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Dirty Secrets Of The "Black Budget"

Former California representative Randy "Duke" Cunningham's guilty plea to bribery and tax evasion exposed Washington's backroom ways, where gifts to lawmakers are sometimes followed by official actions that benefit the officeholder's benefactors. But Cunningham's intervention on behalf of companies went far beyond the projects disclosed in court filings. Capitol Hill sources say Cunningham also delivered for the businesses that bribed him by slipping projects into the super-secret "black budget" that funds classified intelligence work.

The San Diego Republican's alleged actions cast light on one of the dirty secrets of Capitol Hill: Nothing -- not even the spy budget -- is exempt from lawmakers' "earmarks" designed to steer federal spending to favored projects and recipients. "There's general concern about transparency and oversight of earmarks in both the 'black' and the 'white' worlds," says John Schofield, spokesman for the House Appropriations Committee.

While the "white budget" is available for public inspection, the top-secret "black" annex to the annual intelligence-spending bill is kept in a secure room. Only a few staffers are allowed to work on it. Even the members of Congress who vote it into law aren't allowed to read the bill unless they are deemed to have a "need to know," a status limited to a few dozen who oversee the Pentagon and spy agencies.

Legislators with access to the classified portion of the bill can earmark spending for favored projects and technologies, say multiple sources. "These guys can basically give money to whomever their heart desires, and we have no idea who's getting the money," says Keith Ashdown, vice-president of the conservative watchdog group Taxpayers for Common Sense.

The ethics scandals engulfing Washington have put the spotlight on earmarking by the congressional appropriations committees that control the nation's purse strings. Lobbyist Jack Abramoff, now a cooperating witness in a federal investigation, called the appropriations panels Washington's "favor factory." Senator John McCain (R-Ariz.) has launched a war on earmarking, saying the practice is ripe for corruption and drives up the federal deficit. The details are hard to dig out, though, because earmarks are often hidden in bills that run to hundreds of pages. And in the hush-hush intelligence world, unearthing earmarks is all but impossible. But classified pork "is just as wrong as any other earmark," says McCain. "In fact, it deserves extra scrutiny now because Duke Cunningham was able to perpetrate some of his egregious crimes through exactly that vehicle."

Indeed, Cunningham's intervention for San Diego-based defense contractor ADCS and Washington intelligence firm MZM so alarmed Hill leaders last summer that then-Appropriations Committee Chairman C.W. "Bill" Young (R-Fla.) ordered a probe to see what Cunningham put in the spy budget. The committee found that the projects were legitimate.

Total spending in the intelligence bill is confidential. People familiar with intelligence point out that secret earmarks represent an extremely small share of the $27.3 billion spent on pet projects. Lawmakers are more circumspect about favoring special interests in the black budget, these sources say, in part because they can't send out press releases boasting of bringing home the bacon. One source says the bill includes fewer than 10 earmarks a year. Of course, there's no way to know for sure. It's classified.

Americans would rather have a CEO as commander-in-chief than a politician. A Feb. 7-8 Fox News/Opinion Dynamics poll found that 33% of voters preferred a business leader for President, while a politician or general each were favored by 21%. Independents, at 42%, were the biggest CEO backers.

Credit-rating agencies will be on the hot seat on Mar. 7, when the Senate Banking Committee plans hearings to consider tighter regulation of the raters. Corporate CFOs will urge lawmakers to bar the agencies (including Standard & Poor's (MHP), which, like BusinessWeek, is owned by The McGraw-Hill Companies (MHP)) from offering consulting services to corporate clients whose debt they rate. Critics argue that creates potential conflicts of interest. But a spokesperson for S&P says: "We have policies, procedures, and firewalls in place to insure the independence and objectivity of everything we do."

Net scammers have been doing some especially nasty phishing lately: sending out e-mails under a legit-looking IRS logo that promise info about your tax refund. All you need do is send back your name, Social Security number, and credit-card details. An IRS spokesman wants you to know you can find the status of your refund at and that the agency never asks for info by e-mail. And the IRS wants the scammer to know impersonating the taxman is a felony.

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