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Los angeles vip suspect spy { April 29 2003 } Original Source Link: (May no longer be active)
http://www.chicagotribune.com/news/nationworld/chi-0304290250apr29,1,1319822.story?coll=chi-news-hedhttp://www.chicagotribune.com/news/nationworld/chi-0304290250apr29,1,1319822.story?coll=chi-news-hed
From L.A. VIP to spy suspect
By Vincent J. Schodolski, Tribune national correspondent. Tribune news services contributed to this report
Published April 29, 2003
LOS ANGELES -- To those who thought they knew her, Katrina Leung was a great neighbor and "a fixture in this city." She dressed exquisitely and threw expensive parties at her San Marino home.
To the telecommunications industry, she was a businesswoman who earned $1.2 million for setting up a deal with China in the mid-1990s. To California Republicans, she was a fundraiser who delivered thousands of dollars.
In Los Angeles' Chinese-American community she was a prominent naturalized American, educated at Cornell University and the University of Chicago, who spoke English, Mandarin and Cantonese, and was so well-regarded that she served on a local board with Disney CEO Michael Eisner and former Secretary of State Warren Christopher.
The FBI had a code name for her, "Parlor Maid," and the bureau paid her $1.7 million for nearly two decades of work against Chinese espionage.
But according to prosecutors, Leung was a double agent who had affairs with two FBI agents while acquiring classified U.S. information for China.
As Leung, 49, waits in federal custody for her arraignment May 12, a team of FBI internal investigators is combing the bureau's Los Angeles office, and U.S. officials have become increasingly concerned about the damage she may have done to the FBI's counterintelligence operations.
On Monday, her case prompted congressional calls for a review of how the FBI handles informants. Sens. Patrick Leahy (D-Vt.), Charles Grassley (R-Iowa) and Arlen Specter (R-Pa.) sent a letter calling on the Judiciary Committee to hold hearings.
"If even a portion of the allegations raised in the public affidavit are true, we cannot afford to wait until yet another breach of national security occurs before we work with the FBI to improve security and the handling of confidential informants," the senators wrote.
The government charges so far have been very narrow, limited to a single 1997 secret document that the U.S. says Leung passed to the Chinese.
The government's legal strategy to this point differs dramatically from the case of scientist Wen Ho Lee, who was charged with 59 counts related to alleged improper handling of secret data at Los Alamos National Laboratory. A judge later threw out 58 of those counts, and Lee wound up pleading guilty to a single felony count of mishandling secret nuclear data.
U.S. Atty. Debra Yang was cautious when she announced the case against Leung but hinted that additional charges could emerge. Government sources suggest Leung's work may have compromised an undercover sting operation by the FBI.
Leung is a petite woman who looked relaxed and wore her hair in a short ponytail at her bail hearing. She donned wire-rimmed glasses once she took her seat next two her lawyers, and she frequently smiled and waved at people she knew in the courtroom. Leung did not speak during the hearing.
Last week, FBI internal investigators began questioning everybody attached to the bureau's Los Angeles office in an effort to discover who may have known about Leung's activities.
Began FBI role in 1980s
Leung became an informant for the FBI in the early 1980s and was supervised much of the time by James Smith, 59, an agent in charge of the Los Angeles office's counterintelligence operations. Smith has been charged with gross negligence, accused of allowing secret information to fall into Leung's hands.
The two, both married, had a long-term sexual relationship while they worked together. Sources say the affair was an open secret in the Los Angeles FBI office. Smith would meet privately with Leung to pay her, despite a policy that requires another agent to be present. At Smith's retirement party three years ago, Leung showed up with a video camera, the Los Angeles Times reported.
U.S. officials have suggested that Leung may have links to at least two other cases in which sensitive information allegedly was passed to China, including top-secret data on the science used by the U.S. military to track submarines.
The latter case involved Peter Lee, who was accused of passing information on the submarine detection technology to China in 1999. He pleaded guilty and was sentenced to 12 months in a halfway house, 3 years' probation and a $20,000 fine.
Sources suggested that the possible links might come from top-secret information at Lawrence Livermore National Laboratory in Northern California, where Lee once worked.
Leung had a sexual relationship with a second FBI agent, whom sources have identified as William Cleveland. Based in San Francisco, Cleveland worked with Leung before he left the bureau in 1993 for a higher-paying job as head of security at Livermore.
Cleveland and Leung reportedly continued their relationship while he worked at the laboratory. He resigned when his involvement with Leung was revealed this year.
Both Cleveland and Smith had known since the 1990s that Leung was passing secret information to China, the government has said. Indeed, it was Cleveland who first informed Smith that he suspected Leung was a double agent. Smith reportedly told Cleveland he would take care of the situation, but the government contends that nothing was done.
In papers filed in federal court, the government contends that Leung passed information to the Chinese government about an undercover FBI sting operation being run out of the Los Angeles office.
That operation, aimed at catching Chinese agents who were attempting to gather secret information about U.S. nuclear technology, involved Cleveland.
Lawyers for Leung say she is a loyal American who served her country as an FBI informant and passed to China only information the FBI wanted her to hand over.
"She did what the FBI told her to do," said Janet Levine, one of Leung's attorneys. "She had no access to do anything without the permission of the FBI."
Leung's lawyers said her $1.7million home in the upscale suburb of San Marino had hidden microphones and cameras so the FBI could monitor her Chinese guests. Those surveillance devices allowed the FBI to be aware of her actions as well, the lawyers said.
But during her bond hearing, the government presented evidence that Leung traveled outside the United States more than a dozen times without notifying her FBI contacts.
No espionage charges
Leung and Smith have not been formally charged with espionage. The government has only filed a complaint in federal court in Los Angeles. The two are scheduled to appear in May for the arraignment.
Leung, who wore shackles at her hearing, was denied bail after a judge decided she posed a flight risk. She and her husband, Kam, have nearly $190,000 in liquid assets available to them and have family living outside the U.S.
Prosecutors, emphasizing Leung's wealth, said she was paid $1.2 million for arranging business in China for Nortel Communications in 1995 and 1996. Leung used the business name "Merry Glory" in representing Nortel and got 3 percent of any deal she struck, they said.
Smith, who retired from the FBI in 2000, was charged with gross negligence and released after posting a $250,000 bond.
The case has left many people stunned.
"She is a great neighbor," said Alleene Nungesser, who lives next door to the Leungs. "They are a great family. I've always admired them for their political involvement."
Leung's connections included a seat on the board of the Los Angeles World Affairs Council with Disney's Eisner and veteran diplomat Christopher. She also made an impression on Los Angeles City Commissioner Leland Wong.
"Katrina has been a fixture in this city for a long, long time," Wong said. "I can't tell you how shocked I was."
But to the FBI, there is nothing all-American about Leung and Smith, and the damage has yet to be measured.
The complexities of the case were evident during Leung's bond hearing.
There were six lawyers in court for the hearing, three for the government and three for Leung. However, the lawyers had differing levels of security clearances. When they huddled in private, there were times when only two of the lawyers--one for the government and one for Leung--could discuss the matter because of the top-secret nature of the material they were considering.
Copyright © 2003, Chicago Tribune
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