"Dedicated to exposing the lies and impeachable offenses of George W. Bush"


FBI missed China spying warning signs
Yahoo News/Reuters
By James Vicini
May 24, 2006

WASHINGTON (Reuters) - The FBI failed to follow up on numerous warning signs that one of its most highly paid informants was a suspected Chinese spy and that she had a nearly 20-year affair with her FBI handler, the U.S. Justice Department's inspector general said on Wednesday.

Inspector General Glenn Fine said that Katrina Leung, who was accused of being a double agent, had been paid more than $1.7 million by the FBI and that she had a longtime affair with her handler in Los Angeles, FBI agent James Smith.

They were arrested in 2003. Smith, who retired in 2000, pleaded guilty in 2003 to making false statements to the FBI. Leung, a prominent businesswoman and well known in the Southern California Chinese-American community, pleaded guilty last year to lying to the government about the affair with Smith and filing a false tax return. They both received probation.

Fine said in a summary of a 235-page report that Smith operated Leung with little oversight based primarily on his status as a top agent in Los Angeles and Leung's status as a highly valued informant.

"We determined that the FBI was aware of serious counterintelligence concerns about Leung that began to surface during the late 1980s and early 1990s but the FBI did little to follow up on the warning signals it received," he said.

The report said the FBI inappropriately relied on Smith to resolve concerns about Leung in the late 1980s and early 1990s, and failed to follow up to make sure that he had done so.

It found that Smith exploited the inexperience of his supervisors, sometimes intentionally deceiving them, and circumvented or ignored FBI rules on handling intelligence sources.

The report concluded the FBI's inattention to the oversight of Smith and Leung and its failure to aggressively question Smith or follow up when red flags arose allowed Leung to deceive the FBI about the extent of her spying.

In May 2000, the FBI received new information indicating that Leung was a spy for China and that she had a source in the FBI's Los Angeles office.

The FBI inappropriately told Smith about this information and failed to begin an investigation for a year. The report called the delay "particularly troubling" because the FBI at the time was conducting a major investigation of another one of its agents, Robert Hanssen, who spied for Moscow for 20 years.

Leung was originally accused of taking classified documents from Smith but the case was dismissed because of prosecutorial misconduct that prevented Smith from talking to her attorneys.

Original Text