Editors note: Every week, Fortune publishes a story from our magazine archives. On Friday, November 9, former CIA director David Petraeus resigned from his post after admitting to an extramarital affair with his biographer, fellow West Point graduate Paula Broadwell. The complexities of Petraeus' career will unfold over time, but as the term of one CIA director ends, Fortune turns to the career of another: George Tenet. Tenet served under President Clinton and President Bush and resigned from his post in 2004. Looking back on the decisions that Tenet confronted, it's clear that leading the Central Intelligence Agency has always been a complicated job.
By Bill Powell
Two men who would later each run the world's premier foreign intelligence service sat down to lunch at a tony Italian restaurant in Washington, D.C. It was late 1992, and Jim Woolsey, then head of the executive committee at the Smithsonian, was looking for a general counsel. He had called George Tenet, staff director of the Senate Select Committee on Intelligence. Tenet, Woolsey says, listened to his pitch and asked smart questions. Woolsey was encouraged; maybe he'd found his man. Only at lunch's end, after Woolsey had paid the bill, did Tenet deliver the punch line: "But, Jim, there's one problem with the general counsel's job: I'm not a lawyer."
God knows it helps, if you're the director of the Central Intelligence Agency, to be a little cunning. It also helps, in these days of Iraq and al Qaeda--not to mention North Korea and Iran--to have a sense of humor. George Tenet, 50, has now held one of the most difficult jobs in the world for six years, making him the third-longest-serving director of Central Intelligence (DCI) in the Agency's 56-year history. And the period during which he has presided is one in which the word "tumultuous" hardly does justice.
When Tenet became acting director in 1996, he was the CIA's seventh boss in five years. Budgets had been slashed brutally, and the cutting would continue (needless to say, the CIA's budget is classified). President Clinton was not a particular admirer of the Agency, and the coin of the realm in Washington--face time with the President--barely existed for the DCI. (When a crackpot flew a light plane into the White House in 1994, the then-famous joke in Washington was that it was Jim Woolsey trying to get a meeting with Clinton. This was a time, mind you, when people joked about planes flying into buildings.) Agency morale had plummeted, nowhere more so than in the fabled directorate of operations--the "DO," as the spooks call it--home to the undercover spies who do the Agency's most basic and important work: recruiting foreign sources abroad to betray their countries. Devastated by scandal and desperately in search of a post--Cold War mission, the DO was "practically inert," says a former operative. "It was the nadir," agrees Marty Petersen, the Agency's deputy executive director and a 31-year veteran. "A lot of people quit, and a lot more people thought about it. Myself included."
That was the Agency George Tenet inherited. Today, six years on, it is a very different place. Morale is up. Recruitment is soaring. The popular culture, for the most part, treats the CIA with respect. The President cares a lot about what the Agency thinks, and Tenet briefs him six days a week when Bush is in town. Even despite its pre--Sept. 11 intelligence failures--a date now routinely referred to as the most massive intelligence blunder since Pearl Harbor--the Agency is more competent than it has been in some time (witness its critical role during the war in Afghanistan), if not yet as competent as it needs to be (witness the embarrassing hunt for Iraq's weapons of mass destruction). Some of this transformation, of course, is attributable to Sept. 11. But some of it, people in and out of the Agency agree, is due to the DCI himself.
In mid-September the CIA opened the doors at its 258-acre campus-like headquarters in the woods of Langley, Va., to a FORTUNE reporter in a way it rarely does. For three days officials up and down the ranks submitted to interviews. They talked about where the Agency had been, where it is now, and what still needs to be done in what is, let's face it, a grim time for the country.
Secrecy. Mystique. Aura. They all appear daily at the Central Intelligence Agency. How the U.S.'s foreign intelligence service does business remains a mystery to most Americans. For some the Agency is the stuff of fantasy--think the butt-kicking, comely star of the hit TV show Alias--for others it's a secretive, money-wasting joke. "A combination of James Bond and Maxwell Smart," concedes John McLaughlin, the deputy director of intelligence, the second highest official in the Agency. (He's not so far off. Two otherwise intelligent friends, jokingly told that I'd spent a few days at the Agency and "got to use Tenet's shoe phone," replied--not jokingly--"He doesn't really have a shoe phone, does he?")
What's striking to realize, after talking to Agency people from Tenet on down, is how businesslike they are about their jobs. That's "businesslike" in the sense that FORTUNE readers will understand. Breaking down barriers between departments. Getting departments that didn't trust each other to grow up and cooperate. Getting abreast of rapidly advancing technology. Focusing on the core mission of the institution. The CIA, known for years as the "company," has never made a profit, but it is, in many ways, a classic turnaround story.
When Tenet, a New York native, took over, he knew he had to make an immediate impression on his employees. This was the post--Cold War era, when politicians of both parties were eager to spend the so-called peace dividend. Funding the CIA might have been more important than funding the National Parks Service--but only just. On May 5, 1998, Tenet gave a speech to 500 deeply cynical Agency employees who had gathered in the headquarters auditorium. "Oh, yeah, sure," Tenet now says, placing himself in the audience's shoes, "five directors in seven years. Here comes yet another strategic vision, great.'' In short, he says, "I needed to get their attention.'' To do so he was typically, if brutally, direct. He stood them over an open grave. He noted that the CIA had just passed its 50th anniversary, then said that unless things change, fast, "We will never get to our 60th. We will no longer be relevant."
His first priority was to rebuild the spy shop, the DO. Cynics say that the first thing the DO does, before it recruits any spies overseas, "is recruit the DCI." That's why, they say, the DO never changes, why it's the last to know when a traitor like Aldrich Ames is selling the crown jewels to the Russians. The cynics are not completely wrong. But in this case, that recruitment needed to happen--and the target, Tenet, was willing. The DO had been "devastated in the '90s," says Jim Pavitt, who as head of the directorate is the nation's reigning spook. In 1995 the Agency trained all of 25 operations officers, a "frighteningly low'' number, Pavitt says. Nearly 30% of the CIA's stations, or overseas offices, were shut between 1991 and 1997. And the trend lines didn't seem as if they would change anytime soon.
Tenet does not try to gussy up the business of the CIA. "We steal secrets," he says. "We steal secrets so the President can know about things happening in the short and long run in places that he needs to know about. That's what we do." And without "humint," as human intelligence is known, it is very hard to steal secrets. In an era of declining resources, Tenet cobbled together enough money for the DO to increase its number of recruits and boost their training. "Unfortunately," says Pavitt, "there's no pill you can give a new recruit that would give him seven or eight years' experience in the field." So the CIA also began assembling a team of mostly retired Agency operatives who could be sent into the field quickly, depending on events. "Surge capacity," Pavitt calls it. Those efforts got a boost in 1999, when Congress, thanks mainly to former House Speaker Newt Gingrich, kicked in an extra $1 billion for the Agency. In late 2001, after the Sept. 11 attacks, some of the first Agency people deployed to Afghanistan were retired officers with experience in that country. One literally carried a suitcase full of cash that he distributed to Northern Alliance leaders and others who were critical in eventually toppling the Taliban.
Internally, Tenet tried to transform what had become a seriously dysfunctional place. For help he turned to Wall Street. In 1998, Tenet hired A.B. "Buzzy" Krongard as counselor to the DCI. Krongard had been the CEO of Alex. Brown and then vice chairman of Bankers Trust after it acquired the Baltimore-based investment bank in 1997. Krongard had applied to the Agency as a young man in 1961 but opted for a career on Wall Street instead. Over the years he had "consulted informally" for other directors, but still, when he came on board, the culture shock was significant: "I was going from a culture where if a department head came back to me with $5 million in saved money at the end of the year, I'd kiss him and give him a big bonus. Here, if you don't spend every dime they give you, they think you're nuts."
Tenet promoted Krongard to executive director--"the Exdir," in Agency-speak--and asked him, in the spring of 2001, to look into overhauling everything from the Agency's structure and technology to its compensation systems. Less than a month later Krongard delivered his report, and in June, three months before Sept. 11, the Agency undertook what may have been the most sweeping reorganization in its history.
The department of administration, which had become the bureaucratic backwater its name evokes, was nuked. The Agency set up departments of information technology, human resources, and finance, among others. More important, the heads of each sat on the executive board, right next to Tenet and the chiefs of the three core Agency directorates: operations, intelligence (which handles the agency's analysts), and science and technology. Sci-tech, not the Defense Department, operates the highly successful Predator, the unmanned attack and surveillance plane. In an institution as hidebound as the Agency, this was pretty radical stuff. The notion that the head of human resources would be elevated to the same level as the DO? Well, as Yogi Berra might say, if "Wild" Bill Donovan (head of the Office of Strategic Services, the CIA's predecessor) were alive today, he'd be spinning in his grave.
Many of the changes speak to just how far the Agency had to go. Some of that, to be sure, is due to the obvious: The CIA, for all its aura and mystique, is a government agency. Thus pay for performance is inevitably constrained. Still, Krongard implemented a pay scheme that, among other things, linked bonuses with language proficiency. That this hadn't been the case in the foreign-intelligence service of the most powerful nation on earth is a little depressing. But at least it's true now.
Similarly with technology. In Tenet's wake-up speech he had said, "We have now connected all our officers to each other by computer, and now ... we must ensure that our analysts have online access to the rest of the intelligence community, to our customers, and colleagues in other government agencies." This is 1998, when the information revolution was at full throttle. And the Agency had only then enabled all its people to communicate via the Internet. Without question the lag was partly due to security concerns. But it also speaks to the "stovepiping," as Agency people call it, that used to be routine. Departments didn't trust each other or even deal with each other. "Need to know" was everything. Jami Miscik, the DI, or director of intelligence (in charge of the Agency's analysts), recalls a time when the DO and the DI were sealed off from each other by locked doors.
Tenet, with Krongard riding herd, was turning around the proverbial aircraft carrier, when history intervened. On Sept. 11 he was eating breakfast at the St. Regis hotel in Washington with David Boren, the former Senator from Oklahoma with whom Tenet had worked closely during his days on the Intelligence Committee. When the planes slammed into the World Trade Center and the Pentagon, the post--Cold War era was officially over. The United States had been attacked, and plenty of people in Washington who may have had a different opinion on Sept. 10 realized the CIA mattered after all.
As is now widely known, Tenet impressed President Bush with his and the Agency's performance after Sept. 11. The CIA was famously better prepared to get people into Afghanistan and start taking the fight to al Qaeda than was the Pentagon (a fact that, by all accounts, drove Secretary of Defense Donald Rumsfeld to distraction). Some Pentagon officials say the Agency's Afghanistan successes have been exaggerated, and add that the historical tension between the CIA and the military was hardly absent during the war. However true, the Agency, at least as far as Bush was concerned, had had a "good war," and Tenet's relationship with the President was cemented.
The far more controversial war in Iraq--indeed, more controversial by the day--would be next, and by then the CIA's world had been turned upside down. "The pace and range of things we've been asked to do, the amount of risk that we have been asked to take, the stakes that we are playing for, all of that has changed," says Tenet. Although the Agency's budget has increased substantially, so too has the pressure; Tenet says it has "magnified enormously."
For companies and government agencies alike, crises can often be the best agents of change. So it was at the CIA, post--Sept. 11. Recruiting is no longer a problem: The Agency now receives three times the resumes it did in 2000. In one recent survey new engineering and science graduates chose it as their fifth-most-desired employer, behind Boeing, 3M, BMW, and GE.
In the DO, Tenet eliminated old rules constraining agents from recruiting "unsavory" characters. Meanwhile, some internal walls have tumbled down. Jami Miscik now boasts about how many analysts from her directorate work in tandem with DO and sci-tech agents abroad, including several currently in Iraq. Increasingly, those analysts in the field can access data that used to be available only at headquarters. The CIA also laid so much broadband fiber in Iraq during the war, says Bobby Brady, deputy chief information officer, that videoconferencing is easier there than in Virginia.
In October the Agency will start using a data-mining program called Quantum Leap that's "so powerful it's scary," says Brady. It enables an analyst to get quick access to all the information available--classified and unclassified--about virtually anyone. Civil libertarians, not surprisingly, are unhappy, and even Brady says that in the wrong hands, "This could be Big Brother."
But Quantum Leap will be an extremely useful tool at the new Terrorist Threat Integration Center run by John Brennan, a 23-year CIA veteran. TTIC went into business just four months after President Bush announced its formation last February. It draws on personnel from the FBI, the Department of Justice, and the Department of Homeland Security in the hope that next time, the government will be able to "connect the dots."
Tenet spends roughly 60% of his time dealing with terrorism and related issues (Iraq included). He concedes that the risk, in this environment, is that the longer-term management goals on which he had been focused will get lost in the intense effort to complete "what we're supposed to be doing today." Tenet insists--forcefully--that it's not happening: "If you ask yourself, 'What have you institutionalized that nobody can walk back from,' " the answers, he believes, are clear enough: "We rebuilt the 'humint' service. We now have a training facility and recruitment program that's first class [over $100 million has been invested in the fabled 'Farm' at Camp Peary in Virginia, where the CIA trains new spies]. We reward expertise. The workforce is more diverse than it's ever been. And that's not a do-good program; it's because for a foreign intelligence agency it's an absolute necessity. We locked in a language program and tied it to promotion and pay. The next person who gets this job will inherit a rock-solid foundation."
Tenet says he has "no earthly idea" what he will do when he leaves the CIA--"maybe run something else someday." But he says that whoever succeeds him "will inherit something that really works well. He won't get a patient on life support." As he did, Tenet doesn't have to add.
In the intense post--Sept. 11 environment, the DCI draws his share of criticism. Tenet fervently rejects what he calls the "cartoon"--the idea that the Agency was asleep at the switch on Sept. 11. But he acknowledges that in a war that has been ongoing at least since 1998--when al Qaeda bombed two U.S. embassies in Africa--"We lost a big battle that day. Nobody had to tell us what mistakes we made. We were the ones" who pointed out that the CIA did not tell the FBI and other agencies to put two of the Sept. 11 hijackers on their watch list until August 23, 2001. Tenet fiercely rejects the notion that prior to Sept. 11 he had been remiss in trying to get counterterrorism resources for the Agency. In a closed hearing before Congress in June 2002, he said he told members of the administration and Congress that his counterterrorism budget would be as much as $1 billion short each year for the next five years. "We told that to everybody downtown for as long as anybody would listen and never got to first base."
The other frequent criticism of Tenet is that he has been too eager to please the Presidents he has worked for, Clinton and Bush. Consequently, says one Senate staffer, he has "gone with the flow," with the Agency's analysis following suit. The result, to take one recent alleged example, was the inclusion in President Bush's State of the Union address of Iraq's supposed attempts to buy uranium from Niger. In part to quell the mini-firestorm in the press over this issue, Tenet very publicly fell on his sword, taking responsibility for the mistake, when in fact there was plenty of blame to go around. Why did he do that? "Because it shouldn't have been in the President's speech, and we shouldn't have let it get there. That's about it.''
Tenet is philosophical about the criticism. "If you don't think you are going to get stuff on you, you're in the wrong job," he says. "The risk taking and the human judgment is enormous. We are not going to be right all the time. [But] that's what our business is about. You can sit back and be risk averse and not make choices, but don't think you can do this job that way. You can't."
So Tenet has tried, with a fair degree of success, not to be risk averse, to shake up an Agency that had been--and he wasn't exaggerating in 1998--tilting toward irrelevance. He is quick to acknowledge that perfection, or anything close to it, won't happen, no matter who runs the CIA. "There is no perfection." The age in which we live, he says, means that "there are going to be surprises over the next ten years." And they are not going to be happy ones. Terrorism and weapons proliferation and the access "bad guys" have to information--"You can get targeting [coordinates] off the Internet, you can learn how to build a bomb off the Internet"--make those surprises grimly inevitable.
George Tenet inherited the CIA when the Cold War was over, at a time when people thought the worst was behind us. What could be worse than 10,000 Soviet nuclear warheads targeted on Washington alone? Now we know. Now Tenet knows, better than we. In late September, as this article went to press, he was assembling his second "strategic directions" memo, the successor to the one in 1998 on which he based his speech to the troops. He says it will refine "and deepen" many of the themes he struck five years ago. But it will omit--count on it--any reference to the CIA not celebrating its 60th anniversary.
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