by David Wise
Leung's lawyers had been handed an unexpected gift—by the prosecutors. The "no further sharing" language could be read as meaning that Leung's attorneys could not interview J.J., a potential witness against her. The Sixth Amendment of the Constitution provides clearly that accused persons have the right "to be confronted with the witnesses" against them and to compel witnesses to testify for the defense. Levine and Vandevelde saw their opening and pounced. In November, they filed a motion to dismiss the case on grounds of "prosecutorial misconduct" because of the "no further sharing" prohibition.
The government scrambled for a way to respond. Emmick, the Leung lead prosecutor, fired off e-mails to the Justice Department and the other prosecutors to try to find out who had inserted the disastrous language in the J.J. Smith plea and why.
A government brief attempting to explain the history of the controversial paragraph said that the "no sharing" language had been suggested by Lonergan, but written by John Owens, her associate on the case. According to Lonergan, "Owens did the first draft of the plea agreement and then we worked together on the entire plea agreement."
The two prosecutors told Emmick that the language was intended only to require Smith to withdraw from any joint defense agreement with Leung's attorneys. Lawyers for defendants in separate cases sometimes enter into such cooperative arrangements, which are usually secret, to help each other.
"That clause was never intended to stop the defense from interviewing J.J. or using him as a witness for Leung," Lonergan said. "Of course not. That's Law School 101." The intent, she said, was to prevent the lawyers for two defendants from sharing classified information through a joint defense agreement. All of this was happening behind the scenes. Then, in January 2005, in a stunning surprise move, Judge Cooper threw out all charges against Katrina Leung, saying that the government had engaged in "willful and deliberate misconduct" by inserting the "no further sharing" language in J.J.'s plea bargain. Access to a prosecution witness is a basic constitutional right, Cooper noted, which had been denied to the defendant.
The government, the judge said, had repeatedly insisted that it never intended to bar Smith from talking to Leung's attorneys, it was just that the language was "inartfully drawn." Cooper wasn't buying it. There was nothing ambiguous about the clause, she ruled: "Smith is being told not to talk to Leung or her attorneys."
The prosecutors, she added, had "misrepresented" the purpose of the clause. In language seldom heard in a federal court, Cooper made no attempt to conceal her anger. "In this case, the government decided to make sure that Leung and her lawyers would not have access to Smith. When confronted with what they had done, they engaged in a pattern of stone-walling entirely unbecoming to a prosecuting agency."
The target of her wrath was the mild-mannered Michael Emmick. Three months later, however, Judge Cooper backpedaled, conceding that Emmick had been improperly singled out since he had not drafted the plea bargain. But she rejected the government's motions to reconsider the dismissal of the case.
It was a bizarre and unexpected development. Why had the federal prosecutors bungled so badly? Surely they knew that the Sixth Amendment of the Constitution gives defendants the right to confront the witnesses against them. Was it a deliberate attempt to torpedo the case against Leung, to avoid the revelation of intelligence secrets in court—and salacious details of a spy and sex scandal?
It made a plausible theory for the conspiratorially minded, but more likely it was the result of bad grammar and an incredible bureaucratic snafu. Emmick, who was dismayed to see the most sensational case of penetration of the FBI by Chinese intelligence go out the window, offered his own explanation of why the "no sharing" language was included in the plea.
"The goal of the clause was to prevent Smith's lawyers from helping Leung's lawyers with their defense motions. Unfortunately the clause was written in a way that was grammatically awkward and ambiguous." The "no sharing" language, Emmick added, "could be interpreted to mean Smith himself could not be interviewed by Leung's lawyers. And that was not the intent and would be an obvious violation of both the Constitution and legal ethics rules."
Be that as it may, the case against PARLOR MAID had been tossed out of court, a black eye for the government in a case that had been widely publicized when J.J. Smith and Leung were arrested and charged.
Whenever there is a foul-up inside the government, the first reaction of the bureaucrats is to point fingers at one another. True to form, the government, in its response to the dismissal of the case, was quick to say that officials in the counterespionage section of the Justice Department had no role in drafting the Smith plea, it was all done by the prosecutors in Los Angeles. However, it stretches credulity to think that Justice Department officials in Washington did not closely monitor and approve the plea bargain.
One question remained, almost overlooked in the court battle over the odd language in J.J. Smith's plea. Katrina Leung, by her own admission to the FBI, had been passing information to the MSS and working for Chinese intelligence for years. China had paid her $100,000. She was supposed to be spying for the FBI, which paid her $1,718,889 in expenses and other money over nineteen years. In her house she had classified FBI documents that she claimed she had pilfered from her lover. Given that set of facts, why had she not been charged under the more serious espionage statute?
Contrary to public perception, there is no crime of "espionage" in US law. The word appears nowhere in the US Code statutes (only in the heading of Chapter 37, Title 18). Although half a dozen laws are usually referred to as the "espionage statutes," only Section 794, aimed at anyone who transmits information to "any foreign government," carries the more draconian penalties. That is the section that prosecutors mean when they talk about "espionage."
Within the Justice Department, there had been a division of opinion on whether to throw the book at Leung or charge the case more cautiously. Bruce C. Swartz, a senior department official, was said to have pushed for charging Leung with espionage. Officials in the department's counterespionage section, John Dion, the chief and a veteran of many spy cases, Ron Roos, and Robert E. Wallace Jr., were involved in the discussions, as was the US Attorney's Office in Los Angeles. In the end it was decided to indict PARLOR MAID for the lesser charge of taking and retaining classified defense information.
None of the Justice Department officials involved in the sensitive decision would comment. Emmick would only say that there were discussions between Los Angeles and Washington "about whether more serious espionage charges were supported by the evidence or were advisable as a matter of strategy." It was decided "not to charge espionage or to otherwise broaden the charges."
Lonergan, too, would not discuss the decisions made by the Justice Department and the prosecutors. But she indicated that ultimately, the decision was made in Washington. "When a case has high-level attention, it follows that high-level people will be involved in the decision making," she said. "I would not say that case was under our [the prosecutors'] control.
"In any espionage case you want to charge as narrowly as you can," Lonergan continued. "Otherwise you have a huge graymail problem. You open the door to secrets being disclosed.
"Trying to prosecute national security cases is like walking a tightrope. The more serious the charge the government brings, the greater the risk that sensitive secrets will be disclosed. We've got all this evidence, but can we use it? As a prosecutor, you're twisted into a pretzel trying to prove some of these cases. Many of the most serious cases never get charged."
Lonergan, who became a law professor at the University of California after leaving the US Attorney's Office, added, "The more sensitive the information that somebody took, the more likely it is that the intelligence agencies will not want it to be disclosed during a criminal trial." What the public sees "is usually the tip of the iceberg. You're not going to charge your most serious stuff because you do not want to risk exposing the most serious stuff."
Emmick agreed that graymail w
as a huge problem in the Leung case. "The problem is always to make the charge narrow enough to avoid graymail and broad enough to reflect the seriousness of the conduct." The decision was made "to charge the case narrowly so all we needed to do was to establish she had possession of these documents, they were classified documents, she knew they were classified. This would be a narrow, scalpel-like way to charge the case.
"We would reduce the likelihood that classified information would be discovered. We wanted to reduce the risk of being graymailed. There were discussions within the office and within DOJ as to whether to charge more broadly, charges that actually involved espionage, or conspiracy that might involve the Chinese government as well.
"She went to China on a number of occasions and had discussions with representatives of their intelligence service. Information was apparently passed. But the more the charges focused on the passing of information, the more classified information would be involved, and the more vulnerable the case would be to being graymailed."
When government secrets are disclosed in court, Emmick said, it created an additional problem. "You have to declassify documents in order to bring them into a trial, and when you declassify, you lose jury appeal." A jury would think, "If it's no longer secret, then what does it matter? How could it be so important?"
There was another, and at least equally compelling, reason that the government did not charge Leung with spying, despite her admissions to the FBI. The prosecutors certainly described her as a Chinese spy. In one court document, the government termed her "an agent for the PRC" and said that while still an FBI asset "she began to work for the Ministry of State Security ('MSS'), which is the PRC's spy service." And according to the FBI affidavits, she confessed to stealing documents from J.J. Smith's briefcase and "admitted that she provided intelligence she gained in this manner to the MSS." But the affidavits conspicuously omit a description of any specific document she may have provided to China. The clear implication is that PARLOR MAID was careful not to admit passing any specific document to the MSS—otherwise the FBI affidavits would presumably have included that key information. "The fact that there was no specific document admitted by her was a factor," Emmick confirmed.
On July 18, 2005, J.J. Smith stood before Judge Cooper for sentencing. "I have nobody to blame but myself for my being here today," he told her. "I stand before you ashamed and humiliated."
Lonergan argued for a brief prison term, asserting that Smith had endangered national security by his affair with PARLOR MAID. The government, she said, "will be scrambling for years to come to determine what damage was done here."
The judge decided on no jail time for J.J. Smith. She sentenced him to three months of house arrest, three years probation, and fined him $10,000. Under his plea bargain he could have been sent to prison for six months. With tears in his eyes, he turned to his wife and son, who were sitting in the courtroom, and apologized to them.
The prosecutors, meanwhile, were not ready to give up their pursuit of Leung. After Judge Cooper dismissed the indictment against PARLOR MAID, the government appealed the case to the Ninth Circuit. At the same time, the FBI continued to dig into the Leungs' finances. A likely tax charge was still hanging over the couple.
In the original complaint filed to arrest Leung, the government outlined three tax cases against her. It charged that she had failed to pay taxes on at least $435,000 of the more than $500,000 she had received from the FBI for her services as an asset. In addition, the complaint charged that she had paid no taxes on $1.2 million that Nortel had paid to her through Merry Glory, Ltd., a Hong Kong company she controlled. Leung had entered into an agreement to represent the giant Canadian telecom in a joint venture to sell Nortel's digital switching systems in China.
Finally, the government contended that Leung had engaged in a tax scheme to take annual deductions on mortgage interest of about $40,000 on her home by making monthly payments to an account in the name of Right Fortune, Ltd., in the Hang Seng Bank in Hong Kong. Although Right Fortune supposedly held the mortgage on the Leungs' luxurious home in San Marino, the company was actually controlled by Katrina Leung. Each month Leung duly sent a check for $6,000 to the Hong Kong account. As the FBI put it, Leung "was making the mortgage payments to herself and then deducting the interest portion of those payments."
With the three tax cases looming, and the possibility that the appeals court would reinstate the case that Judge Cooper had thrown out, Leung and her lawyers decided it was time to strike a deal. If the government brought the tax charges it would mean perhaps years of expensive litigation for Leung and her husband.
In December, before the appeals court could rule, Leung agreed to a deal. She pleaded guilty to lying about her love affair with J.J.—she had, at first, said he was nothing more than "a good family friend" and that theirs was a "business relationship," and she had denied traveling overseas with him although they had gone to Hong Kong and London together.
In addition, she pleaded guilty to failing to report $35,000 in income from the FBI on her 2000 tax return. She also agreed that in the seven-year period after 1995 she had not reported $207,000 in payments from the FBI. She had to consent to nine debriefing sessions and to take a polygraph if required. In return, the government agreed not to pursue criminal tax charges against Kam Leung and to settle the back taxes owed by the couple.
On December 16, PARLOR MAID stood before Judge Cooper for the last time. She was sentenced to three years probation, two hundred hours of community service, and fined $10,000. Essentially, both Smith and Leung had walked. And the government was spared an embarrassing courtroom spectacle.
Small wonder that Katrina Leung announced to the judge, "I love America."
But J.J., although he had avoided prison, had lost his reputation. The star of the Los Angeles counterintelligence squad had been arrested by his fellow FBI agents and hauled before a federal judge in handcuffs. The personal toll it took on him was revealed in an e-mail he sent to friends when he agreed to plead guilty.
Although his lawyers said he would probably get a minimal sentence or probation, J.J. was worried. "With my luck the judge's husband just ran off with his thirty year old secretary and I'll get five years breaking rocks —in stripes."
With his wife and son watching, he wrote, he had to tell the court, "'I entered into an unauthorized intimate relationship with Katrina and then lied about it to my employer.' Argh!"
Although he could "start working on my tattered relationship with Gail, Kelly, family ... I am near broke, my relationships are shattered ... and will perhaps have to testify against someone I believed in for eighteen years and she will go away for a long time."
His wife stayed with him, despite everything. Gail Smith believed strongly in family. Their son, Kelly, worked as a bartender, graduated from law school, and, ironically, became a prosecutor.
Bill Cleveland and his wife separated. Having lost his six-figure job at the Livermore lab, he turned to teaching criminal justice.
As for Leung's husband, he still loved his wife. Kam Leung appeared to be faithful and true to Katrina, despite her extramarital adventures. "I am a very ordinary human being tossed into this extraordinary situation," he said. "She is my charge, a brilliant person, vulnerable and insecure. It is my job to see it through and protect her."
Was his, then, an open marriage? "No, not an open marriage, I am Chinese by culture. This is the greatest love story. It is my mission, my role. As though I were put in the cosmos to take care of her."
Katrina Leung, the object of all this adoration, kept a very low profile, shunning the public eye in which she had once reveled. She had pleaded guilty to two felonies. She no longer enjoyed her prestige and status as a prominent leader of the Chinese American community in Los Angeles.
Les Wiser, after twenty-three years in the FBI, retired in 2007 from his last post as special agent in charge in Newark, New Jersey. He was hardly pleased that the cases he had built so carefully against J.J. Smith and Katrin
a Leung ended as they did. But Wiser was an FBI agent; he was not in charge of the prosecution. He could take comfort from the fact that he had done his difficult job, and done it well.
The sheriff had caught the bad guys.
Chapter 19
EAGLE CLAW
THE PARLOR MAID CASE was dramatic enough, combining as it did sex, spies, secret reports to the White House, and millions of dollars, but it was not the first time that China had penetrated an American intelligence agency.
Three decades before Katrina Leung passed FBI secrets to the MSS, Chinese intelligence had recruited a long-term spy inside the CIA. His name was Larry Wu-Tai Chin, and his pursuit and eventual detection and capture was given the code name EAGLE CLAW.
Tall and so skinny that his classmates at Yenching University, where he studied English, called him Grasshopper, Chin lived a double life in more ways than one. To his colleagues at the CIA's Foreign Broadcast Information Service, the bespectacled Chin appeared quiet and colorless. But he was not only a Chinese spy—over the years Beijing paid him about a million dollars—he had multiple girlfriends, a penchant for sex toys, gambled tens of thousands of dollars in Las Vegas, and stored gold bullion in a bank account in Hong Kong.
It is not often that the key to unlocking an espionage mystery is literally a key, but it was in the case of Larry Chin. The FBI learned that an American spying for China, his identity not yet certain, had stayed in room 533 of the Qianmen Hotel in Beijing. By 1983, a year after the EAGLE CLAW case file was opened, Chin was under suspicion. In May of that year, as Chin was leaving from Washington for Hong Kong, the FBI searched his luggage at Dulles International Airport and found a key to room 533. It was a major break in the case.
