Tiger Trap: America's Secret Spy War With China (30 page)

Although both Smith and his lover were charged under the laws that as a group are commonly called the "espionage statutes," neither was indicted under the more severe provisions that can carry penalties of life imprisonment, or in some circumstances, death.

Debra W. Yang, the US attorney in Los Angeles, soon assigned the prosecution of Leung to Michael W. Emmick, a twenty-year veteran of that office who had handled several major fraud and public corruption cases. The lead prosecutor in the case against J.J. Smith was Rebecca Lonergan, who had been an assistant US attorney in Los Angeles for a decade and had worked on a number of national security cases. John B. Owens, an assistant US attorney in the fraud and public corruption section, worked with her.

On the morning of June 19
PARLOR MAID,
who had been in jail since her arrest, appeared in federal court in downtown Los Angeles for a bail hearing before Judge Florence-Marie Cooper.
By the time the press and public were admitted, Katrina Leung was already seated on the right side of the courtroom at the defense table next to her attorneys, Levine and Vandevelde. Leung wore an oversize green shapeless jacket. She looked small, not much over five feet, a tiny woman with jet-black hair pulled back in a tight bun, a thin, chiseled face, with high cheekbones and a firm chin. She wore a little lipstick and a hint of rouge. She followed the proceedings attentively with absolutely no expression until the very end of the hearing.

The government's team marched in looking grim, crewcut men in suits, and Diana Pauli, a tall, blond assistant US attorney. The platoon of prosecutors was led by Emmick. From the FBI there was Les Wiser and Peter Duerst.

Judge Cooper, a white-haired, sixty-two-year-old Canadian-born jurist, had been nominated to the bench four years before by Bill Clinton. She announced she had "reached a tentative decision to grant release with a $2 million bond."
That sounded like good news for Leung.

But wait—Cooper said new information had given her "some doubt," chiefly two letters Leung wrote to Chinese leaders in 1998. They showed her close relationship with the top officials, which the court found "particularly troubling." In one of the letters, Leung said she wanted to make a major real estate investment in Shenzhen, a booming industrial area just north of Hong Kong, and asked that the local government be instructed to grant her the right to buy the land. She wrote that "my Hong Kong Fulichang International Company in Hong Kong has raised $500 million Hong Kong dollars from U.K. and U.S. banks (if necessary it can be increased to 1 billion)."

The second letter about the same land deal expressed her appreciation for "the tremendous support you have given me over the years." Each time, she said, "you have come forward to resolve the problems on my behalf."

Judge Cooper clearly enjoyed the sort of suspense that television programs often employ in courtroom dramas. The outcome is not revealed to the audience until the end.

Levine took the podium and claimed that the letters that worried the judge were all part of Leung's work for the FBI. Leung's husband had been "not subtly threatened" with tax prosecution. With some passion, Levine argued that Leung was a political hot potato; there was no way China would want her.

Emmick, in turn, rose to argue that bail of $2 million was not enough. The Leungs had sold their San Marino residence for $1.8 million. They owned several apartment buildings, he said; they were trying to sell three that would raise more cash and make it easier for her to disappear.

Even if Leung were required to wear a tracking device, she might give the feds the slip, the prosecutors argued. A tall, gangling government technician explained to the court that the Global Positioning System is not foolproof; GPS can tell within thirty feet where people are. But in downtown Los Angeles, the system is blocked. You can go into this building, cut the bracelet off, go out a different exit, and the person is gone.

Judge Cooper then summarized the situation. Leung and J.J. Smith "had a sexual relationship"; the defendant, although not charged with espionage, faced up to fourteen years in prison, by the government's estimate. Leung "could reasonably conclude" she might be convicted. The government, Cooper noted, found that the Leungs had sixteen foreign bank accounts, she had made false statements, took fifteen trips not authorized by the FBI, and got $100,000 from the PRC. She and her husband were targets in a pending tax case.

All of this sounded like Cooper would not let
PARLOR MAID
out of jail, after all. But, on the other hand, Cooper said, there were elements to support granting bail: Leung had cooperated with the government and made no attempt to flee when she could have.

Cooper then announced her decision. The court concludes that it is likely the defendant will make appearances, she said. She set bail at $2 million and required Leung to wear an electronic bracelet with GPS capability and remain confined to her residence, except for trips to her attorney's office, the court, or the secure facility in the courthouse where she could read government documents to help prepare her defense. She could not go to seaports, airports, or bus terminals. She also had to surrender her passport.

Leung had no reaction to the judge's ruling, which meant her three-month stay in jail was about to end. But as soon as the hearing was over, she stood up and hugged both of her lawyers. For the first time, she was smiling.

Months of legal maneuvering between the government and the lawyers for Leung and J.J. followed.
PARLOR MAID
made bail, and the Leungs moved into one of the apartments they owned.

Although Leung was out of jail, a few weeks later, Cooper signed an order imposing further restrictions on her. She was not to go within one mile of the Chinese consulate or come closer than one hundred yards to any consular car. And she was not to "knowingly have any contact" with anyone from the PRC.

Even before
PARLOR MAID
was released on bail, her lawyers made it clear that their strategy would be to try to force the government to reveal secrets. Classified information would be "central to defending our client in this case," they warned. Levine and Vandevelde asked the government for access to Leung's "briefings to the FBI over the past 20 years."

"We expect the government will have to make hard decisions about whether to publicly disclose 20 years worth of spying secrets
in order to pursue an ill-advised prosecution of a loyal American," the attorneys said. It was a classic graymail tactic. Typically, in national security and espionage cases, defense counsel try to box the government in by threatening to reveal its secrets.

Under the Classified Information Procedures Act (CIPA), a judge may examine in camera documents sought by the defense if prosecutors claim the material contains government secrets. The law was designed to prevent disclosure of classified information in espionage cases. But the court may rule the documents are relevant to the defense and must be released. Faced with that choice, in a number of cases, the government has dropped charges or scaled them back substantially rather than risk exposing intelligence or other classified data to win a conviction. And the law is often used by defense attorneys as leverage to reach a plea bargain.

Unlike Leung, J.J. Smith had not spent any time behind bars. His attorneys were busy trying to keep it that way. J.J. had been working Chinese counterintelligence cases for two decades. He knew everything there was to know about the FBI's China program. And he had two very smart lawyers. If the case against him went to trial, the government was well aware that its secrets might be aired in court.

The government did not want that to happen. The prosecution worked out a plea deal with J.J.'s attorneys that meant there would be no trial for the former counterspy. There was always a chance, however, that a judge would sentence him to prison.

On May 12, 2004, J.J. pleaded guilty to only one felony count, lying to the FBI
about his sexual affair with Katrina Leung. The charge of "gross negligence" was dropped. He would have to "cooperate fully" with the FBI and answer all questions in debriefings. As part of the plea deal, J.J. would have to testify in court against his longtime lover if she stood trial.

But the Smith plea bargain contained within it the seeds of disaster for the prosecution of
PARLOR MAID
. Lurking on page 7 of the 16-page plea agreement was a single paragraph that, as it turned out, was a land mine. The key sentence requiring the defendant to "withdraw from any joint defense agreement (written or oral) relating to this case, including any such agreement with Katrina Leung, counsel for Katrina Leung, or the employees of counsel for Katrina Leung, and to have no further sharing of information relating to this case with Leung,
counsel for Leung, or the employees of counsel for Leung."

Leung's lawyers had been handed an unexpected gift—by the prosecutors. The "no further sharing" language could be read as meaning that Leung's attorneys could not interview J.J., a potential witness against her. The Sixth Amendment of the Constitution provides clearly that accused persons have the right "to be confronted with the witnesses" against them and to compel witnesses to testify for the defense. Levine and Vandevelde saw their opening and pounced. In November, they filed a motion to dismiss the case on grounds of "prosecutorial misconduct" because of the "no further sharing" prohibition.

The government scrambled for a way to respond. Emmick, the Leung lead prosecutor, fired off e-mails to the Justice Department and the other prosecutors to try to find out who had inserted the disastrous language in the J.J. Smith plea and why.

A government brief attempting to explain the history of the controversial paragraph said that the "no sharing" language had been suggested by Lonergan, but written by John Owens, her associate on the case. According to Lonergan, "Owens did the first draft of the plea agreement
and then we worked together on the entire plea agreement."

The two prosecutors told Emmick that the language was intended only to require Smith to withdraw from any joint defense agreement with Leung's attorneys. Lawyers for defendants in separate cases sometimes enter into such cooperative arrangements, which are usually secret, to help each other.

"That clause was never intended to stop the defense from interviewing J.J.
or using him as a witness for Leung," Lonergan said. "Of course not. That's Law School 101." The intent, she said, was to prevent the lawyers for two defendants from sharing classified information through a joint defense agreement. All of this was happening behind the scenes. Then, in January 2005, in a stunning surprise move, Judge Cooper threw out all charges against Katrina Leung, saying that the government had engaged in "willful and deliberate misconduct"
by inserting the "no further sharing" language in J.J.'s plea bargain. Access to a prosecution witness is a basic constitutional right, Cooper noted, which had been denied to the defendant.

The government, the judge said, had repeatedly insisted that it never intended to bar Smith from talking to Leung's attorneys, it was just that the language was "inartfully drawn." Cooper wasn't buying it. There was nothing ambiguous about the clause, she ruled: "Smith is being told not to talk to Leung or her attorneys."

The prosecutors, she added, had "misrepresented" the purpose of the clause. In language seldom heard in a federal court, Cooper made no attempt to conceal her anger. "In this case, the government decided to make sure that Leung and her lawyers would not have access to Smith. When confronted with what they had done, they engaged in a pattern of stone-walling entirely unbecoming to a prosecuting agency."

The target of her wrath was the mild-mannered Michael Emmick. Three months later, however, Judge Cooper backpedaled, conceding that Emmick had been improperly singled out since he had not drafted the plea bargain. But she rejected the government's motions to reconsider the dismissal of the case.

It was a bizarre and unexpected development. Why had the federal prosecutors bungled so badly? Surely they knew that the Sixth Amendment of the Constitution gives defendants the right to confront the witnesses against them. Was it a deliberate attempt to torpedo the case against Leung, to avoid the revelation of intelligence secrets in court—and salacious details of a spy and sex scandal?

It made a plausible theory for the conspiratorially minded, but more likely it was the result of bad grammar and an incredible bureaucratic snafu. Emmick, who was dismayed to see the most sensational case of penetration of the FBI by Chinese intelligence go out the window, offered his own explanation of why the "no sharing" language was included in the plea.

"The goal of the clause was to prevent Smith's lawyers from helping Leung's lawyers
with their defense motions. Unfortunately the clause was written in a way that was grammatically awkward and ambiguous." The "no sharing" language, Emmick added, "could be interpreted to mean Smith
himself
could not be interviewed by Leung's lawyers. And that was not the intent and would be an obvious violation of both the Constitution and legal ethics rules."

Be that as it may, the case against
PARLOR MAID
had been tossed out of court, a black eye for the government in a case that had been widely publicized when J.J. Smith and Leung were arrested and charged.

Whenever there is a foul-up inside the government, the first reaction of the bureaucrats is to point fingers at one another. True to form, the government, in its response to the dismissal of the case, was quick to say that officials in the counterespionage section of the Justice Department had no role in drafting the Smith plea, it was all done by the prosecutors in Los Angeles. However, it stretches credulity to think that Justice Department officials in Washington did not closely monitor and approve the plea bargain.

One question remained, almost overlooked in the court battle over the odd language in J.J. Smith's plea. Katrina Leung, by her own admission to the FBI, had been passing information to the MSS and working for Chinese intelligence for years. China had paid her $100,000. She was supposed to be spying for the FBI, which paid her $1,718,889 in expenses and other money over nineteen years. In her house she had classified FBI documents that she claimed she had pilfered from her lover. Given that set of facts, why had she not been charged under the more serious espionage statute?