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.
THE OUT-OF-TOWNER WHO INTRODUCED HIMSELF AS JOHN CLIFFORD sounded too good to be true—especially in early 1992, which was one of those down cycles that the aerospace industry has learned to expect in election years. Horizon Discovery Group, the small aero-space company operated by Neal and Karen Jackson, was struggling to stay afloat. So were most of the other small subcontractors who orbited the Lyndon B. Johnson Space Center. The Jacksons, who were expecting their third child in the fall, were about to lose their funding on a long-term project with one of NASA’s prime contractors, GE Government Services. They had talked about getting out of the business, maybe even leaving Houston. Then John Clifford phoned with a proposition that changed their lives and the lives of a lot of people at the Johnson Space Center.
Clifford talked with a Southern drawl and described himself as a good ol’ boy with more money than brains. He and his partner, Joe Carson, owned a number of companies, including Eastern Tech Manufacturing in Maryland and Southern Technologies Diversified in Atlanta. Eastern was developing a unique piece of hardware, and Clifford wanted the Jacksons to represent the product and put him in touch with the right people. The new hardware was a lithotripter, an ultrasound device that smashes kidney stones without invasive surgery. Clifford’s lithotripter was not the standard model found in hospitals, which is so large it has to be transported by an eighteen-wheeler, but a portable model small enough to fit in a spaceship. The hardware sounded right for NASA. In the weightlessness of space, calcium leaches from astronauts’ bones and forms spiny stones that cause immense pain. Clifford made it clear that he was talking about both government and commercial contracts—hundreds of millions of dollars—and that he was offering the Jacksons a chance to get in on the ground floor. He took note of Karen’s pregnancy and guaranteed that by the child’s first birthday the Jacksons would have made at least $1 million. Dazed by the offer, Neal and Karen made a down payment on a lot and hired an architect to design the $500,000 home they had always dreamed of owning.
The Jacksons were typical of the mom-and-pop entrepreneurs who lived in Clear Lake City and the other NASA bedroom communities south of Houston—a close-knit group of scientists, engineers, and business people, well-educated, ambitious, dedicated to the exploration of space. The older ones had arrived in Houston in the sixties, the dawn of America’s space program, but most had hitched their wagons to NASA in the seventies or eighties when they were still in school. Many had dreamed of being astronauts but had settled for positions as support troops. Neal Jackson had ten years of service as an Air Force pilot when McDonnell Douglas hired him in 1983 to train astronauts. Like others in the industry, Neal and Karen moved into a tidy mid-dle-class neighborhood where names like Saturn, Gemini, Apollo, and Chal-lenger seemed painted on every street sign, shopping center, park, or doughnut shop. From their patio gazebo they could look across a vacant field and see the sprawling, campuslike Johnson Space Center complex with the rocket casings of historic missions scattered about like the art of a post-utopian culture.
It was a homogeneous community. People belonged to the same trade organizations, clubs, and churches. They ate at the same steakhouses and drank at the same pubs. They perused the pages of Commerce Business Daily, a bulletin published every morning by the Department of Commerce listing every potential government contract from toilet paper to space shuttles, and swapped information on who was bidding what contract. Life in the aerospace industry revolved around NASA contracts. When a big-ticket contract was up for renewal, the community came to a rapid boil. Résumés were updated and mailed. People jockeyed for position. Small companies like Horizon networked and formed alliances, and large companies worked the halls of Congress. Eight or ten prime contractors dominated the process and set the agenda, subsidiaries of giants like Lockheed, Boeing, General Dynamics, Rockwell, Martin Marietta, McDonnell Douglas, and General Electric. When a contract moved to a new corporation, the scientists and engineers who had worked for the incumbent contractor simply switched badges and went to work for the company that had won the bid. Switching badges was not so much a sign of corporate disloyalty as it was the method by which NASA maintained continuity. In the end, everyone worked for NASA.
Karen founded Horizon Discovery Group in 1985 while Neal was serving with the Air Force Reserve. Later he became her first employee. She was still the company’s CEO in 1992, when the mysterious John Clifford came on the scene. In the argot of the industry Horizon was a body shop: The company sought support and service subcontracts in fields where it had some expertise—writing, for example, a womb-to-tomb mission requirement document for the space shuttle—then hired from the available pool of “bodies” the scientists, biomedical engineers, or market specialists a job might require.
Blond, pretty, pleasingly plump, the 34-year-old Karen was a hardheaded businesswoman with little tolerance for nonperformers. She was Horizon’s organizational strength, the 43-year-old Neal its technical expert. He was a good front man, an aerospace engineer from Texas A&M, an Aggie’s Aggie, macho, egotistical, a bull of a man with broad shoulders, curly steel-gray hair, and fading good looks. He may have been prone to indecision and too slow with the follow-up, but his twenty years in the Air Force and the reserve and his background training pilots and astronauts made him a natural in the industry, as did his record as an unabashed patriot. When Operation Desert Storm erupted, Neal volunteered. Together, Karen and Neal gave Horizon credibility. You heard that word over and over in the aerospace industry. A company’s most precious asset was credibility, which was one reason John Clifford chose Horizon to represent the lithotripter. But there was another, more practical reason. Because Karen owned and operated the company, Horizon qualified as a “small, disadvantaged business.” Eight percent, or roughly $400 million, of the Johnson Space Center’s annual $5 billion budget was set aside for small, disadvantaged businesses.
On April 1, about a month after Clifford’s first telephone call, the Jacksons agreed on the deal at a meeting at Southern Technologies’ new office in a warehouse on Houston’s South Loop. Clifford wanted to seal the bargain with a handshake, but Karen insisted on a written contract. This was her first face-to-face meeting with Clifford. He was younger than she had expected, in his mid-thirties, and a little arrogant, something of a show-off. At that first meeting, Clifford went out of his way to impress on the Jacksons that he was a ruthless businessman who played by his own rules. If that bothered them, he said, now was the time to speak up. “Nice guys finish last,” he said. Karen volunteered that she’d been trying to tell Neal that for years.
This was Clifford’s proposition: Neal would guarantee his services as a contact man for the next twelve months, introducing Clifford and his company to the most important people in the community. Clifford mentioned in particular Carolyn Huntoon, the director of the Life Sciences Projects Division at the Johnson Space Center, who would have to approve the lithotripter proj-ect. In return, the Jacksons would be paid $7,500 a month for the first two months, then $10,000 a month for another ten months. In addition, they would receive 25 percent of any gov-ernment contracts they brought in. This was a no-lose deal, a joint venture with NASA. Clifford emphasized that the deal with NASA was merely the seed money: The NASA logo could be invaluable in marketing the product commercially. After Clifford handed over the first payment that afternoon—in cash—Neal danced around the room and waved the bills in the air.
Driving back to Clear Lake that night, the Jacksons joked that they were probably being followed. “We’d never been paid in cash before,” Karen recalled. “It was legal tender for a legal contract, but still . . .” Things were moving faster than they had ever imagined.
The Setup
OF COURSE THEY HAD NEVER IMAGINED THAT THEY WERE BEING SET UP. More than a year would pass before the Jacksons realized that they had been designated as the Judas goats of Operation Lightning Strike, an FBI sting designed to root out fraud and corruption among NASA employees and contractors. The wheeler-dealer who called himself John Clifford was really Special Agent Hal Francis, who had arrived in Houston the previous summer fresh from a similar sting in St. Louis called Operation Brown Bag. Francis was not all that different from the fictional Clifford, just a good ol’ country boy who grew up in Mississippi and cultivated a gift of gab. Karen Jackson’s initial impression was on the mark: Francis was a hot dog, ruthless in the pursuit of his own cause. Francis had served with the supersecret National Security Agency in the early eighties and joined the FBI in 1988. His reassignment to the Southern District of Texas in 1991 was fortuitous. The NASA Inspector General’s Office needed help. It had investigated hundreds of complaints of contract abuses and kickbacks, many of them at the space center, but had yet to get a single conviction. Most of the complaints came from anonymous calls to the NASA hotline.
Sifting through the open cases, Francis and his boss, Art Schultz, the supervisor of the government’s fraud squad—together with investigators from other federal agencies—created the elements of Lightning Strike. Francis would reprise his role as Clifford. A phony company, Southern Technologies Diversified, was created and given a financial history. When the Jacksons checked the company’s financial rating, it showed that Southern Technologies had annual sales of about $45 million.
Over drinks at Fuzzy’s, a downtown bar, the agents decided they needed something to sell, some kind of “black hole proj-ect” that would appear to suck government money into the tunnel of no accountability while actually sucking greedy contractors into the trap. Francis came up with the idea for the miniature lithotripter. As a prop, the bureau purchased a 1983 model ultrasonic device from Johns Hopkins Medical Center for $5,000. The company that supposedly manufactured the lithotripter, Eastern Tech, was a real company: Its president had cooperated in Brown Bag.
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