Ex-FBI Agent Is Arrested in China Espionage Case
Officials say local businesswoman, also being held, obtained secret U.S. documents.By Greg Krikorian, David Rosenzweig and K. Connie Kang
Times Staff Writers
April 10, 2003
Federal authorities Wednesday arrested a former senior FBI counterintelligence agent in Los Angeles and a prominent local Chinese American businesswoman and charged that his negligence and her work as a double agent compromised secret U.S. documents.
Authorities alleged that Katrina Leung, 49, carried on romances for almost two decades with former FBI Agent James J. Smith, 59, and another unidentified FBI counterintelligence supervisor in San Francisco, using her access to Smith to obtain secrets for China. At the same time, as a federal informant, she collected $1.7 million from the U.S. government, federal officials said.
According to an FBI affidavit, Smith, who was Leung's case officer, knew as long ago as 1991 that she "was providing classified information" to Chinese intelligence agencies, but continued to allow her to have access to classified documents.
"It is a sad day for the FBI," FBI Director Robert S. Mueller said Wednesday. "James Smith was once a special agent, sworn to uphold the rule of law and the high ethical standards of the FBI. According to today's charges, former Agent Smith not only betrayed the trust the FBI placed in him, he betrayed the American people he was sworn to protect."
Smith was charged with gross negligence in allowing Leung access to classified material. U.S. Magistrate Victor Kenton set bail at $250,000.
Leung was charged with illegally obtaining secret documents to the advantage of a foreign power. She was also accused of tax violations, including failure to report her income from the FBI. She was held pending a hearing next week.
Attorneys for both defendants denied the accusations. Convictions could result in federal prison terms of up to 10 years.
Smith's attorney, Brian Sun, described his client as "a loyal, patriotic and dedicated former agent" who is "very disappointed that the government has chosen to bring this case against him."
Leung's lawyers, Janet I. Levine and John D. Vandevelde, released a statement calling her a patriotic American who is innocent.
"For over 20 years she has worked at the direction and behest of the FBI. She repeatedly endangered herself in order to make significant contributions to the security and well-being of the United States and her fellow citizens. We believe that when the full story is known, Ms. Leung will be cleared of all wrongdoing and the extent of her heroic contributions to this country will be revealed," they said.
Like the 1990 Los Angeles case of Richard W. Miller, the first FBI agent ever charged with espionage, Wednesday's charges rocked the bureau and its third-largest division.
"This is as shocking as if someone you know had been shot and killed," said one FBI agent.
A former agent, a colleague of Smith's who had known him for three decades, said the arrest stunned agents. "He was well respected in the office," said the former agent.
"He got numerous citations and commendations" and several times traveled to Washington to receive commendations at FBI headquarters, the former agent said. "He had access to the highest intelligence information that went right to the White House."
Sense of Betrayal
That level of trust fueled the resentment Smith's former colleagues expressed Wednesday. "Betrayal is the word," said an FBI official in Los Angeles. "It embarrasses everyone because it makes us look so bad."
In the affidavits, FBI Agent Randall Thomas outlined in great detail an investigation that began 13 months ago and was monitored at the highest levels of the Justice Department. The investigation included covert physical searches; interception of telephone, fax, and e-mail communications; and extensive surveillance of locations that included a hotel room where the two met.
Smith was assigned for 22 of his 30 years with the FBI to a Foreign Counterintelligence squad in Los Angeles that focused on China. He served intermittently as supervisor of the squad.
Last April, Thomas said, Smith was the subject of an extensive FBI surveillance authorized by the top-secret Foreign Intelligence Surveillance Court in Washington, D.C.
Last month, Thomas said, he received a report from another FBI counterintelligence agent in Los Angeles that Smith, on at least one occasion in 1999, checked out a top-secret document from the bureau's vault in Los Angeles and did not return it until a day or two later.
"No other FBI personnel ever retained top-secret documents overnight that they had checked out," Thomas wrote.
In a search of Leung's San Marino home, agents recovered a 1997 FBI memorandum on Chinese fugitives that was classified secret, as well as two directories of FBI personnel and a telephone list related to an FBI investigation with the code name "Royal Tourist."
That case, Thomas said, involved an espionage investigation into a former TRW employee who pleaded guilty in 1997 to passing secret information to China.
During an interview with agents, Thomas said, Leung said that while Smith would allow her to review classified documents, he never allowed her to keep them. She said she would "surreptitiously" copy documents taken from Smith. Leung told investigators that Smith "would leave his briefcase open, and that the file-folder pockets in the briefcase often contained documents with the text facing out."
"Leung said this enabled her to see documents that she wanted and that she would remove them and copy them without Smith's knowledge when he left his briefcase unattended," according to the affidavit.
Secret Search of Luggage
Smith continued to provide information about the FBI to Leung after he retired in November 2000, according to court documents.
Last November, FBI agents staged a secret, court-authorized search of Leung's luggage at LAX before her departure to China.
In the luggage, Thomas said, there was a fax from Smith to Leung and six photographs of a meeting of the Society of Former Special Agents of the FBI.
When Leung returned to the United States, another search found that the photographs of FBI agents were no longer with her.
As the charges were being announced Wednesday, the FBI's Mueller gave a closed-door briefing on the case to lawmakers on Capitol Hill. He also announced that internal audits were underway to examine the FBI's China counterintelligence program as well as the bureau's procedures for safeguarding classified information.
The chairman of the Intelligence Committee of the U.S. House of Representatives, Rep. Porter J. Goss (R-Fla.), said the case was "of serious concern."
"The director [Mueller] has advised us of the corrective steps he has taken within the Bureau as a result of this matter," Goss said in a statement. "We are satisfied that he has taken the right steps thus far."
Authorities also said that an investigation was continuing, refusing to rule out additional charges.
News of Smith's arrest shocked the quiet Westlake Village neighborhood where he, his wife and son have lived for many years.
"That blows me away," neighbor Pat Lopez said. "I can't imagine."
The Smiths were regarded as pillars of their Westlake Village community, fixtures at the annual Fourth of July barbecue block party.
"They are just the nicest people. I find it really hard to believe. They must have something wrong," said Lisa Otis-Kisor, a neighbor and homemaker. "This is a 'Leave it to Beaver' neighborhood. They were like the Cleavers."
Times staff writers Henry Weinstein, Steve Berry, Caitlin Liu, David Pierson, Josh Meyer, Lance Pugmire and Patrick McGreevy and Times research librarian Robin Mayper contributed to this report.