Tiger Trap: America's Secret Spy War With China (16 page)

Donner ran
SEGO PALM
for another two years. During that period, the FBI pursued another investigation, an offshoot code-named
FALLOUT
.
SEGO PALM
examined the walk-in's documents for clues about their origin.
FALLOUT
was looking at suspects who might have leaked the W-88 details. None was pinpointed or prosecuted.

SEGO PALM
and
FALLOUT
were unable to resolve the mystery of how China obtained the design of America's most advanced nuclear weapon or who had leaked the information. While the Wen Ho Lee disaster garnered all the headlines, the FBI, unknown to the public, worked in secrecy for four and a half years, enlisting three hundred people and ten other agencies, in a massive effort to find the leak and solve the enigma of the man who walked into the CIA with a duffle bag full of secrets. In the end, the answer stayed hidden where it had begun, in China.

Chapter 11

TROUBLE IN PARADISE

S
PECIAL AGENT J.J. SMITH
was sitting on top of the world. With Katrina Leung as his golden informant on China, he continued to enjoy a unique status in the FBI's Los Angeles field office and at headquarters in Washington. An extrovert, confident—some would say brash—he was not easily fazed by the unexpected. But even J.J. froze, at least momentarily, when he heard the news that
PARLOR MAID
brought back from Beijing in March 1991.

This time, she reported on an extraordinary meeting she had with Jiang Zemin, the general secretary of the Communist Party, destined to become China's president; Jia Chunwang, the head of the MSS and the nation's top spy; and Mao Guohua, the head of the MSS's American department.

A month later, J.J. would learn, from the National Security Agency intercept, that Mao was Leung's MSS handler and that, using the code name Luo, she was spilling FBI secrets to him. But
PARLOR MAID
gave no hint of that when Smith debriefed her at her home in San Marino.

It was the subject of the meeting in Beijing that rocked J.J. Jiang Zemin and the other Chinese officials wanted Leung to become a major contributor to the Republican Party. President George H. W. Bush was up for reelection the following year.

According to
PARLOR MAID
, as J.J. wrote in an FBI memo classified
SECRET
, "Secretary Jiang asked, 'What are President BUSH's chances of being reelected?'"
Leung, mistakenly as it turned out, ventured that his chances were "excellent"; Bush was defeated by his Democratic opponent, Bill Clinton.

"JIANG said, of course we care because we don't know if a new president would be as friendly as BUSH." The party chief, according to Katrina, added that "we take every opportunity to support people we like.... It would be nice to have friends like you (pro-China) to be involved in U.S. politics. Every little thing adds up."

Jiang warmed to his subject. "You could be involved at various levels. If your involvement makes you a friend of the Republican Party at the local, state or congressional level then we have one less enemy. I am sure we will give you the support you need."

Uh-oh. Smith realized that this conversation in Beijing, with Chinese officials at the highest level, was about influencing the American presidential election. It was sensitive, politically explosive information, not the sort that counterintelligence agents normally gather and report to FBI headquarters.

The early-morning meeting had taken place on March 4 at Zhongnanhai, the leadership compound adjacent to the Forbidden City in Beijing.
^*
Mao Guohua asked Leung, "How can you actively participate in this election?" Leung then offered the Chinese leaders a short course in US Politics 101. "Most people start at the state level. A person could participate as a 'major member' if you donate about $10,000 to the Republican Party. Then you are in the inner circle."

She explained what would happen next. "Then you can become inner circle at the national level of the party. Of course once you are invited to the inner circle you are automatically invited and expected to donate lots of money at various fund raisers.

"These fund raising parties would include parties for the President, Senators, Congressmen and other state politicians. All of these people would look you up. Even people from out of state. And they would have their hand open for donations."

Mao asked, "When will this process start?" A year before the election takes place, Katrina replied. "MAO asked, if we want you to be involved you should start early, right?" Leung said yes.

There was a discussion as well of President Bush's campaign staff, in which the Chinese officials displayed a keen interest. Mao briefed Jiang Zemin on what he had learned from Leung about the Bush campaign, that "a man named Yeutter will head it replacing a man named ATWATER who is very ill."

Two months earlier, Clayton K. Yeutter, a Nebraska corn farmer and Bush's agriculture secretary, had replaced Lee Atwater as the Republican National Committee chairman. Atwater, the master of attack politics, entered the hospital the day after Leung's meeting in Beijing and died of a brain tumor three weeks later at age forty. It was Atwater who had orchestrated Bush's election in 1988, crushing the Democratic candidate, Michael Dukakis, with the aid of the famous Willie Horton television commercial.

When the meeting broke up after an hour, Mao accompanied Leung to her hotel, where they talked four hours more, according to Smith's report. "MAO said I have the approval for you to make contributions to the Republican Party. If you are correct about $10,000 making you a major member of the Republican Party, we want you to join as a major member."

She replied, "$10,000 will get me in but I will need a lot of money to sustain the effort over a long period of time." MAO responded, "I know. $10,000 is nothing to the Republican Party or to us. We do not expect you to manipulate anyone with $10,000."

Mao then explained, "One of the reasons we want you to go ahead is that it would enhance your image and heighten your profile so that you might be in a better position to handle other things. I clearly understand that once you start this process it is a never ending series of donations. If $10,000 is a reasonable amount to get you in and if it takes a reasonable amount of money to continue then we will support you."

Leung and Mao then fenced about the money. She said, "Define your terms. What is reasonable to you? Give me a budget and I'll work with it."

Mao ducked. "I have this approved in principle," he said. "I have no details."

That evening, Minister Jia Chunwang, the MSS chief, showed up at the hotel and hosted a dinner meeting in room 17, the presidential suite. Jia "had a serious upper respiratory infection" and, solicitous of their important asset, "insisted on sitting at least 5 feet away from the source [Leung] and he covered his mouth with a napkin when he talked." Coughing away, the top spy ordered only hot water to drink.

Here, the meeting among spies took a farcical turn. Leung "insisted he try an old Chinese student flu remedy, boiled Coca Cola with lemon." Never mind me, the MSS chief responded, "you should take better care of MAO, he is too skinny." It was true, Mao replied, he had an ulcer. Leung said "me too" and then Leung and her MSS handler "compared symptoms."

As the officials at the hotel discussed their ailments with Leung, China was preparing to celebrate Lei Feng Day, named for the national hero,
a twenty-two-year-old soldier in the People's Liberation Army who was killed in 1962 when a truck he was directing backed up and hit a telephone pole, which fell on him. He was later glorified by Mao Zedong's propagandists as a symbol of patriotic youth, loyalty to China, and selfless devotion to others. "Be like Lei Feng" was the slogan drilled into Chinese schoolchildren.

Leung remarked, "You probably think I am too young to remember Lei but I do and I remember the song that was written about him." She then proceeded to sing a few bars of the lyrics. "JIA thereafter sang the song in its entirety to everyone's amusement," the FBI report said.

"
Emulate the fine example of Lei Feng, ever frugal and simple,
" the spy chief trilled. "
Emulate the fine example of Lei Feng, who kept Chairman Mao's teachings ever in his heart.
" And so on.

Then the group got back to business. "Minister JIA said, I am sure MAO told you that once you establish a budget to join the Republican Party, we will give you the money. Don't worry there is no special tasking from us. I think it would do you a great deal of good to have a higher profile which gives you more protection. If anything good comes your way for China so much the better."

Jia's instructions were very much in the "thousand grains of sand" mold. Become an active Republican, donate money, and let's see what happens. The entire discussion was a precursor to the much more active, and controversial, role of Chinese donors in President Clinton's 1996 election campaign, in which Katrina Leung would serve as a major FBI source.

Leung in fact did become a substantial contributor to the Republican Party. As noted, she gave $10,000 to Los Angeles mayor Richard J. Riordan, who lost the Republican primary for governor of California in 2002. And after the Beijing meeting, Leung and her husband contributed about $27,000 to the Republican Party during the 1990s.

It was only a month after Leung's meeting with Jiang Zemin, Jia, and Mao Guohua that Bill Cleveland contacted J.J. to warn that
PARLOR MAID
, using the code name Luo, had been caught on tape reporting FBI secrets to Mao.

It was a mark of Leung's growing importance that she had acquired the code name Luo from none other than Zhu Qizhen,
a ranking official in China's foreign ministry. As vice minister, he had run the North American department, and he was ambassador to the United States from 1989 to 1993. Zhu himself had assigned Leung the code name Luo Zhongshan.

But there had been danger signals about
PARLOR MAID
well before the NSA tape provided incontrovertible evidence that Leung was reporting to the MSS. Late in 1987,
PARLOR MAID
asked an official in the Chinese consulate in San Francisco to call her from a pay phone.
The implication was that she assumed or knew that the consulate was bugged by the FBI and had something to tell him that she did not want the bureau to overhear.

If the consulate was wiretapped, the FBI may have heard Leung make her request that she be called from a pay phone. Or perhaps the FBI learned about her request from a recruitment in place, or RIP, that the bureau had inside the San Francisco consulate. In any case, the bureau opened an investigation. But the inquiry was quickly closed when it was discovered that Leung was J.J.'s asset.

In June 1990, almost a year before J.J. Smith and Bill Cleveland learned about Leung's intercepted conversation with Mao Guohua, the FBI received the information that
PARLOR MAID
had tipped off the Chinese to the FBI's bugging of China's consulate in Los Angeles.
Soon after, the FBI's supersophisticated listening devices abruptly went silent.

When headquarters questioned J.J. about the compromise, he contended that
PARLOR MAID
could not have informed the Chinese of the electronic eavesdropping of the Los Angeles consulate, because J.J. himself did not know about it.
FBI headquarters accepted his explanation and let the matter drop. But it was not then known that Leung, during her trysts with J.J., had been quietly helping herself to secret FBI documents from his briefcase.

J.J. was so well regarded at the time that FBI headquarters decided he could personally handle any concerns about Leung's reliability. So the pay phone incident, the report that she had blown the bugging of the Los Angeles consulate, and the intercept of her conversation with Mao were all left in J.J.'s hands.

Which was fine with him. An episode in the mid-1980s illustrated how confident J.J. was that he could handle whatever came along. J.J. Smith was the lead case agent in the FBI investigation of one of its own, Richard Miller, an overweight, klutzy FBI man in Los Angeles who became romantically entangled with Svetlana Ogorodnikova, a sultry thirty-four-year-old KGB agent, and as a token of his affection gave her classified documents. She was sentenced to eighteen years; Miller, the first FBI agent to be convicted of espionage, was sentenced to twenty years. At the very time that J.J. was investigating Miller,
he blithely continued his affair with his own mistress, Katrina Leung.

Despite the red flags raised about Leung, the FBI was reassured by the fact that she had passed two polygraph exams, and because a Chinese defector confirmed much of her reporting. The CIA, as well, was pleased with the information she was supplying to J.J. This was especially true in 1989, when she traveled to China soon after the Tiananmen Square crackdown. When she returned, she provided the FBI with information about political rivalry inside the Chinese leadership at a time when almost no information of that kind was coming out of China.

But not everyone in the FBI and the CIA was enthusiastic over
PARLOR MAID
. In the late 1980s Leung had brought back a videotape she made in China. Bill Cleveland played the videotape for the China squad in the San Francisco field office.

He did not identify
PARLOR MAID
as the source of the video, but the squad knew it had come from J.J.'s premier source in Los Angeles. Leung had gone to the headquarters of the MSS in the West Garden section of Beijing. The videotape showed the entrance and then a courtyard inside the spy headquarters.

How could she do that without getting caught? some of the counterintelligence agents on the squad wondered. And CIA officers in the agency's San Francisco base expressed doubts about the amazing access that J.J.'s source seemed to have and the intelligence she brought back from China. It was, one of the CIA officers remarked, "too good to be true."

Another red flag went up in March 1992 after the London interview with Hanson Huang, the Harvard-educated lawyer who was a key player in the
TIGER TRAP
espionage case. After Smith and Cleveland had interviewed Huang in the British capital, J.J. took five days of leave for a sightseeing trip around England.