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Yes, the stock market was falling apart, but up on the seventh floor of CIA headquarters in Langley, Virginia, you could almost hear the sighs of relief Monday thanks to another bit of news: Former top Agency official Kyle Dustin Foggo had quietly entered a guilty plea in an Alexandria, Virginia, federal courtroom. Henry Paulson still has his job cut out trying to rescue the banking system, but Langley’s spymasters had just been spared the imminent prospect of having some of the nation’s most sensitive secrets spilled in what promised to be one of the more revelatory and cinematic trials of the Bush era.

As court documents laid out in 28 charges, the man known to colleagues as “Dusty,” a former logistics officer, served as the CIA’s number three official and effectively day to day manager when he badgered the Agency to hire one of his mistresses, identified in the indictment as “E.R.”: “On or about March 19, 2005,” the indictment reads, “Foggo sent the CIA Acting General Counsel an email stating, in part, that his staff would tag E.R.’s conditional offer of employment as ‘ExDir Interest’ in order to ‘zip her to the top of the pile.'” (E.R. was indeed hired, to a position in the CIA general counsel’s office. “ExDir” refers to Foggo’s position as CIA Executive Director.)

Foggo’s generosity extended beyond his girlfriend: He also, according to the indictment, engineered the hiring of his best childhood friend’s company for a CIA contract to provide bottled water to staff in Iraq at a 60 percent price markup over the offer of another contractor (who, under the deal worked out by Foggo, was hired as the subcontractor to actually perform the work). He was frequently dealt into a weekly poker game at

various memorable Washington hotels (the Watergate was one) popular with congressmen such as Randy “Duke” Cunningham (R-Calif.), lobbyists, and House intelligence committee staff members; as well as—according to other court documents—prostitutes. That childhood friend, Brent Wilkes, also turned out to be among two defense contractors bribing House intelligence committee member Duke Cunningham with tens of thousands of dollars in antiques, travel, fancy meals, house payments, and hookers in exchange for earmarks steering more than $100 million worth of government contracts to Wilkes’ San Diego-based firm, ADCS.

But it wasn’t the hookers, the card games, the water contract, or even the staff mistress that concerned the Agency’s executives when Foggo spared them by entering a guilty plea on a single count of wire fraud Monday. In exchange for the plea, prosecutors agreed to drop the 27 other charges and requested only three years prison time out of the 20 Foggo could have faced. (“Your lawyers did a good job for you,” US District judge James C. Cacheris told Foggo after he accepted his guilty plea, with evident understatement.)

No, what truly worried Agency brass were the darker secrets their former top logistics officer was threatening to spill had his case gone to trial as scheduled on November 3. They included the massive contracts Foggo was discussing with Wilkes, estimated by one source at over $300 million dollars. “Wilkes was working on several other huge deals when the hammer fell,” a source familiar with Foggo’s discussions with Wilkes told me. What kinds of deals? According to the source, they included creating and running a secret plane network, for whatever needs the CIA has for secret planes now that the network it used for extraordinary rendition flights has been outed. “In or about December 2004,” the Foggo indictment says, “Foggo discussed with Wilkes and J.C. the idea that Foggo might be able to get Wilkes a classified government contract to supply air support services to the CIA…. In or about January 2005, Wilkes directed various ADCS employees to begin developing an air support proposal that would be designed to answer the CIA’s classified needs as outlined by Foggo.”

The indictment continues: “On or about February 3, 2005, an employee of Wilkes’ corporation emailed J.C. with an offer to update him on their work developing the air support proposal. …” (J.C., the indictment explains, is Wilkes’ nephew, whom I’ve identified as Joel G. Combs, the nominal head of a Wilkes’ front company, Archer Logistics.) The “classified air support contract” and its implied purposes for renditions are among the truly damaging national security secrets, along with the methods the CIA uses to create front companies and dole out black contracts, that the CIA and Bush White House would have been anxious not to have exposed, especially in a trial set to take place the day before the election in a suburban DC courtroom within a ten-minute drive of the entire national security press corps.

“Greymail” is the term of art for an old legal defense technique employed by those in possession of classified information: The accused and his lawyers will demand the revelation of so many government secrets in order to get a fair trial that prosecutors come under pressure to make the case go away. And in Foggo, the official responsible for the logistics of much of the administration’s war on terror, federal prosecutors met their greymail match. Foggo threatened “to expose the cover of virtually every CIA employee with whom he interacted and to divulge to the world some of our country’s most sensitive programs—even though this information has absolutely nothing to do with the charges he faces,” prosecutors howled in an early September court filing, before they were evidently compelled to extend Foggo the lenient plea deal; Foggo’s lawyers, the filing continued, were attempting to “portray Foggo as a hero engaged in actions necessary to protect the public from terrorist acts.”

The plea deal hasn’t stopped Foggo’s former CIA colleagues from continuing to fume in outrage at Foggo’s behavior, or from pointing the finger at former CIA director Porter Goss for appointing Foggo to the Executive Director position in the first place. “This behavior is not typical of CIA officials,” one former senior CIA operations officer told me. “We all knew him to be sleazy…This is a guy who should never have gotten that job.” Goss abruptly resigned in May 2006 just as federal investigators were raiding Foggo’s office. Foggo is scheduled to be sentenced January 8. His co-conspirator Brent Wilkes is currently serving a 12 year jail sentence in California. Cunningham, a onetime ace fighter pilot who reportedly served as the inspiration for Tom Cruise’s character in Top Gun, is serving out an eight year sentence, the longest prison sentence ever meted out to any member of Congress. Meanwhile Foggo, based on his plea agreement, is likely to leave prison well before a McCain or Obama administration finishes its first term.

Correction: A previous version of this story noted that “E.R.” as described in the Foggo indictment was hired to a “new position Foggo created—deputy director of administration.” In fact, another Foggo mistress, already a CIA staff member, was appointed to the position Foggo had created for her as deputy director of support. That person was eventually removed from the post.