U.S.News & World Report CHINA DOLL Katrina Leung was a temptress, beguiled by the world of intrigue, but was she an agent of influence for Beijing, as prosecutors now charge?

By Chitra Ragavan explained: A Chinese-American woman working as an intelligence asset for an fbi agent in Los Angeles had hen I. C. Smith and Bill Cleveland tipped off the mss about their trip. Smith was dumb- stepped off the plane in Beijing on Nov. founded. But he put the matter aside, assuming the fbi 30, 1990, nothing prepared them for would can the woman for the security breach: “I as- the reception they were about to re- sumed she would be closed as a source.” W ceive. The two fbi agents had been dis- She wasn’t. It was not until more than 12 years later, patched to assess security at the American Embassy, in fact—in April of this year—that the source of the leak a low-profile assignment. But from the moment they was finally arrested. According to the fbi, she is Kat- arrived, Smith and Cleveland were placed under heavy rina Leung, a prominent Chinese-American bookstore surveillance by the Ministry of State Security, China’s owner, business consultant, and Republican fundrais- kgb. “They were covering me,” Smith recalls, “like er. The fbi now says that Leung, in addition to her a blanket.” many other accomplishments, was a top-drawer Chi- It was as if the mss knew who the agents were. Smith nese spy. A key source of the secrets Leung allegedly finally understood why five months later, when Cleve- purveyed to her Chinese handlers, prosecutors allege, land called him from San Francisco. “I.C.,” he said, “they was the Los Angeles fbi agent who recruited Leung knew we were coming, even before we left.” Cleveland in 1982 and handled her until he retired in November

38 November 10, 2003 ERIC GRIGORIAN—POLARIS FOR USN&WR

10SPY8(1) DARREN 2588 JENN 2303 38 1ST PROOF After her day in court in Los Angeles last month, Leung exits, calm but beaming.

2000. That would be James Smith, known to friends in April after the fbi notified the lab that Cleveland was and colleagues as “J.J.” The fbi has arrested Smith, 59, under investigation and the lab revoked his clearances. a supervisory special agent on a Chinese counterespi- Lab spokeswoman Susan Houghton says a “cursory” in- onage squad in L.A., saying he had an intimate and vestigation shows “no cause for concern” that Cleveland unauthorized relationship with Leung, 49, for more compromised nuclear secrets. The fbi has made sim- than 18 years. For at least 12 of those years, according ilar assurances to the lab. to court papers, Leung stole classified intelligence in- As intelligence debacles go, they don’t get much formation from Smith and passed it on to her handlers messier than this. But even with its many salacious an- in China. Complicating matters further, the fbi alleges gles, the Leung case captured scant public attention last that Leung also conducted at least a seven-year affair spring as the war with Iraq loomed closer. U.S. News with Cleveland. Now 60, Cleveland was a supervisory has conducted an extensive review of the case since special agent who worked out of the bureau’s San Fran- then, examining hundreds of pages of court records and cisco field office, on another Chinese counterespionage interviewing more than a dozen current and former squad. Cleveland has not been charged and is cooper- counterintelligence experts. The review reveals a sys- ating with the Leung investigation. After he retired in temic failure of security procedures and a stunningly 1993, Cleveland became head of security at Lawrence free-and-easy pattern of access by Leung to some of the Livermore National Laboratory. He resigned that job nation’s most highly secret intelligence operations. The

November 10, 2003 39

10SPY8(2) DARREN 2588 JENN 2303 39 1ST PROOF Special Report security breaches were also at least partly Both Smith and Leung have the result, sources say, of the fbi’s failure pleaded not guilty to the to commit anywhere near the same kinds charges lodged against them. of resources to its China counterintelli- Both are free on bail, pending gence program as it did to its Soviet, and trial next year. Prosecutors then Russian, counterpart. fbi managers preparing the case say Leung compounded those problems, govern- has “a long history of lies and ment officials say, by failing to ensure that deception,” noting that the the bureau stopped using Leung as an fbi paid her over $500,000 asset in April 1991, after it learned that she for her information-gathering had tipped Chinese agents to the Beijing services. One of Leung’s at- visit by the two fbi agents. torneys, Janet Levine, coun- “Reliable.” That’s when Cleveland lis- ters that Leung never passed tened to an audiotape provided by an- anything on to the mss “with- other Chinese asset and recognized out the complicity and knowl- Leung’s voice as she told the Chinese edge of this fbi.” She said the about his trip, according to court fbi fed Leung documents to records. He alerted J. J. Smith, who flew give the mss because the bu- to San Francisco to discuss the matter reau had deliberately set her and became “visibly upset.” Both men up as a . “We are flew to Washington to broach the issue confident,” Levine says, “that with officials at fbi headquarters. Nei- the evidence will show that ther man, however, appears to have told Katrina Leung is and has been the fbi that he was having sexual rela- a patriotic, loyal American.” tions with Leung. Indeed, fbi sources After her arrest, Leung’s fam- say, neither knew of the other’s rela- ily issued an angry two-page tionship with her. Smith returned to Los statement accusing the fbi of Angeles and spoke with Leung about a blatant “double standard.” her contacts with the mss. She admit- The statement said: “Their ted it, prosecutors say, adding that the people in Washington are or- Chinese knew she was an fbi asset. chestrating things to protect Smith suggested that Leung take a poly- their own,” adding that “they graph, but she declined. He didn’t press blame the nonagent and the foreign- people he was sworn to protect.” Smith’s the issue. Cleveland, court records say, born, especially the Asian, especially the attorney, Brian Sun, told U.S. News that “relied” on Smith to resolve the prob- woman.” his client “had every reason to believe lem; Smith assured him he had. In fact, Given the nature of the allegations, the that [Leung] was a valuable asset to the he did nothing of the kind. Instead, Leung case is apt to set a new record for United States based upon the informa- Smith made Leung apologize to him and finger-pointing. “It’s a sad day for the tion and the services she provided.” Cleveland, then filed the first of at least fbi,” the bureau’s director, Robert Mueller did not mention the other 19 evaluation reports stating that Leung Mueller, said after the arrests. “Smith fbi agent, Cleveland, who was involved was “reliable” and that she had passed a not only betrayed the trust the fbi with Leung. The fact that he has thus . placed in him; he betrayed the American far avoided any legal repercussions as

DOUG MILLS—CORBIS BETTMANN ment asked Chin to help A SPY WHO CHANGED HISTORY interrogate Chinese pris- oners for the U.S.-allied ll he ever wanted was Richard Nixon’s secret deci- forces in Korea. Chin for U.S. and Chinese sion to re-establish diplomat- promptly sold the Chinese A leaders to get along; ic relations two years before government the names of that’s what Chinese spymas- Nixon’s historic visit to Chinese prisoners who ter Larry Wu-Tai Chin China, and it leveraged key were anti-Communists. claimed was his raison d’être concessions. The North Viet- China responded by de- for almost 40 years of spying namese likely benefited from manding the forced repa- for China. Chin, a cia trans- the secrets that China for- triation of all Chinese lator, analyst, and document warded from Chin during the prisoners as part of nego- control officer, may have Vietnam War. tiations to halt the fight- been the most damaging Chin’s spying career began Wu-Tai Chin ( left), heading to court ing. Experts believe Chin’s anti-U.S. spy ever; he sold in 1948 when he joined the treachery delayed the end bushels of U.S. secrets to U.S. Consulate in Shanghai mission roommate intro- of the Korean War for more China, altering the course of as an interpreter, after a stint duced Chin to a Communist than a year. history. The Chinese govern- at a U.S. military mission in official, who recruited him. Also in 1952, Chin joined ment knew about President southern China. A former In 1952, the State Depart- the cia’s Foreign Broadcast

40 U.S.News & World Report, November 10, 2003

10SPY8(3) DARREN 2588 JENN 2303 40 1ST PROOF/COMP Leung and J. J. Smith watch George W. Bush’s inaugural parade on Washington’s Pennsylvania Avenue from a reviewing stand for VIPs.

evidence of deception. When management failures and will, eventu- Cleveland was in charge of se- ally, issue a report. curity at Lawrence Liver- The Leung saga may offer the trap- more, however, he was poly- pings of a dime store spy thriller, but be- graphed and asked, among neath the sordid details is one very other things, whether he had sobering prospect: Katrina Leung and had any contacts with foreign her two G-man lovers might just possi- agents. Cleveland, sources bly have blown two decades of intelli- say, aced the test. Prosecutors gence work on China sky-high. The say Cleveland lied repeated- mandatory damage assessments are al- ly to fbi agents in interviews ready underway, nearly a dozen in all, by this year about the length of the fbi and a handful of other alphabet- his affair with Leung; it was soup agencies. Among the classified doc- not until his fourth interview uments fbi agents found in Leung’s that Cleveland admitted the home was a journal written in Chinese relationship had gone on and with English words interspersed, such off for at least seven years— as “military double agent,” “rocket not three, as he first stated. knowledge,” and “U.S. Airforce.” In court Circus. The feds, evidently, papers, fbi Special Agent Randall are in a bit of jam with Cleve- Thomas explained that the fbi conducts land. They found no docu- “double agent” operations with the U.S. ments in Leung’s safe that military and Air Force to assess the ca- trace back to him. And they pabilities of foreign militaries like may need him as a potential China’s. In such operations, the United witness, albeit one with some States “feeds” a knowledgeable military major credibility issues. “They member to the mss and controls his or think they need him to get her actions. Thomas quoted a senior fbi Smith or Leung,” a counterin- official, Bruce Carlson, as saying the bu- a result of the relationship doesn’t sit telligence source says. Whatever the rea- reau used information provided by well with some in Washington’s close- sons for the government’s decisions to Leung to deter China’s efforts to steal knit counterintelligence community. A date, “there’s no doubt,” says a veteran U.S. military technology. If Leung’s “in- senior fbi official says that “there’s no counterintelligence official, “that the formation” actually came from Chinese indication” Cleveland gave Leung se- brotherhood is trying to help Cleveland security agencies, the entire fbi exercise crets, adding that the relationship was and throwing Smith to the wolves.” The was, in all probability, a sham. “The fbi “strictly sexual,” and confirmed that Justice Department’s inspector gener- must now reassess all of its actions and Cleveland recently submitted to a poly- al, meanwhile, sweeping up behind the intelligence analysis based on her re- graph exam about the nature of his in- elephants in this three-ring circus, is ex- porting,” said Carlson, adding that volvement with Leung, which found no amining the seemingly endless series of Leung may have “thwarted or compro-

Information Service office in Special Agent I. C. Smith. who later defected to the cell in February 1986—just Okinawa and soon hop- “More people lost their lives States, that there was a spy two weeks after his convic- scotched to the fbis in Cali- because of his treachery so prolific it took the Chi- tion on 17 counts of espi- fornia and then in Virginia than [because of] Aldrich nese two months to trans- onage, conspiracy, and tax as a case officer, with access Ames and Robert Hanssen.” late each batch of secrets. evasion—while awaiting sen- to cia headquarters in near- A gambler and womanizer, To prepare for Chin’s trial, tencing. Chin slid a clean by Langley. Chin sold super- Chin made a fortune by prosecutor Joseph Aronica brown trash bag over his sensitive National Intelli- putting some of the $1 mil- asked the cia to prepare a head, tied it with a shoelace gence Estimates and lion China paid him into real color-coded chart of every from newly ordered high- analyses on China and estate. The cia honored him major development in U.S.- tops, crossed his arms over Southeast Asia to his han- for distinguished service, Sino relations between 1945 his chest, lay down, and dlers in London, Hong kept him on as a consultant and 1985, onto which he quietly asphyxiated himself. Kong, and Toronto. Since after he retired in 1981 at age transposed Chin’s move- The U.S. government had no Chin also translated all the 63, and pestered him to re- ments and access to classi- apparent desire to pursue documents stolen by cia turn full time. fied documents. “He admit- Chin’s legacy further. “As spies in China, he helped the Chin was arrested in ted doing it, was proud of it,” soon as [Chin] suffocated Chinese plug those leaks. 1985, after U.S. intelligence says Aronica, now an attor- himself,” says Smith, “it “He was extraordinarily dev- received sketchy informa- ney with Duane Morris. Chin closed the door on the astating,” says former fbi tion from a Chinese source, committed suicide in his jail scandal.” –C.R.

MICHAEL LUTZKY—THE WASHINGTON POST U.S.News & World Report, November 10, 2003 41

10SPY8(4) DARREN 2588 JENN 2303 41 1ST PROOF/COMP Special Report mised” many other national security pro- operate against a bull fiddle.” never had a viable operation.” grams by passing on to her Chinese han- Others in the U.S. intelligence com- The implications of such a conclusion dlers information she obtained about munity aren’t quite so sure. These are are still sinking in. Current and former them. The other side of the coin, sources among the principal findings of the U.S. government officials say the entire ros- say, is that whatever disinformation News examination of the case: ter of U.S. intelligence efforts for all of Leung fed her fbi lovers could have been l J. J. Smith frequently briefed an ad Asia outside the Soviet Union over the passed up the national security chain of hoc China operations group consisting past 20 years may have been compro- command, perhaps even to the White of the cia, the Defense Intelligence mised, as well as operations of allies like House. “Every double-agent operation Agency (dia), the State Department, the Britain, Canada, Australia, New Zealand, we ran,” says Larry Wortzel, a retired National Security Agency (nsa), and and Taiwan. military counterintelligence official and other agencies. Any disinformation l Leung may have jeopardized the longtime China hand, “might have been Leung provided to her fbi handlers identities of U.S. intelligence and coun- compromised and a failure.” would have permeated the entire intel- terintelligence agents because she guest- Unlike cases involving at- ligence community, numerous officials lectured at the fbi’s academy in Quan- the-office traitors like the cia’s Aldrich say. Smith may also have been present tico, Va. She also had occasion to meet Ames and the fbi’s Robert Hanssen, at cia station liaison meetings with case officers from the cia, dia, nsa, and the Leung case raises some unusually many of these same agencies, officials other intelligence agencies who attend- ed fbi training programs. “There’s concern,” a senior fbi official says, as to what Leung may have told mss from these meetings. “How we do things, how we report things, and what we’re interested in,” this official said, “allows them to build countermeasures to pro- tect that information.” U.S. News has learned that one Quantico talk took place on May 20, 1993—two years after Cleve- land and Smith found out about Leung’s mss contacts. Leung and Smith, sources say, were both in- vited to speak to Chinese coun- terintelligence agents from the fbi, the Pentagon, and other agencies. The topic: how to con- duct double-agent operations. The classified meeting was video- taped. “There they are talking about it in a room full of people,” Chinese police stand guard outside the U.S. Embassy in Beijing. China refuses to allow a source exclaimed, “asking about U.S. marines to protect the outside of the compound, as they do at other U.S. embassies. how it’s done.” l Leung’s task for the fbi, ac- cording to fbi agent Thomas, was delicate issues. It doesn’t involve just say. That’s because, by law, the cia and to pretend to be a Chinese asset, known classified documents that may have the military intelligence services must as a “controlled agent,” providing her been stuffed in a briefcase and smug- coordinate all domestic intelligence- mss handler only with information gled home but secrets that may have gathering operations, such as recruiting Smith had authorized. U.S. News has been spilled during the nearly 20 years assets to send abroad, with the fbi, in learned that the fbi is not discounting of pillow talk Leung allegedly conduct- the event the target of such operations the possibility that Leung was already ed with Smith and the seven years’ involves a U.S. citizen. Because of his su- a real mss asset when the fbi recruit- worth with Cleveland. The possible pervisory status and China expertise, ed her, not a pretend one, which would ramifications have sent intelligence vet- Smith would have been present at many make her not a double agent but a triple erans into fits of apoplexy. “This is just such liaison meetings and could have agent or “triple cross.” perfectly ghastly,” says James Lilley, knowingly or inadvertently provided Despite the potential breaches in na- former ambassador to China. “These Leung with information about cia and tional security, the fbi is confronting two fbi case officers were fools. And military operations, sources, and meth- the possibility that Smith and Leung she made a monkey out of them and ods. Wortzel says the damage from the could walk away with relatively light fed them a lot of tainted information, Leung case could match the compro- punishment, if they are convicted. In- which they fed straight into the White mising of U.S. agents and operations deed, sources say, Smith may be in House.” Lilley, once the cia’s station during the Cold War. “If we are ever able greater legal jeopardy than Leung, be- chief in Beijing, doesn’t believe that to get access to Chinese records,” says cause he was the custodian of the Cleveland and Smith, despite their laps- Wortzel, now vice president of the Her- classified documents and allegedly es, did all that much damage. “My own itage Foundation, “this will compare to breached the government’s trust. Nei- sense,” he says, “is these guys couldn’t East Germany, where we found we ther Smith nor Leung has been charged

42 U.S.News & World Report, November 10, 2003 CHINE NOUVELLE / SIPA

10SPY8(5) DARREN 2588 JENN 2303 42 1ST PROOF Special Report with espionage on behalf of a foreign power, which can carry the death penal- ty. Smith faces five counts related to having improper sexual relations, gross negligence, and filing false reports about Leung’s reliability. Leung is charged with five counts of stealing and copying classified documents. “It’s a clear flag,” says a counterintelligence veteran, that “they have no evidence of espionage.” Chump. Guilty verdicts, in other words, are hardly a given. Chances of “flipping” Smith—persuading him to implicate Leung and testify against her, sources say, also are “highly unlikely” because it would require Smith to admit he was a chump, not a Lothario, and accept sub- stantial jail time. “The saying ‘If nobody talks, everybody walks’ is true in spades in this case,” says the counterintelligence veteran. “If Smith and Leung don’t talk, there’s a better than even chance they both will not go to jail.” If Smith were to plead guilty or be convicted, Leung’s attorneys, undoubtedly, would try to tear him apart on the witness stand, and a jury might not believe him. Leung’s at- torneys are unlikely to spare Cleveland, either. Prosecutors say Leung continued to provide Cleveland information after they became involved and met Cleveland “many times” in Los Angeles and San Francisco, “often in the company of Smith.” fbi officials have looked at the possibility of collusion between Cleve- land and Smith, but officials say they have found no evidence to support such a conclusion. “Katrina is in the catbird seat,” says a veteran counterintelligence official. “An L.A. jury with a case as dirty as this would have a tough time coming out with a unanimous verdict because the government looks worse than Leung.” fbi Director Mueller has or- dered an examination of the bureau’s en- ter how hard it is.” Even so, the scandal application form. Evidently, she was tire China program, all fbi assets, and is proving so vexing, says one veteran born Che Wen Ying in , the entire human intelligence program. counterintelligence official, that “even China, and came to Hong Kong as a tod- Mueller was confronted with a host of Mueller wants it to go away. But this is dler with her aunt, Susan Chin, who challenges in deciding how to handle the going to be yet another turd floating in raised her like a mother but whom Smith and Leung cases, not all of them the fbi’s punch bowl.” Leung reportedly has seen only once in evidentiary. Because the bureau’s inter- The investigation of Leung began in 20 years. Leung met her husband, Kam, nal-affairs unit is under investigation in November 2000, after a cia analyst on at , where he obtained an unrelated matter, Mueller had to loan to fbi headquarters noticed some a Ph.D. in biochemistry. Leung entered reach out to Justice Department lawyers anomalies in Leung’s asset file. A natu- Cornell as a graduate student in engi- for assistance on the cases. Despite its ralized citizen, Leung, in many ways, is neering but later switched to home eco- many difficulties, however, Mueller and an enigmatic figure—highly personable, nomics. Leung told the Los Angeles Attorney General John Ashcroft, both of those who know her say, but hardly the Times in 1997 that her connections to whom assumed direct control of the type of person to carry on extramarital Chinese officials dated to 1972, the year cases, decided they had no choice but to affairs, much less engage in interna- President Nixon made his historic visit prosecute. “Courageous people made tional derring-do. Her personal back- to China. She had just graduated from courageous decisions,” said a senior fbi ground, the fbi contends, is unclear, be- high school. In New York, Leung said, official. “I think it’s important to under- cause of the many allegedly false she helped employees at China’s newly stand that we can take a direct look at statements she made to immigration of- opened United Nations mission. “China ourselves and do the right thing, no mat- ficials, including on her 1982 citizenship remembers old friends,” she told the

44 U.S.News & World Report, November 10, 2003

10SPY8(6) DARREN 2588 JENN 2303 44 1ST PROOF Soldiers marching in Tiananmen Square in 2001; intelligence experts complain that the United States has sent mixed messages to China.

ing both intelligence services.” Smith, ac- has “generally admitted to surrepti- cording to Thomas, acknowledged that tiously taking and copying documents he “probably told Leung too much in the from Smith.” Leung allegedly stole the course of operating her as an asset.” He documents from Smith’s briefcase after and his wife of more than 30 years, Gail, he “debriefed” her in her home, then live with their son, Kelly, 24, just north stepped away to use the restroom or to of Los Angeles. A burly, handsome man, smoke outside. Leung told the fbi, ac- Smith served as an Army intelligence of- cording to Thomas, that “although Smith ficer in Vietnam. Like Cleveland, who sometimes allowed her to review clas- speaks fluent Mandarin and Cantonese, sified documents, he never permitted Smith was fascinated by China, so her to retain them.” steeped in the country’s culture and his- Smith recruited Leung in 1982, when tory that he was nominated by fbi brass she was just 28, the same year she filed for the prestigious National Intelligence papers to become a naturalized U.S. cit- Medal of Achievement. He received it izen. U.S. News has learned that the fbi shortly before he retired—for his han- helped Leung get her citizenship. dling of Leung. During one of several in- Sources say Leung attracted the fbi’s terviews by fbi agents, Smith denied “distant eyes” in the late 1970s, when the having a sexual affair with Leung, un- bureau was trying to track and recruit aware that fbi surveillance cameras had Chinese students who came to the Unit- captured the two having sex in a Los An- ed States after normalization. When geles hotel room. Leung moved to Los Angeles, sources Leung’s double life appears to have say, Smith interviewed her as part of an begun and ended with the most mun- investigation into whether a Lawrence dane of events—a baggage search. Trav- Livermore lab physicist sold neutron eling to China in April 1990 as a “con- bomb secrets to China. Smith passed trolled” asset of the fbi, she was met by Leung on to Cleveland, who was leading her mss handler, “Mao.” He covertly the inquiry. searched Leung’s bags and turned up Party time. The relationship between notes from Smith describing a Chinese Smith and Leung, by any measure, was individual who had defected to the Unit- unusual. Smith decided early on in his ed States. Mao found the notes to be far handling of Leung “to appear with her more comprehensive than the informa- frequently and publicly as an fbi agent,” tion Leung had given him on the indi- Special Agent Thomas wrote. “She came vidual. Leung, according to court papers, to his retirement party, for God’s sake,” admitted that she was working for the says I. C. Smith. “They were seen at pa- fbi. She even had an fbi code name, she rades. These are things you just don’t do.” said—“Parlor Maid.” Nonplused, Mao Forget about appearances—the secu- demanded that Leung switch loyalties. rity implications were huge. J. J. Smith She agreed, according to court papers, permitted Leung to videotape his re- and was promptly given another code tirement party, according to court rec- Times. “All these people I entertained name, “Luo Zhongshan.” If Leung had ords, capturing for posterity the faces of became big shots.” truly begun her secret life in the employ the fbi agents and cia officers there. Prompted by questions raised by the of the mss, she had now, if the allega- Smith was the only agent in the L.A. field cia man, fbi officials interviewed J. J. tions in the court documents are to be office to check out classified documents Smith about Leung. He assured his in- believed, completed the triple cross— overnight between 1997 and 2000, an quisitors Leung was sound. fbi officials working first for the mss, then the fbi fbi clerk told Thomas. And Smith and won’t say why, but in December 2001, the and, finally, for the mss again. Leung met at L.A. hotels. They also met bureau obtained a surveillance warrant In November 2002, when Leung trav- twice in Hong Kong and once in London. on Leung. By April 2002, the inquiry had eled to China, it was the fbi’s turn to “China has an active intelligence oper- expanded to include Smith. Months later, search her bags, as part of a surveillance. ation in London,” says Wortzel, “and fbi agents obtained a trove of classified They found a faxed cover page from J. J. everything in Hong Kong is completely documents from Leung. They also inter- Smith and six photographs of current and penetrated by the prc”—the People’s Re- viewed Smith, Leung, and Cleveland. All retired fbi agents. Smith, the court papers public of China. three lied repeatedly during the inter- say, gave Leung the photographs after he Numbers help to tell the story. views, Special Agent Thomas alleged in retired. When fbi agents searched her Leung had 2,100 contacts with Chinese court documents. bags on her return to the United States, officials over 20 years. She made 71 over- Eventually, however, they cracked. the photographs were gone. seas trips and failed to tell the fbi about Leung, Thomas said, admitted that she Circumstantial evidence? Perhaps, but 15 of them, including the two to Hong had “withheld information from both the in videotaped interviews, Special Agent Kong after Smith retired. She also va- fbi and the mss over the years, deceiv- Thomas wrote in court papers, Leung cationed with Smith, including one trip

DAVID BUTOW—REDUX FOR USN&WR U.S.News & World Report, November 10, 2003 45

10SPY8(7) DARREN 2588 JENN 2303 45 1ST PROOF Special Report

into a spiral that would DANCING destabilize all bilateral re- lations,” says retired mili- IN THE DARK tary counterintelligence official Larry Wortzel. he fbi’s Chinese The fbi’s counterintel- counterintelligence ligence program reflects T efforts have long been that mind-set. “The China the stepchild of delicate program was . . . held to a political concerns, some different standard,” says veteran China hands say. Smith. “We couldn’t be as That was abundantly clear aggressive, so we had to back in November 1990, be more innovative.” when I. C. Smith and Bill The lack of an intelli- Cleveland made their fate- gence databank, and ful trip to Beijing. “I con- China’s second-tier status sidered the total embassy among fbi brass, made to be compromised,” says things difficult. “They Smith. “It was just a secu- didn’t understand Chinese rity nightmare.” Technicians steady the tail cone of the U.S. Navy spy plane intelligence gathering,” Smith would not divulge forced down by Chinese fighter/interceptors in April 2001. Smith says. “If it wasn’t specifics. But intelligence swat teams jumping out sources tell U.S. News that “The single biggest im- posing a ban on the sale of of planes, they didn’t care.” there were tunnels under pediment to a truly effec- U.S. technology to China. Beijing had its own the entire complex. And tive counterintelligence But appearances aren’t learning curve, dating to the U.S. marines guarding program,” says Smith, quite what they seem 1980. Its U.S.-based oper- the facility reported that “has been politics.” sometimes. When Chinese atives argued that Jimmy overhead security cameras “A different standard.” fighter jets deliberately Carter would be re-elect- on sensitive floors regular- On military issues, though, forced a U.S. Navy surveil- ed. When Ronald Reagan ly stopped working. But the United States has lance plane down on won, Beijing scrambled to Washington ignored taken a hard line against Hainan Island, Washing- field a new team of spies Smith’s efforts to end the China since the Tianan- ton responded gingerly. in hopes of garnering bet- security breaches, he says. men Square killings, im- “We did not want to go ter intelligence. –C.R. to Hawaii. Leung told the fbi that China life (box, Page 40). Unlike Ames, no one would ever know the answer to gave her $100,000 because “President Hanssen, and Chin, there is no evidence that question. In December of last year, liked me.” But that was at all that Leung’s actions jeopardized four months before her arrest, Leung sat peanuts compared with what the fbi the lives of American espionage assets for an interview with the fbi. Afterward, paid her—a staggering $1.7 million. working against China. But Wortzel and Special Agent Peter Duerst walked her “Those kinds of payments are really for other experts say the damage could be outside, with a hidden tape recorder run- me, almost unbelievable,” says retired colossal, principally because of the ex- ning. “You know,” Leung, said, according fbi official Thomas Parker. “I’ve made traordinary access J .J. Smith and Bill to court papers, “I think the perfect way huge payments to criminal sources, Cleveland had to some of the nation’s to end all this, if I just . . . disappear, not Mafia guys, but nothing ever added up most precious intelligence secrets. As su- disappear, oh well, wouldn’t that be nice? to that.” Seventy percent of the $1.7 mil- pervisory special agents, Smith and I mean if I don’t exist, if I do not exist any- lion was for Leung’s operating expens- Cleveland were privy to the entire gamut more? Would it help?” es—nearly $1.2 million, all tax exempt. of fbi China operations and led major Leung’s attorneys contend that the She got another $521,000 for passing on China investigations. All must now be re- fbi distorted Leung’s remarks. Leung information, but she failed to pay any tax examined. Among the most critical is- also told Duerst, during the official in- on it. Moans one counterintelligence of- sues: Did Leung play any role in the terview, that going to court was her only ficial: “They were paying for her parties.” botched espionage investigation of Los salvation: “Here I know at least I would Sources say that it’s likely that with so Alamos nuclear scientist Wen Ho Lee or have a so-called fair trial if we go on trial. much “blue-slipping,” as such cash trans- in its largely inconclusive investigation And if you lock me up, at least you won’t actions are called, the fbi doesn’t have of Chinese government campaign con- say, ‘ok, I’m gonna have somebody mur- a full accounting. tributions to the Clinton-Gore re-elec- der you in .’ ok?” Later, in the chat Counting the cost. On balance, some tion campaign in 1996? “We may never with Special Agent Duerst and several of espionage experts say, Leung probably know what we lost,” says Wortzel. “What his coinvestigators, Leung sought to re- didn’t cause as much damage as Ames, we will never know is if what we got was assure the agents: “And I’m not going Hanssen, or Larry Wu-Tai Chin, a for- fed to us and created in China to mislead anywhere, ok? I’m not going anywhere, mer cia translator who spied on the us, or was real. . . . The question is, Who period. I’ll be right here.” l United States for nearly four decades be- was controlling whom?” fore being convicted and taking his own If Leung had her way, the fbi contends, With Carol Hook

46 U.S.News & World Report, November 10, 2003 GAMMA

10SPY8(8) DARREN 2588 JENN 2303 1ST PROOF/COMP