The spy goes to Wall Street Ex-CIA Intelligence Chief Jami Miscik was wrong about WMD in Iraq. But in her new career, Lehman brothers depends on her to say where it's safe to put billions. An exclusive tale of intrigue and redemption from Fortune's Patricia Sellers. By Patricia Sellers, Fortune editor-at-large July 11 2007: 6:12 PM EDT (Fortune Magazine) -- Every Monday at 8:45 a.m., when the dozen top executives at Lehman Brothers gather in a 31st-floor conference room at their Manhattan headquarters, they hear from the oracle. This is the weekly capital markets meeting, where the investment bankers talk about the state of the world in which they put their billions. CEO Dick Fuld presides, but typically he is not the one kicking off the conversation. That job belongs to a Wall Street newcomer few businesspeople have heard of. Her name is Jami Miscik. Her title - global head of sovereign risk - may be cryptic, but her role is clear. She is both über-analyst and seer, forecasting from fuzzy data about yesterday's crisis in the Middle East or today's trouble in Thailand or next year's election in Russia. Last fall, when North Korea's nuclear test rattled global markets, the folks at Lehman (Charts, Fortune 500) were calmer than most; Miscik had forewarned them and explained how it could play out peacefully. Last December, when Venezuelan President Hugo Chávez's brash reelection rhetoric was publicly dismissed as idle boasting, Miscik told the Monday-morning gathering, "He really means this." She predicted an acceleration of his program to nationalize industries: "He'll be doing things bigger, bolder, and faster than even his closest allies in government expect." She was right. Lately Miscik has been talking about the possible fall of President Pervez Musharraf in Pakistan and a confluence of problems in the Middle East. "I see heightened levels of concern this fall," she says. Spoken with the confidence of a guru. But wait a minute. The seriousness with which her predictions are now taken on Wall Street needs to be reconciled with what happened at her previous job, which involved some colossal blunders that affected the course of history. Before she joined Lehman in 2005, Miscik ran the intelligence directorate of the Central Intelligence Agency under CIA chief George Tenet. Her analysts were key contributors to the erroneous judgment in the 2002 National Intelligence Estimate that Saddam Hussein possessed weapons of mass destruction - a conclusion that led Congress to authorize war with Iraq. Only a year earlier Miscik's agency had let America down in another way, picking up warning signs about 9/11 but failing to provide enough information to motivate authorities to do something about them. The story of how Miscik has survived her agency's tragic shortcomings, learned to stand up to an aggressively political Bush administration (in Ron Suskind's bestseller "The One Percent Doctrine," she is described in one scene as "shaking with rage" over White House interference), and managed to achieve platinum-level credibility on Wall Street is a tale of intrigue and redemption. Even today she remains a woman of mystery among her colleagues. Lehman president Joe Gregory says he has resisted querying her about her CIA past. "I know it's inappropriate to ask, 'What was it really like on the inside?' That's a stupid question, even though I really want to know." In interviews with Fortune, Miscik (pronounced MISS-ik) and her colleagues describe her improbable journey from Washington to Wall Street, where Lehman deploys her in the financial world not only for her steely intellect but also for her cachet as a former spy. At this year's Black Diamond Executive Conference in Beaver Creek, Colo., the firm's annual gathering for about 100 key clients, they booked her as a main speaker along with Alan Greenspan and Colin Powell. Lehman also sends Miscik to meet one-on-one with clients, who typically marvel at her geopolitical smarts. "If something is going on in the world, she's our first call," says Stuart Spodek, who heads interest rate trading at BlackRock, the asset-management firm. Kathy Cassidy, the treasurer of General Electric (Charts, Fortune 500), notes that when Miscik visits GE headquarters, "She doesn't bring notes and she doesn't have charts! Everyone else who comes to see us has charts. But she doesn't seem to need them." Miscik, 49, is not just a cerebral showpiece. Her brand of risk analysis has become critical to Wall Street decision-making as competition becomes more complex, developing markets grow more enticing, and threats (from terrorism to avian flu) turn more global. At Lehman her reports on 34 key countries are regarded as the last word in trouble spotting. Says Gregory: "Her information is infinitely better than the information you can get anywhere else that I know of." CEO Fuld credits Miscik's analysis with giving Lehman the confidence to restart business in Russia, which it exited after the country's 1998 debt crisis. "No question, she has been a valuable resource in getting us to the right place in this region," says Fuld. "From the moment I met Jami, I knew we needed her to be part of our team." Conspicuous discretion In her modest office in Lehman's Midtown headquarters, the woman who once commanded more than 1,000 CIA analysts has few artifacts on display, but one stands out for its assertion of bring-it-on street cred: a coffee cup embossed with a photo of her wielding an enormous gun. Would that be an automatic weapon? "I don't know," Miscik replies. When asked if we are to believe that a former spy wouldn't be curious, she laughs conspiratorially. Characteristic of her 22 years as the fastest-rising woman in CIA history, Miscik is conspicuous in her discretion. Her office shows no signs of a personal life except a framed picture of a 7-year-old girl. "My goddaughter," she explains. Miscik presents herself as a determined sentinel who is free of distraction and totally accountable, someone you might trust with another chance. Does she bear responsibility for the WMD conclusion in the Iraq report? "Absolutely. We got this wrong," Miscik acknowledges, while adding she had no time to beat herself up about it in the aftermath. "We were so busy, and we felt this unrelenting push to stay on top of things. It was kind of 'Just do it!'" Did the CIA fail in its responsibility leading up to 9/11? "Yes, because it happened," Miscik says. She remembers feeling helpless in the summer of 2001 to prevent the inevitable. "Our sources went silent. That terrified us," she says. "You see it coming. You're working on it. You have pieces of the puzzle. And then, where are the other pieces? We did not know the date, the place. Could we have provided more warning? Maybe." In her current role Miscik is on the lookout for everything from coups to currency crises to the ultimate disaster beyond 9/11. But besides watching for threats, she's hunting for opportunities. "In government, geopolitical risk is a bad thing," she explains. "Here at Lehman, people are risk takers. They want to understand the situation and the smart risk to take, because smart risk is opportunity." She adds, "You know what I like about it? I really like rolling up my sleeves and getting back into the analysis myself." I mention that she reminds some people at Lehman of a storybook character: Nancy Drew. "That's great. I read her as a kid," replies Miscik, the executive version of the unflappable girl detective. The gunplay at Calumet Harbor might have instilled that coolness under fire. Miscik's father, the son of Lithuanian immigrants, was a U.S. Customs inspector who loved to take Jami, his only child, to work with him on the docks in South Chicago. "He would let me crawl around these big ships," she recalls. "One day this gun battle broke out. It was related to smuggling, I think. I was 8 years old. He took me into the office and said, 'Call your mother. Tell her to come and get you.'" Jami did as he said, and he went back to the docks to catch the bad guys. Her dad, an avid sailor, moved his family to Redondo Beach, Calif., to be near the ocean, but died of a heart attack two years later, when Jami was 12. Her mother was determined to give her daughter the confidence she would need to operate on her own in the world. "She decided I had to be in 1,200 activities," Miscik says. "I went to charm school. I was in the singing group. I helped elderly people at nursing homes. In high school I was student body vice president, on the drill team, the yearbook, the newspaper. By the time I went to college I felt burnt out." She went to Pepperdine University in Malibu, majoring in economics and political science, then got a master's at Condoleezza Rice's alma mater, the University of Denver's School of International Studies. She became fascinated with Washington but was rejected in her bid for an internship with the CIA. When a job in banking fell through, she decided to try again. She simply opened the Denver phone book and looked up "CIA." Nine months of background checks and psychological testing later, she got hired as an economic analyst. "I didn't think I'd stay very long," she says, "but it's such compelling work." (For more from Miscik on her path to the CIA, click here.) While the CIA's operations directorate (now called the National Clandestine Service) employs the sort of agents who pop up in James Bond movies, the intelligence unit is populated by thinkers like Miscik, who create the analytical reports that go to top officials, including the President. The work is heaven for wonks. Analysts typically rely on fuzzy satellite images and secondhand, often contradictory information from partisan sources. "It's like trying to do a 1,000-piece jigsaw puzzle with only 200 pieces," says Miscik. "And as a kicker, you don't get to see the lid of the box to tell you what it's supposed to look like." Starting with the Third World debt crisis in the early 1980s, when she found herself phoning executives at the same money-center banks she had considered joining, Miscik drew attention for having a sixth sense about geopolitics. Says John McLaughlin, a 32-year veteran who was deputy CIA director under Tenet: "I remember hearing about a young woman who was very innovative and creative." Miscik ran a complex program to forecast political instability in 40 countries based on 25 indicators. The indicators - such as protests in the streets, attitudes of the military toward leadership, and public transportation costs - helped her correlate economic deterioration and political instability with an economist's precision. After a stint at the National Security Council, briefing members of President Clinton's White House, she was tapped by Tenet to be his executive assistant, a job comparable to chief of staff. He valued her reputation for straight talk. "If Jami has a problem with something, you're going to know it," says Tenet, who often knew what she was thinking before she uttered a word. "I called it the Lithuanian stare. The raised eyebrow. Then she cut to the chase." Henry Kissinger, a member of the CIA's advisory board while Miscik was moving up, remembers her standing out: "With many analysts you're always wondering if they're slipping in their own policy preferences or telling you what they think you want to hear. Not Jami." By the summer of 2001, Miscik was No. 2 in the intelligence unit, where tension was escalating. "We were so convinced that something was going to happen. It could be here or against U.S. interests overseas," she recalls. In July, Tenet asked for an urgent meeting with Condi Rice, then the National Security Advisor, and warned of an imminent attack. On Aug. 6, Miscik's group published the paper titled "Bin Laden Determined to Strike in the U.S.," which cited reports of "suspicious activity in this country consistent with preparations for hijackings or other types of attacks." The President and his top officials, she says, "were listening but studying [the situation], as opposed to being compelled to act. We couldn't tell them, 'You've got only four weeks.'" After 9/11, there was virtually no time to grieve or feel guilty, Miscik says, explaining, "The press of what we had to do prevented that." The mission, as she understood it, was to bring down al Qaeda and prevent another attack. But by September 2002, after Miscik had stepped up to chief of the intelligence unit, President Bush seemed determined to capture a different enemy, Saddam Hussein. When the Senate asked for the intelligence community's written assessments of the likelihood of WMD in Iraq, the agency had only three weeks to produce its analysis. The resulting, 90-page National Intelligence Estimate stated, "We judge that Iraq has continued its weapons of mass destruction programs.... Baghdad has chemical and biological weapons." By the following summer, after the U.S. invasion, it was becoming clear that Saddam possessed no such weapons. Miscik moved aggressively to assign a dozen of the best analysts in the intelligence community - none involved in the Iraq analysis - to spend six months examining the CIA's errors. The blame fell not on any coercion from the White House but on the agency's own problems. "There are four or five things," she says, ticking them off: a lack of good sources in the field, reliance on decade-old reports by long-gone UN weapons inspectors, and Saddam's boasting about power he did not have. A fourth mistake, the CIA's use of inherited assumptions, is most troubling to Miscik because it's a common trap in any analytical task. "A senior analyst trains a junior analyst and passes on his view, which that junior analyst passes on to the next analyst. You need to rigorously examine inherited assumptions and at all costs avoid groupthink." As firmly as she admitted when she was wrong, she stood her ground when she believed she was right. During this harrowing period senior Bush aides, determined to justify the Iraq war, pressed the CIA to find evidence of complicity between Iraq and al Qaeda, Miscik recalls. There was no significant link, the agency had concluded and written repeatedly, but the administration's questioning persisted. Eventually Miscik told her analysts, "Just stop writing." Her toughest moment came on Jan. 10, 2003, when she got a message that Stephen Hadley, then deputy national security advisor, had called from the office of Lewis "Scooter" Libby, then the Vice President's chief of staff. Hadley and Libby wanted to see Miscik in Libby's office by 5 p.m. "I was hot, and I don't get hot often," she recalls. She stormed into Tenet's office and told him, "We are not changing this paper. This is our judgment. It stands. I'll quit if we change a word of this paper." Tenet phoned Hadley. "She's not coming," he told him. "And we are not rewriting this fucking report." (Tenet's book "At the Center of the Storm" gives a sanitized version of his language.) The following week Miscik, subbing for Tenet, was on her way to deliver the 8 a.m. daily intelligence briefing to the President when she got word that Bush wanted to see her privately. Inside the Oval Office, Miscik recalls, "He said, 'So, I understand that some of my guys might have crossed the line. If they did, you need to tell me.'" She told Bush, "It's nothing we can't handle." His recognition of the pressure on her and her analysts, she says, was enough to ease her concern. "I appreciated that he recognized that there was a problem," she says. The pressure never eased. Tensions with the administration came to a head in November 2004. Vice President Dick Cheney's office asked Miscik to declassify part of a CIA report about the tie between the war in Iraq and the broad war on terrorism. She believed that revealing that portion of the report would leave the public with the wrong impression by telling only a small part of the story, so she denied the request. As she recalls, a few days later an aide to Porter Goss, who had replaced Tenet as CIA chief, delivered a message. "Saying no to the Vice President is the wrong answer," Goss's aide told Miscik. She replied to the aide, "Actually, sometimes saying no to the Vice President is what we get paid for." Goss supported her decision to keep the information classified. A few weeks later, just before Christmas, CIA executive director Kyle "Dusty" Foggo told Miscik that she was being replaced as deputy director of intelligence. A spokesperson for Goss says now, "There is absolutely no linkage between the two events." (See what Miscik recalls about the classified memo she sent about her reasons to keep the information classified.) She lost her job but salvaged her reputation - in contrast to others in the political maelstrom around the war. Until Bush commuted his sentence, Libby faced 30 months in prison for perjury and obstruction of justice. Foggo has been indicted on fraud and other charges related to the bribery case of convicted Congressman Randy Cunningham. Tenet has been widely criticized for his deference to the President. Miscik, meanwhile, has managed to earn respect even from Iraq hawks. Doug Feith, the neoconservative who was undersecretary of defense for policy from 2001 to 2005, says that he was frustrated by the quality and, as he sees it, the antiwar bias of the CIA's information about Iraq, but he says about Miscik, "Among CIA people, she was one of the most impressive and professional." To Miscik, however, getting another job in the capital wasn't an option. Kissinger told her, "In Washington, no matter what you move on to, you're always known as 'the former.'" Miscik didn't want to be a former anything. "I wanted to prove to myself that I could do something totally different," she says. "It was either New York or back to California. New York got me first." (Married and divorced in the '80s, she has a boyfriend in Los Angeles about whom she is typically reticent.) She initially faced some skeptics at Lehman, who were well aware of her role in the WMD judgment, but among her references was Tenet, who told Lehman executives she was "remarkably cool" under pressure. Dave Goldfarb, who oversees risk and principal investing for Lehman, notes that the firm had mixed success with other Washington recruits. "I remember when I interviewed Jami," he says, "I told her, 'The toughest thing will be staying relevant. Can you get the same insights that you had at the CIA?'" Once onboard, at a salary in the mid-six figures, more than double her government pay, Miscik realized, "You have to show your value in a short amount of time." She can no longer get her intel from CIA analysts and operatives. ("That would be crossing the line," she says.) So she keeps a web of sources who include Washington contacts, government officials, and experts at nongovernment organizations and think tanks. She also talks to journalists who cover local governments - "which I couldn't do before," she says - and locals in "entrenched industries" like mining and timber, because those people tend to stay put in their native country. On a typical day Miscik reads and surfs the Internet for about two hours, perusing foreign newspapers ranging from the Bangkok Post to the Turkish Daily News, plus websites such as qantara.de (a "dialogue with the Islamic world" funded by the German government), icps.kiev.ua (a Ukrainian think tank), and sasnet.lu.se (a Swedish collection of South Asian think-tank websites). Have her mistakes at the agency made her a better analyst? "Absolutely," she says. "Having come through it, I'm smarter for it." Asked about her current thinking on global risk, she says, "Hardly anything is generally considered risky in the markets now." For investors, that perception of safety should be worrisome. "The idea that geopolitical risk doesn't move markets is wrong." When a foreign economic crisis happens again, she says, the extent of the damage will probably hinge on geopolitics: "It usually comes down to a government having the political will to do something smart vs. something stupid." Miscik sees rising turmoil in the Middle East this fall. In Iraq "you'll see heightened levels of insurgency as the Iraqis want to make sure that we leave," she says. Miscik found herself in London during the recent terrorist attacks in Britain. "Unfortunately," she says, "the attacks bear out my thinking that al Qaeda is flexible and adaptive. It's still planning from the center, but it's increasingly relying on local terrorist groups and branding these groups under the al Qaeda umbrella." Is she surprised that al Qaeda has not attacked the American homeland since 9/11? No, she replies. "They're very patient - more so than we are. The intent, I have no doubt, remains." Miscik no longer carries the burden of looking out for the overall security of Americans, which comes as a relief to her. Any miscalculations will have an impact only in dollars. But her new role comes at a time when capital is gushing through the world with a force and complexity that dwarfs any one human's ability to understand it. She has found the totally different kind of risk she was looking for. Online exclusives: Miscik's secret CIA memo In her own words: Jami Miscik's path to the CIA   Next: See 2007 FORTUNE Global 500 Europe's top 50 Asia's top 50 From the July 23, 2007 issue

 

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