Both Smith and Leung have pleaded not guilty to the charges lodged against them. Both are free on bail, pending trial next year. Prosecutors preparing the case say Leung has "a long history of lies and deception," noting that the FBI paid her over $500,000 for her information-gathering services. One of Leung's attorneys, Janet Levine, counters that Leung never passed anything on to the MSS "without the complicity and knowledge of this FBI." She said the FBI fed Leung documents to give the MSS because the bureau had deliberately set her up as a double agent. "We are confident," Levine says, "that the evidence will show that Katrina Leung is and has been a patriotic, loyal American." After her arrest, Leung's family issued an angry two-page statement accusing the FBI of a blatant "double standard." The statement said: "Their people in Washington are orchestrating things to protect their own," adding that "they blame the nonagent and the foreign-born, especially the Asian, especially the woman."
Given the nature of the allegations, the Leung case is apt to set a new record for finger-pointing. "It's a sad day for the FBI," the bureau's director, Robert Mueller, said after the arrests. "Smith not only betrayed the trust the FBI placed in him; he betrayed the American people he was sworn to protect." Smith's attorney, Brian Sun, told U.S. News that his client "had every reason to believe that [Leung] was a valuable asset to the United States based upon the information and the services she provided."
Mueller did not mention the other FBI agent, Cleveland, who was involved with Leung. The fact that he has thus far avoided any legal repercussions as a result of the relationship doesn't sit well with some in Washington's close-knit counterintelligence community. A senior FBI official says that "there's no indication" Cleveland gave Leung secrets, adding that the relationship was "strictly sexual," and confirmed that Cleveland recently submitted to a polygraph exam about the nature of his involvement with Leung, which found no evidence of deception. When Cleveland was in charge of security at Lawrence Livermore, however, he was polygraphed and asked, among other things, whether he had had any contacts with foreign agents. Cleveland, sources say, aced the test. Prosecutors say Cleveland lied repeatedly to FBI agents in interviews this year about the length of his affair with Leung; it was not until his fourth interview that Cleveland admitted the relationship had gone on and off for at least seven years--not three, as he first stated.
Circus. The feds, evidently, are in a bit of jam with Cleveland. They found no documents in Leung's safe that trace back to him. And they may need him as a potential witness, albeit one with some major credibility issues. "They think they need him to get Smith or Leung," a counterintelligence source says. Whatever the reasons for the government's decisions to date, "there's no doubt," says a veteran counterintelligence official, "that the brotherhood is trying to help Cleveland and throwing Smith to the wolves." The Justice Department's inspector general, meanwhile, sweeping up behind the elephants in this three-ring circus, is examining the seemingly endless series of management failures and will, eventually, issue a report.
The Leung saga may offer the trappings of a dime store spy thriller, but beneath the sordid details is one very sobering prospect: Katrina Leung and her two G-man lovers might just possibly have blown two decades of intelligence work on China sky-high. The mandatory damage assessments are already underway, nearly a dozen in all, by the FBI and a handful of other alphabet-soup agencies. Among the classified documents FBI agents found in Leung's home was a journal written in Chinese with English words interspersed, such as "military double agent," "rocket knowledge," and "U.S. Airforce." In court papers, FBI Special Agent Randall Thomas explained that the FBI conducts "double agent" operations with the U.S. military and Air Force to assess the capabilities of foreign militaries like China's. In such operations, the United States "feeds" a knowledgeable military member to the MSS and controls his or her actions. Thomas quoted a senior FBI official, Bruce Carlson, as saying the bureau used information provided by Leung to deter China's efforts to steal U.S. military technology. If Leung's "information" actually came from Chinese security agencies, the entire FBI exercise was, in all probability, a sham. "The FBI must now reassess all of its actions and intelligence analysis based on her reporting," said Carlson, adding that Leung may have "thwarted or compromised" many other national security programs by passing on to her Chinese handlers information she obtained about them. The other side of the coin, sources say, is that whatever disinformation Leung fed her FBI lovers could have been passed up the national security chain of command, perhaps even to the White House. "Every double-agent operation we ran," says Larry Wortzel, a retired military counterintelligence official and longtime China hand, "might have been compromised and a failure."