Internal watchdog says State Department mishandled Iran envoy’s clearance

In at least one case, State took actions to spare Rob Malley from “potential embarrassment.”

By Nahal Toosi

State Department officials failed to follow standard procedures when suspending the security clearance of Iran special envoy Rob Malley, leading to “significant confusion” about what work he could do, an investigation has found.

In some instances, the confusion “likely led” Malley to engage on topics “outside the limited scope of issues on which he was authorized to work,” according to the investigators’ report.

Malley may have, for example, participated in a conference call before he was aware his clearance had been suspended, and he may have had access to sensitive emails.

The findings by the State Department Inspector General’s office — whose report was first obtained by POLITICO — are likely to deepen the mystery around Malley, a controversial Washington figure who has been the subject of an FBI criminal investigation involving his handling of classified information.

The report also could heighten Republican criticism of the State Department given how many in the GOP view Malley as too friendly to Iran’s Islamist regime.

Malley’s security clearance was suspended more than a year ago, and he has been on indefinite leave. The FBI probe includes looking into whether Malley moved classified information onto his personal email, where it may have fallen into the hands of a foreign actor, people familiar with the issue have told POLITICO.

That could include a hostile state, such as Iran, or a cybercriminal network.

Malley has denied wrongdoing.

The report, which was sent to Capitol Hill on Wednesday, does not delve into or judge what led to Malley’s security clearance suspension or the FBI probe. It also says the inspector general’s investigators found no evidence that Malley “engaged in classified matters” after he was told his security clearance was suspended.

But the report lays out potential missteps by State Department officials who imposed the clearance suspension on Malley, some of whom said they believed his case was a minor one that would be quickly resolved.

A State Department spokesperson said Wednesday that the department agrees with the recommendations the inspector general made to prevent such situations in the future, reiterating its formal response included in the report.

The department “will begin taking steps to implement them into our standard processes, to the extent we haven’t already done so,” said the spokesperson, who was granted anonymity to discuss a personnel matter.

The report notes that the department lacked formal procedures for dealing with the security clearance suspensions of political appointees such as Malley, who had a Top Secret clearance. The department does, however, have procedures for such situations involving civil servants and Foreign Service officers.

Those procedures — which are nearly identical for the two employee groups — set a standard that was not always followed in Malley’s case.

Diplomatic Security officials notified Malley of his clearance suspension one day later than originally intended. That meant Malley may have been able to participate in a classified conference call with White House officials — after the suspension was approved but before he was told about it.

Diplomatic Security officials, in an atypical move, decided to notify Malley in person to spare him from “potential embarrassment” given that the usual process would have been less discreet.

The original plan was to tell Malley on April 21, 2023. But a top official with Diplomatic Security asked the notifiers to hold off until senior State Department officials were told that Malley’s clearance was being suspended. They did not get the green light to hand over the notification to Malley that day, but were able to do so the next day, April 22, 2023.

The classified call took place on April 21, 2023. The inspector general’s investigators were unable to definitively confirm that Malley actually participated in that call. But there were multiple indications, such as data from the use of his badge, that he had participated.

On Wednesday, Malley told POLITICO that he had not seen the inspector general’s report and could not comment on it. “I offered to cooperate with the inspector general’s investigation, but they did not take me up on my offer and never contacted me,” he said.

The inspector general’s office did not interview Malley. The report gave two reasons for that: Malley was not the subject of this particular review, and the office “sought to avoid interfering with other investigations.” It did not specify which other investigations it was referring to.

Parts of the inspector general’s report were redacted at the request of the State Department, for reasons such as sensitivities involving law enforcement.

Broadly speaking, the State Department has two information systems to which its employees have varying levels of access: a classified system and an unclassified system.

But the unclassified system includes material that is designated “sensitive but unclassified.” This is information department leaders prefer to keep out of the public eye, such as memos summarizing internal debates about a particular policy, or longer versions of strategies that are partially made public.

On April 26, 2023, the department restored Malley’s access to the unclassified system, even though such material was off-limits under the original terms of his suspension and even though the material could contain “sensitive but unclassified” information.

Department officials justified that move by saying they worried that, without access to his work email, Malley would use his personal email “as his primary means of conducting government business,” despite the fact that doing so is not allowed.

The top Diplomatic Security official, who signed off on restoring Malley’s access to the unclassified system, said he “did not consider access to [sensitive but unclassified] information.”

One reason for the haphazard response from State officials was Malley’s unusual position: He’s a political appointee who, on paper, reports directly to Secretary of State Antony Blinken, but the secretary doesn’t oversee his day-to-day work.

While there are rules for how to deal with the security clearance suspensions of civil servants and Foreign Service officers, there isn’t a set procedure at the department for someone like Malley, the report states.

As top department officials mulled Malley’s situation in late April 2023, they determined that because he was neither a civil servant nor a Foreign Service officer, he could go ahead and keep working “as long as the work dealt only with unclassified matters,” the report states.

Those matters included, for example, communicating with the relatives of Americans detained in Iran.

But the decision to allow Malley to keep working with a suspended security clearance spawned more problems.

It wasn’t always clear what work Malley was allowed to do. And because many people he interacted with inside the Biden administration didn’t know his security clearance had been suspended, there was always the danger that they’d discuss classified matters with him.

Some of the top State Department officials who agreed to this set up appeared to believe the case was not very serious. One told investigators he thought the security clearance suspension “would be short-lived and the matter resolved quickly.”

Several top State Department officials thought others were in charge of determining what work Malley could or couldn’t do following his security clearance suspension.

“In reality, [the inspector general’s office] could not identify any department official who decided what Special Envoy Malley could work on or who monitored his work during the period in question,” the report states.

“While Mr. Malley had little oversight prior to the suspension of his clearance, the degree of supervision actually decreased following the suspension, which significantly increased the risk that he could participate in discussions inappropriate for someone lacking a security clearance.”

Republican lawmakers in particular have expressed puzzlement as to why Malley was not immediately placed on full-time leave when his clearance was suspended in April 2023, and some said the department should have told Congress sooner and more clearly about Malley’s exact status.

Investigators noted that they “found no evidence that [Malley] was engaged in classified matters following April 22, 2023.” They also noted that he did not return in person to the State Department’s headquarters after that date, but conducted work remotely, such as via email.

But they did find “evidence that Mr. Malley regularly communicated with White House officials and was kept apprised about secure telephone calls and meetings with a wide range of agencies, including the Central Intelligence Agency, the Office of Director of National Intelligence, and Departments of Defense, Justice and Treasury.”

On May 25, 2023, he was included on an email from a senior State Department official about providing some talking points for Blinken. That official said she didn’t know his clearance had been suspended. In other cases, Malley was blind-copied on certain emails.

“Multiple department employees interviewed by [the inspector general’s office] stated that they had heard, and believed, that he was just on personal leave. Others were not sure what his status was but believed it was important to include him on communications even if it meant doing so by bcc’ing him on emails,” the report states.

According to the report, one employee told investigators that Malley had “attended a private dinner party that included U.S. government and foreign government officials who later became upset when they learned that his clearance was suspended at the time of the dinner, but they had not been informed.”

One person who apparently kept Malley at arm’s length after his clearance was suspended was the Secretary of State, who has known Malley since childhood.

According to the report, Blinken’s chief of staff “ensured that [Blinken] did not engage with Mr. Malley after his clearance was suspended, because the secretary wished to recuse himself from engaging on Mr. Malley’s situation given their longstanding personal acquaintance.”

Among those who had to ask for clarity from senior department officials on how to interact with Malley was his own deputy, who was told not to mention Malley’s security clearance suspension to others due to privacy concerns.

Malley continued to work with limited access to data systems until June 29, 2023. That day, he was told he was being put on indefinite leave without pay and had to cease all his work.

News was emerging about his security clearance suspension at the same time —reports by CNN, POLITICO and others were the first time some State Department officials became aware his clearance had been suspended.

But department officials have said the media coverage was irrelevant to their decision. Rather, according to the inspector general’s office, “they realized that Special Envoy Malley’s suspension was unlikely to be resolved quickly, so the original solution of him performing only unclassified work was untenable.”