Open Secret

It looked like a classic spy operation. Burrowed deep in Los Alamos, the mountaintop lab containing America's most sensitive nuclear secrets, a Taiwanese-born scientist, Wen Ho Lee, was suspected of passing classified-weapons specs to Beijing.

The news sent a shudder through official Washington. It was just the sort of national-security catastrophe that critics of the Clinton administration's China policy had been loudly predicting. Republicans, who had long accused the Clinton White House of cozying up to the Chinese government--sacrificing national security on the altar of commerce--demanded the resignation of National Security Adviser Sandy Berger. In the House, Republicans eager to score political points on foreign-policy issues prepared to release parts of a blistering 700-page report alleging a vast Chinese effort to spirit high technology out of the United States. The Lee case appeared to be a blueprint of how Beijing wages espionage.

A tantalizing story, to be sure. Was the gentle suburban scientist who made Peking duck for his neighbors actually a top Chinese operative? In the days since the Lee case was made public, a far less certain picture has emerged. Senior law-enforcement and intelligence officials tell NEWSWEEK that they are in fact not at all confident Lee passed on critical secrets to the Chinese--or even that espionage was involved at all. Lee was fired last week from his job at Los Alamos, but he has yet to be charged with any crime. The FBI now believes it has virtually no chance of making a case against him.

The fiasco painfully illustrates a disheartening truth for U.S. spycatchers: the old tricks of the trade for tracking spooks may no longer be enough. The timeworn images of seasoned operatives making "dead drops" in dark alleys don't often apply to those caught helping Beijing. U.S. intelligence officials acknowledge that the Chinese government still has plenty of "real" spies working in the United States--professional secret stealers who practice the traditional methods of espionage. But some of the information the Chinese seek to advance their military and technological programs may come from a more elusive--and unlikely--source: a small contingent of Chinese citizens studying and working in the United States. Some of today's Chinese "agents" aren't really spies at all, but patriotic graduate students casually passing on tidbits they pick up during summer internships, or loquacious researchers talking a bit too freely at an academic conference. A lot of the information they impart isn't classified but public--research papers, journal articles, Web sites. Routine to Americans, but coveted by Chinese industry and the military, which still lag decades behind the West and are eager for information that will help them leapfrog forward. Much of what China wants isn't even military, but industrial technologies and scientific know-how. Not as glamorous as top-secret weapons designs, perhaps, but far more useful to a nation playing catch-up in the post-cold-war world.

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The overwhelming majority of Chinese students and scientists, of course, aren't running around stealing secrets--and it's impossible to know how much valuable information Beijing has gathered over the years. But law-enforcement officials say that China clearly thinks of the United States as a gold mine for advanced technology and has high hopes that its "vacuum cleaner" strategy will eventually pay off.

The Lee case is just the latest flare-up in the already tense relationship between Beijing and Washington. In recent years the fragile diplomatic ties have been strained by a series of scandals, from illegal Chinese contributions to American political campaigns to alleged theft of satellite communications technology. The White House was hoping that Chinese Prime Minister Zhu Rongji's visit to the United States next month would be a diplomatic success, perhaps leading to China's entry into the coveted World Trade Organization. Instead, renewed suspicions about Chinese espionage--fueled in part by Republicans trying to embarrass the president--may further test what little good will remains between the two nations.

The FBI acknowledges it had been quietly trying to build a case against Lee for years. In 1995 U.S. intelligence learned that, seven years earlier, the Chinese had acquired schematic drawings for light, miniaturized warheads. The design was suspiciously similar to the U.S. W-88 warhead--America's most advanced weapon--which can be deployed atop ICBMs. Intelligence analysts were divided over whether Beijing had stolen the plans. Some in the CIA argued Chinese scientists could have figured it out themselves. All agreed that there might have been a leak. The most obvious potential source: Los Alamos.

FBI agents focused on a handful of ethnic-Chinese scientists. Among them, Lee quickly caught their eye. The Taiwan-born, U.S.-educated engineer worked on a team developing the trigger for the W-88 warhead. His wife, Sylvia Lee, an administrator at the lab, occasionally arranged tours for foreign dignitaries. In 1987 she had welcomed a delegation of Chinese government officials. The FBI says interviews revealed that one scientist on the trip went out of his way to befriend the Lees. In June 1988 the Lees were invited to Beijing for a scientific conference, where Wen Ho Lee delivered a lecture. There was nothing suspicious about that: Los Alamos scientists are routinely permitted to deliver academic papers to their peers, as long as they clear the content with the lab. Lee's lecture--"Material Void Opening Computation Using Partical Method"--was relevant enough to nuclear-weapons design that some of China's own weapons team likely would have been in the audience. In the question-and-answer period following the lecture, the FBI believes, the talkative and gregarious Lee may have--inadvertently or intentionally--revealed critical technical information about the W-88's design.

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Armed with this information, FBI agents twice sought court approval for a national-security wiretap on Lee's phone. But, NEWSWEEK has learned, the Justice Department bounced both requests. The reason: insufficient evidence to justify the invasion of privacy. Spurred in part by suspicions about Lee, the FBI pressed the Energy Department to tighten security at the country's nuclear labs, where foreign scientists visiting from "sensitive countries" were often allowed to mingle freely with their U.S. counterparts. Energy ignored the request for a year and a half. Sandy Berger was briefed as early as April 1996 about a possible spy at Los Alamos. Yet it wasn't until a year later--when Berger was briefed again and told Los Alamos had a general security problem--that the issue took on real urgency at the White House. In February 1998 Clinton ordered the nuclear labs to increase security.

What took so long? One senior FBI official admits the Bureau wasn't aggressive enough: "We could have worked harder, and faster." But Republican attempts to blame the administration for the Lee case may backfire. After all, if the suspicions about Lee prove true, then the secret information was passed to Beijing in the mid-'80s, when Ronald Reagan was president. According to CIA and Senate Intelligence Committee sources, congressional committees were briefed about the possible theft of nuclear secrets from Los Alamos three years ago.

Federal law-enforcement officials say the Lee case and others are vivid examples of how hard it is to investigate so-called "Case-200s," alleged incidents of Chinese espionage. Unlike the Soviets, who paid people to steal specific secrets, Beijing's espionage efforts are far subtler, and often leave no paper or money trail. U.S. officials say that Beijing targets the hundreds of thousands of Chinese students, scientists and entrepreneurs living in the United States as part of a nationwide technology-collection effort. Chinese consular officers in the U.S. maintain a detailed computerized list of "Persons of Talent"--outstanding Chinese students in science and technology studying at American universities. Each is befriended by a Chinese government official, and encouraged to cooperate. Most don't. But that doesn't stop Beijing from trying.

Often, the "recruits" who do help out are unaware that they are being asked to spy. (China called last week's espionage allegations "groundless.") U.S. intelligence officials who work "Case-200s" say they are astonished that suspected Chinese spies often confess immediately when confronted and seem genuinely unaware that they may have done something wrong. One Chinese scientist caught smuggling secret recipes for space-age plastics was dumbfounded when interrogated by the FBI. "He saw himself as a good citizen of the world," says one agent. "He must have said a hundred times, 'The Chinese are our friends, is this really such a bad thing?' "

Faced with a surge of Chinese espionage in the United States, the Feds are now scrambling to devise new ways of identifying and capturing the elusive new breed of spy. Intelligence officers are careful to downplay the significance of the alleged Los Alamos leaks. Despite their intensified recent efforts to quickly boost their missile capabilities, China is still far down on the nuclear ladder. "It will be many years before the People's Liberation Army presents a major challenge to U.S. forces," Adm. Dennis Blair recently told Congress. Beijing is apparently doing everything it can to prove him wrong.

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