Spy Schools

by Daniel Golden

  When Mercurio left the office, Peng asked the lawyer how long he would have to help the FBI. After some years of “good service,” he could ask to quit, Romine replied.

  The answer dismayed Peng. While he feigned enthusiasm, he inwardly had no desire to spy for the FBI. His childhood had taught him to avoid intelligence agencies, and he also worried about his safety. “I would rather rot in a U.S. jail than a Chinese jail,” he once told Professor Harvey Nelsen, his mentor. Still, he preferred to avoid incarceration in either country, and just now an American prison was the more imminent threat. He had to play along.

  And thus they tangoed. Sometimes accompanied by another agent, Mercurio would pick up Peng in a brown sedan at his drab suburban apartment, and they would head to an Olive Garden off Bruce B. Downs Boulevard for lunch. The Olive Garden was far enough from the USF campus that he was unlikely to be recognized, and FBI agents liked its pseudo-Italian fare.

  When they pulled in at the restaurant, they would often sit talking in the parking lot first. Peng would hand Mercurio the bills from his most recent China trip for reimbursement. Either she didn’t know that USF and the Chinese universities where he taught were also paying his travel expenses, or she didn’t care.

  In their regular corner booth, Mercurio would order a chicken Caesar salad, while Peng chose the more expensive surf ’n’ turf. Then, behind a veneer of friendship and conviviality, the sparring would begin. As in a labor negotiation or diplomatic summit, each side sought to achieve as much of its own agenda as possible. Peng wanted Mercurio to keep him out of prison and restore him to his former glory as Confucius Institute director. She wanted him to spy on China, the Confucius Institutes, and Tampa’s Chinese community.

  At first, she would toss softball questions. How did ordinary Chinese feel about their government? What was his analysis of Chinese policy on Taiwan or Tibet? Peng would pontificate at length, as if lecturing to his USF students. She listened with every sign of interest and gratitude. Stroking his ego, she assured him that his insights would go straight to the president.

  Next she got down to specifics. What government officials would he meet on his next China trip? How could the FBI persuade a certain Chinese-American professor, businessman, or bureaucrat to cooperate—would he be most susceptible to money, a promotion, a green card? What were the names and occupations of Peng’s Chinese friends working in Hong Kong and Macau? Which of his colleagues and students at South Florida were acting suspiciously? Egging him on, she would complain that other China-born professors at USF weren’t doing their part for the FBI.

  Peng would supply a few driblets, but soon his gaze would become wary, his tone evasive. Once, she suggested that he consider a venture outside academia, running a front company that the bureau would establish and fund. It wouldn’t work, Peng said, because he needed affiliation with USF and the Confucius Institute as cover or else he couldn’t do what the FBI wanted—get closer to Chinese government officials.

  He would love to cooperate, he told her, but first the university needed to end its smear campaign against him. After all, without credibility, he was useless to the FBI. It was up to her to save him—for both their sakes.

  * * *

  HIS LAWYERS CAME to the same conclusion. After hammering out the deal with Mercurio, Romine and Peng’s civil lawyer, Steven Wenzel, developed an unusual defense strategy: leave it to the FBI. The attorneys would use a “soft approach” to “buy some time” so that “developments on the other aspect of this … might greatly assist you in the present controversy with USF,” Wenzel emailed Peng on March 19.

  Counting on an outside agency to sway academic discipline, normally the prerogative of university administrators and faculty, might seem like a forlorn hope, but it was shrewd politics. The evidence against Peng was compelling, and his lawyers would be hard-pressed to change university president Judy Genshaft’s mind. The FBI might have more clout. Whether or not the bureau had tipped USF off about Al-Arian’s indictment, Genshaft was likely grateful for its handling of the case and haunted by the public outcry against the university after O’Reilly’s broadcast.

  Bucking the FBI wasn’t the way for Genshaft to repair USF’s image and appease its military constituents. It also wasn’t her inclination. Genshaft’s relations with liberal faculty members had been somewhat strained since the American Association of University Professors had condemned USF for violating Al-Arian’s due process rights by dismissing him before his trial without giving him an opportunity to respond to the charges against him. She was also insecure, rarely sending emails for fear that they would become public. Gordon Gee, former president of Ohio State, where Genshaft had worked for sixteen years, calls her a “nervous Nellie.” Trained in counseling and school psychology (she and Mercurio shared a background in social work), she was less apt to make a fuss about academic independence than, say, a former law school dean like Derek Bok. Nor was Robert Wilcox, a native of Great Britain who became USF’s provost in 2008, likely to stand up to FBI meddling; his expertise was in physical education and sports.

  Wenzel soon began sending Peng sunny bulletins. “Things seem to be going well for you and I am glad,” he emailed Peng on April 30. “I’ve not heard anything from the University which is consistent with what we had all thought might happen as a result of your cooperation.” A week later, he proclaimed, “I am most happy to see that the mess got reversed. No one has acknowledged that to me directly but I was assured that was going to happen.”

  “There is no real issue at USF now,” Peng replied. “[M]y case has actually been stopped. In fact, they are working hard trying to reinstate me as the director for the Confucius Institute.”

  The declaration of victory was premature, as the university convened a five-member faculty committee to review Peng’s case and recommend discipline. “We both think the matter is over but today Diana [sic: Peng’s misspelling of Dianne] told me that the University has to let the panel run its course,” Peng emailed Wenzel on May 12.

  With a lawyer’s caution, Wenzel usually avoided naming the FBI and Mercurio in his emails. They were “our friends,” and the faculty review was “this thing.” As he wrote to Peng on May 25, “our friends and I are working to get this thing stopped but that is taking longer than I had hoped.” He added on May 28, “Our friends are working with me and I am optimistic that they will be successful also.”

  Again, Wenzel’s optimism was short-lived. On July 1, an email from Wenzel warned Peng that if the faculty committee recommended firing him or revoking his tenure, the media would report it, which was the last thing that the FBI wanted. “My conversations with our friends makes it clear to me that you are owed no value to them if there is negative publicity about you,” Wenzel wrote. “I leave to you and Mr. Romine the exploration of what losing these friends means to you.”

  The alternative, Wenzel wrote, was settling with the university, but the terms would be harsh. “Our friends tell me the University will not settle your issues unless you give up tenure,” he wrote. Peng would have to forfeit his job security, and risk being fired at any time.

  Six days later, after talking to USF officials, Wenzel reiterated that the university insisted Peng relinquish his tenure. “They told our friends that and have never told our friends anything differ [sic].” At best, USF “might be willing to consider some adjunct teaching.”

  Peng was aghast. During the faculty review, he learned for the first time that sexual harassment complaints by Xiaonong Zhang and Shuhua Liu Kriesel had triggered the audit. That revelation, combined with Wenzel’s news that the FBI was nudging him to give up his professorship, sent his anxious mind into a whirl. He became convinced that the bureau was conspiring with his accusers and USF.

  The federal immigration investigation was another irritant. When Peng returned to O’Hare International Airport in Chicago that same summer from China, Homeland Security agents copied the images on his three laptop computers and external hard drive, seeking evidence to support a
criminal prosecution for visa fraud. They found “no materials which could be used to defraud the admissions process.” They would close their investigation in November, concluding that while Peng’s “disregard for laws, regulations and ethical standards in academia were well documented by the USF audit,” his “questionable statements with respect to visa procurements were not proven to be false … and no conspiratorial acts were found.”

  * * *

  PENG VENTED HIS frustration on his lawyer. “Please do not growl at me,” Wenzel responded on July 18. “It was not until you began cooperating with our friends that we could even consider giving USF a response. You may remember that before that there was a great deal of concern about your liberty and that that was more important than your job. You and me and Mr. Romine all said that to each other repeatedly.

  “What I don’t think you understand is that the administration of USF at the highest level has made up its mind. There is nothing you’re going to say to change what the president thinks or what her lawyer thinks or what the Provost thinks.… You may remember that we were offered the opportunity [to] take a year’s salary and to submit resignation. That was a certain sign from the president about her intentions.… As for what our friends [sic] advice is, you need to understand they will tell you what ever they want you to hear so that you will continue to be helpful [to] them.”

  “I get the point,” Peng replied. “I have no choice but to fight.”

  Peng badgered Mercurio as well, asking the FBI to pay Wenzel’s fees. “Any compensation my office offers will be as a direct result of your cooperation,” she answered on July 31. “Remember I am keeping you out of jail as well, and it’s difficult to put a price on freedom.”

  He, Mercurio, and another agent talked during this period in a parked car outside Peng’s apartment. Unhappy with the tone of their questions, Peng blurted out, “I know you suspect I’m a Chinese spy.”

  They didn’t deny it, and just looked at each other. “Oh, a spy,” one of them said. Peng felt that he’d broken a taboo, like the boy who dared to say that the emperor was naked.

  Unable to sleep at 3:27 a.m. on August 11, he lashed out at Mercurio in an email. “I am willing to serve my country utilizing my special capacity and resources,” he wrote. “But I have to be treated in an honorable and fair way.… Even if you and USF can twist my arms and force me into a more unfair deal, it is going to hurt our common course in the long run. Please let USF not to mistreat me further.… I have made huge contribution to USF and am running huge risks to contribute to the USA.” He added a plea: “As an effective social workers [sic], you can play a critical role here, since you r [sic] the only one all three sides trust now.”

  Mercurio was fed up. “You are making false allegations about my office which I do not appreciate,” she replied. “My office has not caused your legal troubles to extend, but rather have protected you in the best ways possible.… Your assistance to my office is not considered substantial, only minimal at this point. Therefore, understand that I have stuck my neck out for you thus far, knowing that substantial assistance may never happen. A thank you, instead of a list of demands, would be nice for a change.”

  A thank-you was deserved, because Mercurio was making headway. “We’ve come a long way from the University’s demand that you be fired before the next academic year,” Wenzel told Peng on August 17. “You have received in exchange for your concessions lifelong employment with all tenure rights.”

  By the next day, Mercurio was brokering the final terms between USF and Peng. “It took more than two hours for the FBI to convince me to accept the conditions I e-mailed you Monday,” Peng told Wenzel. “However, USF is still demanding much more.… I do not want a fight between USF and me, especially because it will involve Dianne, who I think has helped me a lot so far … Dianne just called.… I am glad that she told me that USF position IS NOT FINAL and is willing to go back to the table. She called a few USF people and left a message in your voice mail. I told her … that I will absolutely stick to the terms I agreed to FBI on Monday.”

  “She is the only one to get USF to budge (make a movement),” Wenzel replied. “We are dependent on her.”

  On August 19, Wenzel told Peng that Mercurio “called me after speaking with you and speaking with the president at length.” From August 18 to August 26, she and USF general counsel Steven Prevaux called each other seven times, twice for more than fifteen minutes. He also phoned her extension at the FBI office six times between July and December 2010, once for a forty-five-minute conversation.

  On August 24, 2010, sixteen months after he was placed on leave, Peng and the university reached a settlement that had Mercurio’s fingerprints all over it. USF fined him ten thousand dollars and suspended him without pay from December 2010 to December 2011. While the agreement permanently barred Peng from having “administrative responsibility” for the Confucius Institute, it promised that, after his suspension, he would develop a “Confucius Institute linkage” at USF’s branch campus in nearby St. Petersburg, “with appropriate and new Partner(s) in China.”

  Mercurio had preserved Peng’s freedom, his tenured professorship, and the bureau’s potential access to Chinese policy makers and Confucius Institute insiders. USF police never brought charges against him, despite the auditors’ findings. The FBI was so deeply involved in the settlement that “it was acting as though it was the provost,” said Professor Nelsen. Asked if the FBI’s influence, along with his own legal acumen, was responsible for saving Peng’s job, Wenzel said, “That’s about right.”

  The leniency of the punishment astounded faculty members familiar with the allegations against Peng—but not with the FBI’s intervention. “How in the world could he not be fired was the feeling I heard from everyone,” Eric Shepherd said.

  The university contends that the FBI’s advocacy had no effect. The discipline “was consistent with its past practice and appropriate for the serious misconduct,” and Genshaft “was extremely unhappy with the FBI’s continued attempts to insert itself,” according to USF spokeswoman Lara Wade-Martinez. Genshaft and Wilcox declined to answer written questions that I sent them.

  * * *

  EMBOLDENED BY HER triumph, Mercurio stepped up her advocacy for Peng. With a CIA officer in tow, she showed up at the office of South Florida senior vice president Karen Holbrook, who had been assigned on the day of the settlement to supervise Peng’s development of the Confucius Institute affiliate in St. Petersburg.

  The visitors told Holbrook that Peng had been an FBI informant at Princeton and vouched for his ability and patriotism. In essence, they conveyed the message to his new boss that he was under their protection. “They were coming to tell me what they knew about him,” Holbrook told me during a 2014 conversation in the waterfront mansion that she and her husband, Jim, an oceanographer, own on Sarasota Bay. “It was favorable.”

  The CIA officer likely accompanied Mercurio because the agency, which takes the lead on overseas espionage, was hoping to run Peng as an asset in China. The combined presence of the two powerful intelligence services would have intimidated many a university administrator. Not Holbrook. A newcomer to USF and thus unscarred by the Al-Arian uproar, Holbrook had a more formidable academic resume than either Genshaft or Wilcox. A cell biologist, she had been provost of the University of Georgia from 1998 to 2002, and president of Ohio State University from 2002 to 2007. She also recognized the tensions between national security and academic freedom. As graduate dean at the University of Florida in the 1990s, she had rejected an FBI request to see student files, but had been overruled. She wasn’t about to roll over for the bureau now.

  Like the intelligence agents, Peng may have underestimated Holbrook. Reluctant to be exiled to St. Petersburg, he conceived a grander position for himself. He would run, on USF’s main campus, one of four research centers that Hanban leaders told him they planned to establish and fund in the United States. He pitched the idea to Holbrook in her office on October 12, 2010.


  At first, Holbrook was charmed. “I really quite enjoyed talking to him at the beginning,” she said. The USF administrators who dumped Peng in her lap hadn’t told her about the allegations against him. Then Maria Crummett, Peng’s ex-boss, enlightened her. Holbrook read the audit report. “I decided, that was something I didn’t want to get into. That’s when I stopped interacting with him.” Moreover, Hanban funding for the research center, his pet project, didn’t materialize.

  Holbrook didn’t hear from the CIA officer again, but Mercurio phoned her eight times from October 15 to December 1, 2010, and probably went to see her a second time. Mercurio also called General Counsel Prevaux twice.

  On November 17, with Peng five weeks away from starting his suspension, Mercurio emailed Holbrook, urging her to include him in festivities planned for an upcoming visit to USF by a Chinese dignitary. She was likely referring to the leader of a delegation from USF’s Confucius Institute partner, Nankai University, which would arrive in Tampa later that month. “As we discussed in our last meeting,” Peng’s “credibility is critically at stake,” Mercurio wrote. He “has been functioning for over a year on promises of a show of resolve to his overseas contacts” and “will be rendered completely ineffective if no show of support is given by USF in the very near future.”

  Unless Peng is on hand to welcome the guest, she warned, he “will appear extremely rude and disrespectful.” His absence could “generate a high level of suspicion” and cause him to “lose face.” If Holbrook found it awkward for Peng to attend the public events, at least she could arrange a “brief, private meeting.”

  It didn’t seem to occur to Mercurio that Holbrook might not care as much as she did about whether Peng was an effective spy—as against whether he was an effective teacher or scholar. His “credibility does not just affect his dealings with USF, but has national security implications on a large scale,” the FBI agent wrote.