Tiger Trap: America's Secret Spy War With China (19 page)

Now the FBI had to face the fact that an informant it had relied upon for years had concealed the fact that his wife was Jeff Wang's cousin.
Confronted, the informant denied, and kept denying, that he knew his wife was related to Jeff. Eventually, he admitted that Jeff was his wife's cousin, but claimed he had not known that.

The informant's entire story was falling apart. Pressed by the bureau, he admitted that he actually had met Jeff. It was, the source said, at a big family dinner. But the source said they did not talk, because Jeff did not speak Chinese and all the others did.

The gathering had taken place about a year before the informant told his story to the FBI. Jeff's parents had come to visit him and Diane and arranged for the large family dinner in Monterey Park. Jeff met his father's brother for the first time, as well as his father's nephew, niece, and other relatives. The informant was there.

By now, the picture was clear. J.J. Smith, Alston, and the FBI did not believe the informant's tale. He had used his relationship with the FBI to settle a personal score. He had invented the whole story. Later, when the San Francisco office investigated the mess, it determined that the informant was well aware all along that his wife was Jeff's cousin.

"It was a frame job," one senior FBI agent put it bluntly.

If the clouds of the bogus espionage accusation hanging over Jeff Wang were now dissipating, there was another storm gathering for Denise Woo. She had been told to become Jeff's confidante. He had been trying for months to figure out who had set him up and why. It was logical, therefore, that Woo, convinced of his innocence, would have encouraged him in that effort.

But the FBI fiercely guards the identity of its sources. And the bureau's agents, listening in on Jeff's conversations with Woo on the wiretap of his home telephone, decided that she had crossed the line, even by discussing the subject with Jeff of who his accuser might be. The fact that Jeff was speculating about what relative might have had a grudge against him did not seem to matter. Nor did it seem to make a difference that Woo's assignment by the FBI was to win Jeff's confidence, lend him a sympathetic ear, and act as his friend.

In the weeks after Wang was called in by the bureau, Woo argued with her superiors that he was innocent. She pushed, asking what evidence they had on him. She was told she had fallen prey to a version of the Stockholm syndrome, becoming too close to the person who was being investigated as a supposed spy.

In November, Woo was interviewed by the FBI. She denied that she had discussed the identity of the informant with Jeff, or given him any hints, or tipped him off that his phone was tapped. That the FBI had the Wangs' phones wired would hardly have surprised Jeff, an engineer; he and Diane assumed from the time the FBI agents had swarmed their house that their phones were tapped. A few weeks after Woo was questioned, the FBI suspended her.

In trouble now, Woo hired a lawyer, Marc S. Harris, who had worked with her on criminal cases when he was an assistant US attorney for eight years. "She was a fantastic agent," he said. "She was outstanding, extremely diligent and conscientious."

But Harris's small law firm could not handle what loomed as a long investigation of Woo. Mark Holscher, then with O'Melveny & Myers, took the case pro bono.

Federal prosecutors convened a grand jury—not to investigate how an FBI informant had lied to the bureau and framed an innocent man as a Chinese spy, but to build a case against Denise Woo, the FBI agent who tried to help clear his name.

Jeff and Diane Wang were called to testify before the grand jury. The prosecutors played a tape of a conversation between Diane and her mother. The tape confirmed the Wangs' suspicions that their phones were bugged. On the tape, Diane apparently told her mother that she would call her on another line. The government played the tape to attempt to show that the Wangs knew they were being wiretapped, and had been tipped off.

Woo remained suspended by the FBI. Early in 2003, after four years, the bureau fired her.
In August 2004 Denise Woo was indicted on five felony counts for supposedly disclosing the identity of the "covert agent" to Wang, allegedly telling Jeff that his phone was wiretapped, and lying when she denied having done either of those acts. If convicted she faced a minimum sentence of ten years. On December 6, she was arraigned and freed on $50,000 bail.

The government was coming down hard on Denise Woo, even though its case against Jeff Wang had totally unraveled. The prosecution of Woo carried some hidden risks for the FBI, which was not at all anxious for the public to learn that one of its star Chinese counterintelligence informants had framed an innocent man. In the indictment of Woo, Wang was not identified. He was referred to only as "J.W."

Facing five felony counts and a possible ten years in prison, Woo, on the advice of her lawyers, decided to accept a plea bargain. On June 6, 2006, she pleaded guilty to a single misdemeanor of disclosing confidential information.

The original charges, that she had identified the FBI source, revealed the wiretap to Wang, and made false statements denying that she had done so, were dropped. Nor, in the plea bargain, did she state that she had disclosed the identity of the informant to Jeff.

The language of the plea was artful, dancing all around the subject, implying that Woo had revealed the source's name without explicitly saying so. The plea bargain asserted that Woo "discussed with and thereby disclosed to J.W. confidential information concerning the identity of an FBI confidential informant."
The wording does not claim that Woo revealed the identity of the informant, only that she disclosed information "concerning the identity." That could mean almost anything, perhaps something as innocuous as encouraging Jeff's speculation that a relative, or a relative by marriage, bearing a grudge over his father's estate, was responsible for the false accusation against him.

On October 30, 2006, seven years after she was suspended by the FBI, Woo was sentenced by US District Court judge Gary Klausner to probation and a $1,000 fine. "This is a kind of bittersweet ending to a long and continuing tragic injustice,"
Woo said after the sentencing. "I am relieved that after years of false allegations, my family and I can finally get on with our lives."

Mark Holscher criticized the government's pursuit of Woo. "It was very unfortunate that the FBI chose to indict Denise," he said. "She loved the bureau. She was put in a horrible position of investigating a family friend.
The FBI has policies and procedures in place for agents placed in undercover roles, including you don't investigate someone you know. If those policies had been followed Denise would be a decorated FBI agent today."

Had the case gone to trial, Holscher was prepared to show a link between the Woo and Wang investigations and J.J. Smith and Katrina Leung. And here, the plot, like so many aspects of counterintelligence, becomes both shadowy and complicated.

Although it was not known at the time, J.J. had briefed Katrina Leung on the Jeff Wang investigation and consulted her on all details of the case.
J.J. later told the Justice Department's inspector general that the informant's reporting about Jeff "did not make any sense."

The source who in the spring of 2000 told the FBI that Leung was an agent of China's intelligence service was the same informant who fabricated the story about Jeff Wang. The informant was angry at
PARLOR MAID
, accusing her of having told the MSS about his relationship with the FBI.
He also claimed that Leung had told Beijing about the Jeff Wang investigation.

He was the same informant who, a few months later, said that Leung was "in bed with" the FBI's Los Angeles division. But FBI headquarters regarded this as informants pointing fingers at each other, and no further action was taken.

When the bureau finally determined that the informant had falsely accused Jeff Wang, he was dropped from the FBI payroll for lying,
according to a former FBI counterintelligence agent and a current bureau official. By 2006, when Woo signed her plea, he was no longer being used as an informant.

When it was all over, Jeff Wang was able to obtain another job in the defense industry, one that required a security clearance. His name briefly surfaced in the press when he attended the sentencing of Denise Woo. But he will learn many of the details of
ETHEREAL THRONE
for the first time when he reads them in this book.

Brian Sun, who represented Jeff Wang early on in the FBI probe, summed up what had occurred. "A truly innocent man and his family suffered some very damaging consequences.
Here's a guy at Raytheon for over fifteen years, had a great record, loses his job. It was just devastating for them to have to go through that ordeal."

Jeff and his wife have tried to pick up the pieces of their lives and move on. The FBI finally told his attorney that he was no longer "a person of interest." That was nice to know. But Jeff Wang could not understand why he never received an apology from the FBI.

Chapter 13

STORM CLOUDS

I
N
2000
THE FBI'S
national security division, then headed by Neil J. Gallagher and his deputy, Sheila Horan, was preoccupied with tracking down the Russian mole in US intelligence, who turned out to be the FBI's own Robert Hanssen. But the division had also begun to hear disturbing hints that something was very wrong with the Chinese counterintelligence program in Los Angeles.

In July, Ken Geide had taken over as chief of the division's China section at headquarters. Encouraged by Gallagher, Sheila Horan and Geide began a detailed review of the Los Angeles Chinese counterintelligence program. They concentrated on
PARLOR MAID
, if only because Katrina Leung had been a source for so many years.

The group examined what
PARLOR MAID
might have told the MSS, and what she had gained in return. "The balance," one FBI agent said, "did not look favorable. Storm clouds started gathering."

As Geide examined the case, he concluded that Leung was well known to the MSS all the way back to her days in graduate school at the University of Chicago. He wondered if she might even have been operating for the MSS all along. If that scenario were true, then the bureau would have to look back at every case. Because, Geide worried, it might mean that the FBI's Chinese counterintelligence program was controlled by China.

There were "anomalies," as counterintelligence agents call suspicious or unexplained problems. Late in 2000, the investigators discovered the information that had been received ten years earlier identifying
PARLOR MAID
as the source who had tipped off the Chinese about the FBI's highly successful electronic operation against the consulate in Los Angeles. Once the Chinese discovered the bugs, the FBI operation was toast.

"It would not have been news to the Chinese that the consulate was bugged," one FBI agent explained. "It was the sophisticated method used that was compromised."

Although the microphones went silent, it was several years before officials in the consulate suspected that their copying machines had been ingeniously tampered with to transmit documents to the FBI. It was not until the fall of 1999 that the copiers were shipped back to China to be disassembled and analyzed.

In 2001 the Chinese uncovered twenty-seven satellite-operated listening devices that the National Security Agency and the FBI had planted in the Chinese version of Air Force One
while the plane was being refitted in Texas. The aircraft, a Boeing 767, was ordered for Jiang Zemin, the president of China. US contractors in San Antonio built a large bedroom, a bathroom with a shower, and a sitting area with a large-screen TV for Jiang, while a contingent from the People's Liberation Army guarded the $120 million aircraft.

The work was done by four contractors, Dee Howard Aircraft Maintenance, Gore Design Completions, Rockwell Collins, and Avitra Aviation Services. The plane was delivered to China in August 2001, and soon afterward the bugs were discovered, including some in the headboard of Jiang's bed. According to reports from China, twenty Chinese air force officers and two officials were detained and interrogated after the devices were uncovered.

The FBI looked into the possibility that Leung had also betrayed the aircraft bugs to Beijing, but was unable to link her to the episode. "Maybe she had nothing to do with it," one official concluded.
^*

Counterintelligence is such a convoluted, mirror-image world that some US officials speculated that the entire aircraft-bugging episode was an elaborate ploy by Chinese intelligence. Under this theory, the Chinese, knowing that the United States would surely try to bug the plane, made a show of guarding it but deliberately allowed the devices to be planted, and used American contractors instead of insisting on Chinese workers. Once back in Beijing, the aircraft would be pulled apart and the bugs analyzed to learn the state of the art of US eavesdropping technology.

In October 2001 Gallagher flew to Los Angeles to talk to Ron Iden,
the assistant director in charge of the Los Angeles division, about J.J. Smith and
PARLOR MAID
. A month later, the FBI asked for a FISA warrant from the special court established by the Foreign Intelligence Surveillance Act to place Katrina Leung's home under electronic surveillance. The FBI already had a video camera in
PARLOR MAID
's living room, disguised as a motion detector, but that was installed with her knowledge, so that the FBI could secretly tape and record Chinese or other visitors.

Armed with the court warrant, the FBI secretly searched Leung's home, and tapped her phone calls, faxes, and e-mails. The bureau also placed her under physical surveillance.

The approval for the FISA warrant was granted by the secretive court in December. That same month, Sheila Horan became the acting chief of the FBI's national security division, succeeding Gallagher, who had retired.