelligence Task Force for Counterterrorism from the DIA.

I would now like to introduce the members of our distinguished panel.

Mr. George Tenet was sworn in as director of the Central Intelligence Agency on July 11, 1997. In that capacity, he has responsibilities relating to the entire United States intelligence community, as well as directing the Central Intelligence Agency.

He previously served as the deputy director of the CIA and in a senior position at the National Security Council. Prior to his executive branch service, Mr. Tenet served for four years as the staff director of the Senate Intelligence Committee.

Robert Mueller was sworn in as director of the Federal Bureau of Investigation on September 4, 2001. He has served in both line and supervisory capacities as a federal prosecutor, including as United States attorney for the district of Massachusetts and later, the northern district of California.

He has also served as assistant attorney general in charge of the Department of Justice's Criminal Division and, for a period, as acting deputy attorney general of the United States.

Lieutenant General Michael Hayden has been the director of the National Security Agency since March 1999. His long and distinguished tenure in the Air Force has included service as commander of the Air Intelligence Agency, director of the Joint Command and Control Warfare Center and deputy chief of staff, United Nations Command and U.S. Forces Korea.

Each of our committees has adopted a supplemental rule for this joint inquiry that all witnesses will be sworn. I ask Directors Tenet and Mueller and General Hayden to please rise at this time, along with the NIMA and DIA representatives, Ms. Haley (ph) and Mr. Ducy (ph).

Please raise your right hands. Do you solemnly swear that the testimony that you will give before these committees will be the truth, the whole truth and nothing but the truth, so help you God?

(UNKNOWN): I do.

GRAHAM: The full statements of the witnesses will be placed in the record of these proceedings. We have a large number of our members present. And I know that they have a significant and incisive series of questions. Therefore, I am going to ask if our panelists could summarize their statements into approximately 10 minutes, so that we will maximize the time for questions.

At this time, I will call on Directors Tenet, Mueller and General Hayden, in that order, to give their opening remarks.

Mr. Tenet?

TENET: Mr. Chairman, thank you. I'm not going to be able to get this done in 10 minutes, and we'll try and be as fast as I can, but we have a lot we have to say. And we'll be as quick as we can, and I thank you for your indulgence in that regard.

I welcome the opportunity to be here today to be part of an inquiry that is vital to all Americans. On September the 11th, nearly 3,000 innocent lives were taken in brutal acts of terror. For the men and women of American intelligence, the grief we feel, the grief we share with so many others, is only deepened by the knowledge of how hard we tried, without success, to prevent this attack.

It is important for the American people to understand what CIA and the intelligence community were doing to try to prevent the attack that occurred and to stop future attacks, which Al Qaida has certainly planned and remains determined to attempt.

What I want to do this morning as explicitly as I can is to describe the war we have waged for years against Al Qaida -- the level of effort, the planning, the focus and the enormous courage and discipline shown by our officers throughout the world.

It is important for the American people to understand how knowledge of the enemy translated into action around the globe, including the terrorist sanctuary of Afghanistan, before September the 11th.

It is important to put our level of effort into context, understand the tradeoffs in resources and people we had to make, the choices we consciously made to ensure that we maintained an aggressive counterterrorism effort.

We need to understand that in the field of intelligence long-term erosions of resources cannot be undone quickly when emergencies arise, and we need to explain the difference that sustained investments in intelligence, particularly in people, will mean for our country's future.

We need to be honest about the fact that our homeland is very difficult to protect. For strategic warning to be effective, there must be a dedicated program to address the vulnerabilities of our free and open society.

Successive administrations, commissions and the Congress have struggled with this. To me, it's not a question of surrendering liberty for security, but of finding a formula that gives us the security we need to defend the liberty that we treasure; not simply to defend it in a time of peace, but to preserve it in a time of war, a war in which we must be ready to play offense and defense simultaneously.

That is why we must arrive soon at a national consensus on homeland security. We need to be honest about our shortcomings and tell you what we have done to improve our performance in the future. There have been thousands of actions in this war, and intensely human endeavors, not all of which have been executed flawlessly.

Nevertheless, the record will show a keen awareness of the threat, the disciplined focus and persistent efforts to track, disrupt, apprehend and ultimately try to bring to justice bin Laden and his lieutenants.

Somehow lost in much of the debate since September 11th is one unassailable fact: The U.S. intelligence community could not have surged as it has in the conflict in Afghanistan and engaged in an unprecedented level of operations around the world if it were as mired as some have portrayed.

It is important for the American people to know that despite the enormous successes we've had in the past year, indeed over many years, Al Qaida continues to plan and will attempt more deadly strikes against us. There will be more battles won and sadly, more battles lost. We must be honest about that too.

Finally, we need to focus on the future and consider how the knowledge we have gained this year will be applied. Let me begin by describing the rise of Osama bin Laden and the intelligence community's response. We recognized early on the threat posed by him and his supporters. As that threat developed, we tracked it, we reported it to the executive branch policy makers, Congress, and when feasible, directly to the American people.

We reacted to the growing threat by conducting energetic, innovative and increasingly risky operations to combat it. We went on the offensive. And this effort mattered. It saved lives, perhaps in the thousands. And it prepared the field for the rapport success in Afghanistan last winter.

The first rule of warfare is: Know your enemy. My full statement documents our knowledge and analysis of bin Laden from his early years as a terrorist financier to his leadership of a world-wide network based in Afghanistan. But suffice it to say that as bin Laden's providence grew in the early 1990s, it became clear to CIA that it was simply not enough to collect and report intelligence about him.

As early as 1993, our units watching him began to propose action to reduce his organization's capabilities. I must pause here. In an open forum, I cannot describe what authorities we sought or received. But it is important that the American people understand two things.

The first is about covert action in general. CIA can only pursue such activities with the express authorization of the president.

The second point is that when such proposals are considered, it is always because we or policy makers identify a threatening situation. The situation to which we must pay far greater attention. And one in which we must run far greater risks.

As long ago as 1993, we saw such a situation with Osama bin Laden. By the time bin Laden left Sudan in 1996 and relocated himself and his terror network to Afghanistan, the intelligence community was taking action to stop him.

We established a special unit, known as the bin Laden Issue Station, with CIA, NSA, FBI and other officers specifically to get more and more actionable intelligence on bin Laden and his organization. We took this step because we knew the traditional approaches alone would not be enough for this target.

We monitored his whereabouts, increased our knowledge about him and his organization with information from our own assets and from many foreign intelligence services. We were working hard on a program to disrupt his finances, degrade his ability to engage in terrorism and ultimately to bring him to justice.

We must remember that despite the heightened attention, bin Laden was in the mid 1990s, one of four areas of concentration within our counter-terrorism center. That concentration included Hezbollah, the Egyptian-Islamic Jihad, Al Gama'at, the Palestinian rejectionists and smaller groups around the world.

Once bin Laden found safe haven in Afghanistan, he defined himself publicly as a threat to the United States. While we often talk of two trends in terrorism, state supported and independent, in bin Laden's case with the Taliban, we had something completely new, a terrorist supporting a state. What bin Laden created in Afghanistan was as sophisticated an adversary as good as any that we have every operated against.

As the intelligence community improved its understanding of the threat and as the threat grew, we refocused and intensified our efforts to track, disrupt and bring these terrorists to justice. By 1998, the key elements of our strategy against bin Laden and Al Qaida inside Afghanistan and globally placed us in a strongly offensive posture.

They included hitting Al Qaida's infrastructure, working with our foreign partners to carry out arrests, disrupting and weakening his finances, recruiting or exposing operatives, pursuing a multi-track approach to bring bin Laden himself to justice, working with foreign services, developing a close relationship with U.S. federal prosecutors, increasing pressure on the Taliban and enhancing our capability to capture him.

Our 1998 budget submission to the Congress which was prepared in early 1997 outlined our counter-terrorism centers offensive operations listing as their goals to render the masterminds, disrupt terrorist infrastructure, infiltrate terrorist groups and work with foreign partners. It highlighted efforts to work with the FBI in a bold program to destroy the infrastructure of major terrorist groups world- wide. In each subsequent year, we delivered to you equally emphatic statements of our intent.

Despite these clear intentions and the daring activities that went with them, I was not satisfied that we were doing all we could against this target. In 1998, I told key leaders at CIA and across the intelligence community that we should consider ourselves at war with Osama bin Laden. I ordered that no effort or resource be spared in prospecting this war.

In early 1999, I ordered a baseline review of CIA's operational strategy against bin Laden. In the spring of 1999, we produced a new comprehensive operational plan of attack against him and Al Qaida, inside and outside of Afghanistan.

TENET: The strategy was previewed to senior CIA management by the end of July 1999. By mid-September, it had been briefed to the CIA operational-level personnel, to NSA, to the FBI and other partners.

CIA began to put in place the elements of this operational strategy, which structured the agency's counterterrorism activity until September 11 of 2001. This strategy, which we called "the plan," built on what our counterterrorism center was recognized as doing well: collection, quick reaction to operational opportunities, renditions, disruptions and analysis. Its priority was plain: to capture and bring bin Laden and his principal lieutenants to justice.

The plan included a strong and focused intelligence-collection program to track and act against bin Laden and his associates in terrorist sanctuaries. It was a blend of aggressive human-source collection, both unilateral and with foreign partners, and enhanced technical collection.

To execute the plan...

GRAHAM: Mr. Tenet, 10 minutes. If you want to proceed...

TENET: I'd like to, sir.

To execute the plan, CTC developed a program to select and train the right officers and put them in the right places. We moved talented and experienced operations officers into the center. We initiated a nationwide program to identify, vet and hire qualified personnel for counterterrorism assignments in hostile environments. We sought native fluency in the languages of Middle East and South Asia, combined with police, military, business, technical or academic expertise.

In addition, we established an eight-week advanced counterterrorism operations course to share the tradecraft we had developed and refined over the years.

The parts of the plan focused on Afghanistan faced some daunting impediments. U.S. policy stopped short of replacing the Taliban regime. U.S. relations with Pakistan, one of the principal access points, were strained by the Pakistani nuclear tests and the military coup in 1999.

Despite these facts, our surge in collection and operations paid off. Our human intelligence reporting grew. Our human intelligence sources against terrorism grew by more than 50 percent between 1999 and 9/11.

Working across agencies, and in some cases with foreign services, we designed and built several collection systems for specific use against Al Qaida inside Afghanistan.

By 9/11, a map would show that these collection programs and human networks were in place in such numbers as to nearly cover Afghanistan.

Mr. Chairman, let me remind you that I showed you just such a map in closed session. (inaudible) meant that when the military campaign to topple the Taliban and destroy Al Qaida began last October, we were able to support it with an enormous body of information and a large stable of assets.

The realm of human source collection is frequently divided between that which we learn from our foreign partners and unilateral reporting. Even before the plan, our vision for human intelligence on terrorism was simple: We needed to get more from both types.

The amounts of both sources of intelligence rose every year after 1998, and in 1999, for the first time, as I've testified, the volume of reporting on terrorism from our own assets exceeded that from foreign intelligence services, a trend which has continued in subsequent years.

The integration of technical and human sources has been key to our understanding of and our actions against international terrorism. It was this combination, this integration, that allowed us years ago to confirm the existence of numerous Al Qaida facilities and training camps in Afghanistan.

On a virtual daily basis, analysts and collection officers from NSA, NIMA and CIA came together to interactively employ satellite imagery, communications information and human source reporting. The integration also supported military targeting operations before September the 11th, and after, when it helped provide baseline data for the U.S. Central Command's target planning against Al Qaida facilities and infrastructure throughout Afghanistan.

Even while targeting UBL and Al Qaida in their Afghan lair, we did not ignore its cells of terror spread across the globe. We accelerated our work to disrupt and destroy Al Qaida cells wherever we found them.

By 1999, the intensive nature of our operations was disrupting elements of bin Laden's international infrastructure. We went after his leaders and pursued terrorists and other groups engaged in planning future attacks.

By September 11, CIA, and in many cases with the FBI, had rendered 70 terrorists to justice around the world. During the millennium period we told senior policy makers to expect between five and 15 attacks, both here and overseas. The CIA overseas and the FBI in the United States organized an aggressive integrated campaign to disrupt Al Qaida's human assets, technical operations and the hand-off of foreign intelligence to facilitate (inaudible) Foreign Intelligence Surveillance Act warrants.

Over a period of months, there was close daily consultations that included the director of the FBI, the national security adviser and the attorney general. We identified 36 terrorist agents at this time around the world. We pursued operations against them in 50 countries. Our disruption activities succeeded against 21 of these individuals and included terrorist arrests, renditions, detentions, surveillance and direct approaches.

We assisted the Jordanian government in dealing with terrorist cells that planned to attack religious sites and tourist hotels. We helped track down the organizers of these attacks and helped render them to justice.

TENET: We mounted disruption and arrest operations against terrorists in eight countries on four continents, which netted information that allows us to track down even more suspected terrorists.

During the same period, unrelated to the millennium threats, we conducted multiple operations in East Asia, leading to the arrest or detention of 45 members of the Hezbollah network. In December of 1999, an Al Qaida operative named Ressam was stopped trying to enter the United States from Canada.

During the period of the millennium threats, one of our operations and one of our mistakes occurred during our accelerating efforts against bin Laden's organizations when we glimpsed two of the individuals who later became the 9/11 hijackers, Khalid Almihdhar and Nawaf Alhazmi.

In December 1999, CIA, FBI and the Department of State received intelligence on the travels of suspected Al Qaida operatives Nawaf and Khalid to Kuala Lumpur, Malaysia. CIA saw the Kuala Lumpur gathering as a potential source of intelligence about a possible Al Qaida attack in Southeast Asia. We initiated an operation to learn why those suspected terrorists were traveling to Kuala Lumpur.

Khalid and Nawaf were among those travelers who, at the time, we knew nothing more about them. We arranged to have them surveilled. It is important to note that the origin of the operation was a piece of information the FBI passed to U.S. intelligence in August of 1998.

Mr. Chairman, there's a more detailed explanation in the formal statement, but let me walk through the facts. On the 4th of January, based on intelligence, FBI headquarters, its New York field office, CIA, our counterterrorism center and stations overseas knew the full name of one of these individuals, Khalid Almihdhar, who intelligence told us all was an individual with possible ties to Osama bin Laden and the mujahedeen in Yemen, was traveling to Kuala Lumpur.

On the same day, the 4th of January 2000, CIA obtained a photocopy of Almihdhar's passport as he traveled to Kuala Lumpur. It showed U.S. multiple entry visa in Jiddah on 7 April 1999 and expiring on 6 April 2000.

As the operation was under way, CIA briefed senior FBI counterterrorist officers about its progress. CIA continued to keep the FBI apprised of the results of the operation.

On the 5th of January, the CIA officer responsible for initiating and running the operation informed her colleagues at CIA headquarters and abroad in a formal cable that CIA had passed a copy of Almihdhar's passport with its U.S. visa to the FBI for further investigation.

I recognize what Ms. Hill (ph) said in her opening statement. I can only tell you that I've interviewed this officer. She's a terrific officer. She believes she never would have written this cable unless she believes this had happened.

That's as far as we can take that story. And it in no way absolves us of the responsibility for the watch listing, which I will further on complete.

The suspected terrorists left Kuala Lumpur before we could learn about what they discussed at the meeting. At the time we did not know enough about them to assess their significance or the threat they might pose, but we continued to try to learn more.

In March 2000, a foreign intelligence service told us that Nawaf Alhazmi had flown to Los Angeles a week after the Kuala Lumpur meeting ended. Service did not know that Almihdhar was on the same flight. We did not learn that piece of information until August of 2001.

As the active phase of the Kuala Lumpur operation ended, CIA suspected that Almihdhar was a terrorist and knew he had a visa to enter the United States. Those facts met the State Department's standard for adding his name to its watch list. CIA's lapse in not providing that information to the State Department was caused by a combination of inadequate training of some of our officers, their intense focus on achieving the objectives of the operation itself, determining whether the Kuala Lumpur meeting was a prelude to a terrorist attack and the extraordinary pace of operational activity at the time.

The report that suspected terrorist Nawaf Alhazmi had traveled to the United States also should have triggered an early effort to notify the State Department and other agencies. However, the information- only message came almost two months after the terrorists left Kuala Lumpur, and no CTC officer involved with the operation recalls seeing the message when it arrived at headquarters. Again the pace of operations may have been a factor in the missing information.

Later in 2000, in the course of supporting FBI's investigation of the attack on the USS Cole, CIA officers looked at the Kuala Lumpur meeting again, but in their focus on the investigation did not recognize the implications of the information about Alhazmi and Mihdhar they had in their files.

During August of...

GRAHAM: Mr. Tenet, 21 minutes now.

TENET: Well, sir, I just have to say, I've been waiting a year. I've got about another 20 minutes. I think I want to put this in the record. It's important. It's contextual. It's factual. And I'd like to proceed.

(UNKNOWN): Mr. Chairman, I would like to hear the whole thing.

(UNKNOWN): I would too.

TENET: During August of 2001, CIA had become increasingly concerned about a major terrorist attack on U.S. interests, and I directed a review of our files to identify potential threats. In the course of that review, the counterterrorism center found that these two individuals had entered the United States.

On August the 23rd, CIA sent a message marked "immediate" to the Department of State, INS, Customs and FBI requesting that they be watch-listed immediately.

TENET: Before August 2001, CIA should have sent the names of both Hazmi and Midhar to the State Department for inclusion in its watch list. The error exposed weaknesses in our internal handling of watch listing, which have been addressed. Corrective steps have been taken.

The CIA and the State Department are cooperating to transform the tip-off all-source watch list system into a national watch list center. The center will serve as a point of contact and coordination for all watch lists in the U.S. government. It will also allow us to process more efficiently the increase in terrorism intelligence from intelligence and law enforcement agencies.

We have increased the managerial review of the system to reduce the chance that watch list opportunities will be missed. We have designed a database and assembled a team to consolidate information on the identities of known and suspected terrorists and to flag any that have not been passed to the proper audience.

We have lowered the threshold for nominating individuals for the watch list and clarified that threshold for our officers. We have lowered the threshold of dissemination of information that used to be closely held as operational.

Returning to the story of what happened in the run-up to 9/11, in the months after the millennium period, in October of 2000, we lost a serious battle when the USS Cole was bombed and 17 brave Americans sailors perished.

The efforts of American intelligence to strike back at a deadly enemy continued through the Ramadan period, in the winter of 2000, another phase of peak threat reporting. Terrorist cells planning attacks against the United States, foreign military and civilian targets in the Persian Gulf were broken up, capturing hundreds of pounds of explosives and other weapons, including anti-aircraft missiles.

We succeeded in bringing a major bin Laden terrorist facilitator to justice, with the cooperation of two foreign governments. This individual had provided documents and shelter to terrorists traveling throughout the Arabian Peninsula.

We worked with numerous European governments, such as the Italians, the Germans, the French and the British, to identify and break up terrorist groups and plans against American and local interests in Europe.

Taking the fight to bin Laden and Al Qaida was not just a matter of mobilizing our counterterrorism center or even CIA. This was an interagency and international effort.

Two things which are critical in this effort are fusion and sharing. Counterterrorism center was created to enable the fusion of all sources of information in a single action-oriented unit. Not only do we fuse every source of information of reporting on terrorists, we fuse analysis and operations. This fusion gives us the speed that we must have to seize fleeting opportunities in the shadowy world of terrorism.

Based on this proven philosophy, by 2001 the center had more than 30 officers from more than a dozen agencies on board, 10 percent of its complement at the time.

No matter how it is fused within counterterrorism center, no matter how large CTC may be, there are still key counterterrorist players outside of it. If you interview anyone today in the counterterrorism center, he or she will tell you of the work they are doing with their counterparts across CIA, with NSA, with NIMA, with FBI, or today with a special operations unit in Kandahar or Bagram.

It is also clear that when errors occur, when we miss information or opportunities, it is because our sharing and our fusion are not as strong as they need to be. Communication across bureaucracies, missions and cultures is among our most persistent challenges in the fast-paced, high-pressure environment of counterterrorism, and I will return to this later in my testimony.

One of the most critical alliances in the war against terrorism is that between CIA and FBI. The alliance in the last few years has produced achievements that simply would not have been possible if some of the media stories of all-out feuding were true. And FBI officers have been serving as deputy chief of CTC since the mid-'90s, and the FBI reciprocated by making a CIA officer deputy in the bureau's Counterterrorism Division. In the bin Laden issue station itself, FBI officers were detailed there soon after it opened in 1996.

Of course, this is not a perfect relationship. Frictions often develop. In 1994, the CIA inspector general noted that the interactions between the two organizations were too personality- dependent. This has been particularly so when two are pursuing different missions in the same case: the FBI trying to develop a case for court-room prosecution, the CIA trying to develop intelligence to assess and counter the threat.

In 2001, before 9/11, the CIA inspector general found significant improvement, citing, for example, the center's assistance to the FBI in two dozen renditions in 1999 and 2000. The director of the FBI, Louis Freeh, and I worked hard and together on this. We had quarterly meetings of our senior leadership teams. Through training and other means, coordination between our chiefs of station and our legates overseas was significantly improved.

Today, Bob Mueller and I are working to deepen our cooperation, not only at headquarters but in the field. We both understand that, despite different missions and cultures, we need to build a system of seamless cooperation that is institutionalized.

Mr. Chairman, the third period is the run-up period to 9/11. As with the millennium and Ramadan 2000 periods, we increased the tempo of our operations against Al Qaida. We stopped some attacks and caused terrorists to postpone others. We helped to break up another terrorist cell in Jordan, and seized a large quantity of weapons, including rockets and high explosives. Working with another partner, we broke up a plan to attack U.S. facilities in Yemen.

In June, the CIA worked with a Middle East partner to arrest two bin Laden operatives planning attacks on U.S. facilities in Saudi Arabia.

In June and July, CIA launched a wide-ranging disruption effort against bin Laden's organization with targets in almost two dozen countries. Our intent was to drive up bin Laden's security concerns and lead his organization to delay or cancel its attacks. We subsequently received reporting that attacks were delayed, including an attack against the U.S. military in Europe.

In July, a different Middle East partner helped bring about the detention of a terrorist who had been directed to begin an operation to attack an American embassy or cultural center in a European capital.

In the summer of 2001, local authorities, acting on our information, arrested an operative described as bin Laden's man in East Asia.

We assisted another foreign partner in the rendition of a senior bin Laden associate. Information he provided included plans to kidnap Americans in three countries and carry out hijackings.

We provided intelligence to a Latin American service on a band of terrorists considering hijackings and bombings. An FBI team detected explosives residue in their hotel rooms.

In the months leading up to 9/11, we were convinced that bin Laden meant to attack Americans, meant to kill in large numbers, and that the attack could be at home, abroad or both. And we reported these threats urgently.

Our collection sources lit up during this intense period. They indicated that multiple, spectacular attacks were planned, and that some of these plots were in the final stages.

Some of the reporting implicated known Al Qaida operatives. The reports suggested that the targets were American, although some reporting simply pointed to the West or to Israel.

But the reporting was maddeningly short on actionable details. The most ominous reporting hinted at something large was also most vague.

The only occasion from this reporting where there was specific geographic context, either explicit or implicit, it appeared to point abroad, especially to the Middle East.

We disseminated these raw reports immediately and widely to policy makers and action agencies such as the military, the State Department, the FAA, the FBI and others.

TENET: The reporting by itself stood as a dramatic warning of imminent attack. Our analysis worked to find linkages among the reports as well as links to past terrorist threats and tactics.

We considered whether Al Qaida was feeding us this reporting, trying to create panic through disinformation. Yet we concluded that the plots were real.

When some reporting hinted that an attack had been delayed, we continued to stress that where indeed multiple attacks planned and that several continued on track. And when we grew concerned that so much of the evidence pointed to attacks overseas, we noted that bin Laden's principal ambition has long been to strike the United States.

Nevertheless with regard to the 9/11 plot, we never acquired the level of detail that allowed us to translate our strategic concerns into something that we could act on.

The intelligence community counterterrorism board issued several reports that summer. A sign that our warnings were being heard, both from our analysis and from the raw intelligence we disseminated, was that the FAA issued two alerts to air carriers in the summer of 2001. Our warnings complemented strategic warnings that we've been delivering for years about the real threat of terrorism to America.

There's no need to go through it, but you know, Mr. Chairman, in three separate occasions in my worldwide threats testimony, I told you that, as I told you in 1999, there is not the slightest doubt that Osama bin Laden, his worldwide allies and his sympathizers are planning further attacks against us. I told you he will strike whenever in the world he thinks we are vulnerable, and that we were concerned that one or more of bin Laden's attacks could occur at any time.

In 2001, I told you that the terrorists are seeking out softer targets that provide opportunities for mass casualties and that bin Laden is capable of planning multiple attacks with little or no warning.

I looked at the strategic warnings that had been issued on hijacked aircrafts. Earlier in the 1990s we had some serious strategic analytical work on both terrorist targets and methodology. The national intelligence estimate in 1995 warned: "The United States is particularly vulnerable to various types of terrorist attacks. Several kinds of targets are especially at risk: national symbols such as the White House, the Capitol, and symbols of U.S. capitalism such as Wall Street, power grids, communication switches, particularly civil aviation."

The same estimate also said, "We also assess that civil aviation will figure prominently among possible terrorist targets in the United States. This stems from the increasing domestic threat posed by the foreign terrorists, the continuing appeal of civil aviation as a target and a domestic aviation security system that has been the focus of media attention. We have evidence that individuals linked to terrorist groups or state sponsors have attempted to penetrate security at U.S. airports in recent years. The media had called attention to among other things, inadequate security for checked baggage.

"Our review of the evidence obtained thus far about the plot uncovered in Manila in early 1995 suggests the conspirators were guided in their selection of the method and venue of attack by carefully studying security procedures in place in the region. If terrorists operating in this country are similarly methodical, they will identify serious vulnerabilities in our security system of domestic flights."

In the 1997 update, we said pretty much the same thing. It's clear that the message was received. The White House Commission on Aviation Safety and Security noted a number of facts consistent with this in their report which you have in the record.

In its publication, "Criminal Acts Against Civil Aviation 2000," the FAA stated, "Although bin Laden is not known to have attacked civil aviation, he has both the motivation and the wherewithal to do so. Bin Laden's anti-Western and anti-American attitudes make him and his followers a significant threat to civil aviation, especially U.S. civil aviation."

We have given you over a half a million pages of documents and interviewed hundreds of intelligence officers in our efforts to investigate this complex issue. The documents we provided show some 12 reports spread over seven years which pertain to possible use of aircraft as terrorist weapons.

We disseminated those reports to the appropriate agencies, such as the FAA, the Department of Transportation and the FBI, as they came in. Moreover, we also provided versions of intelligence reports that were about threats to civil aviation so they could be distributed more widely through the airline industry.

Mr. Chairman, I want to talk about two more subjects -- and I appreciate the fact that you are letting me go on -- budget and resources.

Ms. Pelosi, you are right. No one should hide behind budget and resources as an excuse for anything. But there's a context to budget and resources that is important for us to evaluate. To evaluate our work, it is essential that you look at three issues: global geo- political issues we were grappling with, counter-terrorism resource changes throughout the 1990s that have affected our ability to fight, and the overall health of U.S. intelligence during this period.

It is simply not enough to look at Al Qaida in isolation. The last decade saw a number of conflicting and competing trends. Military forces deployed to more locations than ever in our country's history, the growing counter-proliferation and counter-terrorism threat, constant tensions in the Middle East, and to deal with these and a host of other issues, far fewer intelligence dollars and manpower.

At the end of the Cold War, the intelligence community, with a $300 billion deficit and budget caps, much like the rest of the national security community, was asked by both Congress and successive administrations to pay the peace dividend. The cost of the dividend was that, during the 1990s, the intelligence community funding declined in real terms, reducing our buying power by tens of billions of dollars over the decade. This loss of people was devastating, particularly in our two most manpower-intensive activities: all- source analysis and human source collection.

By the mid-1990s, recruitment of CIA analysts and case officers had come to a virtual halt. NSA was hiring no new technologists during the greatest information technology change in our lifetime. During this period it was the expectation that we would surge our existing resources to deal with emerging intelligence challenges and including threats from terrorism. And surge we did.

As I declared war on Al Qaida in 1998 in the aftermath of the East Africa bombings, we were in the fifth year of around-the-clock support to Operation Southern Watch. Just three months earlier, we were embroiled in answering questions on the India/Pakistan nuclear tests and trying to determine how we could surge more people to understanding and countering weapons of mass destruction.

In early 1999, we surged more than 800 analysts and redirected collection assets to support the NATO bombing campaign against the Federal Republic of Yugoslavia.

During this time period of increased military operations, the Defense Department was also reducing its tactical intelligence units and funding. This caused the intelligence community to stretch our capabilities because national systems were covering the gaps in tactical intelligence.

TENET: While we grappled with this multitude of high-priority and overlapping crises, we had no choice but to modernize selective intelligence systems and infrastructure in which we deferred necessary investments while we down-sized, or we would have found ourselves out of business.

We had a vivid example of the cost of deferring investments a few years ago when NSA lost all communications between the headquarters and its field stations and were unable to process that information for several days.

Throughout the intelligence community during this period, we made difficult resource allocation decisions to try to rebuild critical mission areas.

In CIA, we launched a program to rebuild our clandestine service. This meant overhauling our recruitment and training practices and our infrastructure. We launched similar initiatives to rebuild our analytical depth and expertise and to reacquire the cutting edge in technology. Although we will not be given credit for these efforts in the war on terrorism, they most assuredly contributed to that effort.

NSA made the hard decision to cut additional positions to free up pay and benefit dollars to patch critical infrastructure problems and to modestly attempt to capitalize on the technology revolution. But with the Al Qaida threat growing more ominous and with our resources devoted to countering the threat clearly inadequate, we began taking more money and people away from other critical areas to improve our efforts against terrorism.

We managed to triple the intelligence community-wide funding for counterterrorism from the period of 1990 to 1999. The counterterrorism center's resources nearly quadrupled in the same period. As your own joint inquiry staff charts show, we had significantly reallocated both dollars and people inside our programs to work the terrorism problem.

Inside CIA, the '90s reflect the same pattern. CIA's budget had declined 18 percent and we'd lost 16 percent of our personnel. Yet in the midst of the stark resource picture, our funding level for counterterrorism just prior to 9/11 was 50 percent higher than our 1997 level. CTC personnel increased by over 60 percent during the same period.

The CIA consistently reallocated and sought additional resources in this fight. In fact, in 1994, the budget request for counterterrorism equaled less than 4 percent of our program total. In the fiscal 2002 budget request, we submitted prior to 9/11, counterterrorism activities constituted almost 10 percent of the budget increase.

During a period of budget stringency, when we were faced with rebuilding essential intelligence capabilities, I made some tough choices. And although resources were virtually everything else at CIA was going down, counterterrorism resources went up.

After the U.S. embassies in Africa were bombed, we requested more money. In the fall of 1998, I asked the administration to increase intelligence funding by more than $2 billion annually for the fiscal years 2000 to 2005, and in each subsequent FYDP program I made similar requests. Only small portions of these requests were approved.

Counterterrorism funding and manpower needs were number one in every list I provided to Congress and the administration. Indeed it was at the top of the funding list approved by Speaker Gingrich in 1999, the first year in which we received a significant infusion of new money for intelligence. That supplemental and those that follow it that you supplied were essential to our efforts and they helped save American lives.

We knew we could not count on supplementals to build multi-year programs. And that's why we've worked so hard to reallocate our resources and seek five-year funding increases. Many of you on this committee and the Appropriations Committees understood the problem very well. You were enormously helpful to us, and we are grateful.

I want to conclude on the resource point by saying one thing. In CIA alone, I count the equivalent of over 700 officers working counterterrorism in August of 2001 at both headquarters and the field. The number does not include the people who are working to penetrate, either technically or through human sources, a multitude of terrorist targets which we could drive intelligence on terrorists. Nor does it include friendly liaison services or coalition partners.

You simply cannot gauge the level of effort by counting only people who had the words "Al Qaida" or "bin Laden" in their position description.

We reallocated all of the people we could and we always knew that we never had enough. We can argue for the rest of the day about the exact number of people we had working this problem, but what we've never said was that the numbers we had were enough.

Our officers told your investigators that they were always short- handed. They were right. They were.

America may never know the names of those officers, but America should know they are heroes. They worked tirelessly for years to combat bin Laden and Al Qaida and have responded to the challenge of combating terrorism all during this time with remarkable intensity. Their dedication, professionalism and creativity stopped many Al Qaida plots in their tracks and saved countless American lives. Most of them are still in this fight, are essential to this fight and they honor all of us by their continued service.

Let me close with some points, Mr. Chairman. Success against terrorist targets must be measured against all elements of our nation's capabilities, policies and will. The intelligence community and the FBI are important parts of the equation, but by no means the only parts. We need a national integrated strategy in our fight against terrorism that incorporates both offense and defense.

The strategy must be based on three pillars: continued relentless effort to penetrate terrorist groups, whether by human or technical means, whether alone or in partnership with others; intelligence military law enforcement and diplomacy must stay on the offense continually against terrorism around the world; we must disrupt and destroy the terrorist operational chain of command and the momentum to deny them sanctuary anywhere and eliminate their sources of financial and logistical support.

Nothing did more for our ability to combat terrorism than the president's decision to send us into the terrorist sanctuary. By going in massively, we were able to change the rules for the terrorists. Now they are the hunted. Now they have to spend their time worrying about their survival. Al Qaida must never again acquire a sanctuary anywhere.

TENET: On defense we need systematic security improvements to protect our country, country's people and our infrastructure, and create a more difficult operating environment here in the United States for terrorists.

The objective is to understand our vulnerabilities better than the terrorists do, to take action to reduce those vulnerabilities, to increase the costs and risks for terrorists to operate in the United States and, over time, make those costs unacceptable to them.

We have learned an important historic lesson: We can no longer race from threat to threat, resolve it, disrupt it and then move on. Targets at risk remain at risk.

In 1993 the first attack on the World Trade Center was damaging, maybe modestly so compared, but nevertheless very damaging. A plot around the same time to attack New York City tunnels and landmarks was broken up.

We all breathed a sigh of relief and moved on, focusing the effort mostly on bringing the perpetrators to justice. The terrorists came back.

At the millennium a young terrorist panicked at a Canadian-U.S. border crossing and his plan to attack an airport in Los Angeles was exposed and thwarted. We breathed another sigh of relief and prepared for his trial. Al Qaida's plans had only been delayed.

Last winter another young terrorist on an airliner ineptly tried to detonate explosives in his shoes, and was stopped by alert crew and passengers. At this point we're smarter. We started checking people's shoes for explosives. It's not nearly enough.

In the last year we have gone on high alert several times for good reason only to have no attack occur. We all breathed a sigh of relief and thought maybe it was a false alarm. It wasn't.

We must design systems that reduce both the chances of an attack of getting through and the impact if it does. We must address both the threat and our vulnerability. We must not allow ourselves mentally to move on while the enemy is still at large.

Two final points: Our people need better ways to communicate. Moreover, we also need systems that enable us to share critical information quickly across bureaucratic boundaries; systems to put our intelligence in from of those who need it wherever they may be, whatever their specific responsibilities for protecting the American people from the threat of terrorist attack.

This means we must move information in ways and to places it never had to move before. We're improving our collaborative systems. We need to improve our multiple communications links, both within the intelligence community and now to homeland security.

Now more than ever before we need to make sure our customers get from us exactly what they need, which generally means exactly what they want, fast and free of unnecessary restrictions.

Chiefs of police across the country express understandable frustration at what they do not know. But there's something else. Intelligence officers in the federal government want to get their hands on locally collected data. Each could often use what the other may have already collected. The proposed Department of Homeland Security will help. So, too, will the intelligence community's experience in supporting our armed forces.

We're going to have to put that experience to work in supporting the police chiefs. We don't have the luxury of an alternative.

This fight is going to be long and difficult, it will require the patience and the diligence that the president has asked for.

It will require resources sustained over a multi-year period, to recapitalize our intelligence infrastructure on a pace that matches the changing technical and operational environment that we face.

It will also require countries that have previously ignored the problem of terrorism or refused to cooperate with us to step up and choose sides.

It will require all of us across the government to follow the example of the American people after September 11th, to come together, to work as a team, and pursue our mission with unyielding dedication and unrelenting fidelity to our highest ideals.

We owe those who died on September 11th and all Americans no less.

GRAHAM: Thank you, Mr. Director.

Director Mueller?

MUELLER: Thank you, Chairman Graham and Chairman Goss, Senator Shelby and Congresswoman Pelosi. And thank you, Congresswoman Pelosi, for acknowledging the loss of our analyst Linda Franklin on Monday as a result of -- at the hands of the sniper.

I want to thank you for the opportunity to appear before you this morning and to discuss the events of September 11th, 2001, and most particularly to discuss the FBI's counterterrorism efforts since that tragic day.

I must start before addressing these matters, though, by taking a moment to honor the victims who died at the hands of Al Qaida terrorists on that day. We cannot begin to imagine how difficult this past year has been for those families and there can be no doubt that the pain, the anger and the grief is as fresh today as it was on that Tuesday morning last year.

As we all know, families lost mothers, fathers, daughters and sons, and the public safety community lost courageous firefighters and law enforcement officers, all of them innocent people going about their daily lives.

And we in the FBI extend our deepest sympathy to the surviving family members and the victims of those attacks and assure them that the FBI is determined to honor the memory of their loved ones by never wavering in our fight to address terrorism.

I would also spend a moment, if I could, at the outset recognizing the men and women of the FBI, particularly those serving as analysts and agents in the counterterrorism program.

These are dedicated, hardworking and most often under-appreciated public servants who were devastated by the events of September 11th. These men and women have struggled day-in and day-out to do their jobs despite often inadequate resources and enormous workloads. And I, over the past year, have been honored to work alongside them, all the men and the women of the FBI.

And I do believe it is important to remind this committee and the American people that the mission of the FBI's counterterrorism program, to identify, prevent, deter and respond to acts of terrorism, is broad and multi-faceted.

While the events of 9/11 have brought into focus the threat posed by Osama bin Laden and the Al Qaida network, we must recognize, as George Tenet has pointed out, that the threats we face are not limited to one individual, one group or one country. Our counterterrorism efforts must address the threats posed by a multitude of international and domestic terrorists.

Our recent history reflects growing threats from a variety of such groups and individuals. Religious extremists, including Al Qaida, committed the bombings of the World Trade Center in 1993, Khobar Towers in Saudi Arabia in 1996, the embassies in Kenya and Tanzania in 1998, and the bombing of the USS Cole in Yemen in October 2000.

More structured terrorist organizations were responsible for numerous other terrorist attacks. Hezbollah, for example, killed more Americans prior to September 11th than any other terrorist group, including Al Qaida: the 1983 truck bombings of the U.S. embassy and Marine Corps barracks in Lebanon, the 1984 of the U.S. embassy annex in Beirut, the 1985 hijacking of TWA Flight 847.

And we cannot forget right-wing terrorist groups espousing principles of racial supremacy and anti-government rhetoric who have also, in the past, become a serious menace, as was so tragically evidenced by the April 1995 bombing of the Murrah Federal Building in Oklahoma City.

MUELLER: I should point out at the same time, as George has, that the FBI and our partners, the CIA and others, have prevented significant terrorist attacks: the 1993 plot to bomb New York landmarks; the 1995 plans to bomb United States commercial aircraft transiting the Far East; the 1997 plot to place four pipe bombs on New York City subway cars, which was narrowly averted by the New York Joint Terrorism Task Force; the 1997 prevention of the possible detonation of 10 letter bombs at Leavenworth federal prison and two offices of the Al Hayat newspaper; and, finally, the 1999 investigation, in coordination with the U.S. Customs Service, which resulted in the conviction of Ahmed Ressam for a plot to bomb the Los Angeles International Airport at the turn of the millennium.

I want to talk for a moment about what the FBI has done subsequent to September 11th. After the September 11th attacks, the FBI, the law enforcement community and the U.S. and foreign intelligence communities joined forces to find out everything we could about the hijackers and how they succeeded. Our immediate goal was clear, and that was to prevent another attack by fully understanding how the terrorists perpetrated this one.

Thanks to these efforts and the unprecedented cooperation of the intelligence and law enforcement communities, both domestic and international, our investigation revealed many of the details about the planning, financing and perpetration of these attacks. Our investigation will undoubtedly continue and likely develop new and significant details in the years to come.

And in earlier testimony before this committee and in my statement for the record, I have explained much of what we now know about the hijackers' activities in this country: that they entered the country legally, that they committed no crimes with the exception of minor traffic violations, they purchased airline tickets in cash or using the Internet, they dressed and acted like Americans, merging into our society.

And I do believe that the context in which these 19 individuals were able to come to the United States and take advantage of the liberties this country has to offer and operate without detection is important to a full understanding of how these attacks were successfully undertaken.

Now, in our post-September 11th investigative activity we have undertaken a number of investigations and operations that have dealt some blows to a number of terrorist groups within the United States. As all of us, I believe are aware, two weeks ago the Joint Terrorism Task Forces in Portland, Oregon, and Detroit, Michigan, arrested four individuals who were charged with aiding and abetting Al Qaida fighters.

Last month, the Buffalo, New York, Joint Terrorism Task Force arrested individuals who were charged with traveling overseas in the summer of 2001 to attend the Al Faruq (ph) terrorist training camp located near Kandahar, Pakistan.

And in May, Jose Padilla was detained as he entered the United States from Pakistan at Chicago's -- he was detained at Chicago's O'Hare International Airport.

And last week in Chicago the executive director of the Benevolence International Foundation, a purportedly charitable organization, was charged in an indictment with fraudulently raising funds for Al Qaida and other violent groups. This was charged as part of a multinational criminal enterprise spanning over a 10-year period.

And I should also add and point out, over the last year, as a result of U.S. military and intelligence community action in Afghanistan, Pakistan and other foreign lands, a large volume of paper documents, electronic media, videotapes, audio tapes and electronic equipment has been seized, and the FBI, CIA, DIA and NSA have established a coordinated effort to exploit these seized materials.

MUELLER: These are just a sampling of the investigative and preventive efforts that have borne fruit over the last year. There have been others but those operations many of them remain classified and have been described in closed sessions with the members of this committee.

I want to talk for a moment and turn to reforms made in the FBI in the wake of September 11th. These 13 months since September 11th have been a time of great change for the Federal Bureau of Investigation.

Starting immediately after the planes hit, and when over half of our 11,500 agents suddenly found themselves working terrorism matters, it became clear that our mission and our priorities had to change dramatically.

Today the FBI has twice the number agents permanently assigned to counterterrorism as were assigned prior to September 11th, and other permanent changes have been carefully considered and implemented.

We have been addressing the shortcomings of the bureau and the intelligence community that have been highlighted since the September 11th attacks, and we have heard and we acknowledge the valid criticisms, many of which have been reiterated by this committee.

For example, the Phoenix memo should have been disseminated to all field offices and to our sister agencies and it should have triggered a broader analytical approach.

And the 26-page request from Minneapolis for a FISA warrant should have been reviewed by the attorneys handling the request in our FISA section.

These incidents and others have informed us on needed changes, particularly the need to improve accountability, analytic capacity and resources, information sharing and technology to name but a few. And we have taken steps to address these shortcomings, some of which I would like to briefly highlight today.

First is the reorganization of the Counterterrorism Division. In November of last year Congress approved my proposal for a reorganization of FBI headquarters. Under this reorganization the assistant director for counterterrorism is responsible for management of the national terrorism program and for select cases and operations which require national-level management due to special circumstances, situations or sensitivity.

This management structure is a recognition that counterterrorism has national and international dimensions that transcend field office territorial borders and require centralized coordination to ensure that individual pieces of an investigation can be assembled into a coherent picture.

This ensures accountability for the program. Under the prior system whereby field offices would have primary responsibility for terrorism cases, responsibility was diffused and bureau leadership could not easily be held accountable for the program.

In this reorganization, the assistant director for counterterrorism is accountable for taking all steps necessary to maximize our counterterrorism capacity. And by saying that I don't mean at all to relieve myself of the accountability ultimately for that program because I am the one ultimately responsible for its success or its failure.

One of the ways in which headquarters supports the field now in maximizing the counterterrorism capabilities is through the newly created flying squads. These squads augment local field investigative capabilities with specialized personnel and support, and they support FBI rapid deployment teams, thereby providing a surge capacity for quickly responding to fast-breaking situations in locations where there is no FBI presence.

Now, this committee is familiar with the FBI's analytical shortcomings, as demonstrated by the limited dissemination and analysis afforded the Phoenix memo. Over the last year we have undertaken the following measures to enhance our analytical capability.

First, we've created the Office of Intelligence which is the component of the FBI that will oversee development of the analyst position and career track and will ensure that intelligence is shared as appropriate within the FBI and the rest of the United States government.

I'm grateful to Director Tenet for his willingness to detail experienced CIA managers from his Directorate of Intelligence to the FBI to set up and manage that office.

We have significantly increased the resources allocated to analysis.

With regard to intelligence operations specialists, who provide direct support to investigations, we are proposing a total staffing level of 205, with 89 currently on board and 44 in various stages of background investigation.

With regard to the intelligence research specialists, who provide strategic analysis, we are proposing a total staffing level of 155, with 70 currently on board and 73 in the background investigation process.

We have requested an additional 28 intelligence operations specialists and 114 IRSes, intelligence research specialists, in our 2003 budget.

And, of course, I'm concerned that until the 2003 budget is approved the FBI will be held to its current spending levels, which could have an impact on the development of our analytical program.

We have created a College of Analytical Studies to provide training for all FBI analytical support personnel. This college is intended to become a featured component of training at the FBI Academy, along with new agent training in the FBI National Academy.

And through the efforts of our expanded Terrorist Financial Review Group and the inter-agency teams conducting document exploitation, we have augmented FBI capabilities to perform financial and communications analyses of terrorist groups and networks.

Much has been made of the reportedly hostile relationship and turf battles between the FBI and the CIA. And as you've heard from Director Tenet, the relationship between the FBI and the CIA has never been stronger or more productive.

While we have to concede that there were in the past isolated failings in the information flow between the two agencies prior to September 11th, we must not overlook the fact that a successful systemic effort has been under way for years to develop and build upon our agencies' relationship.

Starting with Dale Watson's (ph) detail to the CIA's counterterrorism center in 1996, we have had a regular exchange of employees. And at this time we have a number of FBI employees assigned to the CIA's counterterrorism center and the CIA has eight managers and dozens of analysts assigned to the FBI's Counterterrorism Division. Each of these employees has unfettered access to the computer databases and communications systems of the other agency, and every morning a CIA official detailed to the FBI joins other FBI executives in my office for briefings that occur twice a day.

This committee has also presented, I believe, select testimony that is critical of the FBI's historical unwillingness and technological inability to share information with not only the CIA but with other federal agencies and with our state and local law enforcement colleagues. Since September 11th we have instituted several changes which have resulted in significant improvements in communication and coordination of many aspects of information sharing.

I would like to summarize briefly some of those initiatives adopted since September 11th.

MUELLER: We've established joint terrorism task forces in each of our 56 field offices. Prior to September 11th, only 35 offices had those task forces. And this partnering of FBI personnel with investigators from various local, state and federal agencies on these task forces encourages the timely sharing of intelligence that is absolutely critical to our counterterrorism mission.

We established a new joint terrorism task force at FBI headquarters to complement task forces established in each of the FBI's 56 field offices and to improve collaboration and information sharing with other agencies. We currently have representation of 26 federal agencies and two state and local law enforcement officials who on this task force report to the FBI's command center.

We have undertaken a joint terrorism task force information sharing initiative involving the St. Louis, San Diego, Seattle, Portland, Norfolk and Baltimore field offices. This pilot project, which was first initiated in the St. Louis office, will integrate extremely flexible search tools that will permit investigators and analysts to perform searches on the full text of investigative files, not just indices.

Fourth, we created the Office of Law Enforcement Coordination to enhance the ability of the FBI to forge cooperative and substantive relationships with all of our state and local law enforcement counterparts. This office is run by a former police chief.

And we have established the FBI Intelligence Bulletin, which is disseminated weekly to over 17,000 law enforcement agencies and to 60 federal agencies.

As a result of these initiatives, and despite some of the testimony that this committee has heard, we have received numerous letters of support and gratitude from state and local officials, and most particularly from the International Association of Chiefs of Police. And I'd like to submit some of those letters to the committee and ask that they be included as part of the official record of this inquiry.

GRAHAM: Without objection, so ordered.

MUELLER: We are also addressing the shortcomings of the bureau's information technology. Over the years we have failed to develop a sufficient capacity to collect, store, search, retrieve, analyze and share information. Prior testimony before this committee has described the problems the FBI is experiencing because of outdated technology.

Thanks to the support of Congress, the FBI has embarked on a comprehensive overhaul and revitalization of our information technology infrastructure. That process is well under way, but I want to caution you that these problems will not be fixed overnight. Our technological problems are complex and they will be remedied only through careful and methodical planning and implementation. We have made progress in the past year and we have laid the groundwork for significant progress in the months and the years to come.

My prepared testimony sets forth additional details of the development and deployment of what we call the Trilogy Program, our revitalization of our technological infrastructure. We will create an automated system that will allow the FBI to share top secret and sensitive compartmented information internally and throughout the intelligence community.

In the wake of last year's terrorist attacks, the Congress has provided the additional funding we need to enable us to accelerate the implementation of some of these critical initiatives.

In conclusion, Mr. Chairman, let me say that in the aftermath of September 11th, the FBI quickly recognized that the organization needed to change in order to address the terrorist threat facing this nation. As I have indicated, the FBI has faced many challenges over the past 13 months, and I believe we have made significant progress in addressing these challenges. But there is still a great deal of work to be done.

I am, however, proud of the flexibility and the willingness of the FBI work force to do whatever it takes, to change whatever needs changing to prevent another terrorist attack.

I must say that, despite our accomplishments and some of the successes we have had in reorganizing the FBI over the last year and in addressing our shortcomings, the transformation must continue. We must develop a work force that possesses specialized skills and backgrounds, that is equipped with the proper investigative, technical and analytic tools and possesses the managerial and administrative competencies necessary to deal with a complex and volatile environment.

We are in the process of doing an internal reengineering to review and examine virtually every aspect of FBI operations, administration, policy and procedure. As a result of this review, we anticipate additional changes to FBI programs that will enable us to most effectively and efficiently utilize the tools and the resources Congress has provided.

Mr. Chairman, I am confident that we will ultimately prevail in our fight against terrorism. But we will do so only if we work together. Our agents must work closely with our local and state law enforcement partners. Our field offices must work with our headquarters. The bureau must work with the CIA and our law enforcement and intelligence counterparts around the world.

The counterterrorism components of the executive branch must have a meaningful and constructive relationship with our colleagues in Congress.

MUELLER: These relationships are the lifeblood of our campaign against terror and we must do ev