FROM CHINA WITH LOVE

In the counterintelligence world of code names, Katrina Leung’s was “Parlor Maid.” For twenty years she and her FBI handler, Special Agent J.J. Smith, passed information about China that eventually made its way to four American presidents. Then in April of 2003, the government alleged Leung was a double agent and she and Smith were arrested. In a stunning announcement, the government revealed in court filings that Smith and Leung had carried on a romantic relationship for more than two decades.

In “From China with Love,” FRONTLINE® explores a story of secrets, risk, patriotism, and perhaps a story of love. The program airs Thursday, January 15, at 9 P.M. on PBS (check local listings).

The cases against Leung and Smith are shocking to longtime FBI observers. Essentially, Agent Smith and his prized asset Leung have admitted they would meet at her upscale home in a Los Angeles suburb. After they made love, J.J. would leave the bedroom and Katrina would copy secret or classified documents from his briefcase.

Leung’s possession of secret documents and Smith’s alleged complicity have called into question virtually every piece of counterintelligence information gathered by the United States over two decades.

“Very grave damage could have been done,” former San Francisco FBI Head of Counterintelligence Ed Appel tells FRONTLINE. “And it certainly could result in a compromise of U.S. government interests and intelligence interests with regard to China.”

There are also extremely critical questions being asked about the FBI’s own role in supervising Smith after an internal investigation revealed Leung had received more than $1.7 million in payments from the Bureau.

“She’s being paid extraordinary amounts of money,” says former FBI Special Agent in Charge I.C. Smith. “$1.2 million just for expenses that she incurred over the years, and then a half a million for information, which in my view is an imbalance, which made me think the FBI is probably supporting some of her private business ventures.”

Neither Leung nor Smith has been charged with espionage. Instead, the government says Leung had and copied classified documents and that Smith provided access to those documents through gross negligence. Both have pled not guilty.

While Agent Smith was released on $250,000 bail, Judge Victor Kenton originally ruled Leung a flight risk and would not grant bail. His decision appeared to support government discoveries that Leung had sixteen foreign bank accounts in various names, that she regularly traveled to China where she often met with high ranking officials, and that she was a Chinese agent with the code name “Luo.”

“Katrina Leung is a loyal American citizen,” her attorneys said in a statement issued to the press. “For over twenty years she has worked at the direction and behest of the Federal Bureau of Investigation.”

J.J. Smith’s attorney, Brian Sun, questions the motives of the government in charging his client. “We think the Bureau is…reacting and perhaps overreacting to external political pressures, to public relations nightmares, and [Smith and Leung] are being unduly and harshly sanctioned and punished for conduct which arguably could have been dealt with administratively or some other means short of criminal prosecution.”

Former director of the FBI’s Chinese Counterintelligence division Van Magers says, “If the affidavit represents the sum total of information the FBI has, then I don’t know, unless it’s the decision of someone senior [saying], ‘Let’s make an example.’ And why here, why this case, why now? The sex? Maybe. It certainly makes it appeal to prurient interests. It grabs headlines.”

Former FBI Special Agent Jack Keller argues, “I think this is all about sex, quite frankly. Free sex at the cost of the government. The government was paying for his sex, is what they were doing.”

But former Agent Appel says the intimate nature of the relationship is the central point.

“It’s either licit or illicit. If it’s illicit, in the case of a person who’s sleeping with a married person, then obviously there is a blackmailable offense going on,” Appel says. “There is an illicit aspect to it that creates, for counterintelligence purposes, an impossible relationship.”

In the San Francisco FBI office, one of the Bureau’s top Chinese counterintelligence agents, William Cleveland, provided the first inkling that “Parlor Maid” was also working for the Chinese.

In 1991, the FBI assigned Cleveland to travel to China. While there, he was followed by Chinese security agents and apparently confronted by a former espionage suspect under suspicious circumstances. When Cleveland returned to the United States, he was given a wiretap audiotape made before his trip to China on which a woman with the code name “Luo” talks to an agent code named “Mao” and gives the details of Cleveland’s upcoming trip. The woman’s voice was well known to Cleveland. It was one of the FBI’s prized assets—“Parlor Maid.”

But Cleveland had a problem, because for three years he and Katrina Leung also had been lovers. Cleveland would have to turn Leung in to headquarters but hope they never discovered his personal relationship.

Headquarters didn’t—and in what would later be criticized as a profound failure of management—they actually returned “Parlor Maid” to the field and allowed J.J.—her other lover—to continue supervising her.

“What you have set in is the FBI culture,” former Agent Tom Parker tells FRONTLINE. “The good old boy network, the fact that both J.J. and Bill Cleveland are well respected, well liked guys. No reason for any suspicions between the two of them.”

Subsequently it was revealed that even after learning that Leung was working with the Chinese, both Agent Smith and Agent Cleveland continued to share information about important investigations with Parlor Maid.

“Cleveland is deeply involved with Gwo-Bao Min, he’s deeply involved in Wen Ho Lee. He is deeply involved in the Peter Lee Case,” says Dan Stober, author of A Convenient Spy. “If Cleveland is talking to Katrina about these things, that she’s telling the Chinese, the Chinese theoretically could be telling their sources at the labs, ‘Look out, look out.’”

Former agent Cleveland has not been charged by the federal government and is said to be cooperating with the investigation.

“Just like our programs ‘Waco—The Inside Story’ and ‘The Man Who Knew,’ this program details the human drama behind the profound troubles that have plagued the FBI for more than a decade,” says FRONTLINE producer Michael Kirk. “This program illustrates the lack of management controls, the failure of safeguards, the ‘old boy network’ and the complexities of the relationship between sources and agents that is at the heart of what the FBI does.”

“From China With Love” is a FRONTLINE co-production with the Kirk Documentary Group. The producer, writer and director is Michael Kirk.

The FBI nearly bungled the Aldrich Ames case as well. The surveillance of Ames was so bad that they missed not one but two Ames trips to the dead drop. And they also fouled up the Robert Hanssen case so badly that it's a wonder they didn't get sued. (They strongly suspected a CIA operative rather than Hanssen, and this poor CIA guy was suspended from work for a year before Hanssen was discovered to be the spy. Whoops.)

FBI counterintel needs to be cleaned out in my opinion. Perhaps counterintel and counter terrorism responsibilities should be given to another agency.

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