a) It was totalitarian. Early on people were being fired for all kinds of random reasons. (eg. playing a game of minesweeper, not sitting up straight, for making a quick, random call on a cell-phone). The rules were strict and the scrutiny was intense. The only thing that was missing was a heavy-set German woman in a military uniform barking out orders.
b) It was a paranoid work environment. The random firings, lack of adequate communication, and distortions of truth created an atmosphere of paranoia and distrust that never went away. People would constantly comment on how they had to check their cell-phones every morning in order to make sure they hadn't been fired the night before.
--Hiring vast amounts of people, claiming that there was plenty of work, and then firing them only a week later.
--Publicly announcing a project end date, denying it, and then firing over a dozen people on that end date.
--Denying that a "watch-list" existed when, in fact, one very much did exist.
d) Moles and Weasals. While they may have been an effective tool for the agencies and firms to gather intelligence, it engendered an atmosphere of distrust and divisiveness that led to a break-down in good old-fashioned teamwork.
e) Inadequate infrastructre.