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Hi-Tech Surveillance Firm Prospers

New York-based technology firm Verint Systems recently launched a product

called "IntelliFind" that claims impressive capabilities. The system is

designed to be attached to the phone lines at a company's call center, where

it silently monitors every telephone call, and -- using advanced voice

recognition technology -- picks out conversations in which certain keywords

are spoken, dumping a digital recording into a searchable database. "You can

decide you want to see all the calls where product 'xyz' was mentioned, and

then you can pick one and listen to that entire call," says Alan Roden,

Verint's VP of corporate development.

If IntelliFind sounds like something that would normally be found on a

supercomputer humming in an NSA basement, there's a reason. Behind business

intelligence offerings like IntelliFind, and a line of networkable video

cameras, Verint is a leading maker of electronic surveillance equipment and

software for the United States and other governments. And it turns out that

while other technology firms are struggling in a down economy, the business

of helping governments with their spying may be a growth industry. In

quarterly results announced Wednesday, Verint, a subsidiary of Comverse

Technology, posted record sales of $42 million for the fourth quarter of

fiscal year 2002 -- the company's third straight quarter of growth since

going public in May 2002.

"During the year we believe that a greater interest in gathering

intelligence to prevent criminal activity by government and law enforcement

agencies resulted in greater demand for our communication interception

solutions," said company president Dan Bodner in a conference call for

analysts. "Over the past year we enhanced our competitive position by

entering new markets, expanding our customer base, and introducing new

capabilities for the analysis of content and culled data collected from

wireline, wireless and data networks."

Among those new markets was an unnamed country "in the Latin America region"

whose government recently placed a multi-million dollar order for

communications interception systems, said Bodner.

Bodner didn't say what the Latin American government bought with that money,

but the mainstay of Verint's electronic surveillance business is its

"STAR-GATE" and "RELIANT" products, which operate on the supply and

consumption sides of domestic spying respectively. The RELIANT system acts

as a government agency's big ear, collecting and managing intercepted

voice, e-mail, fax, SMS, data, chat, and Web browsing -- all on a single

platform. On the delivery side, STAR-GATE does the actual wiretapping, and

is primarily marketed to telephone companies trying to comply with the 1994

Communications Assistance for Law Enforcement Act (CALEA), which requires

telecommunications carriers to keep their networks wiretap friendly for the

FBI. An ISP version of STAR-GATE lets Internet providers conduct lawful

surveillance of their customers and send the intercepted data to law

enforcement over private networks.

PATRIOT PROFITS. With recent legislation and court decisions granting U.S. law enforcement agencies greater spying powers than they've had since the Nixon

administration, government surveillance solutions look like a good bet, and

other technology companies are getting in on the game. Last Fall, VeriSign

launched its "NetDiscovery" service -- a turnkey CALEA solution for

telephone companies that sends intercepted communications to law enforcement

over a national IP-based network, using Verint STAR-GATEs for the taps. And

last August, computer security company Network Associates got into the

Carnivore business with its acquisition of Utah-based Traxess, makers of the

"DragNet" Internet spy tool.

And for every company that makes the news with a surveillance system, there

may be countless more that nobody's ever heard of. When the non-profit

Electronic Privacy Information Center recently obtained a list of companies

vying for a piece of the Defense Department's "Total Information Awareness"

computerized spying project, the list of bidders included nearly as many

obscure companies as it did brand name defense contractors. "It looks like

there's this whole world of these little security technology companies that

are probably doing well these days," says EPIC attorney David Sobel.

But Gartner analyst John Pescatore isn't convinced that there's big money in

domestic surveillance. Instead, he says, the real opportunities are in

helping the U.S. perform surveillance internationally. Indeed, according to

its quarterly report, Verint has a subsidiary that provides communications

interception solutions to what's described demurely as "various U.S.

government agencies." The subsidiary's offices hold a facility security

clearance from the Defense Department, and are located in Chantilly,

Virginia, a stone's throw from most of America's intelligence agencies.

"Certainly with the USA-PATRIOT Act and all this homeland security stuff,

there's been more effort in domestic collection," says Pescatore. "But the

domestic type money has been a lot slower to start flowing than the national

intelligence stuff... There's been definite growth there." By Kevin Poulsen

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