What's Really Behind US Defense Firm's Botched Deal to Acquire Pegasus Spyware Maker?

A US defense contractor, L3Harris, ended talks with Israeli company NSO Group to purchase the cyber hacking firm due to the White House's opposition to the deal. But why did the American defense contractor engage in business negotiations with the blacklisted spyware company in the first place?

"American defense and intelligence contractors like L3Harris want to make money, and there is a market for spyware, domestically and globally," explains retired US Air Force Lt. Col. Karen Kwiatkowski, a former analyst for the US Department of Defense. "With the NSO Group sanctioned by the USG for surveillance abuse against Americans and others, buying the Israeli company, its codes, software and tools, and hiring its people directly is a way to get that access (and in theory removing it from the sanction list by incorporating it under a different US company entity)."

The controversial negotiations between NSO and L3Harris were jointly reported by the Guardian, the Washington Post and Haaretz on June 14. At the time, The Guardian quoted a senior White House official as saying: "Such a transaction, if it were to take place, raises serious counterintelligence and security concerns for the US government."

The US Commerce Department blacklisted Israeli firm NSO Group in November 2021 for providing spyware called Pegasus to foreign governments that "used these tools to maliciously target" journalists, embassy workers and activists. According to the Biden administration, NSO acted "contrary to the national security or foreign policy interests of the United States."

"Pegasus is a 'zero-click' hacking tool that can remotely extract everything from a target’s mobile phone, including messages, contacts, photos and videos without the user having to click on a phishing link to give it remote access," wrote The New York Times, adding that the Israeli wonder-tool could also turn the target's mobile phone "into a tracking and recording device."

Nonetheless, L3Harris kicked off covert talks with NSO, claiming that US intelligence officials quietly supported its plans to purchase the firm's core spyware technology as well as a possible transfer of NSO personnel to the American defense contractor. What’s more, NSO's technology has long been "of intense interest" to the FBI and the CIA, according to NYT.

Thus, in March 2022, FBI Director Christopher Wray testified to Congress that the agency had bought NSO's spyware Pegasus, claiming that the agency acquired the tool for evaluation but did not use it.

"The FBI has not and did not use the NSO products operationally in any investigation," Wray told the lawmakers. "I can confirm that we bought a limited license for testing and investigation. We routinely evaluate technologies that are out there: what are the security concerns raised by those products?"

The L3Harris-NSO negotiations continued in secret until June 2022, when the US and Israeli mainstream press leaked information about the possible sale, prompting a storm of criticism from the White House. According to The Guardian, Washington denied that the US intelligence community had ever been "supportive" of the deal. However, this possibility cannot be ruled out, according to Kwiatkowski.

"The outcry of US citizenry and media about illegal and harmful surveillance by the NSO group drove the Biden sanctions; Intel community bureaucrats and their contractors have very different interests, they want to use the most capable (and cost effective) software surveillance and tracking tools out there," she explains.

Kwiatkowski has no doubts that if NSO hacking technology were acquired, it would have been used on American citizens. Furthermore, she does not rule out that "it is already being used, much as before sanctions, and the purchase is in part designed to ensure its use can continue and be expanded."

According to Kwiatkowski, "if left only to lawyers and politicians, this purchase in some form… would proceed and happen, and ultimately serve as a relief from existing sanctions for several aspects of NSO Group's products and services."

Apparently, the "hypocritical and self-serving" deal was slowed down and stopped due to the fact that it was widely publicized, according to the former Pentagon analyst.

Meanwhile, NSO Group is said to be involved in a broad campaign in the United States to get off Washington's blacklist, according to ProPublica nonprofit newsroom and Shomrim, an Israel-based nonpartisan news organization.

"NSO has invested hundreds of thousands of dollars in the past year in payments to lobbyists, public relations companies and law firms in the US, in the hope of reversing the Biden administration’s November decision, according to public records filed under the Foreign Agent Registration Act and conversations with people familiar with the effort," ProPublica and Shomrim reported on 12 July.

Moreover, NSO is currently trying to get the matter raised during a meeting between US President Joe Biden and Israeli Prime Minister Yair Lapid, according to the news organizations.

"So far, the lobbying campaign has generated little response," the report said. "NSO has not been told what it needs to do to remove itself from the list, according to the people familiar with the campaign."