WASHINGTON -- A man accused of running an illegal contractor spy ring in Afghanistan has resigned from the Air Force, still maintaining his innocence, and still facing possible criminal charges.
Two investigations continue in a case that has tested the definition of what contractors are allowed to do in war zones.
Air Force civilian employee Michael Furlong, together with his boss, Mark Johnson, resigned in July after the Air Force inspector general told the men they'd face official censure for how they ran an information gathering network in Afghanistan.
"After 17 months of DOD investigations and an FBI investigation, it was determined that no criminal laws were broken," Furlong wrote in his August 12 resignation letter, obtained by the Associated Press.
But inquiries continue by the U.S. Air Force Office of Special Investigations and the Pentagon's Defense Criminal Investigative Service, a senior defense official said, speaking on condition of anonymity to discuss matters still under legal review.
The CIA alleged in late 2009 that Furlong's private military contractors were running an illegal covert spying network in Afghanistan and Pakistan, managed by legendary ex-spymaster Duane R. Clarridge. The then-CIA station chief complained those contractors were helping target terrorists for capture and kill operations, and getting in the way of agency operations on the ground, according to multiple U.S. officials briefed on the investigation. All officials spoke anonymously to discuss intelligence matters.
A series of reports by The New York Times first exposed the controversy, leading then-Defense Secretary Robert Gates to order a review. A Defense Department inquiry dated June 2010, obtained by the AP, concluded Furlong's "Information Operations Capstone" had hidden clandestine spying activity beneath layers of legitimate information collection, violating Pentagon policy and leading to the more in-depth investigations.
Furlong and Clarridge maintained to investigators that they were operating a legal network of paid informants, gathering data on everything from gas prices and local clan disputes to enemy threats against coalition forces. The information was used for everything from mapping tribal loyalties to tracking Taliban bomb-building cells before they could strike, two defense officials said, describing the inquiries.
Clarridge said what he did was no different than what a foreign news network would do, using a system of freelance local stringers across the country to gather information.
Under the Furlong-Clarridge system, a handful of five to six foreigners -- former CIA and special operations officers with experience gathering intelligence -- ran a network of low-level local operatives, who asked people what they thought or worked their own sources, as directed by their "handlers."
The problem with information gathering done by a contractor is that the Rolodex of sources becomes an asset of a private company instead of the unquestioned property of the U.S. government, officials said.
That creates a loophole in which there is no way to cross-reference those human sources with existing military and CIA networks on the ground, a crucial step in assessing the veracity of information, and in making sure the same spies or tipsters aren't double-dealing to two arms of the U.S. government, or getting in the way of each other's operations, two former intelligence officials said. They spoke on condition of anonymity to describe a classified process.
That issue became especially prickly for the CIA when Furlong's network started reporting threat information to the military, which Furlong says led to targets.
"Most importantly, we saved U.S. and Afghan lives with the 'Force Protection Atmospherics' program," Furlong said in his letter of resignation. "We enabled the separate targeting board process and the Predator operations to be much more successful than they were . or have been since they terminated the Atmospherics program. That is verifiable fact."
Defense officials say Furlong and subcontractor Clarridge maintained their information even led to CIA Predator strikes inside Pakistan. The officials insist investigations have not proven a link between data gathered by Clarridge's network and GPS coordinates of known U.S. drone strikes in Pakistan.
In his resignation letter, Furlong does note that his operation was caught in a grey area of intelligence operations, and he said he welcomed the changes in oversight that had since been put in place.
Those changes included the restructuring of how contractors gather what is known as "atmospherics," like the tone of Friday sermons at a mosque, or the mood on the street of a village toward a local official or NATO. The paid tipsters, still employed by U.S. contractors, now collect information passively, by observing and sharing what they've heard on the street.
Those changes came too late for at least one of the other contractors Furlong employed under his multi-armed intelligence network. Tampa-based International Media Ventures (IMV) shut its doors, turned radioactive by association with the investigations, even as high-ranking Pentagon officials praised IMV's work gathering social and civil data to map Afghan society -- work that is now being carried out by another contractor.
Another one of the firms involved, Strategic Influence Alternatives, went back to the business of protecting corporate executives overseas.
Clarridge is now shopping his human-intelligence networking skills to other foreign intelligence agencies, and to U.S. agencies like the FBI, the defense officials say. Clarridge would not comment for this story.
Defense officials said Furlong told investigators he is confident he'll be cleared.