The Parlor Maid

Recently, Katrina Leung, a prominent Republican and Asian-American activist, who had been used by the FBI as an "asset" (code name "Parlor Maid") in learning what the Chinese were up to for roughly the last 20 years, was arrested on suspsicion of being a double-agent who gave many of our secrets back to the Chinese.  She apparently had been having an affair with one of her "handlers" - who was also one of the top agents in our Chinese counterintelligence program - and was able to obtain classified material from him when he would leave papers and other materials in a room with her, unattended.

If the charges are true, the damage from this case could be huge.  The Washinton Post notes that [t]op FBI officials have told members of Congress that every Chinese counterintelligence case investigated by the FBI since at least 1991 may have been compromised by a suspected agent of the Chinese government arrested in Los Angeles this week.

Several cases have likely been compromised, including the "big" ones that have made the news over the last 2 decades, such as the investigation of Wen Ho Lee who was accused of selling secrets from the Los Alamos National Laboratory, whether nuclear secrets regarding neutron warheads were transferred from the Lawrence Livermore National Laboratory, and claims that the Chinese were trying to funnel large amounts of illegal contributions to politicians in the 1996 elections.  This last one may end up being the most interesting, as Leung was well known to be a prominent Republican supporter and the investigation of the 1996 campaign-financing concerns focued mainly on Democrats, including Bill Clinton, who was President at the time.

One of the more interesting twists to the case is that Leung's handler and lover, James J. Smith, was alerted to the possiblity that she was a double agent in 1991, most likely by William Cleveland, Jr., a former Chinese counterintelligence agent, who was also having an affair with Leung.  Cleveland had left the FBI to work at Lawrence Livermore Labs in 1993, and resigned from his post there last week as the story broke.  Currently, he has not been charged with any espionage, but is under investigation.

Officials are suggesting caution should be taken before judging the situation:

Goss, a former CIA officer, stressed that charges against Leung and Smith have not yet been proven. FBI officials who supervise double agents such as Leung "are given a lot of latitude," he said, and may have legitimate reasons to provide bits of sensitive information.

If the FBI is unable to make a case against her, howeverk, the IRS just might.  Apparently, in addition to potentially stealing secrets and giving them to China, Leung was also cheating on her taxes.

The 29-page government affidavit that details the espionage case against Leung also alleges that for more than a decade she has failed to report sizable amounts of her income to the Internal Revenue Service and has contrived elaborate tax schemes to defraud the government.

Federal investigators allege that Leung did not report the payments and expense reimbursements that the FBI gave her over nearly two decades on her taxes, even though she was advised twice by Smith to do so. The affidavit also charges that Leung was paid more than $1 million by a technology company based in Hong Kong, money that she did not report on tax forms.

Leung also had been claiming mortgage- interest deductions on her taxes for a residence that was not mortgaged, according to the affidavit. It details an alleged scheme in which Leung pretended to refinance a home that she owned by paying a foreign company that she and her husband controlled.

In the affidavit, an FBI agent asserted that Leung admitted to the alleged tax scheme when she was questioned by agents investigating whether she was spying.

I'm curious to see how much play this case gets.  Given Leung's connections to Republicans, and, in particular, fund-raising for Republican politicians, this could be a real bombshell - especially since one of the cases that she may have compromised is the one involving Johnny Cheung, who, in 1999, admitted to having been given $300,000 that he was supposed to give to the Presidential campaign of President Clinton in 1996, though only $20,000 of the money was ever traced to the DNC.

With 20 years of Chinese counterintelligence on the line, the amount of damage Leung could have done may well be incalcuable, and who knows how many agents or politicans may be touched by this scandal.  This will take a thorough, careful and fair investigation - not exactly what the FBI is always known for - but hopefully they'll be able to get this one right.