THE SOLDIER SPIES

It was the summer of 1989, and plans were in the works for the U.S. military invasion of Panama. But the problem was that the CIA and its agents were not in place to watch dictator Manuel Noriega. There was, however, a spy the U.S. could turn to -- in this case a young man, the son of European immigrants, who passed himself off as an international merchant willing to do business with the pariah regime. Noriega had him over for dinner and intimate talks. (The spy had ingratiated himself by presenting the general with a bust of his hero, Napoleon Bonaparte.) As proficient as he was, the American agent did not work for the CIA. He was a U.S. Army sergeant posted to a top-secret military unit. "They are the agents no one talks about," says a senior Pentagon officer. Now TIME takes an exclusive look at these little-known and, until now, barely supervised secret agents of the Pentagon.

In the past six years, the military has deployed its clandestine units of spies in Panama, the Persian Gulf and Somalia, among other places. The U.S. Army, Navy and Air Force operatives, who number nearly 1,000 (compared with the CIA's 5,000), will be centralized by October under the existing Defense Intelligence Agency, an outfit that for the most part analyzes the data collected by the CIA, the Pentagon's satellites and defense attaches at U.S. embassies. Centralized discipline is designed to correct past problems of rogue agentry and wasteful spending.

The new division of the DIA will be given a bland name: the Defense Humint Service (humint is spy jargon for human intelligence -- that is, information collected by agents on the ground). The CIA will oversee the intelligence targets of this new branch of agents. "They'll send a lot of guys out who just look like military men in suits," sniffed one veteran cia officer. Still, the military's spy operations have delivered crucial intelligence to the Pentagon in the past.

DIA officials refused to be interviewed on the new service. The Pentagon, however, has admitted that it is "retooling" the separate spy programs run by the various services into one system so as to eliminate waste and overlap. Indeed, a huge amount of money is already being poured into military intelligence. While the CIA gets most of the attention, the large majority of America's $28 billion-a-year intelligence budget is consumed by the Defense Department and its expensive spy satellites. (The Pentagon also has 13,000 intelligence analysts, in contrast to the cia's 1,500.)