Alleged Chinese Double Agent Indicted

Katrina Leung is shown in this 2000 file photo. Authorities say Leung, a high-profile Republican activist, used a decades-long affair with a retired FBI agent to spy for China. Leung, 49, was charged Thursday, April 10, 2003, with unauthorized copying of U.S. secrets with the intent of providing them to Chinese intelligence services.
A federal grand jury Thursday indicted alleged Chinese double agent Katrina Leung on charges that she illegally took, copied and kept secret documents obtained from an FBI agent who was both her chief contact and her lover.

But the five-count indictment is most notable for its omission of the more serious charge of espionage against Leung, 49. The indictment was returned by a grand jury in Los Angeles, where Leung has been jailed without bond since her April 9 arrest.

The charges follow a six-count indictment returned Wednesday against Leung's longtime FBI handler and lover, retired counterintelligence agent James J. Smith. Smith was charged with wire fraud for filing false reports to FBI headquarters about Leung's reliability and with gross negligence for allowing her access to classified material.

CBS Legal Analyst Andrew Cohen suspects that Smith was charged was negligence rather than espionage because prosecutors felt unsure they could prove he intended to spy on the United States.

Prosecutors say Leung, a valuable FBI source of Chinese intelligence for 18 years, was simultaneously passing secret information obtained from Smith to the People's Republic of China. The breach has raised questions about every Chinese FBI counterintelligence investigation or operation from 1982 to 2000.

Justice Department officials declined comment on why Leung was not charged with espionage, but they did note that more charges could be brought in the future. Prosecutors acknowledge facing a tough balancing act in determining how to deal with classified material in an open court trial.

Leung, a prominent Los Angeles socialite and political activist, was paid $1.7 million by the FBI for her information as an intelligence asset code-named "Parlor Maid."

In a statement issued following Smith's indictment, her attorneys said Leung is being betrayed by a government she served patriotically.

"She is a loyal American who is being stabbed in the back by the people she worked faithfully for for over 20 years," said the statement from attorneys Janet Levine and John Vandevelde.

Smith's attorney, Brian Sun, also has insisted on his client's innocence.

The indictment against Leung charges her with two counts of copying classified documents with the intent to use them to benefit a foreign nation, namely China. The documents were allegedly taken from Smith when he visited Leung at her home in San Marino, Calif.

One document contains details of "Tourist Trap," an FBI investigation into Peter Lee, a TRW Inc. employee who pleaded guilty to spying for China in 1997. Another document is described only as a June 1997 secret FBI electronic communication.

The other three charges say Leung kept those documents without authorization, as well as another document detailing FBI intercepts of Leung's conversations with her Chinese intelligence contact, known only as "Mao."

Leung faces up to 50 years in prison if convicted on all counts, while Smith faces up to 40 years behind bars.

Both Smith and Leung are married to other people. The indictment against Smith repeatedly stressed the impropriety of the relationship and said the agent should have disclosed it in the 19 reports he filed with FBI headquarters about her.

The relationship, Smith's indictment says, "deprived defendant Smith of the required objectivity in evaluating the ongoing reliability of Katrina Leung."

Leung claimed contacts with some 2,100 Chinese officials and frequently visited China, where she was often seen with high-ranking government officials. The FBI learned in 1991 that she had passed information to a Chinese intelligence officer but the matter was left to Smith to handle.

In his subsequent reports to FBI headquarters, Smith repeatedly vouched for the validity of her information and said she had been verified in part by use of a lie detector. In fact, Leung refused to take a lie detector test.

The government says Leung provided the Chinese with information from FBI files regarding Chinese fugitives, a telephone list of agents involved in an espionage case, lists of agents serving at overseas posts and other classified information.