Spies Never Came In From the Cold : Espionage: FBI claims Soviets are still snooping in Silicon Valley. Business leaders suggest that counterintelligence experts may be exaggerating threat.
He was, it seemed, an especially gregarious and polished entrepreneur out to make deals.
On a visit a few months ago, the deputy chief of a Soviet high-tech concern busied himself by meeting Silicon Valley executives, gathering company reports and soaking up as many details as he could. He also attracted the attention of FBI foreign counterintelligence agents. Under his businessman facade, agents concluded, he was a Soviet intelligence officer.
For U.S. firms looking to tap into the Soviet market, these are heady days. Come November, the Berlin Wall will have been down for a year. U.S.-Soviet cooperation has reached new heights as the two countries joined to condemn Iraq’s invasion of Kuwait. But for all the summits, arms control talks and trade agreements, FBI agents say, word evidently has not reached Soviet spies that the Cold War is over.
L. Douglas Gow, assistant FBI director, said as recently as June that Soviet espionage was increasing nationwide. FBI agents say it is particularly evident in Silicon Valley.
“There’s no clear evidence that they have diminished their efforts. And to the contrary, there’s evidence that they have increased it,” said Edward J. Appel, assistant special agent in charge of the FBI in San Francisco.
Appel is responsible for foreign counterintelligence efforts in Northern California. It is turf well known as a center for research and development of high-tech products and electronic warfare equipment. Roughly 500 firms here are cleared to perform secret or top-secret work, and 30,000 people hold high security clearances.
In the 1980s, the Bay Area served as a backdrop for major prosecutions of spies and entrepreneurs who sold or attempted to sell restricted computer equipment to the Soviets and Eastern European countries.
The dramatic spy prosecutions of the last decade may have given way to above-board business deals in the 1990s, but according to Appel and other FBI agents whose job it is to catch spies in Northern California, the Soviet Union and some Eastern European countries continue their quest for U.S. trade secrets, economic and political intelligence, and restricted high-tech equipment.
“They have an enormous (spy) apparatus,” Paul Seabury, political science professor at UC Berkeley, said of the Soviets. Noting that the Soviet Union hopes to develop its own high-tech industry, he said: “Why not steal it? It’s a cheap way of getting what they need.”
At any given time, the FBI has estimated, a third of the 35- to 40-member Soviet delegation attached to the San Francisco consulate are intelligence officers. The consulate, housed in a five-story brick building in the Pacific Heights neighborhood, is one of three Soviet missions in this country. The others are the embassy in Washington and the United Nations.
A high-ranking Soviet diplomat based in San Francisco, questioned after a recent ceremony at San Francisco City Hall, said he had nothing to say about espionage matters.
In the last two years, there have been no arrests in Northern California for spying or illegal exportation of restricted computer equipment. But the FBI provided details of several recent episodes in the Bay Area and Silicon Valley suggesting that Soviet espionage continues. Among the examples the FBI described are:
* A West German firm has been trying to acquire state-of-the-art computer equipment from firms on behalf of a Soviet enterprise. The Soviet contact who is directing the effort is a KGB officer who has used a commercial cover in the past to obtain U.S. technology.
* A computer marketing executive is suspected of selling restricted computer equipment to an Eastern European intelligence officer. The sale remains under investigation, and the intelligence officer continues to contact U.S. business executives.
* An Eastern European country sent a request to a defense firm asking for details about electronic warfare equipment. The material was not sent.
* A Soviet defector identified several Soviet intelligence officers who are working as commercial representatives trying to set up joint ventures here.
Appel noted that no one can predict what will happen in the rapidly changing Soviet Union. Unlike many experts who believe that the Soviets will continue on a path toward democracy, Appel notes that nobody can say with certainty that the changes are “irreversible.” Soviet intelligence officers are “true believers” in communism, he noted, and he has seen nothing to suggest the faith of Soviet spies has been shaken.
“They have to improve their economy and they have to sucker us into helping them do it,” Appel said.
Warnings from foreign counterintelligence agents notwithstanding, U.S.-Soviet business continues to increase. Executives of companies from Apple Computer to AT&T; sought out seats when Soviet President Mikhail S. Gorbachev spoke in San Francisco in June.
Those business leaders insist they are well aware of security concerns. Some also suggest that counterintelligence experts may be exaggerating the current Soviet threat. After spending their careers chasing spies, one businessman noted, it is only natural that their anti-Soviet attitudes would die hard.
“The challenge U.S. business faces is not security,” said Chuck Collyer, senior vice president in charge of Soviet activities for Bechtel Inc., the San Francisco-based engineering and development giant. “The challenge is how to make a successful venture, how to get paid, how to attract investors. . . . They’re business-related issues. They are not security-related issues.”
Bechtel counts among its directors former Secretary of State George P. Shultz, one of the more prominent advocates of a more open approach to the Soviets. For its part, Bechtel has a contract with the Soviets to perform a feasibility study looking at creating a Silicon Valley 20 miles southwest of Moscow. Such a center would have hotels, airport and housing tracts and would be used to develop and manufacture high-tech products for sale overseas.
U.S. trade officials encourage such openings. Agreements between the two nations have resulted in the lifting of many travel restrictions that became outdated with the end of the Cold War. As an indication that contact will only increase, the State Department in 1989 issued 59,673 visas to Soviets to visit the United States for business, cultural or scholarly reasons. In the first six months of 1990, State Department figures show, 39,761 visas were issued to Soviet travelers.
Not long ago, there would have been no more than two or three Soviet scholars at Stanford University or UC Berkeley. Lately, Soviet students have been attending colleges that are scarcely known outside their regions.
After considering colleges in Boston and Oklahoma City, 15 engineers and managers from the Soviet Ministry of Aviation enrolled at the School of Business and Economics at Cal State Hayward last school year.
The Soviets, who paid $183,000 in tuition, took the business courses in the hope of improving the management and efficiency of plants they oversee. The plants manufacture aircraft and car and truck engines.
Jay L. Tontz, dean of Hayward’s business school, said he assumed that some of the equipment they manufactured had military uses, although he said he did not press for details about their work. Before agreeing to enter into the arrangement, Tontz called the FBI. As it turned out, the FBI seemed only mildly interested, he said.
Tontz is considering helping to start a management school near Moscow. Such unprecedented ventures are high risk, he said. “My intellectual side says they can’t go back, so it is appropriate to get in now at the ground floor.”
Ventures of the type contemplated by Bechtel and Tontz have critics outside the FBI. UC Berkeley’s Seabury charged that helping the Soviets develop a high-tech industry is “unconscionable.”
He also said that “American capitalism is always after a fast buck.” He recalled that in the 1970s, firms from the United States and other Western nations helped build a large Soviet truck plant, only to find that in the 1980s, the trucks carried troops into Afghanistan.
Such experiences have not stopped many institutions, including ones with conservative bents, from opening their doors to former adversaries. One of the most notable is the Hoover Institution at Stanford. During Ronald Reagan’s presidency, more than two dozen Hoover fellows flocked to Washington and worked for the Administration. Shultz is a Hoover fellow. So is economist Milton Friedman, one of Reagan’s top domestic policy advisers.
The Hoover Institution recently began hosting 15 Polish, Romanian and Czech diplomats in a three-month course, as it reaches out to help Eastern European nations create democratic governments and free-market economies.
“In times past,” Hoover fellow Richard Burress said, “you would just assume” that any delegation visiting from an Eastern European country would include an intelligence officer. “Now, you’d almost have to say, ‘So what?’ If they invited Milton Friedman to go over there, he’d tell them the same thing.”
Burress, an adviser to Presidents Richard M. Nixon and Gerald R. Ford, prides himself on being under no illusions about the Soviet Union. He noted that while old battle lines have become blurred, “their (spying) apparatus is still in place and operating.”
“Boy, oh boy, for a crystal ball. Is this just a pause in the Cold War, or the end of it?” Burress said. Given the changes in the Soviet Union, there is a desire to help, he said. “We want them to develop a market economy. Where are they going to get the knowledge to do it?”
Even the FBI has practiced a sort of glasnost, in reverse. About a year ago, a San Francisco-based Tass correspondent did something that until lately would have been unheard of: He called the FBI asking for an interview about how U.S. law enforcement goes about combatting this country’s organized criminals.
The agent who gave the briefing turned out to be Appel. He was happy to do it. It was a way of spreading good will. He also made certain that the reporter was positioned on a couch so that he could not help but see one of Appel’s favorite wall hangings. It is a poster of a caricature of a spook with a red line slashed through it. “Here to Save America. Spybusters,” the caption reads.
