WASHINGTON — The CIA set up a network of front companies in Europe and elsewhere after the Sept. 11 attacks as part of a constellation of "black stations" for a new generation of spies, according to current and former agency officials.
But after spending hundreds of millions of dollars setting up as many as 12 of the companies, the agency shut down all but two after concluding they were ill-conceived and poorly positioned for gathering intelligence on the CIA's principal targets: terrorist groups and unconventional weapons proliferation networks.
The closures were a blow to two of the CIA's most pressing priorities after the 2001 terrorist attacks: expanding its overseas presence and changing the way it deploys spies.
The companies were the centerpiece of an ambitious plan to increase the number of case officers sent overseas under what is known as "nonofficial cover," meaning they would pose as employees of investment banks, consulting firms or other fictitious enterprises with no apparent ties to the U.S. government.
But the plan became the source of significant dispute within the agency and was plagued with problems, officials said. The bogus companies were located far from Muslim enclaves in Europe and other targets. Their size raised concerns that one mistake would blow the cover of many agents. And because business travelers don't ordinarily come into contact with Al Qaeda or other high-priority adversaries, officials said, the cover didn't work.
Summing up what many considered the fatal flaw of the program, one former high-ranking CIA official said, "They were built on the theory of the 'Field of Dreams': Build them and the targets will come."
Officials said the experience reflected an ongoing struggle at the CIA to adapt to a new environment in espionage. The agency has sought to regroup by designing covers that would provide pretexts for spies to get close to radical Muslim groups, nuclear equipment manufacturers and other high-priority targets.
But current and former officials say progress has been painfully slow, and that the agency's efforts to alter its use of personal and corporate disguises have yet to produce a significant penetration of a terrorist or weapons proliferation network.
"I don't believe the intelligence community has made the fundamental shift in how it operates to adapt to the different targets that are out there," said Rep. Peter Hoekstra of Michigan, the top Republican on the House Intelligence Committee.
The cover arrangements most commonly employed by the CIA "don't get you near radical Islam," Hoekstra said, adding that six years after the attacks on New York and the Pentagon, "We don't have nearly the kind of penetrations I would have expected against hard targets."
Trying to get close
Whatever their cover, the CIA's spies are unlikely to single-handedly penetrate terrorist or proliferation groups, officials said. Instead, the agency stalks informants around the edges of such quarry -- moderate Muslims troubled by the radical message at their mosques; mercenary shipping companies that might accept illicit nuclear components as cargo; chemists whose colleagues have suspicious contacts with extremist groups.
Agency officials declined to respond to questions about the front companies and the decision to close them.
"Cover is designed to protect the officers and operations that protect America," CIA spokesman Paul Gimigliano said. "The CIA does not, for that very compelling reason, publicly discuss cover in detail."
But senior CIA officials have publicly acknowledged that the agency has devoted considerable energy to creating new ways for its case officers -- the CIA's term for its overseas spies -- to operate under false identities.
"In terms of the collection of intelligence, there has been a great deal of emphasis for us to use nontraditional methods," CIA Director Michael V. Hayden said in November 2006 radio interview shortly after taking the helm at the agency. "For us that means nontraditional platforms -- what folks call 'out of embassy' platforms -- and we're progressing along those lines."
The vast majority of the CIA's spies traditionally have operated under what is known as official cover, meaning they pose as U.S. diplomats or employees of another government agency.
The approach has advantages, including diplomatic immunity, which means that an operative under official cover might get kicked out of a country if he or she is caught spying, but won't be imprisoned or executed.
Official cover is also cheaper and easier. Front companies can take a year or more to set up. They require renting office space, having staff to answer phones and paying for cars and other props. They also involve creating fictitious client lists and resumes that can withstand sustained scrutiny.