The Bush administration raised the terror alert level to "high" during the 2003 winter holidays on the basis of a fake claim that Al Qaeda was passing messages to agents through a secret code embedded in TV broadcasts, says an investigative report at Playboy magazine.

Aram Roston reports that Homeland Security Secretary Tom Ridge raised the terror alert level to high in December, 2003, based on claims by Dennis Montgomery, the chief technology officer of Nevada-based eTreppid Technologies. Montgomery said he had developed software that could crack secret messages being placed inside transmissions from Al-Jazeera, the Arabic satellite news channel.

The alert level was raised despite serious objections by some individuals inside the CIA, who found the idea of "secret messages" inside TV signals both ridiculous and pointless. Montgomery's secret code was never released; attempts to recreate his results failed; and to this day everything having to do with the secret code-breaking software is classified. Roston reports:

Montgomery claimed he had found something sinister disguised in Al Jazeera’s broadcast signal that had nothing to do with what was being said on the air: Hidden in the signal were secret bar codes that told terrorists the terms of their next mission, laying out the latitudes and longitudes of targets, sometimes even flight numbers and dates. And he was the only man who had the technology to decrypt this code.

Back in Washington, few insiders in government knew where the intelligence was coming from. Aside from Tenet and a select few, no one was told about eTreppid’s Al Jazeera finds. Even veteran intelligence operatives within the CIA could only wonder.

And when some experienced officers heard about it, they couldn’t believe it. One former counterterrorism official remembers the briefing: “They found encoded location data for previous and future threat locations on these Al Jazeera tapes,” he says. “It got so emotional. We were fucking livid. I was told to shut up. I was saying, ‘This is crazy. This is embarrassing.’ They claimed they were breaking the code, getting latitude and longitude, and Al Qaeda operatives were decoding it. They were coming up with airports and everything, and we were just saying, ‘You know, this is horseshit!’?”

First, Montgomery never explained how he was finding and interpreting the bar codes. How could one scientist find the codes when no one else could? More implausibly, the scheme required Al Jazeera’s complicity. At the very least, a technician at the network would have to inject the codes into video broadcasts, and every terrorist operative would need some sort of decoding device. What would be the advantage of this method of transmission?

The terror alert hike of December, 2003, came with one of the starkest warnings the Bush administration ever issued about the possibility of a terrorist attack on the United States.

Homeland Security Secretary Tom Ridge "said the move was the result of a 'substantial increase' in the volume of intelligence pointing to 'near-term attacks that could either rival or exceed what we experienced on September 11,'" CNN reported at the time.

Roston suggests the administration may have been willing to believe the story, despite its improbability, because of Al-Jazeera's image as being an anti-American news source that has at times received statements from Al Qaeda.

Al Jazeera was an inspired target since its pan-Arabic mission had been viewed with suspicion by those who saw an anti-American bias in the network’s coverage. In 2004 Secretary of Defense Donald Rumsfeld accused Al Jazeera of “vicious, inaccurate and inexcusable” reporting.

Roston reports that Montgomery was charged with fraud earlier this year for passing bad checks worth up to $1 million. And, even though the CIA eventually determined that Montgomery's codes were fake, the Nevada businessman continues to do business with the US government, having signed a $3 million contract with the Air Force earlier this year.

Roston further suggests that profit was the motive behind Montgomery's scheme.

The pattern recognition, anomaly detection and compression work were nice, but it was the Al Jazeera stuff—the “noise filtering”—that had cash potential. Even though the CIA had abandoned Montgomery in 2004 after determining the bar codes didn’t exist, he and eTreppid continued to try to sell it.

[eTreppid CEO Warren] Trepp later told a judge in a federal lawsuit that he’d asked the government for $100 million. Montgomery has also cited that figure in sworn declarations—though he also claimed Trepp wanted $500 million for the “decoding technology.”

The report in Playboy adds to a growing body of evidence that terror alerts during the Bush administration were unreliable. Earlier this year, controversy erupted over statements made by Ridge, the former Homeland Security chief, that the terror alerts authorized at the highest levels of the administration may have been "politically motivated."

Ridge also told a Washington forum audience earlier this year that terror alerts were at times raised on the basis of flimsy evidence.