Norman Hardy says:
I remember hearing an anecdote from a fairly private but unclassified source. According to this source NSA was incensed when IBM first developed Lucifer for banking applications, especially because they published details in a Scientific American article. NSA accused IBM of stealing secrets from NSA thru IBM employees having access to NSA technology as part of their jobs developing hardware and software for NSA. IBM was of course prepared for this eventuality. They quoted an early paper by Shannon suggesting that a mixture of transpositions and permutations would likely produce strong ciphers. This is, of course, the heart of both Lucifer and DES. NSA backed off.
This sounds like an urban legend -- NSA and IBM worked way too closely on the development of DES for this to sound likely. .pm