Sino-American Loyalty

Jerry Chun Shing Lee spy trial: China gave Sino-American agent US$100,000 and promised to take care of him 'for life'

By Raquel Carvalho

China has given accused spy Jerry Chun Shing Lee a US$100,000 cash gift and promised it would “take care of him for life”, according to court documents seen by the Post.
Hong Kong-born Lee, who was a CIA officer between 1994 an 2007, has also deposited hundreds of thousands of dollars more in illicit payments from his Chinese handlers into his personal HSBC accounts in the city.
He is scheduled to be arraigned in a US court on Friday, where he is expected to plead not guilty to one count of conspiracy to gather or deliver national defence information to aid a foreign government, as well as two counts of unlawful retention of national defence information.
The naturalised United States citizen is behind one of the most serious American intelligence breaches in decades, one which led to the death or imprisonment of 18 to 20 US informants in China.

Lee was arrested by FBI agents in January , after landing at John F Kennedy International Airport in New York from Hong Kong, on charges of unlawfully retaining national defence information.
Federal prosecutors initially accused him of having illegally kept notebooks containing sensitive information about CIA operations. 

But, last week, he was accused of a far more serious crime – conspiring to commit espionage.
Lee, 53, was indicted on May 8 by a federal grand jury in Virginia, and is due to be arraigned at 9am on Friday before Alexandria US District Judge TS Ellis III.
Lee, also known as Zhen Cheng Li, has been described by many as a mole at the centre of one of the most serious US intelligence breaches in decades.
The New York Times reported last year that the first signs of trouble that led to the dismantling of the US spy network in China surfaced in 2010. 

After 2010, the FBI and the CIA opened a joint investigation into what had happened.
According to the indictment – which did not touch on the consequences of Lee’s espionage – he met two intelligence officers of China’s Ministry of State Security in Shenzhen, a city bordering Hong Kong, in April 2010.
At the time, they gave him “a gift of $100,000 cash in exchange for his cooperation”, with the promise that “they would take care of him for life”.
In the following month, documents read, Lee began receiving a series of written instructions from the Chinese intelligence officers, some of the envelopes accompanied by gifts.
At least 21 pieces of information were requested from Lee and most of them asked him to reveal sensitive information about the CIA, including national defence information.
The indictment noted that the Chinese intelligence and security agency, and its bureaus, were tasked with conducting clandestine human source operations, of which the US was a principal target.
Lee had worked as a CIA case officer, which meant his primary mission was to recruit clandestine human intelligence sources. 

He had also served in various positions and places overseas, all of which required a top-secret clearance, court documents described.
Intelligence sources said Lee had left the American agency because he felt “frustrated” and “not appreciated”.
It was later determined that the information Lee included in this document was national defence information

US COURT INDICTMENT
Court documents claim that, in May 2010, Lee made a cash deposit of HK$138,000 ($17,468) into one of his personal HSBC accounts in Hong Kong.
“This would be the first of hundreds of thousands of dollars in cash deposits Lee made” until December 2013, the documents read.
Prosecutors mentioned as further evidence a document created on Lee’s laptop that included information on places where the CIA would assign officers, and the location of a sensitive operation.
“It was later determined that the information Lee included in this document was national defence information of the US that was classified at the secret level,” court papers read.
It is also claimed in the indictment that in response to a tasking from Chinese intelligence officers, Lee drew a sketch of the floor plan of a particular CIA facility abroad.
According to court documents, the taskings continued into at least 2011.
Lee is also accused of having made several false statements to the US authorities.
As the Post reported, Lee started working for a cigarette company in Hong Kong in 2007, the same year he left the CIA. 

In 2009, Japan Tobacco International terminated his contract amid suspicions he was leaking sensitive information about its operations to Chinese authorities.
He then set up his own company, also related to the import of cigarettes, which did not succeed. According to court papers, Lee’s business partner in Hong Kong arranged meetings and passed messages from Chinese intelligence officers to him.
From June 2013 to September 2015, the former CIA agent worked for the cosmetics company Estée Lauder.
At the time of his arrest, he was the head of security at the international auction house Christie’s in Hong Kong.
Lee has been held at the high-security Alexandria’s jail without bail and, if convicted, could spend the rest of his life in prison.

Sino-American Double Loyalty

'We need answers from the FBI about why this wasn’t prevented,' Senate Judiciary Chairman Charles Grassley says.
By JOSH MEYER

“It’s disturbing to learn that the FBI was suspicious enough of Lee that they interviewed him five times in 2013,” said Sen. Chuck Grassley, whose committee has oversight of the bureau. “We need answers from the FBI about why this wasn’t prevented.” 

Congressional watchdogs want an explanation from the FBI and CIA about whether they bungled the case of a former CIA officer long suspected of betraying potentially dozens of U.S. spies in China.
Senate Judiciary Committee Chairman Charles Grassley (R-Iowa) and other senior members of Congress are asking why the FBI took more than five years to arrest former CIA China hand Jerry Chun Shing Lee after it first became suspicious of him.
Grassley, a frequent FBI critic, also wants to know whether possible unwarranted delays, missed warning signs or other counter-espionage lapses in Lee’s case helped Beijing to decimate America’s spy network on its soil in one of the worst known American intelligence debacles in a generation.
“We need answers from the FBI about why this wasn’t prevented,” Grassley told POLITICO in a statement.
And following at least two other similar cases in the last year, some lawmakers fear the Jan. 15 arrest of Lee — who is scheduled to appear in a Virginia federal court Monday — suggests larger problems in the U.S. effort to protect its secrets from Russia, China and other adversaries.
CIA Director Mike Pompeo wouldn't respond directly to a question about Lee in a Jan. 23 talk at a Washington think tank but did express concern about “traitors,” saying he had taken his job a year ago “intent on improving our capacity to protect our own information.” 

The CIA is "working against our adversaries’ services in a way that prevents them from getting inside of our service," he added.
Lee’s arrest after an international flight to New York came more than a decade after he left the CIA, and years after outward indications of his vulnerability to recruitment by Beijing’s intelligence operatives, a former supervisor at a private investigation firm where he worked told POLITICO.
Lee is being held on the relatively minor charge of unlawful retention of classified “national defense” information, though some U.S. officials also suspect he betrayed up to 20 U.S.-recruited Chinese intelligence assets believed arrested or even executed by the Beijing government over the past decade.

Lawmakers fear that the Jan. 15 arrest of Jerry Chun Shing Lee — who is scheduled to appear in court for the first time on Monday — suggests larger problems in the U.S. effort to protect its secrets from Chinese espionage.

Whether Lee is actually to blame for their disappearances is a subject of debate in intelligence circles, where some have blamed intercepted CIA communications and other lapses of tradecraft.
Lee, who also went by the name Zhen Cheng Li, is expected to make an his first court appearance on Monday since being transferred to Alexandria, Va., where the federal charges against him have been filed. 

He was originally detailed in Brooklyn, N.Y. after his arrest at JFK airport.
Lee's former supervisor at a Hong Kong private investigations unit said he was fired in 2009 for suspicious behavior that included regular contacts with China’s Ministry of State Security spy agency.
The supervisor said the firm reported Lee as an espionage risk to the FBI in 2010, after receiving additional information about his ties to Chinese agents.
In his statement, Grassley expressed concern over the FBI's delay in moving against Lee, for reasons that remain unclear.
“It’s disturbing to learn that the FBI was suspicious enough of Lee that they interviewed him five times in 2013. And yet the U.S. intelligence community has seen counterintelligence assets blown,” said Grassley, whose committee has oversight of the bureau.
Two House intelligence committee Democrats, both former prosecutors, say Lee’s arrest raises similar concerns about how the CIA handled the case, including its efforts to detect potential turncoats within its current and former ranks.
“What did we know about this individual? What concerns were raised in the past? What investigative steps have been taken? And did the case get the appropriate attention it deserved from the beginning?” ranking committee Democrat Adam Schiff, (D-Calif) asked in reference to Lee.

Schiff, who prosecuted the first FBI agent ever charged with espionage nearly 40 years ago, said his initial briefings on the Lee case have intensified his concerns beyond what has been disclosed publicly.
Rep. Eric Swalwell, the top Democrat on the committee’s CIA oversight subcommittee, said in an interview that he has similar concerns but was tight-lipped about details.
“Based on an arrest of a former agency employee, I would like to know more about the basis of the arrest and what it means for the intelligence community,” Swalwell said. 

“That’s about all I can say.”
In June 2017, authorities arrested a former State Department security officer and ex-CIA official, Kevin Mallory, on allegations that he sold U.S. secrets to Chinese agents. 

Three months before that, China-based American diplomat Candace Claiborne was charged with taking cash and expensive gifts from Chinese intelligence.
But if the most serious allegations against him are true, Lee’s case is far more damaging to U.S. national security than either of those.
Lee left the CIA in 2007 after 14 years, including stints as a covert case officer spying against China and as an agency liaison to the Ministry of State Security.
After his arrest, an unsealed FBI affidavit disclosed that agents conducted two covert searches of Lee’s possessions in 2012, and found notebooks containing top-secret information that he wasn’t allowed to take with him from the CIA. 

That included the names and other personal details of U.S.-recruited operatives working in China, among them government officials the agency had spent years cultivating. 

FBI agents then questioned Lee five times while he was still in the U.S. before letting him return to Hong Kong.

The delay in acting — perhaps to observe and gather more information about him — was a calculated gamble that appears to have been unsuccessful, some current and former officials said.
“All I can really say is that the information alleged to have been in his possession, which would be directly revealing of our sources and could put the lives of those people in danger, is among the most closely held information that the intelligence community has,” Schiff said. 

“That he would have it in an unsecure environment poses a full range of deeply troubling questions.”
Schiff, Swalwell and other lawmakers stressed that there could well be good reasons for why the case took so long to bring, and why it resulted in charges that likely could have been filed years ago. 

They also said they understand such counterintelligence efforts take an extraordinary amount of time, and that even when evidence of espionage is found, it may not meet the standard of proof needed, or be too sensitive, to merit prosecution.
FBI and CIA officials have provided little information about the Lee case, but the FBI affidavit said the investigation is ongoing. 

Lee, who has not been charged with espionage, faces a maximum of 10 years in prison if convicted. Neither Lee nor lawyers for him have commented on his case, and no publicly released information ties him to China’s crackdown.
Officials at the FBI, CIA, and Office of the Director of National Intelligence declined requests for comment on their handling of the case.
Speaking at the American Enterprise Institute last month, Pompeo said he has stepped up the CIA's counter-espionage efforts, including by ordering his top counterintelligence official to report directly to him in what he called “a signal” to his workforce about internal security.
Pompeo said he had dedicated more resources to “offensive counterintelligence,” and that the CIA is providing the Justice Department with more information to prosecute “these traitors” in federal courts.
In an interview with the BBC last week, Pompeo underscored the severity of the Chinese threat in particular.
“We talk a lot about Russian influence these days," Pompeo said, adding that China is “very focused” on "efforts to steal American information, to infiltrate the United States with spies.”
Some current and former intelligence officials defend the FBI and CIA, saying they have mounted an extraordinarily aggressive and sustained investigation, including luring Lee to the U.S. for questioning by creating a fake job offer for him. 

Letting Lee return to Hong Kong, authorities said, was a calculated risk, to see whom he was associating with and whether he shared CIA information. 

Three current or former intelligence officials told POLITICO they know of no proof that Lee intentionally did that, and that there have long been indications that Beijing could have identified the U.S. operatives by intercepting covert CIA communications channels.
“In spy cases, it’s always a judgment call – when are you going to take an individual down versus seeing who else he’s potentially connected to,” said one former senior FBI counter-espionage official.
The former FBI official described ongoing counter-espionage case as “a bad deal, there’s no doubt,” because of the resulting intelligence-gathering losses in China.
But he said that FBI and CIA officials have been briefing oversight officials in Congress for years, and that they are most likely doing it now as well. 

If the current lawmakers “don’t know what’s going on, they need to ask the people who were there when all of this was happening,” the former official said. 

“Because trust me, they were fully briefed.”
Others, however, say more could have been done in the Lee case, especially by late 2010, when the CIA had begun an urgent mole-hunting investigation after some of its operatives began disappearing in China. 

Ultimately, as many as 20 were killed or detained, including some whose identities were reportedly found in Lee’s notebooks, according to the New York Times.
One critical question is why the FBI apparently never followed up aggressively on a warning from Lee’s private-sector supervisor that he was exhibiting highly suspicious behavior that included contact with China’s security services and declarations of resentment towards his former employer, the CIA.
Lee’s supervisor at the Hong Kong unit of Japan Tobacco International —also a former U.S. intelligence official — said he plucked Lee from the CIA after hearing from mutual associates that he was looking for a private sector job.
Lee’s covert operations experience, his U.S. Army service and his purported liaison work with Chinese intelligence all made him perfect for the dangerous job of investigating Asian crime syndicates exporting multi-ton loads of counterfeit cigarettes out of China with the help of corrupt officials.
Almost immediately, though, Lee raised concerns due to his incessant, and public, complaining about his time at the CIA, according to the supervisor.
“He was quite critical about the organization and his time there; the fact that he didn't get credit, he didn't get promoted, he didn't get the assignments he deserved,” the supervisor said, describing them all as obvious red flags.
Lee also displayed an obsession with money, he said, and flaunted a suspicious stream of cash that couldn’t have come from his day job.
Soon it became apparent that Lee was tipping off corrupt Chinese officials about his investigations and pending enforcement actions, allowing them and their criminal associates to avoid being caught up in raids by outside law enforcement agencies, the supervisor said.
After Lee was fired in June 2009, having spent less than two years on the job, the supervisor got a call from a colleague who worked with the Chinese government, who confirmed that Lee was not only sharing information with the Ministry of State Security, but also actively working with Chinese intelligence officials in his new private security start-up.
But the biggest red flag, the supervisor, was Lee’s vicious vindictive streak. 

After Lee was fired, he told Ministry of State Security officials that his former security unit was actually a CIA front company targeting China, according to the supervisor, who said threats from ministry officials prompted him to move his family from Hong Kong within three weeks.
Lee also told Japan Tobacco that his former colleagues kidnapped and tortured suspected Chinese cigarette traffickers, launching an investigation that shut down the unit, the supervisor said.
“If he does that to a bunch of knuckleheads working at a cigarette company,” he asked, “what’s he going to do with the CIA if he thinks he’s been denied his due?”
Despite reporting Lee to the FBI in 2010, the supervisor was never questioned in connection with the case. 

“I certainly reported it to the appropriate authorities,” he said. 

“Whether that kicked off the investigation or there was something already going on, I don’t know.”
At the time, the FBI was still recovering from another serious counter-intelligence breach known as Operation Parlor Maid, which came to light in 2003.
Unbeknownst to the FBI, its most prized U.S.-based China asset, Katrina Leung of Los Angeles, was a double agent who was sleeping with not one, but two, of the bureau’s top China agents. 

One of them was her long-time handler, and she provided him with misinformation for more than a decade that was deemed so important that it often was pipelined right to the White House.
Parlor Maid underscored the growing threat to the US from Chinese intelligence operations, which the FBI had underestimated. 

It triggered a series of efforts to reform U.S. counter-espionage programs, including beefed-up “Insider Threat” programs, training and funding, and renewed emphasis on watching employees for telltale warning signs.
Since then, U.S. counter-espionage efforts, and congressional oversight of them, have improved dramatically, according to Rep. Dutch Ruppersberger (D-Maryland) who served 12 years on the House intelligence committee until 2015, including four as ranking member.
For several years, at least some members of the House and Senate intelligence committees have received classified briefings on the Lee case, and the broader FBI-CIA investigation. 

The chairman and ranking Democrat on the Senate committee, Sen. Richard Burr, (R-North Carolina) and Sen. Mark Warner (D-Virginia), declined comment through spokespersons.
But already, concerns about the case have prompted significant improvements to U.S. counter-espionage programs and congressional oversight of them, said Michael Bahar, the staff director and general counsel for House intelligence committee Democrats until last June.
“To their credit, they have actually been banging the drum well before this story became public of the need to refocus and reprioritize our resources toward this hard target as we enter another age of Great Power politics,” said Bahar, a lawyer at Eversheds Sutherland LLP. 

He said Schiff and the committee’s Republican chairman, Devin Nunes of California, as well as Republican Senator Tom Cotton of Arkansas, were especially proactive in getting reforms included in last year’s renewal of the Intelligence Authorization Act.
Even so, Congress will need to continue to ask tough questions of the FBI and CIA, and about whether its own oversight function is working – including providing enough funds for it at a time when Congressionally-mandated budget sequestration has cut funding across the board, Ruppersberger said.
“Sure, this case alarms me,” he said. 

“How did it occur? Was it a management issue? Was it an individual? Was it that we didn’t have the technology we need? Is it [budget] sequestration? We need to find that out.”