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Former CIA senior Clandestine Services Officer Daniel Hoffman on pursuing the "Russian ten"

In this episode of Intelligence Matters DECLASSIFIED: Spy Stories from the Officers Who Were There, host Michael Morell interviews former CIA Senior Clandestine Services Officer Daniel Hoffman about the FBI and CIA's decade-long pursuit of 10 Russian "illegals" living and operating in the U.S. A former Chief of Station, Hoffman tells Morell how a group of Russian intelligence officers came to pose as American citizens all over the country, and spent years stealing secrets to send back to Moscow. Hoffman explains how they were monitored and eventually caught, and details the negotiations that ultimately led to a spy swap with Russia. Intelligence Matters DECLASSIFIED is new series dedicated to featuring first-hand accounts from former intelligence officers. 

Listen to this episode on ART19

HIGHLIGHTS

  • What the FBI knew: "The FBI knew exactly where these 'illegals' were going to be at all times. They had penetrated their communications, and so they were reading their covert, not-so-covert communications. They knew beforehand when these illegals were going to go out and perform operational acts. And so they were able to track everything that the illegals were doing and warn American citizens who otherwise wouldn't have known that they might have been in contact with somebody they should avoid." 
  • Decision to make arrests: "The concern as well that the FBI had, frankly, is that they were really immersing themselves into our society. They were having children who were going to potentially penetrate our government agencies, and it was going to become quite a significant outlay of resources to surveil them all. And so that's I think in the large sense what was motivating the FBI; it's always a zero-sum game. If you're surveilling a bunch of Russian 'illegals,' you don't have as many to to surveil Russian intelligence officers or Chinese intelligence officers or terrorist threats." 
  • Putin's payback: "I think, for Vladimir Putin, he knows that his own government is wildly corrupt and he knows that his people are often thinking about spying on behalf of the United States.  And so he wants to make it clear to them that if they take that risk and they think that they can spy and then be resettled in the West, that their lives are going to be at risk, he's going to find them and he's going to kill them... [H]e wants his own people to know that if they do this, that if they betray him, that he will find them and and take revenge upon them."  

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INTELLIGENCE MATTERS DECLASSIFIED – DANIEL HOFFMAN

PRODUCER: OLIVIA GAZIS

MICHAEL MORELL: Dan, thank you so much for coming on Intelligence Matters, it is it is good to have you with us and it is very good to talk with you again.

DANIEL HOFFMAN: Oh, thanks. It's a real pleasure and an honor to be here.

MICHAEL MORELL: So, Dan, this is the next in our series of what we're calling Spy Stories: Real Stories Told By Real Intelligence Officers. But before we get to that story, I'd love to ask you a couple of questions that aren't really related to the story, but I'd like to ask them anyway. And the first is, how did you end up at the Central Intelligence Agency and how did you end up spending a good chunk of your career focused on on Russia?

DANIEL HOFFMAN: Well, how I ended up at CIA was really because I wanted to serve my country. I have family who had served in the military. We'd been the beneficiaries of the great freedom of opportunity in this country. My grandfather was the first one born in this country; his parents had nothing. He went to public schools, served in World War I, and then he went off to Harvard, Harvard Law School and founded his own law firm. And that really was something that that I thought a lot about as I was looking at a career, I wanted to serve my country. 

And so it crystallized for me when I was earning a Master's degree at London School of Economics in 1986 and I was reading George Kennan's memoirs. And that was what got me really focused on Russia. And when I joined CIA three years later, I was just fortunate that I had the opportunity, first, to learn Finnish and serve a couple of years in Helsinki and then to learn Russian and spend two and a half in Moscow. And then I learned Estonian and served in Estonia. All of that was before 9/11. After 9/11, things got a little bit different for all of us at CIA. But before 9/11, I was really focused to a great extent on Russia.

MICHAEL MORELL: So let me just ask you, Dan, one more question before we get to the story itself. I'd love, since you spent so much time focused on Russia, I'd love your assessment on how you think about the threat that Russia poses to the United States today. When people ask you that, what do you say?

DANIEL HOFFMAN: Yeah, in the big picture sense, I look at Russia almost like a Venn Diagram. There is some shaded space, not a lot, but a little bit – areas which we can collaborate on together, like counterproliferation and counterterrorism. And look at the SpaceX launch, even space exploration, and arms control, very important.

There's also a big area of unshaved space where we can't collaborate because Vladimir Putin is the KGB operative in the Kremlin. And for him, the United States is Russia's main enemy. What scares him the most is democracy, freedom and liberty. He wants his brand of KGB authoritarianism to be perceived as some sort of an equal in stature to the United States.

And he knows that if his own people were allowed the freedom to assemble and the liberty and the democracy that we enjoy in this country – albeit under siege at the moment –  that his rule, his regime security would be at risk. And so that's why he embarked on a real Russia resurgence strategy after seizing power two decades ago, invaded Georgia, launched massive cyber attack against Estonia, invaded Ukraine and annexed Crimea, has interfered in our elections, European elections and reinvigorated Russia's influence in Latin America, in the Middle East. 

So, you know, while we counter Russia and that's important, we also still need to look for opportunities to work together. It's a very dicey, very challenging diplomatic affair, which really has a great role, of course, for the intelligence community as well.

MICHAEL MORELL: OK, Dan, let's dig into the story. But let me start by saying that you're our narrator here, and that we won't be going into detail about your personal role in these events – although I'd say it's safe to assume that anybody who worked on Russia at high levels at CIA, as you did, would have touched this case in some way. But we just can't go into details about that. 

The case, as you know, Dan, but for our listeners, is called Ghost Stories. There is a famous book about the CIA's role in South Asia with that title. But this Ghost Stories is quite different. In this context, Ghost Stories is the FBI code name for a counterintelligence investigation of a group of Russian illegals living in the United States. So let's start, Dan, with what is an 'illegal,' just in general terms, the concept of an illegal: What is it? How do you think about it?

DANIEL HOFFMAN: So an 'illegal' is the Russian term. It's in this case, a Russian intelligence officer operating under nonofficial, rather than the traditional diplomatic, cover. So those intelligence officers, they can't claim immunity from prosecution if they're arrested. They may operate under a false name or have documents purportedly establishing them as a national of the country where they're residing, or from a different country other than Russia. 

The Soviet Union, historically they deployed 'illegals' to the United States to steal our nuclear secrets in the 1930s and 1940s. It's been a real key part of the KGB and their success or intelligence organizations' playbook. Important to note as well, Vladimir Putin was an illegal support officer in East Germany, and so he would consider illegals to be a key arrow in his own espionage quiver.

They're meant as stay-behind to conduct operations in case of  those intelligence officers operating under diplomatic cover being declared persona non grata. Sometimes they're used to run sensitive operations. In the case of the 'illegals' in the United States, the Russian ones, their goal was to immerse themselves deeply in our society and enable close contacts. 

Imagine – to go way back in time – think of Kevin Costner's movie No Way Out, a classic. He was a Soviet 'illegal.' And I would encourage listeners to go back and enjoy that movie. It was extremely well done. 

MICHAEL MORELL: OK, Dan, so walk us through the Russian 'illegals' in the Ghost Stories operation. How many were there? Where did they live? What were their cover stories?

DANIEL HOFFMAN:So these Russian 'illegals,' they were what we would call sleeper agents. They were all born in the Soviet Union. Many of them went to Canada first because that's a common place for Soviets – later Russian immigrants – to go so they could create a legend or a cover story of being Western citizens before their onward deployment to the United States. 

The Russian external – their foreign intelligence service, the SVR, was running these 'illegals.' They all created fictional stories, again, many of them posing first as Canadian citizens. They would often adopt the name of a dead toddler, and they have Russian illegal support officers like Vladimir Putin who would steal birth certificates so that they could build the personas that they needed. And then eventually, travel to the United States, become American citizens and seek contacts with academics and business people and others.

MICHAEL MORELL: Did they roughly come at the same time or did they come over a period of time?

DANIEL HOFFMAN: Right. So they came in at different times and, you know, there were a whole host of them and they settled in different parts of the country.

For example, Cynthia and Richard Murphy – I'm going to use their their alias names rather than their true Russian names. But they arrived in New Jersey in the mid-1990s, and that gave them a lot of time. Cynthia Murphy developed contacts in New York City financial circles and she was trying to cultivate relationships with a venture capitalist who was co-chairing Secretary Clinton's 2008 presidential bid. 

Others arrived at different times. The most notorious of them, Anna Chapman, she arrived much later and she was a little bit different because she was a what we call a 'true name illegal.' So she wasn't operating under alias. That was her true name. 

Although, I can tell you from reading the Russian press, the Russians were referring to her her after she was arrested as 'Agent 90-60-90,' typical of Russia, a misogynistic society. Those were her measurements. So that's how they referred to Anna Chapman.

MICHAEL MORELL: So do we know, Dan, if they were aware of each other or were they operating independently?

DANIEL HOFFMAN: They were not aware of each other. And in fact, the first time that they became aware of each other was after they had been arrested and they were on the flight from New York to where they had been arraigned, from New York to Vienna, where the spy swap took place.

It was on the plane that they all came to meet and know one another. And some of them were more talkative than others. But that's where they all first met each other. It was a network, but for the most part, they they did not know each other.

MICHAEL MORELL: So you touched on this a little bit earlier, but, what was their mission? What did the SVR want them to do?

DANIEL HOFFMAN: So this was the first generation of Russian 'illegals,' and so this generation would make contacts and obtain intelligence, if they could, about protected information, about U.S. business, about our senior government officials. 

Donald Heathfield and his wife, Tracy Foley. They're from my hometown, Cambridge, Massachusetts. Heathfield earned a master's degree, which was later revoked, from Harvard's Kennedy School of Government. Their son, though – their son would have been a US citizen because he was born here and not naturalized. Their son Tim was going to be groomed as a future spy. They wanted him to get a job in one of our security agencies. He had just finished his sophomore year at George Washington University when his parents were arrested.

MICHAEL MORELL: So, Dan, when did the United States become aware of the illegals? And are you at liberty to explain how we became aware that they were here and who they were?

DANIEL HOFFMAN: Yeah. The Russian press has claimed as early as November 2010, shortly after the spy swap, that there was a defector who was responsible for revealing the information about these illegals in the United States.

And much of the press has indeed focused on the fact that – and the FBI has has noted this in their website describing Ghost Stories – that the FBI surveillance of the Russian 'illegals' went on for many, many years. 

And I can tell you, as someone whom the Russians surveilled quite a lot when I was serving overseas, it's extraordinarily difficult to do it without being noticed. And the fact that the FBI was able to do this for so many years is a real tribute to their tradecraft. 

But I can tell you that you don't catch spies through gumshoe work. It takes a penetration of the other side's service to tell you who they are. That's how we caught Rick Ames. That's how we caught Hanssen. And that's how we uncover how the Russians and for that matter, Chinese and others are operating against us.

MICHAEL MORELL: So why didn't the bureau move to arrest them right away? Why did they take so long? Why did they want that 10 years to to watch these folks?

DANIEL HOFFMAN: I think what the FBI believed and probably our intelligence community, writ large, but particularly FBI and CIA, felt like there was a stream of reporting on these 'illegals.' And if the 'illegals' had been arrested, that would have disrupted the stream of reporting. 

And so the idea was to carry on with the surveillance, which allowed for additional collection because presumably the stream of reporting was covering not only what was happening in the United States, but elsewhere as well. You do reach, at some point, a tipping point where it can't go on forever. And then a decision ultimately is going to have to be made about ending the operation.

MICHAEL MORELL: So during the the 10 years that the FBI was watching the illegals, what did they observe? What did the FBI see?

DANIEL HOFFMAN: So imagine – I know you're a football fan. Imagine, you know, you're like my hometown, New England Patriots, and you kind of stole the other team's playbook. The FBI knew exactly where these 'illegals' were going to be at all times. They had penetrated their communications, and so they were reading their covert, not-so-covert communications. They knew beforehand when these illegals were going to go out and perform operational acts. And so they were able to track everything that the illegals were doing and warn American citizens who otherwise wouldn't have known that they might have been in contact with somebody they should avoid. 

They had to be very careful about that. But that's what they were doing. And it was, again, just a very closely-held operation. Very few people knew about it, but expertly run by the FBI, a real tribute to their professionalism with support, again, from from others in the intelligence community.

MICHAEL MORELL: So as far as we know, did the Russian illegals recruit any Americans to work for Russia or not?

DANIEL HOFFMAN. They did not. And they did not have any success of the sort that their predecessors had in the 1930s and 40s when they stole our nuclear secrets. It doesn't mean that they weren't of long-term risk to us, but they did not inflict any damage. Now, part of the reason why they didn't inflict any damage was because the FBI was tracking them so closely. And learning a lot because they were reading all of the 'illegals'' communications back to SVR center; imagine the value of that.

MICHAEL MORELL:  So, Dan, why do you, in addition to having the FBI watch them, I've heard people say that their operational tradecraft was pretty weak. Would you agree with that?

DANIEL HOFFMAN: I think it was – I've heard people say that as well. I think they were at times lazy and I don't think they ever expected that anyone was interested in what they were doing. Their cover was so deep. How could anyone care? 

It's a good lesson for intelligence officers because you've got to use the best tradecraft you've got and always assume that if you don't, you'll be running a risk to your operations. So they did make some mistakes and they were caught making errors of judgment, that's for sure. But at the same time, they were using some fairly advanced communications techniques back to SVR center.

And I think that if you ask the FBI, 'Would you have known about these 'illegals'? Would you have caught them without some intelligence reporting stream tipping you off?' I think they probably would say, honestly, no, they wouldn't have spotted them. So there's something to be said about that, too.

MICHAEL MORELL: So then something just to take the story forward here. Something then happens in mid-2010 that changes the dynamic. So just watching them is no longer the best option. What happened?

DANIEL HOFFMAN: Well, there was always an ongoing discussion about when these 'illegals' are going to be arrested. They are, after all, 'illegals,' and operating illegally in the United States. And so eventually the end of this operation is going to be arrests, DOJ arrests. And there was always a lot of interagency discussion about when that should happen. And I can't go into all the sensitive details about that – but imagine that your stream of reporting on the illegals at some point needs to be brought to a close. And that's about the time you start thinking about making the arrests of these illegals. 

The concern as well that the FBI had, frankly, is that they were really immersing themselves into our society. They were having children who were going to potentially penetrate our government agencies, and it was going to become quite a significant outlay of resources to surveil them all. And so that's I think in the large sense what was motivating the FBI; it's always a zero-sum game. If you're surveilling a bunch of Russian 'illegals,' you don't have as many to to surveil Russian intelligence officers or Chinese intelligence officers or terrorist threats.

 And the other thing that the FBI considered was that the specific timing was based, I think, mostly on the fact that the illegals, many of them, were going to be leaving in the summer on vacation. And this was the time, June 27, when they all happened to be in their homes in Boston, New Jersey, New York and Northern Virginia when the FBI could arrest them all on the same day, on a Sunday, without risking anyone fleeing.

MICHAEL MORELL: You know, this is where I first enter the picture, Dan. I had just become the deputy director of the agency in April of 2010, and that's when I was first briefed on the case. In fact, I was briefed by some of your colleagues.

They would not even do it in my office. I had to be taken to a special room at our headquarters. I know you know that room well. And then I was involved in the policy discussions in The Situation Room with Director Panetta.

And I was a bit surprised that the discussions were not as straightforward as I thought they were going to be. There was concern on the part – and you'll remember this – there was some concern on the part of policymakers that making the arrests could upset our reset with the Russians, which the Obama administration was pursuing at the time.

In fact, then-Russian President Medvedev was scheduled to visit the U.S. in mid-June. And this got all wrapped into the policy discussions. Can you comment on that?

DANIEL HOFFMAN: Yeah, that's absolutely right. The Obama administration, rightly so, did not want their reset policy to suffer any collateral damage. And that was one reason why, if you arrest the 'illegals,' the last thing you're going to do is, is keep them in jail and perpetuate a bad situation. The way out of that was a swap. 

I can't go into too many details; I can tell you that I was involved in those discussions and what I emphasized, particularly to my colleagues in the State Department, was that there was no other option but to make these arrests. But the way to avoid collateral damage was to allow us to handle it in an intelligence channel, and do so without public scrutiny, which could potentially have an impact on our bilateral relationship. We actually solve quite a lot of problems in our intelligence channel – I'll get to more of that later.

But we could do this quickly and find an elegant solution. And again, if reset was not going to succeed, it would be because of the KGB operative in the Kremlin, Vladimir Putin's nefarious policies, not because of the spy swap or because of anything that we might not have done as well as we should have.

MICHAEL MORELL: So back to the Sit Room, just to keep the story going here. So the FBI Director at the time, Bob Mueller, and our director, Leon Panetta – with huge support, I should say, from Tom Donilon, the National Security Adviser – really carried the day in this argument about what we should do. 

And Panetta, a great, great director, he argued that not to act would have been irresponsible and that the bilateral relationship could absolutely take the hit of the arrests. And he tabled the idea of a swap because you guys had prepared him for that. And that made the whole thing more palatable to the folks in the room. So President Obama made the decision that the arrests would happen after Medvedev departed Washington, and that's where you kind of pick it up here.

So, Dan, can you tell us tell us what happened on the day of the arrests? Did they all go smoothly? What were these folks charged with and why were there no espionage charges?

DANIEL HOFFMAN: Yeah, so, the arrests all went smoothly that day; Anna Chapman's arrest was a little bit tricky and listeners can read about it.

She was – the FBI actually tracked her and did a fantastic job of getting her to implicate herself. And it's a good story to read. But the 'illegals' were charged with money laundering and failing to register as agents of a foreign government. There were no charges of espionage, which would have required – it's a very tough thing to prove. And I think the last thing that that the FBI would have wanted to do was to have to present evidence in that sort of a case.

And again, the ultimate goal, keeping our eye on the prize, was not to hold the 'illegals' for any longer than we needed to, it was to send them home to Russia and in return, get the freedom four Russian citizens who were being held in Siberian labor camps.

MICHAEL MORELL:  So you mentioned, Dan, that this was kept in intelligence channels, that the next step in the process, once they were arrested, was for Director Panetta to actually call his counterpart in Russia. 

And I happened to be in the room, along with some of your colleagues. And the conversation went something like this: The Director said, 'Mikhail, we have arrested a number of people, as you saw in the press, and those people are yours.' 

And I remember there was a very long pause on the other end of the phone. And then Panetta's counterpart comes back and says, 'Yes, they are our people.' 

Panetta then said, 'We're going to prosecute them. And if we have to go through with the trials, it's going to be very embarrassing for you.' 

And then there's another long pause. And Panetta, his counterpart, Fradkov, says, 'What do you have in mind?' 

And Panetta says, 'You have three or four people that we want. I propose a trade.' 

And Fradkov, as I remember, did not agree immediately, said he would get back to Panetta, but then he eventually did. And I'm wondering from you, what do you think happened back in Moscow after that phone call from Panetta? How did that play out in Moscow, do you think? I know we don't know.

DANIEL HOFFMAN: So, the Russians were faced with a lot of shock and awe. I mean, first, all the 'illegals' were arrested and it was only a day or two after that when Director Panetta was on the phone with with his counterpart, Fradkov. 

And I think that when the Russians looked at this, their overriding goal was to get their 'illegals' home. It's bad press for them. They're concerned about the 'illegals' talking. They didn't know at the time that the FBI had been tracking the 'illegals' as closely as they had for 10 years. And so they're nervous about what the 'illegals' might be giving up.

And they want them home, and they want them home right away. And so I don't think there was much doubt but that the Russians were going to accede to these demands. It was always a question about whether they would agree to the whole swap to give us four of their own citizens in return.

But I think that they saw that there was no other option. And I think you're 100 percent right about Director Panetta; I never worked for for a better director. And he's a very convincing person. He's also a very genuine and an honest person. And it's important to note that he had been to Moscow in May of that year and established a personal relationship with Fradkov that he later used to his advantage.

MICHAEL MORELL: Dan, tell us what you can about the four individuals that we wanted in exchange for the 'illegals.'

DANIEL HOFFMAN: So after the the Russian 'illegals' were arrested, our Deputy Director for Operations, Mike Sulick, phoned his British counterparts and decided that he would let them know that there was an opportunity for us to to retrieve some of their contacts as well. And so we included a couple there who were in contact with our British partners.

One was Igor Sutyagin, who was an arms control researcher at a thinktank in St. Petersburg, arrested in 1999 and given 15 years of hard labor. He never provided anything but open source information to a British consulting firm, which was obviously passing it to British intelligence. But just open source, nothing more than that. But Putin used him as an example. 

The second person for whom we traded was Sergei Skripal, very famous person, a colonel in the military intelligence, the GRU. He, folks might remember, was poisoned in 2018, he and his daughter, Yulia, with the Soviet nerve agent, Novichok, in Salisbury, England. He's recovering from that attack and is remarkably still alive.

The other two, Alexander Zaporozhsky, who was an operative in Russia's foreign intelligence service, sentenced in 2003 to eighteen years of hard labor. And the last was Gennady Vasilenko, who was never a recruited agent, but someone that Russian intelligence really kind of wanted to take some revenge against him.  He's an interesting guy. He's very tight with Robert De Niro and has been in some of De Niro's films, believe it or not. 

But those were the four we were able to to get out of harm's way.

MICHAEL MORELL: So, Dan, once the Russians agreed to the swap, it became mostly about the operational logistics of that. But one of the issues were the kids who did not know their parents were Russian citizens and spies. Many of them wanted no part of going back to Russia, many of them who were actually born in the United States and were U.S. citizens. How was that ultimately resolved?

DANIEL HOFFMAN: It was hard on the kids and the FBI and our government took great pains to ensure that the kids were taken care of after the arrests of their parents. Many of them, you're right, didn't even speak Russian, had no idea that their parents were from Russia. Some of them had flown back to Russia with their family and with their parents and had taken vacations there and were aware, but most of them were not. 

They were all sent home; done so with greatest care and respect for their humanitarian rights, human rights. And they were the ones who suffered from this operation, from Russia's perspective. I mean, the kids were just pawns, I would say, in Vladimir Putin's espionage game.

MICHAEL MORELL: Right. So the spy swap itself takes place, of all places, in Vienna. Tell us about that. What was it like?

DANIEL HOFFMAN: So imagine you've got one plane full of these Russian 'illegals' who had never met each other, and there are US government officials on that plane traveling to Vienna, and then you've got another plane coming from Moscow with the four Russians who were being traded: Zaporozhsky, Vasilenko, Sutyagin and Skripal, 

And this was not quite like a Checkpoint Charlie or anything like that, but rather on the tarmac where the Russian 'illegals' walked out of the plane, their plane, and the Russian citizens walked out of their plane. And they were escorted to their new planes to go off and have a – you know, in the case of the four individuals – they were going to have a new life in the United States or in the UK. And then the Russian 'illegals' all went home and Vladimir Putin made a point of spending time with them and singing songs with them and thanking them for their patriotism.

I think he did that for public relations reasons. This was a major problem for Fradkov as the head of the SVR. He didn't last long.  I think when Vladimir Putin saw that it was OK, it was time, he removed him. And Fradkov is now running a thinktank. 

But it was an emotional moment because I think that the US government officials, for example, never expected to see Zaporozhsky again, or Vasilenko, and our British colleagues, certainly never expected to see Skripal again. And when your sources are in harm's way, you do everything you can to get them out. But, my goodness, when they're in Soviet-style labor camps in Siberia, it's a tough place to to gain their freedom.

MICHAEL MORELL: So, Dan, this has been amazing. And I just want to ask you one more question, and you've already made reference to it. And that was, even though we had a deal here, a deal to swap 'illegals' for folks that we wanted, that wasn't the end for Putin. He actually tried to kill one of the four. You talked about that. And maybe he's not done yet getting his revenge. Maybe he has not forgotten, as yet. How do you think about that?

DANIEL HOFFMAN: I definitely agree with you. I think, for Vladimir Putin, he knows that his own government is wildly corrupt and he knows that his people are often thinking about spying on behalf of the United States.

And so he wants to make it clear to them that if they take that risk and they think that they can spy and then be resettled in the West, that their lives are going to be at risk, he's going to find them and he's going to kill them. 

That's why, look, they could have tried to kill Sergei Skripal in any one of a number of ways that left no footprints. But Putin purposely used a nerve agent so there would be footprints leading all the way back to the Kremlin. And he wants his own people to know that if they do this, that if they betray him, that he will find them and and take revenge upon them. 

And I don't think Vladimir Putin would would hesitate to do that on U.S. soil either. That's how he stays in power. It's ruthless. But remember, that's where he came from in the KGB.

MICHAEL MORELL: Dan, thank you so much for joining us today. This has been an amazing story and thank you for sharing it with with with our listeners. 

DANIEL HOFFMAN: My pleasure. Thank you.

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