http://www.wired.com/threatlevel/2009/12/montgomery-2

A programmer who claims he produced software that detected hidden terrorist messages in Al Jazeera broadcasts was apparently responsible for a false alert in 2003 that grounded international flights. The 2003 incident raised the government’s security level, according to a remarkable story published by Playboy.

The developer also allegedly faked software demonstrations and conned the Pentagon into investing in a program that fellow workers suspect never existed or couldn’t do what the developer claimed.

In December 2003, DHS secretary Tom Ridge announced a terror alert based on intelligence from “credible sources” about imminent attacks that “could either rival or exceed what we experienced on September 11.” Dozens of French, British and Mexican commercial “flights of interest” were canceled, and news agencies were reporting that the threats extended to “power plants, dams and even oil facilities in Alaska.”

Playboy says the source of the intelligence was never revealed publicly. But the evidence points to Dennis Montgomery, who had convinced the government that Al Jazeera — the Qatari-owned TV network — was unwittingly transmitting attack orders to Al Qaeda sleeper cells concealed in video it broadcast.

Montgomery claimed he decoded the orders using a program developed by his four-year-old Las Vegas firm, eTreppid Technologies. The software found hidden bar codes in Al Jazeera videos that contained latitudes, longitudes, flight numbers and dates for planes being targeted for attacks, he reportedly claimed. He fed the information to a CIA employee at the agency’s Directorate of Science and Technology, who passed it up to CIA Director George Tenet, who in turn passed it to the White House.

“[Tom] Ridge’s announcement, the canceled flights and the holiday disruptions were all the results of Montgomery’s mysterious doings,” the Playboy article asserts.

Over the next few years Montgomery’s intelligence wound its way through the Department of Homeland Security, the Pentagon, the Senate Intelligence Committee and even Vice President Dick Cheney’s office.

But aside from Tenet and a few others, Playboy reports, no one actually knew the information was supposedly gleaned from messages hidden in video broadcasts.

In the aftermath of the 9/11 attacks, the government was searching feverishly for any information or tools that would help deter additional attacks, and was willing to throw millions of dollars at any prospector who asserted he had a solution. It was this environment that helped Montgomery convince officials at DHS and elsewhere that he was able to detect hidden messages in video that no one else was able to see.

When one CIA officer finally learned the source of the information his agency was being fed, he says he was livid.

“I was told to shut up,” he told Playboy. “I was saying, ‘This is crazy. This is embarrassing.’. . . I said, ‘Give us the algorithms that allowed you to come up with this stuff.’ They wouldn’t even do that. And I was screaming, ‘You gave these people fucking money?’”

Frances Townsend, a Homeland Security adviser to President George W. Bush, admits to the magazine that the bar code idea sounded far-fetched, but said the government had no choice but to pursue the leads Montgomery passed them.

“It didn’t seem beyond the realm of possibility,” she said. “We were relying on technical people to tell us whether or not it was feasible. I don’t regret having acted on it.”

It was a branch of the French intelligence services that finally helped convince the U.S. government in 2004 that the bar codes were fake after they and the CIA commissioned another company to try to detect the messages and were unable to uncover anything.

But by then Montgomery was already making headway with other software claims. His company got a contract with the Air Force to handle video shot by unmanned Predator drones. He claimed his program could recognize weapons in the surveillance video. In 2004 the U.S. Special Operations Command reportedly gave his company a $30 million no-bid contract for “compression” and “automatic target recognition” technology. Montgomery even got a security clearance. But a former worker told Playboy that he had helped fake some 40 demonstrations of the software.

In January, 2006 Montgomery left the company over disputes with one of his business partners and investors. The company claims the software disappeared and the source code was wiped out when Montgomery left. Hard drives that supposedly stored backup copies of the programs turned out to contain nothing. Montgomery has been called a “habitual liar engaged in fraud” by one of his former attorneys and was charged in Las Vegas with bouncing nine checks in the amount of $1 million in September 2008. He was arrested on a felony warrant in California.

Montgomery and his former partner sued each other over various claims. When Montgomery named the Department of Defense as a defendant in his suit, Director of National Intelligence John Negroponte intervened and invoked the state secrets privilege, claiming the suit could result in “serious, and in some cases exceptionally grave, damage to the national security of the United States.”

Montgomery went on to find another patron-investor in the form of Edra Blixseth, wife of billionaire Tim Blixseth. He began receiving checks through various businesses connected to the Blixseths and their main company, Blxware, for developing software. The FBI began investigating Montgomery, but this didn’t stop the National Security Agency from discussing work on a project for that agency in 2007. He apparently requested $4 million to develop software for them. Playboy doesn’t say what happened with that deal, but this year Montgomery was able to pawn his technology off on a new federal customer — the U.S. Air Force. The agency reportedly signed a contract to pay $3 million for “research, development, test and evaluation” of Montgomery’s software earlier this year.

The results of the evaluation were “inconclusive,” however, and the deal ended there. But not before the Air Force paid out $2 million in taxpayer funds last February. That same month, Montgomery received $600,000 from Blxware.