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Two plead not guilty to classified documents indictments

From Charles Feldman and Stan Wilson
CNN Los Angeles Bureau

Katrina Leung
Katrina Leung

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An FBI agent who allegedly had an affair with a Chinese woman was indicted on charges of wire fraud and gross negligence. CNN's Charles Feldman reports (May 8)
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LOS ANGELES, California (CNN) -- A former FBI informant recruited by the United States to spy on China and its intelligence services pleaded not guilty Monday to charges she took unauthorized "secret" documents from her FBI handler while also working as a double spy for China.

The now-retired FBI agent who recruited her to spy on the People's Republic of China also pleaded not guilty Monday to charges of gross negligence in handling classified material.

A U.S. District judge set a July 1 date for separate trials for Katrina Leung and James J. Smith.

A federal grand jury last week handed down a five-count indictment against Leung, 49, but did not charge her with espionage. Leung has been held without bail in the Federal Detention Center in Los Angeles since her April 9 arrest.

Authorities say Leung surreptitiously photocopied and took handwritten notes of classified material from the briefcase of Smith without his permission when the former FBI agent visited her home.

Leung admitted to investigators that she obtained some information from Smith and another FBI agent over several years without their consent. Prosecutors suspect she passed that information to agents of the Ministry of State Security, China's intelligence branch. Investigators are trying to determine the extent of the damage to U.S. intelligence from Leung's alleged breaches but stopped short of charging her with espionage.

Federal prosecutors also allege that Leung had a sexual affair with Smith and another retired FBI agent over a 20-year period. Both Leung and the agents are married to other people.

The indictment against Leung lists three counts of unauthorized possession of documents relating to national defense and two counts of copying documents connected with the U.S. national defense with reason to believe that they would be used to the benefit of another country.

"This is not in any way, shape or form an espionage case," said Leung attorney Janet Levine.

"She had no access to places where secret documents were kept, she only had the documents that FBI agents, her government handlers, brought to her for her use in support of this country and in support of the ideals of this country which she strongly believes in."

Smith, who is free on $250,000 bail, faces a six-count indictment charging him with wire fraud for allegedly filing false reports to FBI headquarters about Leung's reliability and with gross negligence for allegedly allowing her access to classified material.

The government alleges that Smith, 59, sent his less-than-honest evaluation reports about Leung to FBI headquarters in Washington in 1998, 1999 and 2000.

At the time of Leung's indictment, her lawyers argued that FBI agents fed information to her for nearly two decades and encouraged her to give it to the Chinese government in order to obtain the trust of the Chinese.

James J. Smith
James J. Smith

From 1983 to 2002, Leung was paid $1.7 million for providing information about China, according to affidavits.

Neither Leung nor Smith made any comments before or after their court appearances. Leung sat motionless in the courtroom during her hearing.

The prominent Chinese-American businesswoman had access to top Chinese leaders including former President Jiang Zemin, former Premier Zhu Rongji and the late President Yang Shangkun, officials said.

Authorities suspect Leung was a "double agent" who routinely stole secret U.S. national defense documents and handed them to China's Ministry of State Security, its intelligence service.

But her husband said he believes his wife will be found innocent.

"I love my wife very much," said Leung's husband Kam Leung. "We are sure that she will be exonerated of all charges and I look forward to welcoming her home very soon."

The five counts in the indictment against Leung carry a maximum possible penalty of 50 years in federal prison if she's convicted. Smith faces up to 40 years in prison if convicted.

Smith retired in 2000 after nearly 30 years in the FBI. He worked almost exclusively on foreign counterintelligence focusing on China.

He became the center of a criminal investigation after authorities began secretly monitoring meetings between him and Leung long after his official business association with her ended, according to court documents.


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