Fears About Sensitive Data Block Move to Cut Off Wages : ‘Catch-22’ Situation Keeps Bloch on State Dept. Payroll

Concerns about disclosing sensitive eavesdropping information are hampering efforts to remove Felix S. Bloch from the State Department payroll while investigation of his alleged espionage continues, government sources said Thursday.

A key element of information obtained by investigators against Bloch, the sources said, is a recording of a conversation that he had with his wife in which he allegedly indicated complicity in spying for the Soviet Union.

Although the comments themselves are not enough to support criminal charges, the government is exploring ways to cut off the paychecks that Bloch has been drawing on his $78,600 annual salary since the State Department suspended him and stripped his security clearances June 22.

Meetings With FBI

However, officials are concerned that they might have to detail sensitive information about their surveillance methods at a hearing Bloch could request to challenge his firing. State Department officials have met several times with the FBI about what information would have to be revealed to uphold a firing before they decide how to proceed, the sources said. The behind-the-scenes negotiations reflect the government’s desire to take some action soon against Bloch, whose daily treks around Washington while under surveillance have attracted extensive news media attention and embarrassed the State Department.

Department officials declined to comment on possible moves against Bloch.

“We have to avoid comment on the whole situation,” said spokesman Richard Boucher. “It’s a very sensitive legal matter.”

An FBI spokesman declined to comment, as did Bloch’s lawyer, John M. Bray.

The electronic monitoring of the Bloch conversation with his wife is believed to have been conducted in Washington before June 22.

Disclosing details of the electronic eavesdropping, conducted under the secret Foreign Intelligence Surveillance Act, could compromise confidential information on intelligence sources and methods, officials familiar with the matter said.

In addition to the sensitivity about the monitoring, there are legal questions about whether the information collected could be protected by marital privilege, one source said.

It is understood that Bloch’s wife, Lucille, recently was called before a federal grand jury in Washington, which has been subpoenaing documents and taking some testimony in the case. Bray would not discuss her activities and declined to say whether she has retained separate representation.

A source familiar with the investigation said that the same panel had questioned a former Austrian prostitute named Tina, who in July told Austrian police that Bloch had paid her more than $750 a night for sexual services. She now works as a waitress in a Viennese coffee house, and Austrian security officials said that they are “certain” she had no connection with any espionage activity.

No. 2 in Vienna

Bloch served as the No. 2 official in the U.S. Embassy in Vienna from 1984 to 1987 before reassignment to the State Department in Washington as director of the office dealing with the European Community.

Investigators who have examined Bloch’s financial records have found no evidence that he ever withdrew such sums of money, leading them to suspect that he may have had an illicit source of cash.

Bloch was photographed May 14 by French intelligence agents having dinner in a Paris restaurant with Reino Gikman, during which time he is said to have passed a travel bag to Gikman. U.S. sources have described Gikman as a Soviet spy traveling as a Finnish computer salesman.

Bloch, in an Austrian television interview last month, acknowledged dining in a Paris restaurant May 14, but declined to say whether he dined with Gikman or left a bag with him. Earlier, he is understood to have told the FBI that he knew Gikman only as a fellow stamp collector.

Contrary to published reports in July, Bloch, in his only substantive interview by FBI agents, did not tell them that he had been paid “a lot of money” by the Soviet Union, sources familiar with the case said. However, he is understood to have made a comparable comment during the monitored conversation with his wife.

Times staff writer Doyle McManus contributed to this report.