Leung Case Poses Risks for U.S.

Facing a Friday deadline to indict an alleged Chinese double agent and her former FBI handler, Justice Department lawyers and counterintelligence officials confront difficult choices in shaping the charges to minimize the amount of classified information that might have to be divulged during prosecution.

So far, neither Katrina Leung, the San Marino businesswoman accused of being a Chinese agent, nor former FBI agent James J. Smith has been charged with espionage. Leung has been charged with illegally taking classified documents for the benefit of a foreign power, as well as tax-law violations. Smith, with whom Leung allegedly carried on an affair for many years, is charged with negligently permitting her to obtain the documents.

Prosecutors may decide to broaden those charges when they present the case to a federal grand jury in Los Angeles this week. As with any case, they need to decide what they can prove in court. Do they believe, for example, that Smith’s conduct was simply negligent, or do they think he was more actively involved in Leung’s activities? Can they prove that Leung not only copied documents, but also turned them over to Chinese officials?

Beyond those issues of proof, however, lawyers familiar with the case say prosecutors must weigh the risk that proving some charges might require making large amounts of classified material public.

“Classified information is central to defending our client in this case,” Leung’s attorney, John Vandevelde, said last week. The lawyers said he and his co-counsel, Janet Levine, “have already asked for access to critical and classified materials, especially our client’s briefings to the FBI over the past 20 years.”

“We expect those briefings and other classified documents will confirm that Katrina Leung was a loyal and valuable citizen of the U.S. and truly an asset to this country, providing information that the FBI verified and then used at the very highest level of government,” the attorneys said in a joint statement.

Brian Sun, Smith’s lead lawyer, said classified material is also crucial to the defense.

“At the heart of my client’s defense to the gross-negligence charges is the fact that he always placed great confidence and trust in Ms. Leung, because of the established track record she had for providing extremely insightful and valuable information to the U.S. government,” Sun said. Smith “necessarily will have to rely on classified information in order to establish that he was justified in this thinking.”

Sun will be assisted in the case by Albuquerque attorney John Cline, who worked with Sun in defending Wen Ho Lee, the nuclear scientist charged with mishandling government secrets. Fear of disclosing classified data was one factor that prompted the government to abandon 58 of the 59 counts originally filed against Lee in 1999.

Thom Mrozek, a spokesman for the U.S. attorney’s office in Los Angeles, said the office would not comment on any classified information issues.

Cases involving such information present problems for both sides. Defense lawyers must obtain high-level security clearances -- so high-level, in fact, that several attorneys who have worked on such cases said in interviews that they were not allowed to divulge even the name of the classification level, other than to say it was “compartmentalized” -- meaning very secret.

Even before his arrest, Smith gave the government 47 volumes of material about his work with Leung that he had kept at his house. In return, he received “act-of-production immunity,” an extremely limited form of protection that prevents the government from prosecuting him for having the materials away from the office.

Sun said he can review those materials at a “secure location” under government supervision but is unable to make copies.

But the biggest challenges face prosecutors. In these cases, defense lawyers try to confront the government with a Hobson’s choice: Turn over classified material or protect the data and drop the case, said Elizabeth R. Parker, former general counsel of the CIA and now dean of McGeorge School of Law in Sacramento.

The difficulty for prosecutors could be particularly acute in this case, legal experts say, because Leung worked as an FBI “asset” for 20 years, according to an affidavit filed by FBI agent Randall Thomas when Smith and Leung were arrested April 9.

“The battlefield in this case is going to be littered with Hobson’s choices” for the government, said Miami attorney Myles H. Malman, who dealt with similar issues when he successfully prosecuted former Panama dictator Manuel R. Noriega.

All of the work of the FBI’s Chinese counterintelligence squad in Los Angeles, which Smith headed, “is, by definition, top secret,” Malman said.

In the current case, Justice Department lawyers already have revealed the FBI’s long relationship with Leung, plus the fact that she had been paid $521,000 in fees and $1.2 million in expenses.

Leung’s relationship with the FBI and Smith, and the payments, probably were all classified until they were described in an affidavit made public April 9, said John Q. Barrett, a professor at St. John’s University in New York. Barrett was the specialist on classified information for independent counsel Lawrence E. Walsh in the Iran-Contra prosecutions of the mid-1980s.

Jonathan Turley, a law professor at George Washington University, said that “it is very common for the FBI to give some legitimate intelligence information to an informant” so the informant can develop credible relationships with foreign operatives. Thus if the government charges a former informant with providing information to a foreign government, a natural defense is that the exchange of information was authorized.

Proving whether that is the case inevitably involves releasing classified information. Because of that, “whenever you have someone who has an acknowledged relationship with an intelligence agency, the person can leverage that relationship into a strong defense,” Turley said.

The law on how such issues are handled in a prosecution, the Classified Information Procedures Act, was enacted in 1980. It was designed to address the problem of “graymail,” the defense tactic of persuading prosecutors to drop charges by threatening to disclose secrets at trial.

In the early 1980s, the Justice Department developed guidelines that require the government to measure the risk of classified disclosures against the benefits of the prosecution before seeking an indictment. As part of this process, Justice lawyers review an indictment with intelligence agents, say lawyers familiar with the process.

The classified information law sets up a three-stage process for a judge to review classified documents that a defense lawyer tries to obtain. The review occurs behind closed doors in a secure location. In some instances, even the hearing’s locale is not made public.

In Iran-Contra, security personnel checked the courtroom of U.S. District Judge Gerhard A. Gesell for hidden microphones and the possibility that the proceedings could be monitored by some kind of satellite, Barrett recalled. After the courtroom was declared secure, tape was placed over the windows and guards were stationed outside.

Initially, the defense has to show that the material it seeks is relevant and admissible as evidence. If the judge decides that the information meets that test, Justice Department lawyers can argue that a substitute for the actual classified document should be used. Substitutes are supposed to provide the essence of the material without divulging details, but defense lawyers generally dislike them because they are frequently bloodless summaries rather than powerful firsthand descriptions.

If the judge decides that a substitute is acceptable, the case advances. If not, the government has to turn over the material or drop part, or all, of the case.

The law was “designed for a relatively discrete quantity of information,” Barrett said.

Because Leung worked as an informant with Smith so long, and there are so many records at issue, he said, an attempt to prosecute either of them could test the limits of what the law can handle.