Their spokesagency, NIST, has said that it will be illegal to encrypt on top of Skipjack or to mung the LEEF. Pre-encryption is not mentioned, AFAIK, and would be borderline impossible to detect anyway.

Actually, it won't be illegal, unless they get CONgress to pass some laws, but they may be able to do some contractual constraints on it as part of the process of getting your Skipjack products approved, either through the current process of export approval, or through the approval process described in the proposed FIPS (which basically says "Whatever NSA wants"); they could even place restrictions on selling Clipper chips to unapproved companies. It *will* violate the FIPS, if the FIPS gets approved, so you won't be able to sell SkipJack/LEAF products to the government unless they're capable of operating without post-encryption. That doesn't mean they won't buy dual-mode products that are switchable between secure and FIPS modes, though obviously the politics of the situation don't make that real likely :-) An interesting question is whether the export or manufacturing approval processes will ban the use of Clipper/etc. in programmable devices, either explicitly user-programmable ones, or devices in which the PROMs are easily replaced. It costs a little, but using flash-EPROM in a secure phone would make firmware upgrades easy, and that could include a LEAF-masking option.