The EconomistFebruary 22nd 2020 Business 67E
spionage and business have long been entangled. In “Live and
Let Die”, Ian Fleming’s second novel, James Bond masquerades
as a businessman working for Universal Export, a flimsy front
company for mi6 that occupies a “big, grey building near Regent’s
Park”. In “On Her Majesty’s Secret Service”, published almost a de-
cade later, the game is up. “As cover, solid cover, Universal was
‘brûlé’ with the pros”, rues Bond. “It had been in use too long. All
the secret services in the world had penetrated it by now. Obvious-
ly Blofeld knew all about it.”
Ernst Blofeld, head of Spectre, a global criminal syndicate—a
man in need of secret communications—would doubtless also
have been wise to Crypto ag, a Swiss company that rose to domi-
nate the global market for cipher machines after the second world
war. By the 1990s it was apparent that the firm was in bed with the
National Security Agency (nsa), America’s eavesdroppers. The
truth, it turns out, was even more remarkable. From 1970 to the
2000s, at least, Crypto agwas wholly owned by the ciaand, until
1993, the bnd, Germany’s spy agency, according to the Washington
Post. “It was the intelligence coup of the century,” crowed a ciare-
port. “Foreign governments were paying good money...for the priv-
ilege of having their most secret communications read.”
The history of intelligence is littered with such front compa-
nies, used to collect intelligence or carry out covert skulduggery.
“Active Measures: The Secret History of Disinformation and Politi-
cal Warfare”, a forthcoming book by Thomas Rid, describes how
the ciaseed-funded and controlled a printing house in Berlin in
the 1950s to spread propaganda in the Soviet bloc. It published po-
litical pamphlets and news magazines, forged and real, as well as a
lonely-hearts newsletter, a women’s magazine, and even publica-
tions devoted to astrology and jazz. It was one of many publishing
houses and publications around the world that were covertly sub-
sidised by the ciaand kgbto spread influence.
Some fake firms have been devilishly crafty. In the 1970s, at the
height of the Troubles, the British Army established a brothel and
launderette in Belfast. Not only could soldiers use laundry vans to
move around discreetly, but irasuspects’ clothes could be tested
for explosive residue (both operations were eventually exposed
and shot up). mi6 similarly operated a bogus travel agency thatwould lure republicans to Spain with free holidays, where they
could be recruited as double agents. In the 1980s Mossad, Israel’s
spy agency, ran a Sudanese beach resort that was used to smuggle
out thousands of Jews from neighbouring Ethiopia.
As well as creating sham companies, spies have also cultivated
a cosy relationship with the real corporate world. mi6 and the cia
were both reputed to have close dealings with oil companies and
the press. Kim Philby, a Soviet double-agent in mi6, served briefly
as this newspaper’s correspondent in the Middle East shortly be-
fore his defection. More recently, American telecoms firms have
been paid hundreds of millions of dollars a year to co-operate with
the government, often going beyond legal obligations to do so; the
nsahas lauded at&tfor its “extreme willingness to help”. Ameri-
can spies are also reported to have paid rsa, a security company,
$10m to use a flawed technique that made it easier to break a wide-
ly used form of encryption (the company denies this).
Such clandestine suborning is even simpler for dictators. The
kgbwould occasionally divert flights by Aeroflot, the Soviet na-
tional airline, to collect intelligence from the air. Today, America
fears that Huawei, a Chinese telecoms giant that wants to build
Western 5gnetworks, could help China’s espionage efforts.
In some respects, the private sector is more important to
spooks than ever. Tech companies hold more personal data than
state-owned telecoms firms ever did. And as the use of biometric
border controls makes it trickier for spies to travel under an alias—
fingerprints are harder to fake than passports—the ciaand others
have relied increasingly on recruiting and placing employees in le-
gitimate companies so they can travel under their real names with
commercial cover.
What is in it for the suits? Money, for a start. Before it was
bought outright, Crypto agwas handed large sums of cash both to
buy its loyalty and to ensure that its back-doored cipher machines
would have an edge over competitors. Companies might also get
access to secrets. mi6 would funnel useful titbits to national
champions like bpand British Airways, according to a former in-
telligence officer. Today the ciaprovides pliant corporate partners
with “special, tailor-made briefings”, according to a recent report
by Jenna McLaughlin and Zach Dorfman for Yahoo News.Live and let die
Yet cloak-and-dagger arrangements can go badly wrong. Compa-
nies that collaborate with spooks can put—often unwitting—em-
ployees abroad at risk. In 1992 Hans Buehler, a salesman for Crypto
ag, was detained in Iran for nine months and freed only after a $1m
ransom payment (he claimed he knew nothing of the firm’s back
doors). Then there are the reputational costs. An aggrieved Mr
Buehler went to the press, and the firm’s secret trickled into the
open, prompting German spies to walk out of the deal (with a tidy
five-fold return on the original investment). Crypto agwas wound
up in 2018; its once-illustrious brand name is now destroyed.
A worse fate befell Ferranti, a British engineering firm that pur-
chased International Signal and Control (isc), an American arms
contractor that turned out to be a ciafront for rampant gun-run-
ning. Ferranti went bankrupt in short order. When James Guerin,
isc’s ceo, was convicted of fraud and illicit arms dealing, Bobby
Ray Inman, a former deputy director of the cia, wrote to the judge
with a character reference: “Mr Guerin displayed patriotism to-
ward our country...even though it could have risked unfavourable
publicity for his company.” Alas, gratitude from the spooks is scant
consolation for aggrieved shareholders. 7Schumpeter The CEO who loved me
Spies often use businesses as cover for their work, but it can end in tears