Held Hostage: Video 
Behind the Lines: Podcast 
The Sting
More FBI follies! Instead of rooting out corruption at NASA, Operation Lightning Strike exposed little more than the bureau’s ruthlessness.
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Once covert operations were approved in December 1991, Francis went undercover. All conversations with targets were recorded. In keeping with policy, Francis regularly filed reports and placed his tapes into evidence, and he met each morning with Art Schultz. The two met weekly with Assistant U.S. Attorney Abe Martinez and other federal prosecutors. To target a subject, the government has to establish that the subject is predisposed to commit a criminal act. Higher-ups at the FBI’s headquarters made the call on who was and wasn’t predisposed, but Martinez had to decide when a target had sufficiently compromised himself to warrant prosecution.
Francis’ initial targets were GE Government Services and the Life Sciences Division at the Johnson Space Center. He didn’t contact the Jacksons until he had spent all of January and most of February having doors slammed in his face. Frustrated by an inability to crack the close-knit community or score with the corporate executives and NASA bigwigs, Francis apparently decided to use Neal Jackson as bait. Once Jackson was under his spell, Francis began to construct a house of cards based on the belief that Jackson was predisposed to crime. This predisposition rested on two anonymous complaints: that Karen was merely a front for their small disadvantaged business and Neal was the real boss, and that Neal had once attempted to influence government contracts by flying GE Government Services executives on hunting trips to West Texas. Neither complaint survives scrutiny, but that didn’t stop the FBI.
Neal was the perfect instrument for Lightning Strike, a man so taken with his own abilities and ambitions that he would see what he wanted to see, hear what he wanted to hear. In the spring Jackson flew to Baltimore to inspect the manufacturing facilities at Eastern Tech. The plant specialized in “black box,” or top secret, electronics. Eastern had contracts with, among others, the National Security Agency, with whom Clifford claimed to have once served. Neal inspected areas where technicians were assembling circuit systems for robots, and he saw the prototype of the lithotripter. Neal had researched ultrasound equipment and believed the device to be genuine.
A few weeks later Neal and Karen flew to Atlanta to Southern Technologies’ headquarters. Clifford and Joe Carson (a fake name used by another undercover agent) met them in a Rolls-Royce convertible and treated them like visiting royalty. At NationsBank they watched Clifford sign a $1 million line of credit for the lithotripter. Always the Southern gentleman, Clifford hurried ahead to open doors for Karen. As they were about to leave, Karen gave Clifford a hug and for an instant felt him freeze. Months later she realized that he had been wearing a body mike.
Twice in the spring and summer of 1992, Clifford invited Neal to the Florida Keys for one of his boys-only fishing trips aboard his 54-foot cabin cruiser. There is a classic photograph, taken by Clifford, of Neal kissing a thirty-pound dolphin fish. The boat was one of the undercover agent’s favorite toys, a method of making targets relax and lulling them into compromising conversations. These trips usually included dinner at a fancy restaurant and an evening at a topless bar, another of Agent Francis’ passions. Clifford would knock down tumblers of whiskey and expound on his philosophy of ruthlessness, how he’d steamroll anyone who got in his goddam way. He talked about accounts in offshore banks and offered to arrange one for Neal that even Karen wouldn’t know about. Neal declined.
One night at a Fort Lauderdale bar, Clifford remarked that he didn’t care if the lithotripter worked or not. His only concern was getting money out of NASA. This statement pushed Neal’s button. His own tongue loosened by whiskey, Neal told Clifford to produce or get lost. “John, we don’t enter these things lightly,” Jackson said. “I’ll tell you, you can take your money and your three-day boat trip and shove it up your ass.” When Neal thought about Clifford’s cavalier attitude in the sober light of day, how he went out of his way to make even the most innocuous transaction appear sleazy, he decided it had something to do with Clifford’s background as a National Security Agency spook.
All that spring, Jackson introduced Clifford to the right people. From the perspective of the undercover agent, the right people were people who could be targeted. Meetings or lunches were arranged with individuals and groups at NASA and with major contractors. On three separate occasions, meetings were scheduled with Carolyn Huntoon, the space center’s director of Life Sciences, but all were canceled for various reasons. At a division of Krug Industries, Neal introduced his boss to 49-year-old Jim Verlander, a fellow Aggie and a business acquaintance. A research scientist, Verlander had been with NASA since the Apollo program and was currently working on an ultrasound device for the space station. This alone made Verlander a potential target. But there was something else that made the scientist ripe for exploitation—his vulnerability. Verlander’s pregnant wife suffered from cervical cancer, and the family had exhausted its savings.
Clifford showed Verlander a brochure on the lithotripter. Verlander told Clifford to forget it, that the machine was not on NASA’s wish list. On the other hand, if this technology could be redesigned as a multitissue imaging system that could study all the organs of the body, Verlander believed that it might sell. No problem, Clifford told him, the boys at Eastern Tech would get to work on it right away.
Clifford paid Verlander $5,000 to write an unsolicited proposal to the space center, extolling the wonders of the lithotripter—now referred to as a multitissue ultrasound imaging system, or MTIUS—and asking NASA to approve $600,000 to develop the prototype. This was a relatively small amount for NASA; Huntoon had the authority to approve it out of discretionary funds. Even so, getting the proposal into Huntoon’s hands would be tricky without inside help. A few days later Verlander called Clifford, offering to provide exactly that help. Verlander told Clifford that he had a mole deep inside NASA, close to Huntoon, who could tell Clifford how to get the project funded. This service would cost $3,000. Clifford agreed.
Though it now appears that there was no mole—Verlander invented the mysterious insider to improve his stock with Clifford—he did have a friend who worked in Huntoon’s division. David Proctor, a 33-year-old, pudgy, mild-mannered biomedical engineer who had once played saxophone in the Abilene Cooper High School band and had a graduate degree from Texas Tech, had been at NASA since 1988. Along with other engineers, Proctor had traveled to Russia with Huntoon to work on the joint U.S.-Russian space station, but he wasn’t tight with the director of Life Sciences. Proctor planned to quit NASA at the first opportunity and open a consulting firm with Verlander. The lithotripter could be their ticket to better things.
Though he never met Clifford, Proctor became Verlander’s partner, editing the proposal, supplying costs for hiring engineers, sharing the money. To fine tune the proposal and do future work for Clifford, Proctor needed a more powerful computer than the one he had at home (using his computer at the space center would have violated NASA policy). When Clifford learned of this dilemma, he loaned Proctor a $10,000 model through Verlander that was more than adequate for the job. A few months later Proctor was surprised to receive a $1,000 Christmas bonus from Clifford—again through Verlander.
In the weeks that followed, the undercover agent greatly accelerated activities. He persuaded the Jacksons to incorporate another small, disadvantaged business, Space Payloads and Commercial Enterprises, or Space, Inc., with Karen as its CEO. Space, Inc., was conceived as an electronics manufacturing company, though it would depend on Eastern Tech for hardware. The Jacksons owned 51 percent of Space, Inc., and Clifford owned the other 49 percent.
The first thing Space, Inc., needed to qualify as a vendor to NASA was a financial statement. Neal pointed out that the company had no finances, but Clifford didn’t see that as a problem. They would simply create one. After all, Eastern Tech, their partner, was well financed. Clifford offered to supply blank invoices or whatever else might help. They needed someone to draft the financial statement, and Neal thought of his friend Dale Brown, who was trying to persuade Clifford to sink money into one of his pet projects, a NASA theme park. Brown, 37, and two younger associates owned TerraSpace, a small company that shared offices with Horizon. These entrepreneurs saw themselves as “the future captains of the aerospace industry” and believed that the wave of the future was the transfer of technology from the government to the free market: NASA had blazed this trail repeatedly with such inventions as the cellular phone, and the lithotripter was following that same path. Assistant U.S. Attorney Abe Martinez later described Brown as “a gnat who wouldn’t go away,” but Hal Francis saw another target and put Brown on the payroll. Brown recalls that he used numbers supplied by Clifford to cobble together a financial statement good enough to satisfy NASA’s requirements. Clifford seemed pleased and promoted Brown to marketing director at a salary of $5,000 a month, plus 10 percent of the profits from the lithotripter.
In the summer and fall Clifford elevated the profile of the project and lured more victims into his net. He commissioned the prestigious Washington consulting firm of Beggs and Associates to lobby the lithotripter at NASA headquarters in Washington and in Congress. The president of the firm, Jim Beggs, had been the top guy at NASA during the Bush administration and had persuaded Congress to fund the U.S.-Russian space station. He had also been indicted on charges of falsifying government contracts, though the charges were later dismissed and the government issued a written apology. Nevertheless, the FBI and the Department of Justice believed that Beggs was dirty and gave Hal Francis permission to move on him.
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