The first formal brief to White House national security staff—although not yet President Obama—came in February. The FBI explained the broad contours of the illegals program and some of the individuals operating in the United States. The case had been simmering for years. But it was about to come to the boil. And the decision on how to end it risked causing an explosion within the administration. But after a decade of patient surveillance, why was it now time to act?
The explanations as to why the investigation moved to its final phase have been confused, often deliberately to obscure the truth. False leads abounded. There were claims that the surveillance operation was somehow compromised. That was not true. There were also reports that the roundup was because the CIA wanted a swap to get their agents out and needed something to exchange for them. That got things the wrong way around. There was talk that perhaps Richard Murphy was being recalled because of poor performance or the illegals’ term was coming to an end. But that was not the case. He might be frustrated and arguing with his boss, but his wife was doing pretty well. The official story at the time was that in spring the FBI learned that one or more of the agents were preparing to leave the country and might not return, and so if the opportunity passed, they would lose the chance to capture them. There was some truth in this. But it was not the whole story.
Another explanation was that the illegals were changing behavior and becoming more dangerous. This was a factor. There had been changes from 2009. That was partly the natural progression of an illegal’s career—many had spent years building their cover and working their way into influential circles and this was now beginning to pay off in terms of the contacts they were making. As the summer of 2010 began, orders were coming from Moscow for the illegals to become more aggressive. They also seemed to be converging on the nation’s capital. Donald Heathfield was making inroads. Cynthia Murphy was looking at lobbying jobs. Anna Chapman was blazing her trail through New York. Zottoli and Mills had been moved to the Washington area and along with Semenko were in physical proximity to people with top security clearances. The SVR was pressing for more results. They needed to prove their worth. There had always been some questions from the Center for the illegals to earn their keep and prove they were not just enjoying life in America. This meant that some of the constraints that had limited their activity—like how close they got to government officials or people with clearances—were now being relaxed. The risks were growing and some of the contacts were becoming more alarming. “We were becoming very concerned they were getting close enough to a sitting US cabinet member that we thought we could no longer allow this to continue,” FBI officer Frank Figliuzzi later said. Cynthia Murphy’s contact was one step away from a cabinet member—and not just any cabinet member but the secretary of state, Hillary Clinton. FBI officials were aware that if it later emerged that they had known a Russian spy was getting close to her and they had simply watched, there could have been severe criticism. “It would be withering,” says one former official. The fears were growing. “Had they been allowed to continue, it’s hard to say where their efforts would have ended,” FBI director Robert Mueller said a few years later.
“We were getting intelligence and making sure they were not,” is how one FBI official puts it. The bureau had got what they needed in terms of understanding the way the SVR worked. But it was getting harder to prevent bad things happening as the illegals embedded themselves deeper into American society and made more and more contacts. This was all true, but it was still not quite the full story.
Officials had to be careful at the time not to reveal that there was another factor driving decisions. Events were also driven by the man who had started it all. Ghost Stories had begun because of Alexander Poteyev. And he would bring it to a close.
18
Decision Time
IN MOSCOW, ALEXANDER Poteyev was growing nervous. A decade of clandestine meetings and the passing of secrets shredded your nerves. He had become worried the spy-catchers were on his tail. The relentless spy fever led by Putin and instituted by men like Alexander Zhomov at the FSB had been growing around him, the news filled with talk of arrests. And Poteyev had his own reasons to worry. He had been an enormously productive asset for the West. He had known the details of all illegals across the Americas and even though Directorate S was heavily compartmented, he had also picked up leads about other illegals operating globally (including the role of people like Metsos supporting them). He had shared these with his American handlers. As time had passed, Poteyev’s intelligence proved so important that it was used widely and not just in the United States by the FBI. Some was shared with allies in a carefully protected way. This was because he had insight into illegals operating in their countries who posed serious national security risks. And this meant that in some cases action had to be taken.
The full tally of which cases were linked to Poteyev remains hazy, officials unwilling to confirm his role and cautious of revealing too much. But there was one case—one of the most important involving illegals in the 2000s—whose discovery set off alarm bells in Moscow and whose link to Poteyev has not previously been disclosed.
Herman Simm had just bought some cake at a shopping center and was walking back to his car when he was surrounded on September 19, 2008. The cake was for his stepmother and he had driven with his wife to a shop just outside the Estonian capital, Tallinn, to get it. Simm, just over sixty years old with a tough, rugged face that suggested he had seen much, was an important man. At one point, he had been head of the Baltic state’s police force but more recently had been a senior security officer assigned by Estonia to NATO. That meant he was privy to some of the alliance’s most important secrets. He was also a long-term SVR agent who had been inflicting massive damage on NATO. He had handed over thousands of pages of secrets and had seen almost all the traffic between the European Union (EU) and NATO, including details on secret codes used by the alliance. NATO officials said the damage was comparable to what Aldrich Ames inflicted on the CIA.
Simm had been tracked down through his handler—an SVR officer called Sergei Yakovlev who worked under illegal cover in Spain posing as a Portuguese businessman called Antonio de Jesus Amurett Graf. He was running a network in the Baltics. Simm had been placing memory sticks in trash cans to be picked up by the Russians as well as meeting Yakovlev in different countries. A call was intercepted between the pair in September, three days before Simm’s arrest. At the time it was reported the investigation had begun in May 2008 and that the United States had been involved. The capture of a prized agent like Simm was a catastrophe for Moscow and the Russians began to investigate. One possibility, they would have known, was a compromise in Directorate S. When an operation goes bad, it immediately starts ringing bells. After all, it took a spy to catch a spy. Was there a mole?
The CIA had been careful to disguise leads from its agent when it shared them—the classic trick is to mask such material as signals intelligence, an intercepted communication. Some of the roll-ups over the years may have come from other sources or for other reasons but they would still have served to increase the focus on possible treachery inside Directorate S. Poteyev would have known that. The hunt for spies that had gathered pace in Putin’s Russia was now focusing within the SVR’s most secret directorate. After Simm, it would intensify. There would be talk in Russia later that their investigators were somehow zeroing in on Poteyev and that he was about to be polygraphed, which made him run, but that sounds more like an attempt to cover up failures in not spotting him. The truth was the pressure was starting to tell in the mind of the agent. If Poteyev was overly worried or paranoid, who can blame him? He felt the fear that every agent and their handlers know can come. He was done. After a decade, it was time to get out.
If Poteyev wanted out, then that would change everything. The success of Ghost Stories had been built on the fact the FBI and CIA were inside the SVR’s operation. This had allowed them to know the identities, read the communications, and understa
nd the plans of the illegals. It also provided the FBI with the confidence that there was no risk to sensitive classified material. But when their source was gone, they would no longer have that insight or control over the illegals. It was time to bring things to an end.
The FBI had begun to think about how Ghost Stories might finish as early as 2006. What happens if the investigation was compromised? What if Moscow either pushed the illegals to do something more dramatic or pulled them back? The FBI wanted the investigation to end on their terms. They did not want to lose the suspects by having them flee or just confront them and then allow them to walk away. After discussion, it had been agreed that the preference was to try to arrest the illegals. So the FBI had been building a detailed evidential case to get ready for this day. Word had gone out to the field offices to start collecting material with that in mind. Now they pushed this plan into action. But not everyone would be sure this was the right path. And some of the objections would come from the top.
Craig Fair was the operational lead in headquarters for the arrests. It was a delicate, unprecedented operation that was heading right up to the White House Situation Room. “It was one of the longer years in my career,” he later reflected drily. Bill Evanina had been brought in to headquarters in 2009 to help. He had worked in New Jersey on the Murphy case but also had experience of the process of arresting and charging from time working on organized crime (after he helped advise the writers of the TV series The Sopranos, a character was named after him). Arrest plans were complex because of the number of individuals across different states and because field offices were not always aware of the interconnections. In spring of 2010 word went out to the field office that the case might be about to move to its final phase. Prosecutions were rare in counterintelligence since investigations normally relied on sources and methods that needed to be protected. This was going to be different. Evidence had been collected for years with the family illegals. There was the opportunity to send a message and put the Russians in the dock.
The initial time frame was that the end would come in the second half of 2010. But in May, the bureau found it did not have as long as it thought. It seems as if Poteyev wanted to get out fast. He thought his time was up and he had made that clear to his handlers. Top national security officials would tell cabinet officials that the source now needed to get out of Russia “immediately.” The whole operation was going to come to a conclusion not in months but in thirty days.
The exact timing was fiendishly complicated. Getting Poteyev out was a CIA operation and there was an exfiltration plan that had to be activated. But there were also time pressures because of the movements of the illegals themselves. The important constraint was that some of them were about to leave the country—including Donald Heathfield and one of his sons, who were due to go to Moscow on June 27, with the other son following soon after. Anna Chapman was also due to head back for a visit.
“There were a number of reasons there—not the least of which is several of the individuals were on their way out of the country and we would have lost our opportunity to detain them,” Robert Mueller later said. This created a hard stop. If the arrest and escape date slipped beyond June 27 then the FBI risked having some of their targets out of reach. Not only was there a narrow window in which all the illegals were still in America but there was another prize that was suddenly, tantalizingly in reach. Christopher Metsos—who had not been seen in the United States since 2006—arrived in Cyprus on a Canadian passport on June 17. He checked into a two-star, forty-euros-a-night hotel just behind the waterfront in Larnaca. He behaved just like any other middle-aged tourist and looked the part as well, with shorts, an untucked shirt, glasses, and a mustache. An attractive woman in her early thirties with short brown hair would wait in the lobby and accompany him to the beach or dinner. Metsos’s movements had been tracked back in Washington. Getting hold of a controller would be a major catch because his knowledge extended well beyond just the American illegals.
If this window closed, it might not open again. So logic said to move ahead of Heathfield’s departure. Poteyev’s departure had to be timed carefully to take place before any arrests as the Russians would instantly be aware of the possibility of a compromise in their own ranks. “It would clearly raise an awareness on the part of the Russians that there must be a potential source that made us aware,” Panetta recalls. “In the intelligence business, when an operation goes bad it immediately starts ringing bells.”
But there was a problem. And it was a big one. At the end of June, Russia’s president was coming to town. And the White House was in the middle of trying to organize a high-profile “reset” of its relationship with Moscow. After a decade of patient intelligence work, the politics of diplomacy were about to risk everything.
OBAMA HAD ARRIVED in the White House just a few months after a new president took over in Russia. Putin was limited to two terms and Dimitri Medvedev had been handpicked to replace him. Younger, not just in appearance but in mind-set, than Putin, he certainly seemed to strike a different tone. Could there be a fresh start? In March 2009, Hillary Clinton sought to express this idea by bringing a prop when she met her Russian counterpart in Geneva. It was a large button. Unfortunately, thanks to a mistake it said “overload” rather than “reset” in Russian. And now there would be a fear that the arrest and prosecution of nearly a dozen Russian spies could overload the relationship at a critical moment.
There were different views about the “reset” across government. Inside the White House, the Obama team wanted big wins in foreign policy. Improved relations with Russia was one of those—a new START nuclear treaty was concluded in April 2010 and the two presidents drank champagne to celebrate. But it was not just about relations with Russia for their own sake but also the promise that this could unlock other issues. The debates over arresting the illegals were coming at a particularly delicate moment. In June, the Obama team felt they had scored a major diplomatic triumph with the UN Security Council approving new sanctions on Iran over its nuclear program. That had only been possible with the support of Moscow, which had not deployed its veto. Another aspiration—unsaid in public—was that they could boost Medvedev and make it more likely he could solidify a transition to a more moderate Russia. In Moscow, Putin was watching this new relationship carefully. He and other hard-liners were worried that their new President Medvedev was getting sucked in too close to the Americans.
Over at the State Department, Russia hands were skeptical Putin had really relinquished power but thought there was no harm in testing how much had really changed. Meanwhile, inside the CIA, old Moscow hands were much more critical, referring to the “reset bullshit” and those who believed in it as “naive morons.” After all, they pointed out, in the summer of 2008 Russia, under its new president, had engaged in a small war with Georgia.
IN THE OVAL Office on June 11, 2010, President Obama and his top White House aides were handed a major headache by the FBI. The president was briefed by officials from the FBI, CIA, and Justice Department for the first time about Ghost Stories. He was given an overview of the illegals program, what the individuals in the United States had done over the last decade, and why events were moving apace. The possible criminal charges were outlined.
The FBI and CIA advocated tough action. These spies were called illegals for a reason, the FBI argued. The bureau had spent years on this case and did not want it to end in silence. Some in the FBI and CIA wanted to not just prosecute and imprison the Russians but go even further by also expelling dozens of Russian diplomats and other officials who were spying under diplomatic cover, to make the point. White House officials were not happy with the stance of their law enforcement and intelligence community. Medvedev was coming to the White House in a matter of weeks. The visit was being meticulously planned in order to give the impression of two leaders who were taking their countries forward. The last thing they wanted was a Cold War throwback getting in the way. Medvedev was going to travel across the Uni
ted States before going to a G20 summit in neighboring Canada. The visit was due to last until June 27—the exact end of the arrest window. Arresting a bunch of Russian spies was going to be seen as a slap in the face. The timing could not be worse. “The primary concern was at that point whether this could perhaps undermine this effort to be able to work with the Russians because it would be so embarrassing,” recalls then–CIA director Panetta.
The first White House meeting made it clear that there were major differences of opinion. There was a tangle of issues that were dauntingly intertwined. There was an anxious source in Moscow who had to be extracted from the country. There were ten illegals in America who needed to be arrested as soon as possible after his departure and some of them had plans to travel abroad. And finally, there were politics and diplomacy.
Mike McFaul was the Russia lead on the National Security Council. He knew Russia well and could understand the risk the illegals posed. “As I looked round the White House, I saw lots of young special assistants with the highest levels of security clearances. . . . Imagine if one of those illegals landed a job as an executive assistant to the national security advisor?” But the case, he felt, was also a reminder that there were those opposed to improving relations. And they were on both sides, he reflected. In Moscow there were the hard-liners who were watching Medvedev and hoping he would fail. But also he saw little sign of real belief in a reset for those in American intelligence and counterintelligence. “American Cold War thinking and habits were not going to change overnight,” he thought.
Russians Among Us Page 22
