12/03/13 – Michael Kelly – The Scott Horton Show

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Alright, y'all, welcome back to the show.
I'm Scott Horton, this is my show, The Scott Horton Show, I'm on Liberty Express and ScottHorton.org.
Oh man, I meant to join up the chat room during the break, well, I'll get around to it.
It's just ScottHorton.org slash chat, if you're interested in that.
Our first guest on the show today is Michael Kelly from Business Insider, BusinessInsider.com, and boy does he have some interesting stories to talk with us about.
Welcome to the show, Michael, how are you doing?
I'm good, glad to be here.
Tell us all about Arnon Milchin, am I saying his name right?
Yeah.
Alright, so what's the news?
Well, he's one of the most prolific Hollywood producers in the last three or four decades.
He's still working.
He produced movies like Natural Born Killers, Pretty Woman, Flight Club, L.A. Confidential.
And I apologize to everyone, I know nothing about movie stuff, so maybe this guy is a household name, but I just have never heard of him.
Yeah, for people who know Hollywood producers, he certainly is.
And there have been rumors for years, there's this book called Confidential that said that he lived a double life as an Israeli intelligence operative.
And last week he confirmed to Israel's Channel 2 that, in fact, that's what he was working as, a spy, for decades as he was working in Hollywood.
And this isn't just a made-up movie script?
No, no, this guy's the real deal.
Alright, so now, what was his job, and for how long did this go on?
He was recruited when he was in his 20s, so that would be the 1960s, essentially.
He's long-time friends with current Israeli President Shimon Peres, Benjamin Netanyahu.
And he spoke about doing this work in the 60s for LaCombe, which is Israel's very secretive economic espionage unit.
And so he did this through the late 50s, the 60s, the 70s, and perhaps into the 80s.
Now this is a story that you've been writing about since, I guess, Grant Smith originally broke it back in the summer of 2012.
Now was it already out at that point, about this movie producer's role in it, or we're only finding out that now, or how's that work?
Yeah, not really, I kind of, Smith does note that essentially what happened is that an American company sent 800, over the course of five years, 1979 to 1983, sent 800 triggers for nuclear weapons through Milchan's company to the Israeli Ministry of Defense.
And Smith points out that he was recruited by Arnon Milchan in meetings with Benjamin Netanyahu, who was working for Milchan's company in Israel, and how the operation was rolled up after this American was indicted for smuggling.
And so it was out there, but since he never confirmed it, once he confirmed it, it kind of came back in the light.
And it's really, if you know both stories, it's really amazing how high up this guy was working while he was also very high up in Hollywood.
Right.
And now, so part of what he does, his job was economic espionage, and so I guess I'm not exactly clear what all that means, but that included brokering all sorts of arms deals for a very long time, correct?
Right, weapons deals, he started out by, he told Channel 2 that he, at one point he was operating 30 companies, so they're front companies, in 17 different countries, so front companies all over the place.
And yeah, he talks about being involved in a lot of arms deals in the 70s, nuclear triggers his company was in the middle of that in the late 70s and early 80s, so he was really involved in the highest forms of smuggling for decades.
And before we get back to that, do you know much about what else, could you give us examples of what kind of economic espionage you're talking about, like trade secrets from manufacturing firms or banks or that kind of stuff, or what?
Oh, yeah, anything.
I'm not an expert on LaCombe, when I think of it, I think of any, I think of Divert, I think of Grant Smith's book, because through LaCombe they were able to get tons, 22 tons of highly enriched uranium.
That's about the most prized possession for any country that is looking at nuclear power, looking to build a nuclear warhead.
It's exactly what Israel and the United States and Western powers are trying to stop Iran from getting, is highly enriched uranium.
And LaCombe, through a company called NUMEC, got 22 tons of this, pretty much enough to build most of Israel's arsenal between 1957 and 67.
So anything from that down that they wanted, you can set up a shell company and try to get it, essentially.
And now, it's a very interesting story, too, and I really appreciate how you link back to all of Grant's work on it, well, I mean, to the book, but also what he's written at the IRMEP site there, with all the source documents and all of that.
But I know it's kind of difficult, I'm not even sure if I could follow, but I'd like to try to give you a chance anyway, if you could, to explain who was working for who, what role Milton played in introducing who to who, and exactly how it is.
I think, as you say in there, there's, paraphrasing, or even quoting Grant Smith, that there's actually no smoking gun about this, but there are, what, empty shell casings laying around all over the floor, something like that?
As far as NUMEC goes, yeah, it was essentially, NUMEC and Zaman Shapiro, that story is both connected to Ralph Eton, who ran, Raffi Eton ran the jailed spy, Jonathan Pollard, who's the most famous U.S. spy, or caught spying on the U.S. ever, and he's still imprisoned.
And Eton and LeCombe's chief, Benjamin Bloomberg, were the ones that recruited Milton, actually.
And as far as NUMEC went, Zaman Shapiro was a brilliant, brilliant man.
He helped build the world's first operational nuclear-powered submarine in 1954 for the USS Nautilus, and eventually he created NUMEC in 56, and essentially, from the start, it was used to funnel nuclear materials to Israel.
Raffi Eton visited there, and David Lowenthal, an American citizen, another American citizen who secretly fought for Israel during the 1948 War for Independence, traveled on its behalf.
And so it simply had a network that was slightly hidden from view for years, and Shapiro obviously did great things for the U.S. Navy.
And over time, they were able to funnel all of this nuclear material out somehow.
And when Smith talks about no single smoking gun, it's because you can't—he does a great job in the book—he has the exact what left NUMEC and in what cans, but how poorly this was documented or investigated at the time, you can't really say who did what where.
But there are some really interesting interviews and documents in that book that really build what would be circumstantial evidence to this front company funneling highly enriched uranium to Israel.
Yeah, I was surprised that one of the things that you mentioned there was—or maybe it was him.
I reread one of his articles this morning, too, one of the ones that you linked to there, but where he talks about Anthony Kordzman, the famous—I forgot which think tank he's at, but very establishment, perhaps center-left realist-type foreign policy analyst guy.
That's what I mostly know him as anyway.
But in a former life in the 1980s, he said that there was no explanation for what these guys were doing there other than diverting uranium.
Right, yeah.
He said there's no conceivable reason for Rafi Itan to have gone to NUMEC because—and he said it in 1986—because Rafi Itan's the top spot in Israel.
So why is he going to a small town in Pennsylvania?
And who was Kordzman at the time when he said that, do you know?
He was studying the Middle East as an analyst.
He was a Middle East operative analyst.
So he's watching the world unfold, and he notices this and points out that there's no reason, really, for Israel's top spy to be there.
And then I thought it was funny, the contrast.
I was reading this thing about how people call 911 on each other all day long, and then I read this thing about—I mean, for nothing, right?
There's no cheese on my burger kind of stuff.
And then I read about, yeah, you know, it's funny.
I did see some Israelis with some giant drums of highly enriched uranium loading it on a ship and sailing it away.
Now that you mention it, FBI agents who are asking me about it 15 years later or whatever it was.
Are you kidding me?
Yeah, it's an interesting time in history, in American history, in Israel's history, that such an operation could happen.
And, you know, hindsight's 20-20, and it's easy, but, you know, it's 22 tons of highly enriched uranium from Pennsylvania to Israel.
So, yeah, it is amazing, and I'm sure that some people in the government know a lot about this, and in the FBI that are embarrassed and mind-blown, essentially, by how it happened.
And you know what?
I'm terrible.
I'm going to bring this up, but I don't know the answer, but I should.
I asked Grant once about, well, maybe Johnson knew about it and said it was okay and had the CIA provide cover for it kind of thing like that.
It was just a covert op, and that's how they got away with it.
And then he actually came back to me with an answer about that, but I don't remember what it was.
I think it was an indication that perhaps that was true, but I bet he's listening right now cringing because I don't remember.
Yeah, I would be interested.
I forgive myself about what he said about the administrations after Kennedy, because Kennedy was very, very much against Israel's nuclear program, and Johnson held them in a little more favor, and certain things did go back on the uptick after Kennedy was assassinated and such.
But yeah, I'm not sure.
I mean, there's a lot of things that could be known about this that aren't known about it.
Yeah.
Well, now, Project Pinto, that wasn't the FBI investigation.
That was the Israeli covert op, correct?
I believe that Project Pinto was about the nuclear triggers.
Oh, right.
Not the diversion of the uranium, but just the Krytrons.
Right.
Right.
And now, so what was current Prime Minister Benjamin Netanyahu's role in that?
According to the FBI documents that Irma got a hold of, the president of Milco, this company that brokered the trade of the nuclear triggers, met with Milchan and Netanyahu, at points, who was working for the smuggling front Kiwi Trading, the Milchan Brothers Trading Company, which is Milchan's company, on the Israeli side.
So he was working for the company that was reported middle way between the California company and Israel's Ministry of Defense.
And now, again, these Krytrons, they're just switches.
They're not nuclear material, but they're forbidden for export, right?
And then, as you said earlier, the company that produced these things and helped smuggle them to Israel, they ended up getting prosecuted, right?
Or at least their leader did?
Yeah.
The U.S. and actually Kelly's president, Kelly Smith, on 30 counts of smuggling, making false statements, because these things that could be used as nuclear triggers require a U.S. State Department munitions license to be exported, and the U.S. had denied multiple licenses for Israel prior to that.
So, however they got there, they got there and they bypassed the export meeting for a munitions license.
They were smuggled out.
And now, remind me, do you know when the FBI investigation of this started?
Because it seems like a lot going on.
Again, we already talked about this, but they didn't just look at this after the fact, did they?
And this went on for a decade, right?
Yeah, and if I remember correctly, in Grant's book, he discusses how people were on this trail even in the 60s and 70s, but there wasn't much sharing of information.
You have the FBI and the CIA, and you kind of have people getting hushed up along the way that could be helpful in certain ways.
The documents that AIRMAP got, they're from the early 90s, talking about this Project Pinto.
FBI agents and nuclear officials had spoken with Zalman Shapiro, who was running NUMEC.
They were talking to him all the time.
They knew him, so they were asking him questions and stuff, so they were involved.
It's just they never got wise to it, essentially.
Right.
All right.
Again, it's Michael Kelly from Business Insider, and I see here that you've got this article about the Stuxnet attack, and about more that's being found out about the, I guess, medium term so far, effects of this virus.
Can you, I guess, first of all, remind the audience what Stuxnet was, and then what's changed in the story, what we already knew from David Sanger and the rest of them?
Yes.
Stuxnet is known as a joint U.S.-Israeli project that caused about a fifth of Iran's nuclear centrifuges to spin out of control.
So people, the NSA says that it's widely considered the claim that it set Iran's nuclear program back two years.
And what was not known about it, and what this cyber security expert Ralph Langer wrote in Foreign Policy, was that Stuxnet attack of the centrifuges being out of control was actually the second part of the attack, and it was much more, it was much simpler than the first attack.
The first attack essentially had to be put in by a human agent, a double agent.
Some of them were around facilities, and it created a blueprint.
It slowly infiltrated all the systems, and it wasn't meant to destroy something.
That wasn't an intended effect.
Its intended effect was to go throughout the entire system.
And it was wildly complex.
Langer says that the coding was so far out, it leads one to wonder whether its creators might have been on drugs.
It's something that no one has ever seen before.
And only when they found this second version of Stuxnet did they notice that there was a first one at all.
So they essentially could have been doing this for even longer, without an offensive attack like the second version to actually cause things to spin out of control.
And what's amazing about that is that what Langer concludes is that all these industrial control systems, a military facility or normal facility like water and electricity, this attack showed that if you go to the weakest link, which is the human beings, the contractors working for these places, you can hypothetically insert something that could infect it for years and could essentially be followed up by something that could attack it, which is pretty daunting for cyber security researchers.
Right.
Well, it's interesting what you say about they must have been tripping or something.
I guess it must have been the CIA behind that thing, because they probably got the monopoly on LSD production in this country anyway.
There was probably no one as talented.
It probably had to be the biggest talents, which would be the NSA and Israel's Unit 8200.
He said that there were things in there that hackers could only dream of as far as what they could do.
So yeah, this is widely known that this was a government backed operation.
Right.
And now, so I think I saw a thing a couple of weeks ago about how Stuxnet is living on and it's infecting all kinds of things around the world.
Nobody knows what it's going to do.
I mean, I don't think anybody's saying it's going to turn into Skynet and kill us all yet, but it's apparently they, you know, Norton doesn't have a patch for that thing yet, right?
Yeah.
And Langer discussed this a little bit, and he said that it seems that the people that created Stuxnet kind of wanted the second version to go out.
They didn't mind.
So the second one, you didn't need a human carrier.
It was injected in and then it was self replicated on all sorts of computers.
So it would jump networks and go all over and was essentially spreading and also collecting information about all sorts of computers it was jumping to.
So yeah, it just, it spread.
And so you have, the implication is that you have a state sponsored piece of malware that was intended to spread outside of the target's computers and just go into the wild.
And there was a report that a Russian astronaut had accidentally taken it up to the International Space Station.
Just a potential example of how, what that means, what the implication of that is if something goes into the wild like that, and something as relatively complex as that.
So yeah, yeah, it's out there.
Well, but I mean, the market will provide, right?
Somebody's got to get really high and write the Stuxnet killer, right?
Yeah, good luck with that.
They would have to be the best that there is.
It's really so it's not just that it's so good at doing what it does and so hard to find, but it's that hard to kill too.
Well, the Iranians said that they were able to neutralize it and notice it neutralizing it.
And at some point it would make sense that they would because it was the second version was such an offensive weapon that you could, you could perhaps see and adapt quickly.
But the daunting thing about it is that that first attack, they didn't know for years, but cyber research don't, don't even exactly know how long it was going on.
Something so brilliant.
And, and so under the radar, it makes you wonder what other very complex viruses are out there that no one has noticed yet.
Yeah, well, you know, I wonder Greenwald keep saying, I guess, as recently as, you know, a month or six weeks ago or something that, oh no, all the big stories we're still holding on to for now, which hurry up.
But I guess we may find out something like that.
What do you think?
Think that's probably in there?
You know, what other kinds of viruses they've done?
That is a really interesting question.
If the Snowden cash document has the offensive Olympic games type worms in there, I would think that he wouldn't have access to something that far up the chain.
But I, you know, I've been blown away by, by some of these leaks already.
So, you know, it's not, I guess it's not out of the question.
If, if he reportedly took the blueprints of the NSA, he probably took as many offensive things, offensive files as possible as well.
Yeah, I really wonder about that.
I mean, 20,000 documents.
I don't know if that means pages exactly, or if it really means 20,000 documents, but I guess this thing could go on for years and would it be, is it a correct frame of reference at all that the offensive capabilities and the vacuum up everything in the world capabilities that we see that we could categorize in our own head as kind of separate missions of the NSA.
Are they really that separate inside the NSA where somebody like Snowden might not have access to that offensive stuff at all?
That's all going on in a different building under different control, or we just might imagine that?
There's a certain bit of overlap because the NSA has both an offensive and defensive mission, which is a bit contradictory because there's the argument that they insert malware and weaken the internet for their offensive purposes.
So they're weakening the defense of the infrastructure for offensive purposes.
But there are very elite of the DAO hackers, GAO and the most offensive elite hackers in the NSA, they're separated.
In Hawaii, where Snowden took most of those documents, they're separated by an air gap.
So he wouldn't be able to get to the most sensitive offensive operations, I don't think.
But that being said, there is chatter that he does have information generally about what they do.
And Scott Shane wrote a great, very long, wonderful New York Times piece a couple weeks ago about his thoughts on the NSA documents and what he learned from it.
And he notes the DAO hackers in some things, but he just generally touches on it.
So there's a hint that that stuff is there and it's very sensitive material in there.
But it may not be something that the public would find out because it's not necessarily in the public interest to be revealing those sorts of things.
Well, I hope that he's got the NSA dossiers on the House and the Senate.
I want all their dirty laundry all over every website.
Because this is all their responsibility.
So they should be the worst victims of it.
Right.
And that makes sense.
The political potential political dirt angle is quite interesting here.
I mean, that's why they created the NSA in the first place was to blackmail Congress into giving NSA more money.
Right.
Well, yeah, it would be a vicious cycle to start.
I mean, Hoover started that trend.
So you have the right.
I'm sorry, the music's cutting in here.
We got to go.
I'm talking all over your interview.
I'm sorry, Michael.
Thank you very much for a great interview and great work here.
Business Insider dot com.
Appreciate it.
Thanks.
All right.
That's Michael Kelly at Business Insider writing all about Arnon Milchan, the Israeli spy, Hollywood movie producer and Stuxnet, too.
And we'll be right back.
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