• Cover Story
• Table of
  Contents
• Contents By
  Topic
• Columns
  • Brownstein
  • Cook
  • Crook
  • Powers
  • Rauch
  • Stokes
  • Schneider
  • Taylor Jr.
• Regular
  Features
  • Hotline Extra
  • Inside Washington
  • Insiders Poll
  • K Street Corridor
  • People
  • The Week on the Hill

In announcing major new regulations in January that set national standards for driver's licenses under the 2005 Real ID Act, Homeland Security Secretary Michael Chertoff declared, "This is a great teaching moment on the challenges of really reconfiguring a society."

Chertoff's announcement was music to the ears of private companies and lobbyists who see major national security benefits, as well as the potential for big bucks, in helping government agencies verify individuals' identity. Federal programs like the one created by Real ID are being promoted by, and helping to boost, an industry that specializes in producing identity documents and collecting biometrics such as fingerprints and iris scans. Real ID does not have a biometrics requirement, but some industry officials think that it eventually will.

The estimated value of potential contracts to implement so-called federal identity-solutions programs has more than doubled since 2006, rising from $890 million to $2 billion this year, according to Jeremy Grant, a senior vice president for the Stanford Group, which advises investors. Not surprisingly, several companies vying for a share of the market have plowed money into their lobbying activities--some by hiring former administration officials--according to interviews with industry insiders and a review of federal lobbying records.

But the industry faces a backlash from critics who argue that the government is recklessly weaving requirements for biometrics and identity verification into the fabric of the nation's homeland security without adequate public debate.

SECURITY: THE CONTRACTORSThe PlayersChris StrohmThese five companies are leading identity-solutions contractors for various programs by federal, state, and local governments.
Lockheed Martin
Business: Identity-solutions systems integration
Contracts: Justice Department next-generation identification systems; DHS Transportation Worker Identification Credential program; Registered Traveler
Power play: More than $10 million in lobbying activity in 2007
L-1 Identity Solutions
Business: Identity-solutions systems integration; multimodal biometrics
Contracts: Defense Department and intelligence biometrics; passports; secure documents
Power play: Board members include former CIA Director George Tenet and former DHS Deputy Secretary James Loy
Digimarc
Business: Driver’s licenses; secure documents
Contracts: State enhanced driver’s licenses; Real ID
Power play: Plans to merge with L-1 Identity Solutions
Cross Match Technologies
Business: Multimodal biometrics
Contracts: Defense Department biometrics
Power play: [more...]

"There is a little glass dome over the Washington, D.C., Beltway community," says Jim Harper, director of information policy studies at the Cato Institute, "where these contractors and security folks ... are absolutely convinced of a growing and mutating and metastasizing terrorist threat--and Congress, meanwhile, has granted them tremendous amounts of money to use any way they can."

Harper says he is particularly worried about how much influence L-1 Identity Solutions would have if it is successful in its bid to acquire Digimarc's ID Systems business, which is most of Digimarc. The two companies together control more than 90 percent of the driver's license market nationwide. "That combination will be the premier lobbyist for Real ID, for a national ID law," Harper says.

On June 30, Digimarc's board approved a $310 million offer from L-1 Identity Solutions, but the government must approve any final sale. L-1 has kept a relatively low lobbying profile but has heavy hitters on its board, including former CIA Director George Tenet and retired Coast Guard Adm. James Loy, who was the Homeland Security Department's first deputy secretary. Digimarc won contracts from Washington state and Vermont to produce new driver's licenses with radio frequency identification chips, and is poised for more work under the Real ID law.

Bruce Davis, Digimarc's chief executive officer and board chairman, said that the vision behind the sale is to provide the government with both a systems integrator and expertise in identity documents. "I think we're in the merging market phase of global identity management," he says. "As the industry continues to mature, I believe that the kind of consolidation that we are doing with L-1 is essential to meeting customer needs." Last year, Digimarc's lobbying activity spiked to $1 million, up from $350,000 in 2006, according to the Center for Responsive Politics. The company spent $180,000 on lobbying for the first quarter of 2008.

Defense giant Lockheed Martin solidified its foothold in the identity-solutions market in February by winning the contract for the Justice Department's billion-dollar next-generation identification system. The program is intended to transform the department's fingerprint-based system for identifying criminals and suspected terrorists into a multimodal biometrics system that includes facial scans, iris imaging, and palm prints. Lockheed Martin is also Homeland Security's prime contractor for issuing new biometric identification cards to seaport workers. The corporation spent $4 million on lobbying in the first quarter of this year, putting it on pace to exceed the $10.6 million it spent in 2007, according to the center.

Multimodal biometrics is viewed as a growth field for government programs, says Elaine Dezenski, who most recently was a senior vice president for Cross Match Technologies, which specializes in biometrics applications. On June 5, President Bush issued a directive requiring administration officials to come up with policy and legal recommendations for increasing the collection and sharing of biometrics for identifying not just known or suspected terrorists but also other "categories of individuals."

Dezenski joined Cross Match after serving as acting assistant secretary for policy at Homeland Security. And the company's president, James Ziglar, is a former commissioner of the Immigration and Naturalization Service. The company is positioned to provide mobile biometrics systems, particularly to the Transportation Security Administration for airport security and to the U.S. Border Patrol and Immigration and Customs Enforcement for enforcing federal immigration laws, Dezenski said.

Cross Match's lobbying activity soared last year to $860,000, up from $260,000 in 2006, the center reported. The company spent $150,000 in the first quarter of this year. The Monument Policy Group is a top lobbying firm for Cross Match and Digimarc. The shop was founded by Stewart Verdery, who was Homeland Security's first assistant secretary for policy, and recently brought in a new partner, Jessica Herrera-Flanigan, who served as Democratic staff director and general counsel for the House Homeland Security Committee. Victor Cerda, formerly chief of staff and counsel for Immigration and Customs Enforcement, was a contract lobbyist for Cross Match in 2006 and 2007 but is not lobbying for the company now.

"It seems, based on recent contracts, this technology is only going to continue to grow, as well as the market."

----Peter Cheesman

Companies that specialize in biometrics are also using trade and lobbying associations to try to keep federal procurement dollars flowing. "The industry is pulling itself together to be involved in the policy process more than it ever has in the past," says Tovah LaDier, managing director of the International Biometric Industry Association. LaDier says that the association most recently lobbied Chairman Bennie Thompson, D-Miss., of the House Homeland Security Committee, in favor of a bill that would require the Transportation Security Administration to form a working group with private companies to evaluate existing and proposed industry biometric programs that could be used in airports. The House passed the bill in mid-June.

LaDier works as a lobbyist for the IBIA and for the clients of the Williams Mullen Strategies law firm in Washington. One of her biggest clients, according to federal lobbying records, is Cogent Systems, which is a subcontractor for the government's US-VISIT foreigner-tracking program. According to Grant of the Stanford Group, Cogent could be the prime beneficiary as the government expands the US-VISIT program from collecting two fingerprints per person to collecting all 10.

The most closely watched event in biometrics this year, Grant says, will occur when Lockheed Martin selects subcontractors for the Justice Department's next-generation identification system. Cogent is in the running to support the fingerprint and palm portion of the program, according to Grant. The company spent $120,000 on lobbying in 2007, and about $30,000 in the first quarter of this year.

Industry officials are divided, however, over how much the identity-solutions market will grow in the next several years. Grant predicts that the market will stay flat, especially as a new administration takes over the White House in 2009 and analyzes the existing programs. He projects that spending on federal identity programs will grow to $2.2 billion through 2012.

Comparative estimates are difficult to find. The International Biometric Group, for example, projects that the market for biometrics alone will reach $3.7 billion in 2012 for law enforcement, military, and other federal government programs. "In my opinion, it seems like the federal government is really driving the technology development in this industry and investment in this industry," said Peter Cheesman, marketing director for the IBG. He says that major spending programs include Justice's new identification system, US-VISIT, and the Defense Department's biometrics operations and support services program. The Pentagon is now accepting bids for its biometrics program, and has hired Cogent to help evaluate them. "It seems, based on recent contracts," Cheesman said, "this technology is only going to continue to grow, as well as the market."

Industry officials are also closely watching whether the Real ID program will include a biometric component. Chertoff said that states are free to require fingerprints for the new licenses. "If biometrics does in fact become a part of that program, you're going to see that become a huge driver for the industry," Cheesman said. Moreover, if Congress passes comprehensive immigration reform legislation, industry and company officials expect the government to use biometrics to verify the identity of temporary migrant workers. "Without a biometrics component, I think you could make the argument that these [guest-worker] programs wouldn't work," Dezenski said.

The industry's optimism is countered, however, by critics who believe that the government and the industry are rushing to implement security programs without enough public debate over policies and spending. And the push-back has created strange bedfellows, aligning the Cato Institute's Harper with such groups as the Center for American Progress, a liberal think tank, and the American Civil Liberties Union. The Center for American Progress issued a report in early June on an emerging "ID divide" that leaves those without proper identification unable to participate in the most basic functions of U.S. society.

"Although Americans of all backgrounds may find themselves on the wrong side of the ID divide, there are disproportionate effects on the poor, the young, the disabled, the less-educated, communities of color, and citizens born outside of the United States," the report concluded.

For the foreseeable future, at least, the odd bedfellows will work together. Says Harper, "You'll know your privacy and liberties are relatively secure when I get back to fighting with the ACLU."

The author is a reporter for CongressDaily.