Russian Spy Case: Part John le Carré, Part Austin Powers

Five of the 10 alleged Russian spies in a New York courtroom on June 28. Shirley Shepard / AFP-Getty Images

Echoing the more frigid years of the Cold War, Washington said Monday it had busted up a network of Russian spies who posed as ordinary Americans, prompting angry denials from Moscow. On Tuesday, Russia's Foreign Ministry called the espionage allegations "baseless and improper."

The 10 individuals arrested in the case were not charged under U.S. espionage laws. Instead they face conspiracy charges related to money laundering and to their alleged failure to register as agents of a foreign government. The defendants are also not charged with trying directly to steal U.S. government secrets themselves. Rather, said two U.S. officials familiar with the investigation, their job was in effect to act as talent spotters—identifying and cultivating government and political insiders who then could be turned into secret Russian government informers by other intelligence operatives.

In court papers and an official press release, federal prosecutors and the FBI said that on Sunday, eight individuals were arrested for allegedly performing long-term "deep-cover" assignments in the United States on behalf of the SVR, Russia's principal foreign intelligence agency and a direct descendant of the notorious Cold War–era KGB. Two additional suspects were also arrested Sunday for allegedly participating in the scheme. At least one alleged coconspirator, described by an official familiar with the investigation as a "cutout"—or intermediary who transmitted cash and information between the undercover field operatives and their SVR handlers—is still at large, the government says.

Details of the Russian spy network, outlined in two FBI complaints and a government press release, tell a spy story that is part John le Carré and part Austin Powers. The operatives allegedly used the code name "Farmer" for one person they were attempting to cultivate: an American with contacts in student networks in Washington. Other potential American targets for cultivation were code-named "Cat" and "Parrot."

According to the government's account, the FBI has been onto the alleged "sleeper" network for a period of several years. At the heart of the scheme were eight Russian undercover agents, who assumed identities as American married couples with American names, apparently fake American backgrounds, and even in some cases American children, and then set out years ago to embed themselves in U.S. society as what are known in spy jargon as "illegals." Over the years, U.S. authorities say, the undercover operatives reported back to Moscow through a variety of methods—ranging from classical exchanges of information in public spaces to coded messages cleverly embedded in graphics or photos posted on the Internet. The illegals' objective, in the words of FBI documents: to become sufficiently "Americanized" in order to gather information about the United States for Russia, and to "successfully recruit sources who are in, or are able to infiltrate, United States policy-making circles."

According to the FBI documents, the SVR even spelled out the illegals' mission in a message sent to some of the undercover agents last year from "Moscow Center"—a term that Russian spies have used for their headquarters since the days of notorious KGB bosses like Yuri Andropov and Lavrenti Beria. The FBI said it managed to intercept and decode the message to the sleeper agents, which reads as follows: "You were sent to USA for long-term service trip. Your education, bank accounts, car, house etc.—all these serve one goal: fulfill your main mission, i.e. to search and develop ties in policymaking circles in US and send intels [intelligence reports] to C [center]."

As part of the investigation into the spy ring, the FBI and Justice Department say, they monitored efforts by assorted suspects to pass messages back to their controllers using spy techniques both classical and ultramodern. In some cases, the feds say, the spies used "brush passes"—meetings in public places where the illegal operatives exchanged messages with controllers as they briefly brushed past each other. In other cases they communicated via wireless computer hookups, in which one of the undercover illegals would exchange coded messages while sitting near another Russian operative—sometimes Russian government representatives operating openly in the U.S.—in a public place like a restaurant or a bookstore. Also, the government says, the illegals relayed messages to their controllers using "steganography"—a highly sophisticated technique in which secret messages are coded and embedded in graphics or photographs posted on the Web.

As for their missions: prosecutors and the FBI say that among the assorted influential Americans the undercover Russian operatives were assigned by their masters to try to cultivate: a U.S. government official who worked on strategic-planning issues related to nuclear weapons, an unnamed former high-ranking U.S. national-security official (with whom one of the Russians allegedly made contact), and a "prominent New York–based financier" who was an "active fundraiser" for an unidentified American political party who is also "a personal friend" of an unnamed U.S. cabinet official. Also, says a U.S. official familiar with the case, some of the accused spies were instructed to visit universities to try to identify students who might be recruited for jobs with the CIA, presumably so the names could be passed back to Moscow Center and other Russian spies could be assigned to try to compromise them once they had joined the agency. It is not clear from material the government has released so far whether any of the Americans the SVR targeted for recruitment cooperated with the Russian operatives or gave them any introductions or information of genuine import.

Apart from the SVR's seemingly anachronistic methodology, another big question remains unanswered: why bother to set up such elaborate long-term undercover plants when the Russians could arguably buy as much influence as they want in Washington by simply hiring the right consultants, lawyers, and lobbyists?