In developing the standards, criteria, and procedures, full consideration shall be given to the rights of individuals, consistent with security requirements.

33

Pursuant to these orders, the three Secretaries drew up a directive on the "Industrial personnel and facility clearance program," setting up three industrial personnel security boards in New York, Chicago, and San Francisco, with a screening division and an appeal division in each. Twenty-one criteria for the denial of clearance were set out.34 This directive was issued by the three Secretaries without being referred to the Munitions Board for comment or concurrence.35

A period of considerable confusion and chaos existed after the abolition of the PSB and the IERB and the commencement of operations of the new regional boards. In October 1953, it was reported that the New York board had a backlog of over 300 cases, 36 and in February 1954, it was reported that "the screening division of the board in New York is apparently over a year behind in its cases and the backlog is considerable." "

In January 1954, Secretary of Defense Wilson authorized the Secretaries of the three military departments "to modify or overrule any decision of an Appeals Division of an Industrial Personnel Security Board when they deem such action to be in the national interest." 38

In mid-1954, Secretary Wilson noted that:

A number of problems have arisen in connection with the Boards' operations which suggest another look at the program. In particular, the problems involved backlog of cases, lack of uniform application of procedures in the administration of the Boards, lack of uniformity in the statement of charges against individuals and failure to complete cases once they have been referred to the Board for action.30

The director of the office of domestic security programs commented:

There is dissatisfaction within the military departments on the present operation of the Boards, but, because of lack of any established leadership, the three departments have been unable to get together and solve the problems."0

The general counsel of the Department of Defense requested the Secretaries of the Army, Navy, and Air Force to review the industrial personnel security clearance and review program in July 1954. A working group was appointed from the staff of the general counsels of the three Military Departments and the Department of Defense and a representative of the Industrial Security Division. They produced a plan which included central admin

33 Memorandum from Secretary of Defense Wilson to the Secretaries of the Army, Navy, and Air Force and the chairman of the Munitions Board, dated Mar. 27, 1953.

34 Directive, dated May 4, 1953, Subject: Industrial personnel and facility clearance program.

35 Memorandum from Maj. Gen. F. R. Dent, military director, Munitions Board, to the acting chairman, Munitions Board, dated May 4, 1953.

30 Memorandum from the director, industrial security division, to the director, office of domestic security programs, dated Oct. 1, 1953.

37 Memorandum from the General Counsel of the Navy to the counsel, New York branch, dated Feb. 20, 1954.

38 Memorandum from the Secretary of Defense to the Secretaries of the Army, Navy, and Air Force, dated Jan. 18, 1954.

39 Memorandum from the Secretary of Defense to the Secretaries of Army, Navy, and Air Force, undated (approximately July 1954).

40 Memorandum from the director, office of domestic programs, to the general counsel, Department of Defense, dated July 13, 1954.

istration in a new Industrial Personnel Security Review Division in the Office of Personnel Security Policy under the Assistant Secretary of Defense for Manpower, Personnel and Reserve Forces. Provisions were made for a central screening Board in Washington to pass upon cases in which one of the three Military Departments had recommended that clearance should be denied or revoked. Regional hearing boards were provided in New York, Chicago, and San Francisco, with review by a central review board in Washington. The criteria were refined and standard procedures were promulgated in the industrial personnel security review regulation of February 2, 1955.41 A first annual report of the new review program was issued in September 1956.

LEGAL BASIS

Introduction

The industrial security program of the Department of Defense has as its objective the effective protection of classified information and material in the hands of United States industry through the use of specified policies and procedures for physical security (the identification, receipt, handling, and storage of classified information and material) and for personnel security (limitation of access to classified information or material to those individuals who have been cleared for access). These policies and procedures are set forth in two Department of Defense publications (the Armed Forces Industrial Security Regulation and the Industrial Security Manual for Safeguarding Classified Information) and the various implementing regulations of the three military departments. The industrial security regulation is directed to the military departments, while the industrial security manual is directed to those companies (contractors) who are bidding on or have entered into classified contracts with one of the military departments. The provisions of the industrial security manual are imposed contractually upon contractors through a "security agreement" (DOD Form 441), which is entered into by the contractor and binds him to observe and adhere to all of the provisions of the industrial security manual. In addition, each classified procurement contract entered into by a contractor contains a "military security requirements" clause, which obligates the contractor in a similar manner.

Statutory Basis of the Program

The operation of the industrial security program may thus be said to rest upon Government regulations and upon contractual obligations. These

Department of Defense directive 5220.6, dated Feb. 2, 1955.

regulations and obligations do not, however, constitute the legal basis for the program as a whole.12 Such a basis must be found in a statute which authorizes the executive branch of the Government (and the Department of Defense in particular) to establish this program.

It is clear that there is no statute (or Executive order) which expressly authorizes the Department of Defense to establish an industrial security program. A legal basis for the program may, however, be found in the implied authority contained in one or more of the following statutes (or Executive order):

5 U. S. C. 22. "The head of each department is authorized to prescribe regulations, not inconsistent with law, for the government of his department, the conduct of its officers and clerks, the distribution and performance of its business and the custody, use and preservation of the records, papers, and property appertaining to it." In addition to the general authorization contained in this act to prescribe regulations for the distribution and performance of the department's business, that part thereof which specifically authorizes the head of a department to prescribe regulations for the custody, use, and preservation of the records, papers, and property of the department has been uniformly held by the courts to authorize regulations prohibiting subordinate officers of the department from producing in court any official records of the department in obedience to a subpena duces tecum.13 It would seem that if the head of a department can preserve Government secrets from disclosure in court, where the public interest in justice may be thwarted, he can probably act to prevent disclosure of Government secrets to individuals in industry who may be unfriendly to the United States. The scope of the authority would also seem to extend to the protection of property the title to which is not yet in the United States, such as guns, ships, and airplane propellers being produced for the United States, because such property is, in the language of the statute, "appertaining to" the Department. This statute refers to the "head of each department," which may refer to just the Department of Defense and not the Departments of the Army, Navy, or Air Force. Even if this restricted interpretation is accepted, the applicability of the statute to the military departments can be supported on the basis that the industrial security program is actually a Department of Defense program, operated by the three departments as agents of the Department of Defense.

This statute would therefore appear to authorize the industrial security program to the extent that such program is reasonably related to the distribution

42 But see Greene v. Wilson, D. C. D. C., Civil Action No. 3561-54 (March 29, 1957), in which the court upheld the removal of Mr. Greene under an earlier industrial security program, apparently on the ground that there was a contract between the Government and Mr. Greene's employer: "It is fundamental when one presumes to accept a contractual offer then that offer must be accepted in terms, and one of the terms here, as has been said, related to security controls. The necessity for such is obvious. If the plaintiff's employer did not see fit to accept and conform, it had perfect freedom not to enter into the contract. On acceptance of the offer in terms, it was obliged in the circumstances to carry out its essentials, the presumed result of which was the loss by the plaintiff of his position."

43 Baske v. Comingore, 177 U. S. 459 (1900); In re Huttman, 70 F. 699 (1895).

and performance of the department's business or is reasonably designed to protect Government secrets or defense production.

The National Security Act of 1947, as amended, 5 U. S. C. 171, is frequently cited in support of the industrial security program. Section 171a (b) provides that the Secretary of Defense shall have direction, authority, and control over the Department of Defense. Section 171a (c) (4) provides that "The Departments of the Army, Navy, and Air Force shall be separately administered by their respective secretaries under the direction, authority, and control of the Secretary of Defense." These sections grant the Secretary of Defense and the three military Secretaries the authority to administer their departments. It may well be argued that the power to protect the records and property of the department is an implied power of the head of the department who is responsible for administering the department.

18 U.S. C. 793 and 798 supply indirect authority for the industrial security program, for they clearly set forth the congressional policy that it is illegal for any person having defense or classified information to disclose the same to unauthorized persons or with the intent to injure the United States. The President, under article II, section 3, is directed to take care that the laws are faithfully executed by his subordinates. The industrial security program represents such an attempt, for it has as its objective the safeguarding from disclosure of defense or classified information.

41 U.S. C. 151, et seq.-The "Armed Services Procurement Act," authorizes each of the three military departments to negotiate procurement contracts of "any type" which in the opinion of the agency head will promote the best interests of the Government. This statute would appear to authorize the department head to prescribe any reasonable conditions in procurement contracts, including provisions for carrying into effect the mandate of 5 U. S. C. 22 above, namely, the preservation of the records, papers, and property appertaining to the department, although this interpretation of the act is weakened by the fact that the following subsection of the act may indicate that the type of contract referred to was a type of financial contract. The contracting authority provided for by this statute may therefore supplement the authority granted by 5 U. S. C. 22, and may be an additional legal basis for the industrial security program.

Executive Order 10501 (November 5, 1953) states that it ". . . is essential that certain official information affecting the national defense be protected uniformly against unauthorized disclosure," and provides in detail for and authorizes the classification, changes in classification, marking, safekeeping, and so forth, of such official information. In particular, section 5i of the order provides that when classified material affecting the national defense is furnished authorized persons in or out of Federal service, there shall be placed on such material a statement that the transmission or revelation of this material to an unauthorized person is prohibited by law. Section 7b further provides that "classified defense information shall not be disseminated outside the executive branch except under conditions and through channels

authorized by the head of the disseminating department or agency, even though the person or agency to which dissemination of such information is proposed to be made may have been solely or partly responsible for its production." This order therefore supports and in fact authorizes the proper safeguarding of all classified defense information in the hands of industry, which is the objective of the industrial security program.

At various times the Department of Defense and the military departments have cited certain other statutes and Executive orders and constitutional provisions as supplying the legal basis for the industrial security program. These citations include:

1. Executive Order 10104 (February 1, 1950).

2. 50 U. S. C. App. 781-783.

3. 10 U. S. C. 310 (j).

4. 50 U. S. C. 781-826.

5. Executive Order 10421 (December 31, 1952).

6. 18 U. S. C. 2151–2156.

7. 5 U. S. C. 412.

8. 5 U. S. C. 181-4.

9. The United States Constitution, article II, section 2—the authority of the President as Commander in Chief to protect the Nation's secrets. The statutes and Executive orders discussed or referred to above adequately authorize the Government to establish a program for the protection of classified information and material in the hands of private industry, although serious consideration might well be given to recommending the enactment of a statute expressly authorizing such a program and the particular policies and procedures to be used to implement the program.

Constitutional Basis of the Program

Aside from questions as to the statutory basis of the industrial security program, serious questions have been raised as to whether Congress has the constitutional authority to enact legislation authorizing an industrial security program, particularly where such a program provides for the exclusion or removal of designated employees of private defense facilities from those jobs in which they have access to classified information or material. Such questions do not, however, attack the constitutionality of the four statutes and the Executive order discussed above as supplying the legal basis of the industrial security program, for, as was emphasized above, these statutes and the Executive order do not deal directly with the subject of an industrial security program nor do they expressly authorize such a program.

Legislation expressly authorizing an industrial security program similar to that now in operation by the Department of Defense could be supported constitutionally as an exercise of Congress' power to: Declare war, raise and support armies, and provide and maintain a Navy-article I, section 8,