The search giants collaborated with the feds after 9/11 on an electronic intelligence program.

By Tory Newmyer, writer

FORTUNE -- Google and Yahoo -- and the other tech giants stung by the recent news of their participation in government surveillance programs -- are in the midst of a public-relations offensive to steady suddenly wobbly reputations.

They're sounding a commiserating note, insisting they're just as confounded and concerned as many Americans by the reported extent of the feds' reach. And indeed, the New York Times, among others, has reported that the companies resisted government requests for information on their users on at least a few occasions.

But if Google (GOOG) and Yahoo (YHOO) are as frustrated as they sound with the sprawl of the post-9/11 surveillance regime, at least they can say they got front-row seats to its launch. Two months after the 2001 attacks, Google co-founders Larry Page and Sergey Brin, Yahoo co-founder David Filo -- along with venture capitalist Marc Andreessen and a handful of other Silicon Valley heavyweights -- jetted to Washington for a meeting at the still-gaping Pentagon.

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The all-day session focused partly on the government's own exposure to cyber-snoops, with the tech luminaries offering their assessments. Dan Farmer, a cyber-security pioneer in attendance, says he was frank after hearing a presentation that put hard numbers to detected breaches of the Pentagon's network. "It was an absurd presentation," says Farmer, whose claim to fame at the time was having created one of the first scanners to assess a network's vulnerability -- called the Security Administrator Tool for Analyzing Networks, or SATAN. "You can't have that much certainty, particularly with the Defense Department. The idea that they had these precise metrics was laughable."

To meet that challenge, Farmer says, the Google cofounders were "flogging their new appliance. It was a little server you could put in your network and Google inside it. They thought if the government knew more about what was out there, and what was more easily accessible, they could get a better sense of what was going on."

The Pentagon huddle was a collaborative effort by John Kasich, a former Republican congressman then working for Lehman Brothers, and venture capitalist Mark Kvamme, then a partner at Sequoia Capital. (Fortune first mentioned the meeting last summer in a profile of Kvamme, who moved to Ohio to help Kasich, now governor of that state, engineer an economic turnaround.) To make the meeting happen, Kvamme recruited the tech leaders, and Kasich pitched the idea to top military brass.

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Kvamme, the son of Silicon Valley icon Floyd Kvamme, recalled sitting across from then-Defense Secretary Donald Rumsfeld and explaining, "My father was a founder of National Semiconductor, and I'll never forget when I was a kid how Silicon Valley and the government, NASA, worked together to put a man on the moon. In today's world, we do everything possible to stay away from the government. We don't want to work with you guys, because it's terrible." Rumsfeld responded, "Let's go change that."

They weren't just talking about building up Defense's defenses. More significant, the military wanted to squeeze the tech industry's brightest for help as they began a very different kind of war against a stateless enemy. The meeting launched a classified project for which the Silicon Valley chieftains scouted emerging technologies with potential military applications and reported them to military and intelligence agency leadership.

The point was to end-run the lengthy bureaucratic process of identifying a need, designing a solution for it from scratch, and then bidding it out. "Innovation doesn't happen through 18-month RFPs," one participant said. "This was about real-time problems and getting people who had incredible ideas in early-stage companies together with the people who were trying to save our country." For the next three years, the group would reconvene in Washington and pitch promising innovations to representatives of the military branches, as well as the FBI, CIA, and NSA.

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The industry participants themselves say they don't know the full scope of what the effort yielded, because they were largely cut out of the loop after they presented. It is not clear how much Brin, Page, and Filo participated beyond the initial meeting. Kvamme said the Defense Department wound down the project once lawmakers got wind of it and wanted to subject it to Congressional oversight. It relaunched in 2006 under the moniker "Defense Venture Catalyst Initiative" -- DeVenCI for short -- but the founding members didn't rejoin. "The minute they gave it an acronym and made it part of the whole thing, we just said, 'This isn't going to work,'" Kvamme told me last year. "I just saw the writing on the wall. It wasn't going to be what it had been."

A spokesperson for Google declined to comment. A Yahoo representative had not responded to requests for comment at press time. A Pentagon spokesperson says DeVenCI wound down in September of last year, after spending cuts eliminated the program's $4 million annual budget.

What to make of this history in light of the recent disclosures about the NSA's PRISM program? There's a major difference between tech executives recommending new capabilities -- whether their own, their peers', or from their investment portfolios -- and secretly handing over users' personal data and communications. And as we're learning, the relationship between Silicon Valley and Washington has grown much more complicated as the intelligence agencies have increased the pressure on industry to cooperate. Tech executives may no longer be flying themselves across the country to volunteer their help, but it is worth noting the roots of the collaboration are both deep and lengthy.