The New York Times

April 20, 2003

F.B.I. Spy Case Highlights Problem With Informants

By ERIC LICHTBLAU

WASHINGTON, April 19 — A widening spy scandal involving a veteran agent of the Federal Bureau of Investigation and a prized informant in Los Angeles is part of a much broader institutional problem that has led to the disciplining of several hundred agents in recent years for improper dealings with informants, law enforcement officials say.

The vast majority of these cases have never been made public, but law enforcement officials who have reviewed the problem say the F.B.I. has grappled with recurring episodes in which agents have had sexual or financial relationships with confidential informants.

Some agents have worked out schemes in which they made "tens of thousands of dollars" by padding the expenses paid to informants or by demanding kickbacks from them, said a senior law enforcement official who insisted on anonymity.

"Getting too close to the asset is the thing that most often brings an agent down," the official said. "It happens over and over again, and it's usually about sex or money."

Senior F.B.I. officials acknowledged in interviews this week that better oversight was needed. But they made clear that the bureau relied on many thousands of confidential informants, including drug runners, mobsters, professors, foreign diplomats and political defectors, to glean intelligence about crimes and threats to national security. In the fight against terrorism, the F.B.I. depends on them more than ever.

The F.B.I.'s system for managing its informants was thrown into the spotlight last week by the arrests in Los Angeles of James J. Smith, a veteran agent, and Katrina Leung, a longtime informant, on charges of mishandling classified data.

Ms. Leung was a prized F.B.I. "asset," paid $1.7 million over the last two decades to move seamlessly between her native China and her adopted home in Los Angeles in search of Chinese secrets.

But prosecutors now contend that Ms. Leung was a double agent. Soon after she became an F.B.I. informant in 1982, Ms. Leung and Mr. Smith, a veteran counterintelligence agent who was her handler, began an affair, officials said. Ms. Leung would take and photocopy classified national security documents from Mr. Smith's briefcase during his many visits to her home and pass secret information to Chinese officials in Beijing, prosecutors say.

Defense lawyers have said Ms. Leung and Mr. Smith will be exonerated.
Ms. Leung's family, in its first public comments, said in a statement released today that she had spent two decades "doing what the F.B.I. wanted," putting herself in great personal danger. The family said she was now being targeted in part because she is a Chinese-American woman.

"When Katrina can present the full story, you will know she has been abused and smeared by the F.B.I., she is a loyal and patriotic American and she is innocent of any crimes against America," the statement said.

Defense lawyers have suggested that senior F.B.I. officials were well aware of the information Ms. Leung gave to the Chinese.

Indeed, officials at F.B.I. headquarters received reports in the early 1990's that suggested Ms. Leung was giving unauthorized information to the Chinese government. But a former F.B.I. official who was a participant in a 1991 meeting called in Washington to discuss the problem said officials were willing to accept the risk that she was a double agent because she was producing such valuable information for the F.B.I.

"It's a give and take," the official said. He called the information Ms. Leung gave to the Chinese essentially worthless and said, "The United States gained incomparably more."

But officials investigating the episode say some of the F.B.I.'s most delicate intelligence matters involving China may have been compromised.

Law enforcement officials and members of Congress say the Los Angeles arrests — along with an equally notorious case in Boston involving James Bulger, a fugitive mobster and informant — raise troubling questions.

Senator Charles E. Grassley, Republican of Iowa, said he wanted hearings on the F.B.I.'s use of informants and the bureau's "inadequate controls."

Senator Arlen Specter, Republican of Pennsylvania, said of the Los Angeles case: "There were lots of red flags missed here. The level of complacency by the bureau is shocking."

In the Boston case, F.B.I. agents protected Mr. Bulger and other mob informants for decades as they engaged in killings and racketeering. Agents kept silent when four innocent men went to jail for murders that the F.B.I. had evidence Mr. Bulger's gang had committed, officials found. Mr. Bulger's F.B.I. handler, a childhood friend, John J. Connolly Jr., was sentenced to 10 years in prison last year for racketeering and obstruction of justice. Mr. Bulger disappeared in 1995 after being indicted by a federal grand jury.

"You have some rogue agents who do stupid things," said Representative Dan Burton, Republican of Indiana, who has led a Congressional investigation into the Boston mobster case. "There needs to be aggressive policing by the F.B.I."

Senior F.B.I. officials said the bureau was developing tougher safeguards. Even before the Los Angeles case broke, they said, they had begun cataloging past abuses and considering stronger controls as part of a reorganization after Sept. 11, 2001.

While that effort is continuing, a senior F.B.I. official said, the bureau has identified several hundred cases in the last 10 years in which agents were disciplined for improper dealings with informants. Using those cases, the F.B.I. plans to develop a computerized system to identify signals to alert them to problems in an agent's relationship with an informant, based on things like the length of the relationship and the money paid.

In Los Angeles, for instance, Mr. Smith was allowed to remain Ms. Leung's main handler for 18 years, an unusually long partnership fraught with perils, officials said.

The officials said existing policies require that a supervisor review an agent-informant relationship every 60 to 90 days, that two agents be present when an informant is paid and that classified material be shared with an informant only with senior-level approval.

F.B.I. officials cautioned that they did not want to chill the ability of agents to cultivate informants.

"We can't shy away from developing sources," a senior F.B.I. official said. "It's our bread and butter. We just have to put better controls in place, which we're doing."


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