by David Wise
The prosecutors solved the problem with a simple stratagem—they obtained a superseding indictment that moved the export violations and other charges to Wen's actions after March 16, 1992, the date he left the consulate. That disposed of any diplomatic immunity issue.
Wen's decision to stand trial was a gamble he lost. The government's evidence was strong. During the trial, FBI agent Ryan Chun read parts of the transcripts of eight telephone calls intercepted by the FISA wiretaps. The prosecution presented extensive documentary evidence of the various dodges Wen and his wife had used to circumvent the law and export regulations. In September, Wen was convicted of violating export controls, money laundering, and making false statements.
On January 18, 2006, Wen stood before Judge William Griesbach in federal court in Green Bay for sentencing. He faced up to twenty-five years in prison. Griesbach was sympathetic, up to a point. He called Wen a "diligent, hardworking person," which he said made the sentencing "difficult."
But the judge rejected Hailin Lin's testimony at the hearing that she often did not tell her husband about the day-to-day operations of Wen Enterprises because he was "very busy" making ice machines in Hangzhou. "I do not find it credible," Griesbach said, "that he didn't know the violations going on."
He then sentenced Wen to five years in prison and fined him $50,000. ANUBIS was sent to the minimum-security federal prison camp in Duluth, Minnesota. His lawyers appealed. Chicago attorney James Geis argued Wen's case before the Seventh Circuit Court of Appeals.
When the Foreign Intelligence Surveillance Act was passed in 1978, the special FISA court it established was authorized to approve wiretaps if the government can show probable cause that the target is a foreign power, or an agent of a foreign power, and that "the purpose" is to obtain foreign intelligence. After 9/11, the Patriot Act amended that language to allow surveillance if "the significant purpose" was obtaining foreign intelligence.
Geis argued that under the broader language the government used FISA to conduct a criminal investigation of Wen. The district court, in refusing to throw out the wiretaps, Geis maintained, had disregarded the requirements of the Fourth Amendment.
In December 2006 the Chicago appeals court ruled against Wen, a decision that expanded the government's power to use wiretaps aimed at foreign targets in criminal cases unrelated to espionage. Less than a year later, however, in September 2007, a federal judge in Oregon struck down the expanded provisions of the Patriot Act that Geis had contested.
In the world of spies, nothing is entirely predictable. But in the annals of Chinese counterintelligence cases inside the FBI, the saga of ANUBIS is surely one of the strangest. Not every crime is prosecuted or presented to a grand jury. Prosecutors have discretion and great leeway with respect to whom they choose to go after. Wen Ning had been a secret FBI asset for fifteen years, yet that did not prevent the Justice Department from prosecuting him after another arm of the government, the Commerce Department, uncovered his sins. His five-year prison term was not likely to encourage others to risk their lives to become sources for the FBI.
But ANUBIS for more than a dozen years had been illegally sending computer circuits to China that could be used in missiles and other weapons systems. And that, in the words of Erica O'Neil, the assistant prosecutor, "will not be tolerated."
One FBI agent remarked, sorrowfully, "We brought him out, got him a job in Wisconsin, and he went sideways up there."
A few months before Wen was arrested, the local newspaper did a friendly feature story on him, as a Manitowoc resident whose unusual job took him to China most of the year. He did not then know that the full weight of the United States government was about to come crashing down on him. But in retrospect, the comment he made as he sat in the living room of his house was prescient.
"Of course, I am Chinese by birth," he said, "but I am not a Chinese citizen any more. I'm afraid sometimes China doesn't recognize me as Chinese and America doesn't recognize me as an American. Just who am I?"
Chapter 18
ENDGAME
THEY KNEW IT would come, and on April 9, 2003, it did. PARLOR MAID and J.J. Smith were arrested at their homes by the FBI, taken downtown, and in handcuffs appeared separately in federal court. Both were charged under the espionage statutes.
Gail Smith had to cancel her trip to attend a reunion of the Daffodil Queens in Washington State. She had planned to go with her ninety-three-year-old mother. Her spunky mother insisted on going alone, and did.
US magistrate Victor B. Kenton ordered Katrina Leung held without bail after Rebecca Lonergan, an assistant US attorney, contended she was "a serious flight risk." PARLOR MAID sat in the courtroom with her head in her hands. She was charged with unauthorized copying of national defense information with intent to injure the United States or benefit a foreign nation.
J.J. Smith was charged with "gross negligence in handling documents related to the national defense." Magistrate Stephen Hillman set bail at $250,000 and ordered J.J. to surrender his passport. He was released that night after pledging his home as bail.
For the first time since the start of his investigation, Les Wiser surfaced publicly. "This is a sad day for the FBI," he told reporters. "Mr. Smith was once a special agent sworn to uphold the rule of law and the high ethical standards of the FBI." According to the charges, Wiser added, "he betrayed the trust we all placed in him."
In Washington, Robert Mueller, the FBI director, agreed. The charges that J.J. Smith "caused the loss of classified information, as well as his personal indiscretions with Ms. Leung, are very serious," he said.
The lawyers for Leung and J.J., as might be expected, had a rather different view. PARLOR MAID had hired Janet Levine, a smart, tough Los Angeles criminal defense lawyer, and her courtly older partner, John D. Vandevelde, to represent her. Levine knew her way around the criminal courts—she had defended drug dealers and other clients accused of fraud, money laundering, and racketeering.
"Katrina Leung is a loyal American citizen," the two defense lawyers said in a statement. "For over twenty years she has worked at the direction and behest of the Federal Bureau of Investigation. She repeatedly endangered herself in order to make significant contributions to the security and well-being of the United States and her fellow citizens." When "the full story" became known, they predicted, she would be cleared and "her heroic contributions to this country will be revealed." Understandably, they made no mention of her heroic contributions to the MSS or the $100,000 she received from the Chinese government.
J.J. Smith's attorney, Brian Sun, who later successfully represented Wen Ho Lee in his lawsuit against the government, called his client a "loyal, patriotic, and dedicated former agent." He did not mention J.J.'s long-term affair with PARLOR MAID, but the FBI affidavits detailing their relationship and describing the bureau documents found in her home were released to the press.
The government took no action against Bill Cleveland, but the day after the arrests, Cleveland resigned from his job as chief of counterintelligence at the Lawrence Livermore lab and his office was sealed. While Cleveland "has not been charged with any wrongdoing, due to the seriousness of the situation, a thorough review of his work is now under way," Susan Houghton, the lab's spokesperson, announced.
It was a close call for Cleveland. While he had not initially volunteered his affair with PARLOR MAID, he later admitted it. He had worked in tandem with Leung, but the FBI had no evidence that she had obtained documents from him, although he had told her about his trip to China, which she then revealed to Mao Guohua, her MSS handler. "He was guilty of poor judgment," one FBI agent said, "but not a crime."
In J.J.'s quiet Westlake Village neighborhood, residents could not believe that he had been arrested. The Smiths were regarded as solid members of the community, fixtures at the annual barbecue block party.
A month later, on May 7, J.J. was indicted on charges of "gross negligence" for allowing classified documents to end up in Leung's hands. Two counts of the ind
ictment specifically cited the documents revealing a classified location used in the ROYAL TOURIST investigation—the Peter Lee case—and the June 12, 1997, electronic communication from the FBI legat in Hong Kong, classified SECRET and found in Leung's second-floor bookcase.
The indictment also accused J.J. of defrauding the FBI and United States of his honest services by having "an improper sexual relationship with Katrina Leung" and failing to report to the FBI her "unauthorized contacts with the PRC" and her admission "that she had secretly passed information to the PRC without authorization." In addition, the indictment charged J.J. with four counts of wire fraud for transmitting his periodic evaluation reports on PARLOR MAID assuring headquarters she was a "reliable" asset. J.J. was not accused of knowing that Leung was taking the documents from his briefcase or that she was passing information to China. The six-count indictment carried a possible maximum penalty of forty years in prison, although federal sentencing guidelines made a much shorter sentence likely.
The next day it was PARLOR MAID's turn. A federal grand jury handed down a five-count indictment, accusing her of illegally copying classified defense documents with "intent and reason to believe" that the data would be used "to the injury of the United States" and to the advantage of a foreign power. As in the case of Smith, one of the documents cited revealed the classified location used in the ROYAL TOURIST investigation, and another was the 1997 report from the Hong Kong legat.
Three more counts charged that Leung had "willfully retained" three documents—the transcripts and summaries of her conversations with Mao, the ROYAL TOURIST document, and the 1997 report from Hong Kong. If convicted, she faced a possible maximum sentence of fifty years in prison, but more likely ten to fourteen years.
Although both Smith and his lover were charged under the laws that as a group are commonly called the "espionage statutes," neither was indicted under the more severe provisions that can carry penalties of life imprisonment, or in some circumstances, death.
Debra W. Yang, the US attorney in Los Angeles, soon assigned the prosecution of Leung to Michael W. Emmick, a twenty-year veteran of that office who had handled several major fraud and public corruption cases. The lead prosecutor in the case against J.J. Smith was Rebecca Lonergan, who had been an assistant US attorney in Los Angeles for a decade and had worked on a number of national security cases. John B. Owens, an assistant US attorney in the fraud and public corruption section, worked with her.
On the morning of June 19 PARLOR MAID, who had been in jail since her arrest, appeared in federal court in downtown Los Angeles for a bail hearing before Judge Florence-Marie Cooper. By the time the press and public were admitted, Katrina Leung was already seated on the right side of the courtroom at the defense table next to her attorneys, Levine and Vandevelde. Leung wore an oversize green shapeless jacket. She looked small, not much over five feet, a tiny woman with jet-black hair pulled back in a tight bun, a thin, chiseled face, with high cheekbones and a firm chin. She wore a little lipstick and a hint of rouge. She followed the proceedings attentively with absolutely no expression until the very end of the hearing.
The government's team marched in looking grim, crewcut men in suits, and Diana Pauli, a tall, blond assistant US attorney. The platoon of prosecutors was led by Emmick. From the FBI there was Les Wiser and Peter Duerst.
Judge Cooper, a white-haired, sixty-two-year-old Canadian-born jurist, had been nominated to the bench four years before by Bill Clinton. She announced she had "reached a tentative decision to grant release with a $2 million bond." That sounded like good news for Leung.
But wait—Cooper said new information had given her "some doubt," chiefly two letters Leung wrote to Chinese leaders in 1998. They showed her close relationship with the top officials, which the court found "particularly troubling." In one of the letters, Leung said she wanted to make a major real estate investment in Shenzhen, a booming industrial area just north of Hong Kong, and asked that the local government be instructed to grant her the right to buy the land. She wrote that "my Hong Kong Fulichang International Company in Hong Kong has raised $500 million Hong Kong dollars from U.K. and U.S. banks (if necessary it can be increased to 1 billion)."
The second letter about the same land deal expressed her appreciation for "the tremendous support you have given me over the years." Each time, she said, "you have come forward to resolve the problems on my behalf."
Judge Cooper clearly enjoyed the sort of suspense that television programs often employ in courtroom dramas. The outcome is not revealed to the audience until the end.
Levine took the podium and claimed that the letters that worried the judge were all part of Leung's work for the FBI. Leung's husband had been "not subtly threatened" with tax prosecution. With some passion, Levine argued that Leung was a political hot potato; there was no way China would want her.
Emmick, in turn, rose to argue that bail of $2 million was not enough. The Leungs had sold their San Marino residence for $1.8 million. They owned several apartment buildings, he said; they were trying to sell three that would raise more cash and make it easier for her to disappear.
Even if Leung were required to wear a tracking device, she might give the feds the slip, the prosecutors argued. A tall, gangling government technician explained to the court that the Global Positioning System is not foolproof; GPS can tell within thirty feet where people are. But in downtown Los Angeles, the system is blocked. You can go into this building, cut the bracelet off, go out a different exit, and the person is gone.
Judge Cooper then summarized the situation. Leung and J.J. Smith "had a sexual relationship"; the defendant, although not charged with espionage, faced up to fourteen years in prison, by the government's estimate. Leung "could reasonably conclude" she might be convicted. The government, Cooper noted, found that the Leungs had sixteen foreign bank accounts, she had made false statements, took fifteen trips not authorized by the FBI, and got $100,000 from the PRC. She and her husband were targets in a pending tax case.
All of this sounded like Cooper would not let PARLOR MAID out of jail, after all. But, on the other hand, Cooper said, there were elements to support granting bail: Leung had cooperated with the government and made no attempt to flee when she could have.
Cooper then announced her decision. The court concludes that it is likely the defendant will make appearances, she said. She set bail at $2 million and required Leung to wear an electronic bracelet with GPS capability and remain confined to her residence, except for trips to her attorney's office, the court, or the secure facility in the courthouse where she could read government documents to help prepare her defense. She could not go to seaports, airports, or bus terminals. She also had to surrender her passport.
Leung had no reaction to the judge's ruling, which meant her three-month stay in jail was about to end. But as soon as the hearing was over, she stood up and hugged both of her lawyers. For the first time, she was smiling.
Months of legal maneuvering between the government and the lawyers for Leung and J.J. followed. PARLOR MAID made bail, and the Leungs moved into one of the apartments they owned.
Although Leung was out of jail, a few weeks later, Cooper signed an order imposing further restrictions on her. She was not to go within one mile of the Chinese consulate or come closer than one hundred yards to any consular car. And she was not to "knowingly have any contact" with anyone from the PRC.
Even before PARLOR MAID was released on bail, her lawyers made it clear that their strategy would be to try to force the government to reveal secrets. Classified information would be "central to defending our client in this case," they warned. Levine and Vandevelde asked the government for access to Leung's "briefings to the FBI over the past 20 years."
"We expect the government will have to make hard decisions about whether to publicly disclose 20 years worth of spying secrets in order to pursue an ill-advised prosecution of a loyal American," the attorneys said. It was a classic graymail tactic. Typically, in national secu
rity and espionage cases, defense counsel try to box the government in by threatening to reveal its secrets.
Under the Classified Information Procedures Act (CIPA), a judge may examine in camera documents sought by the defense if prosecutors claim the material contains government secrets. The law was designed to prevent disclosure of classified information in espionage cases. But the court may rule the documents are relevant to the defense and must be released. Faced with that choice, in a number of cases, the government has dropped charges or scaled them back substantially rather than risk exposing intelligence or other classified data to win a conviction. And the law is often used by defense attorneys as leverage to reach a plea bargain.
Unlike Leung, J.J. Smith had not spent any time behind bars. His attorneys were busy trying to keep it that way. J.J. had been working Chinese counterintelligence cases for two decades. He knew everything there was to know about the FBI's China program. And he had two very smart lawyers. If the case against him went to trial, the government was well aware that its secrets might be aired in court.
The government did not want that to happen. The prosecution worked out a plea deal with J.J.'s attorneys that meant there would be no trial for the former counterspy. There was always a chance, however, that a judge would sentence him to prison.
On May 12, 2004, J.J. pleaded guilty to only one felony count, lying to the FBI about his sexual affair with Katrina Leung. The charge of "gross negligence" was dropped. He would have to "cooperate fully" with the FBI and answer all questions in debriefings. As part of the plea deal, J.J. would have to testify in court against his longtime lover if she stood trial.
But the Smith plea bargain contained within it the seeds of disaster for the prosecution of PARLOR MAID. Lurking on page 7 of the 16-page plea agreement was a single paragraph that, as it turned out, was a land mine. The key sentence requiring the defendant to "withdraw from any joint defense agreement (written or oral) relating to this case, including any such agreement with Katrina Leung, counsel for Katrina Leung, or the employees of counsel for Katrina Leung, and to have no further sharing of information relating to this case with Leung, counsel for Leung, or the employees of counsel for Leung."
