Pentagon official to resign over flap

WASHINGTON -- The official who oversaw a plan for the Pentagon to run a terrorism futures-trading market is resigning under pressure, a senior Defense Department official said on Thursday.

John M. Poindexter, a retired rear admiral who was President Ronald Reagan's national security adviser, will step down "in the next few weeks," the defense official said, following disclosure of a proposal that outraged lawmakers and embarrassed senior Pentagon officials. The plan was to create an online betting parlor that would have rewarded investors who forecast terrorist attacks, assassinations and coups.

Defense Secretary Donald H. Rumsfeld did not personally dismiss Poindexter, but the defense official said Rumsfeld agreed that the admiral's credibility had been undermined and that he should leave.

"It's fair to say that the secretary understood what Admiral Poindexter understands, which is that it's difficult for any work that he might be associated with to receive a dispassionate hearing," said the official, who spoke to a group of reporters at the Pentagon on Thursday on the condition of not being named.

A spokesman for Poindexter and his agency, the Defense Advanced Research Projects Agency, a research arm of the Pentagon known as DARPA, said he and the office would have no comment on the resignation, first reported Wednesday night by the Wall Street Journal.

But Poindexter said in an electronic message to a friend, which was given to a reporter, on Wednesday night that he had been contemplating resigning for several months, to get out from under a steady stream of criticism and spend more time sailing on the Chesapeake Bay.

Poindexter was first engulfed in controversy nearly two decades ago in the Iran-Contra scandal during the Reagan administration. More recently he developed a program at DARPA that proposed spying electronically on Americans to monitor potential terrorists.

That program, originally called Total Information Awareness, was envisioned by Poindexter as a sweeping electronic surveillance plan that would forestall terrorism by tapping into computer databases to collect medical, travel, credit and financial records.

But Congress earlier this year barred the program from spying on Americans, and the Pentagon changed its name to Terrorism Information Awareness.

The current furor centered on an initiative under Poindexter's control called Policy Analysis Market. Under the plan, traders were to be able to begin registering on Friday to trade futures in Middle East developments as of Oct. 1 on a Web site program, which the Pentagon was operating with private partners.

Two Democratic senators, Byron L. Dorgan of North Dakota and Ron Wyden of Oregon, disclosed the existence of the futures program on Monday, calling it morally repugnant.

DARPA has tried to defend the idea behind the program, saying it was merely using the market place to assess the probability of events, much like predicting elections or commodity prices. But even senior Pentagon officials, like Deputy Defense Secretary Paul D. Wolfowitz, were mortified that the program's developers could be so politically tone-deaf, and they quickly agreed to kill the program.

On Thursday, the senior defense official sought to soften the impact of what even staunch supporters of Poindexter acknowledged were serious blunders.

"We've had a couple of programs of varying degrees of merit that have been seen as certainly unorthodox," the defense official said. "It's cutting edge and beyond that in some cases."

The defense official praised Poindexter for his "very creative intellect" and wished him luck in other counterterrorism efforts. But he also said it was highly doubtful that the Pentagon would seek his advice as a consultant any time soon.

Republicans who had criticized the $3 million futures program on Thursday sought to prevent the debacle from tainting the rest of DARPA's work.

"Although this was a serious mistake by DARPA, I believe that the agency has played a tremendously important function in our overall defense structure for decades," Sen. John W. Warner, R-Va., who heads the Armed Services Committee, said in a statement, adding, "DARPA must continue to serve in the interest of our national security." .

As for Poindexter's future, Warner said that was a matter for the Defense Department to decide. Warner met with Rumsfeld in the Capitol on Thursday, although the senator's spokesman declined to say whether they discussed the admiral's fate.

But Democrats suggested that there were more questionable activities afoot inside the Pentagon that had not been uncovered yet.

"The problem is more than the fact that Admiral Poindexter was put in charge of these projects," Sen. Patrick J. Leahy, D-Vt., said in a statement.

"The problem is that these projects were just fine with the administration until the public found out about them."

Dorgan and Wyden said the outrage over the market plan should fuel momentum to cut off all money to the Terrorism Information Awareness effort.

"Even with today's announcement, the proposed TIA program would still be the biggest spying and surveillance overreach in America's history, and it should be shut down," the senators said in a statement.

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