Sino-American Double Loyalty

Ex-C.I.A. Officer Sentenced to 19 Years in Chinese Espionage Conspiracy

Jerry Chun Shing Lee pleaded guilty to conspiring with Chinese intelligence agents

By Zach Montague

Jerry Chun Shing Lee, 55, pleaded guilty in May to conspiring with Chinese intelligence agents.

ALEXANDRIA, Va. — A former C.I.A. officer was sentenced to 19 years in prison on Friday for conspiring to deliver classified information to China in a case that touched on the mysterious unraveling of the agency’s informant network in China.
The former officer, Jerry Chun Shing Lee, 55, pleaded guilty in May to conspiring with Chinese intelligence agents starting in 2010, after he left the agency. 

Prosecutors detailed a long financial paper trail that showed that Lee received more than $840,000 for his work.
Lee, an Army veteran, worked for the C.I.A. from 1994 to 2007, including in China. 

After he resigned, he formed a tobacco company in Hong Kong with an associate who had ties to the Chinese intelligence community. 

Lee then began meeting with agents from China’s Ministry of State Security, who assigned him tasks he admitted to taking on and offered to “take care of him for life.”
While working in Hong Kong in 2010, Lee reapplied for employment with the C.I.A. but misled American officials repeatedly in interviews about his dealings with Chinese intelligence officers and the source of his income.
Around the time Lee began speaking to Chinese agents, the C.I.A. was rocked by major setbacks in China as its once-robust espionage network there began to fall apart. 

Between 2010 and 2012, dozens of C.I.A. informants in China disappeared, either jailed or killed, embroiling the agency in an internal debate about how Chinese intelligence officers had identified the informants. 

Many within the agency came to believe that a mole had exposed American informants, and Lee became a main suspect.
But F.B.I. agents who investigated whether he was the culprit passed on an opportunity to arrest him in the United States in 2013, allowing him to travel back to Hong Kong even after finding classified information in his luggage. 

F.B.I. agents had also covertly entered a hotel room Lee occupied in 2012, finding handwritten notes detailing the names and numbers of at least eight C.I.A. sources that he had handled in his capacity as a case officer.
The investigators apparently decided that by continuing to quietly monitor Lee, they might glean more clues about the disappearing C.I.A. informants in China. 

But even after his arrest in 2018 on the same charge the C.I.A. was prepared to bring in 2013, they were unable to determine whether Lee was involved in the disclosures to Chinese intelligence operatives.
Because of Lee’s plea agreement, in which he admitted to one count of possessing information classified as secret — a lower level than top secret — prosecutors asked for a relatively lighter sentence of roughly 22 to 27 years, rather than life in prison.
But prosecutors argued that even if Lee never turned over information to Chinese intelligence officers, the fact that he shared his knowledge of American intelligence work with Chinese agents alone could have a chilling effect on the C.I.A.’s source-building efforts.
“It makes it difficult to recruit people in the future if they know the C.I.A. isn’t protecting their people,” said Adam L. Small, a federal prosecutor in Northern Virginia, where Lee was charged. 

“These are people who put their names and lives in his hands.”
The sentence for Lee is the latest in a string of recent cases in which American intelligence workers have been handed lengthy prison terms for espionage connected to China. 

In announcing Lee’s sentence, Judge T. S. Ellis III said that a hefty sentence was necessary to deter others from jeopardizing American intelligence.
In May, another C.I.A. case officer, Kevin Patrick Mallory was sentenced to 20 years in prison for selling classified documents to a Chinese intelligence officer for $25,000. 

Judge Ellis, who presided over that case as well, decided that a life sentence for Mallory was excessively harsh even though prosecutors showed he successfully transmitted secret information.
In September, Ron Rockwell Hansen, a former Defense Intelligence Agency officer, received 10 years in prison for attempting to pass along defense secrets.

In announcing the sentence, Judge Ellis said he was not convinced that Lee’s interactions with Chinese intelligence officers were benign, and that it is common in espionage cases to never fully uncover the extent of illicit dealings.
While he acknowledged that Lee, a naturalized citizen born in Hong Kong, had done a great deal with his life as an American — four years in the Army, a 13-year career with the C.I.A. — Judge Ellis appeared unmoved.
“That gets erased,” he said, “when you betray your country.”

Lord Patten lashes China's claims about 'black hands' and CIA interference

• China broke the promises they made to Hong Kong
• The mask ban put in place across the city last month was madness

By Jason Fang, Bang Xiao and Michael Walsh

Hong Kong's last British governor, Chris Patten, has hit back at his Beijing critics who accuse him of trying to "devastate the city" in the wake of months-long pro-democracy protests.
China's Ministry of Foreign Affairs accused Lord Patten, the current chancellor of Oxford University, of "hypocrisy, bigotry and ruthlessness" after he suggested the mask ban put in place across the city last month was "madness".
They said Lord Patten, who served as the governor of Hong Kong from 1992 until Britain's handover of the city to China in 1997, was using a "black hand" to meddle in Hong Kong's affairs.
In a wide-ranging interview with the ABC's The World program, Lord Patten said the accusations were "so preposterous that nobody of any intelligence should give it any credence".

He also criticised other "absurd arguments" made in China's state media about Hong Kong's history and the current unrest, including allegations the Chinese Communist Party gave the city democracy, and claims that foreign powers have helped organise the protests.
Here's some of what Lord Patten had to say:

On the claim that 'Britain never gave Hong Kong democracy':
"When Britain talked about introducing greater democracy in Hong Kong, who was the biggest critic?
Who said this mustn't happen? The Chinese Communist Party.
Because they said to Britain: 'You mustn't do that, because if people get democracy like in Singapore or Malaysia or other British colonies, they'll think they're going to have independence, and that's not going to happen'.
One of the most absurd arguments is the suggestion that China was in favour of democracy — China's never been in favour of democracy …
The old bit of propaganda, that 'Well, you didn't do it all before 1997, so you mustn't criticise us afterwards' — how many years is it since 1997?
22?
What are the Chinese Government doing? 
What have they done, which has actually produced a generation of people who want to be independent of China?"

On state media claims that he is a 'black hand':
"It's simply propaganda …
If you want to know what's happening in Hong Kong, if you're a Westerner, you look at the Hong Kong Free Press website — I hope in saying that I'm not going to bring about its closure.
The idea that kids, who were born in many cases way after I left Hong Kong, are being manipulated by a 75-year-old former diplomat is so preposterous that nobody of any intelligence should give it any credence, let alone write it …
I'm not criticising the Chinese for not implementing democracy, what I'm criticising them for is the squeeze they've put on freedoms right across the board in Hong Kong.
They broke the promises they made in developing democracy in Hong Kong. 
And you can't argue against that, because it's clear, it's on the record.
And I think that was a terrible error.

On claims the CIA is organising protests in Hong Kong:
"Well, I wonder how much a totalitarian regime understands what's happening down below, among the people.
The Chinese Foreign Minister is a highly "intelligent" man, and only a week or so ago [he] was saying the demonstrations were all a result of things being whipped up by the CIA or the British Government — the British Government couldn't manage a traffic jam in London, let alone organise demonstrations in Hong Kong.
I think that was both insulting to people in Hong Kong, and simply failed to understand the degree of concern about the erosion of Hong Kong's freedoms and way of life. 
How come 2 million people back in June were on the streets and demonstrating.
How come that even today, after all these weekends of violence, people are still demonstrating the things they believe in.

Should the UK offer protection to protesters, and what happens now?:
"I would like Britain to do that, but I would hope it wouldn't be necessary …
I hope Hong Kong will continue to be the sort of Chinese community with its own freedoms that people want to live in and to help thrive.
For China's benefit as well as for their own …
The most helpful thing China could do is, to borrow a phrase, to cut [Carrie Lam] some slack, to give her some elbow room so she could actually listen more to people in Hong Kong, listen to those who are giving very wise advice …
But the trouble is that at each turn, at every stage, the Hong Kong Government has done rather too little, too late.
And I'm sure that's because it's having to press for every inch of change that it makes."

Chris Patten is in Australia to give the Fraser Oration at Melbourne University. You can watch his full interview with The World on the ABC News Channel at 10:00pm AEDT.

American Amateurism

Botched CIA Communications System Helped Blow Cover of Chinese Agents
The number of informants executed in the debacle is higher than initially thought.
BY ZACH DORFMAN

It was considered one of the CIA’s worst failures in decades: Over a two-year period starting in late 2010, Chinese authorities systematically dismantled the agency’s network of agents across the country, executing dozens of U.S. spies. 

But since then, a question has loomed over the entire debacle.
How were the Chinese able to roll up the network?
Now, nearly eight years later, it appears that the agency botched the communication system it used to interact with its sources, according to five current and former intelligence officials. 

The CIA had imported the system from its Middle East operations, where the online environment was considerably less hazardous, and underestimated China’s ability to penetrate it.
“The attitude was that we’ve got this, we’re untouchable,” said one of the officials who, like the others, declined to be named discussing sensitive information. 

The former official described the attitude of those in the agency who worked on China at the time as “invincible.”
Other factors played a role as well, including China’s recruitment of former CIA officer Jerry Chun Shing Lee around the same time. 

Chinese mole: Ex-CIA officer Jerry Chun Shing Lee

Federal prosecutors indicted Lee earlier this year in connection with the affair.
But the penetration of the communication system seems to account for the speed and accuracy with which Chinese authorities moved against the CIA’s China-based assets.
“You could tell the Chinese weren’t guessing. The Ministry of State Security [which handles both foreign intelligence and domestic security] were always pulling in the right people,” one of the officials said.
“When things started going bad, they went bad fast.”
The former officials also said the real number of CIA assets and those in their orbit executed by China during the two-year period was around 30, though some sources spoke of higher figures. 

All the CIA assets detained by Chinese intelligence around this time were eventually killed.
The CIA, FBI, and National Security Agency declined to comment for this story. 

The Chinese Embassy in Washington did not respond to requests for comment.
At first, U.S. intelligence officials were “shellshocked,” said one former official. 

Eventually, rescue operations were mounted, and several sources managed to make their way out of China.
One of the former officials said the last CIA case officer to have meetings with sources in China distributed large sums of cash to the agents who remained behind, hoping the money would help them flee.
When the intelligence breach became known, the CIA formed a special task force along with the FBI to figure out what went wrong. 

During the investigation, the task force identified three potential causes of the failure, the former officials said: A possible agent had provided Chinese authorities with information about the CIA asset network, some of the CIA’s spy work had been sloppy and might have been detected by Chinese authorities, and the communications system had been compromised. 

The investigators concluded that a “confluence and combination of events” had wiped out the spy network, according to one of the former officials.
Eventually, U.S. counterintelligence officials identified Lee, the former CIA officer who had worked extensively in Beijing, as China’s informant. 

Lee was in contact with his handlers at the Ministry of State Security through at least 2011.
Chinese authorities paid Lee hundreds of thousands of dollars for his efforts, according to the documents. 

He was indicted in May of this year on a charge of conspiracy to commit espionage.
But Lee’s betrayal alone could not explain all the damage that occurred in China during 2011 and 2012, the former officials said. 

Information about sources is so highly compartmentalized that Lee would not have known their identities. 

That fact and others reinforced the theory that China had managed to eavesdrop on the communications between agents and their CIA handlers.
When CIA officers begin working with a new source, they often use an interim covert communications system—in case the person turns out to be a double agent.
The communications system used in China during this period was internet-based and accessible from laptop or desktop computers, two of the former officials said.
This interim, or “throwaway,” system, an encrypted digital program, allows for remote communication between an intelligence officer and a source, but it is also separated from the main communications system used with vetted sources, reducing the risk if an asset goes bad.
Although they used some of the same coding, the interim system and the main covert communication platform used in China at this time were supposed to be clearly separated. 

In theory, if the interim system were discovered or turned over to Chinese intelligence, people using the main system would still be protected—and there would be no way to trace the communication back to the CIA. 

But the CIA’s interim system contained a technical error: It connected back architecturally to the CIA’s main covert communications platform. 

When the compromise was suspected, the FBI and NSA both ran “penetration tests” to determine the security of the interim system. 

They found that cyber experts with access to the interim system could also access the broader covert communications system the agency was using to interact with its vetted sources, according to the former officials.
In the words of one of the former officials, the CIA had “fucked up the firewall” between the two systems.
U.S. intelligence officers were also able to identify digital links between the covert communications system and the U.S. government itself, according to one former official—links the Chinese agencies almost certainly found as well. 

These digital links would have made it relatively easy for China to deduce that the covert communications system was being used by the CIA. 

In fact, some of these links pointed back to parts of the CIA’s own website, according to the former official.
The covert communications system used in China was first employed by U.S. security forces in war zones in the Middle East, where the security challenges and tactical objectives are different, the sources said. 

“It migrated to countries with sophisticated counterintelligence operations, like China,” one of the officials said.
The system was not designed to withstand the scrutiny of a place like China, where the CIA faced a highly sophisticated intelligence service and a completely different online environment.
As part of China’s Great Firewall, internet traffic there is watched closely, and unusual patterns are flagged. 

Even in 2010, online anonymity of any kind was proving increasingly difficult.
Once Chinese intelligence obtained access to the interim communications system,­ penetrating the main system would have been relatively straightforward, according to the former intelligence officials. 

The window between the two systems may have only been open for a few months before the gap was closed, but the Chinese broke in during this period of vulnerability.
Precisely how the system was breached remains unclear. 

The Ministry of State Security might have run a double agent who was given the communication platform by his CIA handler. 

Another possibility is that Chinese authorities identified a U.S. agent—through information provided by Lee—and seized that person’s computer. 

Alternatively, authorities might have identified the system through a pattern analysis of suspicious online activities.
China was so determined to crack the system that it had set up a special task force composed of members of the Ministry of State Security and the Chinese military’s signals directorate (roughly equivalent to the NSA), one former official said.
Once one person was identified as a CIA asset, Chinese intelligence could then track the agent’s meetings with handlers and unravel the entire network. (Some CIA assets whose identities became known to the Ministry of State Security were not active users of the communications system, the sources said.)
One of the former officials said the agency had “strong indications” that China shared its findings with Russia, where some CIA assets were using a similar covert communications system. 

Around the time the CIA’s source network in China was being eviscerated, multiple sources in Russia suddenly severed their relationship with their CIA handlers, according to an NBC News report that aired in January—and confirmed by this former official.
The failure of the communications system has reignited a debate within the intelligence community about the merits of older, lower-tech methods for covert interactions with sources, according to the former officials.
There is an inherent paradox to covert communications systems, one of the former officials said: The easier a system is to use, the less secure it is.
The former officials said CIA officers operating in China since the debacle had reverted to older methods of communication, including interacting surreptitiously in person with sources. 

Such methods can be time-consuming and carry their own risks.
The disaster in China has led some officials to conclude that internet-based systems, even ones that employ sophisticated encryption, can never be counted on to shield assets.
“Will a system always stay encrypted, given the advances in technology? You’re supposed to protect people forever,” one of the former officials said.

Ex-CIA Officer’s Case Highlights Fears About Reach of Chinese Spying

China is seeking to cultivate former U.S. intelligence officers with security clearances—and personal problems
By Aruna Viswanatha and Dustin Volz

China is targeting former U.S. intelligence officers with security clearances—and personal problems to obtain access to sensitive information. 

ALEXANDRIA, Va.—Former U.S. intelligence officer Kevin Mallory was months behind on his mortgage, $30,000 in debt, and getting financial help from his church, when Chinese agents approached him in 2017 to work for them, according to testimony at his espionage trial this past week.
“This is the choice Mallory made,” Assistant U.S. Attorney Jennifer Gellie said, telling jurors that the military veteran, who has worked for the Central Intelligence Agency and the Defense Intelligence Agency, sold top secret information about DIA’s priorities to a Chinese intelligence agent.
Mallory has pleaded not guilty and said he only developed the relationship with the Chinese agent so he could turn him over to his former colleagues.
The case highlights a concern by U.S. officials that China is employing increasingly targeted efforts to cultivate former U.S. intelligence officers with security clearances—and personal problems—in an effort to obtain access to sensitive information.
Earlier this week, another former DIA officer, Ron Hansen of Utah, was charged with trying to provide classified information to Chinese agents and smuggling technology to them.
Hansen—who served in the Army for more than 20 years, worked as a DIA case officer and spoke fluent Mandarin and Russian—was arrested near Seattle-Tacoma International Airport on Saturday as he was on his way to board a flight to China.
Prosecutors accused Hansen, 58, of working with two Chinese intelligence officers to try to elicit classified information from his former DIA colleagues.
Hansen couldn’t be reached to comment, and a lawyer hasn’t yet appeared in court on his behalf.
Like Mallory, Hansen was deeply in debt. 
One of his companies, which prosecutors described as providing cloud-computing IT services, reported $1.1 million in losses in 2014, and Hansen had carried more than $150,000 in personal debt since 2012, according to the complaint filed against him.
In late 2016, he started borrowing funds against the credit cards of his family members, prosecutors said.
Dean Boyd, spokesman for the National Counterintelligence and Security Center, said Chinese intelligence services are targeting current and former U.S. intelligence officials “with money, business opportunities and other methods of recruitment.”
“Although a spate of espionage-related investigations and prosecutions have hit the news of late, this is not a new problem, but one that remains a persistent and constant challenge,” Mr. Boyd said, adding that China’s intelligence services “are particularly aggressive actors.”
The Chinese government has vast resources for this purpose, said Larry Pfeiffer, a former chief of staff at the CIA and now a senior adviser at the Chertoff Group, a security consulting firm.
Other countries, including Russia, often have similar intent but lack Beijing’s limitless supply of intelligence officers and money.
“Money is one of the classic enticements,” Mr. Pfeiffer said.
“There are a handful of things that people will turn against their country for, and money is one of them.”
Mr. Pfeiffer and other former U.S. intelligence officials said China is further aided by its theft of sensitive data on current and former government employees from the Office of Personnel Management. 
The breach of the federal agency by Chinese hackers, disclosed in 2015, boosted Chinese efforts to zero in on U.S. intelligence officers. 
There is no public indication that Chinese agents targeted Mallory or Hansen with information specifically from the OPM breach.
An FBI spokesman declined to comment.
China has generally avoided commenting specifically on the cases.
DIA is an intelligence agency that provides the Defense Department with military intelligence information.
Over a week of testimony in the Mallory case, prosecutors have laid out a case they said shows the former CIA officer was approached in a textbook manner by Chinese intelligence agents and responded as a recruited spy would.
Ms. Gellie, the prosecutor, read messages that Mallory allegedly exchanged with the Chinese agent, who described how he would reimburse Mallory and said he was concerned about Mallory’s safety. Former DIA official Michael Higgins, on the witness stand, said this fit the pattern of Chinese intelligence operations.
“It makes perfect sense,” he said, repeatedly, as Ms. Gellie recounted the messages.
In an opening statement and through cross-examination, Mallory’s lawyers acknowledged his financial troubles.
A CIA employee whom Mallory contacted about the Chinese agent testified against him last week, saying he knew of Mallory’s financial troubles because they attended the same Chinese congregation of the Church of Jesus Christ of Latter-day Saints.
“I wrote the checks,” said the witness, Ralph Stephenson, referring to checks from the church to needy members that Mallory had received.
He also said he found Mallory’s outreach extremely inappropriate and informed security.
Mallory’s lawyers argued that Mallory had good intentions in continuing to meet with the Chinese agent and that he had spoken to CIA employees to inform them of his relationship to the agent.
“Mallory knocked on the front door to tell the CIA what he knew,” said his lawyer, Geremy Kamens.
“If he was motivated by money, he would have kept his mouth shut.”
Hansen, too, was arrested after discussing his Chinese contacts with FBI and DIA officials.
He approached FBI agents in 2015 and proposed acting as a double agent of sorts, providing the U.S. with information about Chinese intelligence, the complaint against him said.
The FBI had already begun an investigation into Hansen in 2014, the document said.
The investigation picked up in 2016 after Hansen approached a former DIA associate, who reported the outreach and became a confidential informant for the FBI.
Prosecutors said Hansen tried to get this informant to provide information on “U.S. positions related to North Korea, South Korea and China,” telling the informant that Chinese agents could pay for the information.
The informant met with Hansen and provided him with classified information just moments before Hansen was arrested, prosecutors said.

Trial begins for former CIA officer accused of spying for China

By David Shortell

A rare espionage trial began Wednesday in Virginia as a jury heard testimony rife with references to covert communications devices and blocks of stashed cash payouts.
In a shabby hotel room in Shanghai last year, three Chinese men, all surnamed Yang, had questioned Kevin Patrick Mallory, a former CIA covert officer, about the new Trump administration's foreign policy. 

What did he know about the THAAD missile system? 

The administration's stance on the South China Sea?
"They were a little bit coy," Mallory later recalled. 

"I asked them point blank" if they worked for the government and "they didn't deny it."
Mallory was sitting across from a CIA investigator in the spy agency's headquarters in May of 2017 as he recounted the episode and how a headhunter had approached him on LinkedIn for what he thought was an interview for a job consulting with a Chinese think tank.
This week in federal court in Alexandria, Virginia, Mallory sat next to defense attorneys as video from that CIA meeting played out -- a central piece of evidence in the case brought by the Justice Department accusing him of spying.
As tension between the US and China climbs amid threats of a trade war, Mallory's case is emblematic of another challenge from the superpower: aggressive new efforts by Chinese intelligence to go after American state secrets, experts say.
It could mean a life sentence for the 60-year-old Virginia man. 

Deciphering the case may be a challenge for the men and women of the jury, who heard two divergent motivations behind a fact that Mallory does admit: that he sent four pages of documents to the Chinese men and received from them thousands of dollars that he did not properly declare on customs intake paperwork.
Mallory "betrayed his country" and sold classified information to the Chinese to stave off "mounting personal debt," prosecutor Jennifer K. Gellie said.
He had "fallen on hard times," Mallory's defense attorneys conceded, but the former Army veteran is a "loyal and patriotic American who has served his country with distinction throughout his life."
They said he had grown suspicious that his interviewers were in fact intelligence operatives and "tried to string the Chinese agents along" and warn the CIA so as not to let an opportunity to learn about an adversary's sources and methods "slip away."
The trial in the Eastern District of Virginia is expected to last at least a week. 

The government says it will call witnesses from the CIA and Defense Intelligence Agency, where Mallory had also been employed.
Jury members on Wednesday briefly saw the documents Mallory transmitted over a modified Samsung cellphone that Gellie said contained discussion of human source information.
Mallory's attorney, Geremy C. Kamens, said one document was so "generic" that it had no use, and called two pages of handwritten notes that accompanied it "essentially gibberish."
Two CIA employees testified Wednesday -- one under a pseudonym and behind a folding wall so as to remain anonymous -- about a series of phone calls and text messages they'd received from Mallory asking them to put him in contact with officials in the agency's East Asia division before and after his meetings in Shanghai.
Mallory had stopped working as a CIA case officer in 1996 and left an intelligence position at the DIA in 2010, but had known one of the men through his church, and the other through consulting work Mallory had done at the CIA from 2010 to 2012, according to court documents and testimony.
"He was practically begging to set up a meeting," Kamens said.
Days after he finally landed the May 2017 sit-down at CIA headquarters, Mallory took the Samsung phone to a follow-up meeting with the CIA investigator at a Virginia hotel, officials testified Wednesday. 

Two FBI special agents were also there to interview Mallory and review the contents of the phone.
On June 22, 2017, Mallory was charged with delivering defense information to aid a foreign government and making false statements, and has pleaded not guilty.
His arrest is one in a string of high-profile Chinese espionage cases in the past two years that Peter Mattis, a former intelligence official and China expert, says is on trend with a recent generational shift in the Chinese intelligence apparatus.
"In terms of coming after and trying to get sources in the US intelligence community, [the Chinese] have become more aggressive and they've got better tradecraft and they're putting more money into it," Mattis said.
Former State Department employee Candace Marie Claiborne is fighting charges in the District of Columbia that she lied to the FBI about her failure to report thousands of dollars' worth of gifts she allegedly received from two Chinese intelligence agents. 

Claiborne has pleaded not guilty.
Earlier this month, Jerry Chun Shing Lee, a former CIA case officer believed to have helped China identify and kill members of the US spy network in the country, pleaded not guilty to conspiracy to commit espionage.
"As far as we can tell from public reporting Kevin Mallory [was paid] $25,000 for a handful of documents," Mattis said. 

"That's a fairly hefty chunk of money for a relatively small amount of information."

Sino-American Loyalty

Jerry Chun Shing Lee Indicted in Dismantling of U.S. Informant Network in China
By ADAM GOLDMAN

Jerry Chun Shing Lee, 53, was indicted on Tuesday on a charge of conspiring to commit espionage.

WASHINGTON — A former C.I.A. officer suspected of helping China unravel the agency’s spy network in that country was indicted on Tuesday on a charge of conspiring to commit espionage.
The officer, Jerry Chun Shing Lee, 53, was arrested by F.B.I. agents in January after federal prosecutors accused him of illegally possessing classified information.

But the new charge reflected a willingness of prosecutors to disclose sensitive details they might have been reluctant to acknowledge publicly.
According to prosecutors, two Chinese intelligence officers approached Lee in April 2010 and offered to pay him for information. 

The intelligence officers “provided Lee with a series of email addresses so that he could communicate covertly with them,” court papers said, and he received instructions from Chinese intelligence officers until at least 2011.
“I can’t comment on the indictment because the government hasn’t filed anything but a press release,” Lee’s lawyer, Edward MacMahon, said on Tuesday.
Lee was at the center of an intensive F.B.I. and C.I.A. investigation into how the Chinese determined the identities of agency informants. 

The dismantling of the C.I.A.’s spy network in China was one of the worst American intelligence failures in years.
Lee joined the C.I.A. in 1994 and left in 2007, moving his family to Hong Kong. 

According to court documents, the F.B.I. lured Lee back to the United States in 2012 as part of a sensitive intelligence operation.
While he was in Virginia and Hawaii, agents secretly searched his belongings and found a pair of notebooks containing sensitive details about C.I.A. operations and the identities of undercover officers and informants.
The F.B.I. interviewed Lee five times but never directly asked him whether he had worked for the Chinese government. 

Investigators let Lee leave the country in 2013 in hopes of gathering more evidence and proving he had committed espionage.
Prosecutors said Lee made “unexplained cash deposits, and repeatedly lied to the U.S. government during voluntary interviews when asked about travel to China and his actions overseas.”

Chinese Peril: Huawei and ZTE Smartphones

Six top US intelligence chiefs caution against buying ZTE and Huawei phones

• The directors of the CIA, FBI, NSA and several other intelligence agencies express their distrust of Huawei and fellow Chinese telecom company ZTE.
• During a hearing, the intelligence chiefs commended American telecom companies for their resistance to the Chinese companies.
• Huawei has been trying to enter the U.S. market, first through a partnership with AT&T that was ultimately called off.

By Sara Salinas

Chinese esionage: Six top US intelligence chiefs caution against buying ZTE and Huawei phones

FBI Director Christopher Wray (L) and CIA Director Mike Pompeo (2nd L) testify on worldwide threats during a Senate Intelligence Committee hearing on Capitol Hill in Washington, DC, February 13, 2018.

Six top U.S. intelligence chiefs told the Senate Intelligence Committee on Tuesday they would not advise Americans to use products or services from Chinese smartphone maker Huawei.
The six — including the heads of the CIA, FBI, NSA and the director of national intelligence — first expressed their distrust of Huawei and fellow Chinese telecom company ZTE in reference to public servants and state agencies.
When prompted during the hearing, all six indicated they would not recommend private citizens use products from the Chinese companies.
"We're deeply concerned about the risks of allowing any company or entity that is beholden to Chinese government that doesn't share our values to gain positions of power inside our telecommunications networks," FBI Director Chris Wray testified.
"That provides the capacity to exert pressure or control over our telecommunications infrastructure," Wray said.

"It provides the capacity to maliciously modify or steal information. And it provides the capacity to conduct undetected espionage."

Huawei and ZTE smartphones are Chinese espionage's favorite tools.

Huawei has been trying to enter the U.S. market, first through a partnership with AT&T that was ultimately called off. 

At the time, Huawei said its products would still launch on American markets.
Last month, Huawei CEO Richard Yu raged against American carriers, accusing them of depriving customers of choice. 

Reports said U.S. lawmakers urged AT&T to pull out of the deal.
At the hearing, the intelligence chiefs commended American telecom companies for their measured resistance to the Chinese companies.
"This is a challenge I think that is only going to increase, not lessen over time for us," said Adm. Michael Rogers, the NSA's director. 

"You need to look long and hard at companies like this."

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.”

Chinese Peril

CIA chief says China as big a threat to US as Russia
BBC News

CIA director Mike Pompeo

Chinese efforts to exert covert influence over the West are just as concerning as Russian subversion, the director of the CIA has said.
Mike Pompeo told the BBC that the Chinese "have a much bigger footprint" to do this than the Russians do.
As examples he cited efforts to steal US commercial information and infiltration of schools and hospitals -- and this extended to Europe and the UK.
Mr Pompeo was a hardline Republican congressman before becoming CIA chief.
In his BBC interview, Mr Pompeo also said:

• He expected Russia to try to disrupt US mid-term elections in November 2018. There had been no significant diminishing of Russian attempts at subversion in Europe and the US.
• North Korea may have the ability to strike the US with nuclear missiles "in a handful of months"
• Recent claims in the book Fire and Fury that Mr Trump was not up to the job were "drivel".

Focused efforts
"Think about the scale of the two economies," Mr Pompeo said of Russia and China.
"The Chinese have a much bigger footprint upon which to execute that mission than the Russians do."

CIA Director: China intent on stealing US secrets
Earlier this year, a former CIA officer was arrested on charges of retaining classified information in a case thought to be connected to the dismantling of the agency's spy operations in China.
In the two years before Jerry Chun Shing Lee's arrest, some 20 informants had been killed or jailed -- one of the most disastrous failures of US intelligence in recent years.
But officials did not know at the time whether to blame a mole or data hack.
The US spy chief told the BBC that countries could collectively do more to combat Chinese efforts to exert power over the West.
"We can watch very focused efforts to steal American information, to infiltrate the United States with spies -- with people who are going to work on behalf of the Chinese government against America," he said.
"We see it in our schools. We see it in our hospitals and medicals systems. We see it throughout corporate America. It's also true in other parts of the world... including Europe and the UK."

Chinese methods v Russian
By Gordon Corera

Russian interference has been the focus of political debate in Washington with allegations of hacking and releasing information as well as using social media to sow division.
But the CIA director's surprising claim to me was that China has a more wide-ranging ability to exert influence and more needs to be done to confront it.
China's reach, the CIA director says, ranges from traditional espionage (human and cyber) through allegations it has used stolen intellectual property to helps its businesses.
But it also includes the way in which it uses its economic weight to influence American companies seeking access to its market.
Mr Pompeo also challenged the idea that the US had little influence on the conflict in Syria, where President Bashar al-Assad is still in power and backed by Russian and Iranian support.
"We're going to work on those complicated problem sets and push back against the Iranians everyplace we can," he told the BBC.
It emerged last year that he had written to Qasem Soleimani -- the leader of the Quds force, part of the Iranian Revolutionary Guards -- to warn him that any attacks on US interests would not go unpunished.
"I wanted to send a clear message to Qasem Soleimani that there are American interests -- there are Western interests, British interests and others -- and an attack on those will be met with an equal response.
"He should be deeply aware that it is intolerable for the Iranians to take on American interests," he continued.
The CIA director said that Iran firing missiles at Saudi Arabia through a proxy force in Yemen was "unacceptable" and constituted "acts of war".
He told the BBC the best way of avoiding an escalation of conflict was to make sure the Iranian people understood the cost of such activities by their government, not just in the region but also in Europe.
"I hope that they will rise up and understand that it is not the best interests of their country to send forces to places like Europe as proxies to try and conduct malign activity in Europe when there's so much that can be done to make Iran a better place," he said.
"We are confident that the Iranian people will understand that. We are hopeful that their leaders will accept that proposition as well."

Sino-American Loyalty

Jerry Chun Shing Lee Had Ties to Chinese Spies
By SCOTT SHANE

Jerry Chun Shing Lee, who was arrested in New York this week, had repeated official and unofficial contacts with China’s Ministry of State Security, its main intelligence agency, in the years before he came under F.B.I. suspicion as a possible turncoat.

WASHINGTON — Jerry Chun Shing Lee, the former C.I.A. officer arrested this week in New York, had repeated contacts with Chinese intelligence, both on an official basis while working for the agency in Beijing and afterward under circumstances his business associates found deeply suspicious, according to a former colleague who worked closely with him.
The new information suggests why American investigators suspect Lee, who has been charged with mishandling classified information, may have played a role in the dismantling of the C.I.A.’s networks of agents in China starting in 2010.
The former colleague, who worked with Lee at Japan Tobacco International, said he was viewed at the company with mistrust and was fired as a result, before he came under intense F.B.I. scrutiny as a possible turncoat.
Executives at Japan Tobacco informed the F.B.I. of some of Lee’s suspicious contacts in 2010, the former colleague said in an interview.
But it is unclear when and whether F.B.I. counterintelligence agents learned all the details of his multiple contacts with Chinese spies.
The destruction by Chinese security agencies of the C.I.A.’s operations inside the country, including the imprisonment or execution of a dozen Chinese nationals secretly working for the United States, is considered one of the most devastating intelligence setbacks for the agency in recent decades.
With Lee’s arrest and the continuing investigation, inquiries at the C.I.A. and the F.B.I. into how it unfolded and what mistakes were made are likely to go on for years.
Lee, 53, a naturalized American citizen who was born in Hong Kong, joined the C.I.A. in 1994 after serving in the Army and earning two business degrees at a Hawaii university.
He worked under diplomatic cover in Asia and at C.I.A. headquarters in Virginia.
By 2007, he was growing frustrated by his lack of advancement and decided to leave the agency.
He was hired by Japan Tobacco International and joined that company’s team of investigators who tracked cigarette smuggling and counterfeiting.
Lee told his new employer that his last government assignment had been as the agency’s official liaison in Beijing to Chinese intelligence, according to the former colleague, who did not want to be swept into the media storm over the case and spoke on the condition of anonymity.
While some of Lee’s meetings with Chinese officials would have been approved and carefully documented, former officials say there were some concerns at the time that he might not have been fully forthcoming with superiors about his unofficial contacts.
After a year or so in the new job, he came under suspicion from superiors at Japan Tobacco who thought he might be tipping off corrupt Chinese officials about the company’s investigations of cigarette smuggling and counterfeiting.
Cases that he was informed about often fell apart, so his bosses stopped updating him about their inquiries, said the former colleague, who was directly involved in the operations.
After such suspicions prompted his dismissal by the Japanese company in mid-2009, a Chinese official warned the company that Lee was again talking with Chinese intelligence officers, falsely telling them that the company’s investigations unit in Hong Kong, where he had worked, was a C.I.A. front, the colleague said.
Japan Tobacco officials passed the information to the F.B.I.
By October 2010, looking for business for a new company he had created, Lee was accompanied to a business meeting by Chinese intelligence officers, who vouched for him, Japan Tobacco was later told by people at the meeting.
Lee was taken into custody on Monday after arriving at Kennedy International Airport and charged with a single count of retaining classified information.
The charge, which carries a maximum sentence of 10 years, related to Lee’s possession in 2012 of two notebooks that contained the identities of Chinese nationals working for the C.I.A. and other highly classified details.
Lee’s repeated contacts with Chinese intelligence would be of great relevance to the question of whether he may have been recruited by China and played a role in the betrayal of C.I.A. secrets.
During the early years of the investigation into the loss of sources in China, there were disagreements between the C.I.A. and F.B.I. over whether Lee was the likely source of the breach. Some investigators believed China might have penetrated the C.I.A.’s covert communications or sloppy tradecraft.
Lee does not yet appear to have a lawyer, though he was represented by a federal public defender during a court appearance this week.
He has not been charged with espionage, and no evidence has publicly emerged linking him directly to the deaths of the C.I.A. sources in China.
The colleague, who was formerly a senior manager with Japan Tobacco and worked closely with Lee there, said the company had good reason to believe Lee’s claim that he had been the C.I.A. liaison to the Ministry of State Security, though he declined to give details.
He said the company also believed the later report that Lee was meeting in 2010 with Chinese intelligence, which came as a tip from a Chinese official to a veteran investigator with Japan Tobacco, a former Hong Kong police investigator who had handled many tobacco cases.
Lee’s reported false claim that Japan Tobacco investigators were actually working for the C.I.A. alarmed company officials, who thought it would put at risk every company investigator who traveled in China.
He said the claim had no basis in fact, and that any perception of an association with any foreign intelligence service was carefully avoided because it would have been dangerous for Japan Tobacco employees in China.
Company officials thought the false C.I.A. claim was an act of revenge for Lee’s firing.
For months, the company banned all travel to the rest of China by Hong Kong-based investigators, said the former colleague.
“We took it as payback from Jerry,” the colleague said.
In addition, at the time of his firing, Lee told senior Japan Tobacco officials that other company security employees were carrying out kidnappings and torture in their hunt for smugglers, the former colleague said.
Those claims were never substantiated, but they roiled the company and led to the breakup of the Hong Kong investigative unit, which was later reformed with mostly different personnel.
But Lee’s contacts with the Chinese Ministry of State Security did not end there, the former colleague said.
After Lee was fired, he joined with a former Hong Kong police officer to form a small investigations firm and sought tobacco companies’ business.
In October 2010, Lee appeared at a meeting of the Guangdong Province branch of the Chinese state tobacco company accompanied by Ministry of State Security officers, people at the meeting told Japan Tobacco officials.
Lee was seeking business for his new investigations firm, and the intelligence officials were there to support his appeal, Japan Tobacco was told.
Lee co-owned the investigations firm, FTM International, with Barry Cheung Kam Lun, according to corporate records.
Cheung was a former Hong Kong police officer, according to Lee’s former colleague.
Lee’s wife, Caroline Lee, served as the sole director of FTM, the records show.
Though the investigations firm, called FTM International, evidently did not thrive and eventually went out of business in 2014, Lee was later hired by Estée Lauder, the cosmetics company, and Christie’s, the global auction house, which suspended him after his arrest.
But the former colleague said Japan Tobacco never heard from Lee or his prospective employers.
He said he did not know about the F.B.I. investigation until Lee was arrested.
An internal announcement of his hiring by Christie’s as director of security for Asia described him as having “considerable domestic and international experience of managing complex security issues” and said he spoke Cantonese and Mandarin as well as English.
In a statement, Lavina Chan, head of corporate communications for Christie’s Asia, confirmed that Lee had worked in the job for the past 20 months and had been suspended after his arrest pending the outcome of the investigation.
The colleague recalled other details of Lee’s two years with Japan Tobacco.
While reticent with superiors, he was more loquacious with local Chinese employees, who described him as frequently talking about the money he was making or wanted to make.
When the firm discovered a $15,000 shortfall in a cash fund used to pay informants on cigarette smuggling cases, Lee came under suspicion.
His bosses feared he might also be taking money to pay informants who did not exist, the colleague said.
He was married with two daughters, appeared to be devoted to his children and did not live a flashy lifestyle, the colleague said.
But he was unpopular at work, widely seen as untrustworthy, and when he left, “none of us ever wanted to see him again.”

Sino-American Double Loyalty

Ex-CIA officer Jerry Chun Shing Lee spied for China
by KEN DILANIAN, PETE WILLIAMS and ROBERT WINDREM

A former CIA officer who was charged Tuesday with unlawful possession of secrets is suspected of a much worse crime: betraying U.S. informants in China, sources familiar with the case told NBC News.
The former officer, Jerry Chun Shing Lee, 53, was arrested Monday after flying into New York on a Cathay Pacific flight from his home in Hong Kong, federal authorities announced.
Lee, who is a naturalized U.S. citizen, was charged with a single count of unlawfully possessing national defense information, based on a 2012 search that found him to be in possession of two notebooks containing the true names of CIA assets and covert facilities, which are some of the agency's most closely guarded secrets.
He is suspected of funneling information to China that caused the deaths or imprisonment of approximately 20 American agents, in one of the worst intelligence breaches in decades.
The New York Times reported last year that the Chinese government systematically dismantled CIA spying operations in the country starting in 2010, killing or imprisoning more than a dozen sources over two years and crippling intelligence gathering there for years afterward.
The lobby of the CIA Headquarters Building. 

CIA and FBI officials were mystified and mortified as one after another of their best agents in China were jailed or executed.
It was considered the worst intelligence catastrophe since the 1990s, when Aldrich Ames and Robert Hanssen, formerly of the CIA and the FBI, provided secrets to Moscow for years that led to the deaths of multiple agents. 

Both men are serving life terms in federal prison.
The Times story described a debate over a suspected mole, a former CIA case officer now living in an Asian country.
An FBI task force launched an investigation and began to focus on Lee, sources tell NBC News. 

It's unclear how the FBI lured Lee back to the U.S. but officials say there have been several undercover attempts to incriminate him, and at least one confrontational interview during which he denied being a spy.
In 2012, one source said, the FBI lured Lee back to the U.S. with a phony job offer, but no charges were filed and he returned to Hong Kong.
Officials familiar with the case say it is unlikely that Lee will be charged with espionage, which can carry the death penalty. 

It may be that the government doesn't have the proof required for such a charge, or that it doesn't want to air secrets in an open courtroom.
But sources say Lee was the subject of an intense — and extremely secret — counterintelligence investigation. 

That included searches of his hotel rooms in Hawaii and Virginia in 2012, according to the court records filed Tuesday.
"A review of photographs taken during the August 13, 2012, search in Hawaii and the August 15, 2012, search in Virginia revealed that, during his stay in both hotels, Lee possessed two small books (the "books") best described as a datebook and an address book," the arrest affidavit said, adding that the books contained classified information.
"The datebook contained handwritten information pertaining to, but not limited to, operational notes from asset meetings, operational meeting locations, operational phone numbers, true names of assets, and covert facilities," the affidavit said. 

"The address book contained approximately twenty-one pages. The address book contained true names and phone numbers of assets and covert CIA employees, as well as the addresses of CIA facilities."
Some who investigated the case believed the Chinese had hacked the communications the CIA was using to get in touch with its assets in China. 

A source familiar with the case said such a hack was possible, but that it was also clear Lee was spilling secrets to the Chinese.
Court documents say Lee had been a CIA case officer since 1994. 

He graduated from Hawaii Pacific University in 1992 with a bachelor's degree in International Business Management and in 1993 received a master's degree in Human Resource Management, according to court documents, which do not list a lawyer for him.

Former CIA officer accused of spying for China could have gotten people killed

By Rachel Weiner

Former CIA officer Kevin Mallory is accused of selling secrets to the Chinese.

A former CIA officer accused of spying for China had notes in his home that could have gotten clandestine sources killed, according to prosecutors in Alexandria federal court.
While Kevin Mallory is not accused of handing those documents over to Chinese intelligence agents, prosecutors noted his access to the material to underscore the seriousness of potential breaches and to argue that he should remain jailed pending trial on espionage charges. 

A federal judge agreed.
Mallory, a 60-year-old from Leesburg, Va., is accused of handing over classified documents revealing details of CIA intelligence.
On a phone that Mallory admitted was given to him by someone he thought worked for Chinese intelligence, eight documents were found, authorities said. 

Six were classified CIA documents and one was a classified Defense Intelligence Agency document, FBI agent Stephen Green testified Friday. 

The last is a mix of typed and handwritten pages that are still being reviewed.
At least two of the documents were transmitted to the Chinese earlier this year, according to prosecutors.
A magistrate judge last week ordered Mallory’s release on a $10,000 bond. 

But U.S. District Judge T.S. Ellis overturned that decision Friday, in part based on the new details revealed regarding Mallory’s CIA career and the documents found in his possession.
Prosecutors confirmed in court Friday that Mallory worked for both the CIA and the Defense Intelligence Agency, the CIA’s counterpart in the Defense Department.
According to court documents, Mallory was a covert CIA case officer from 1990 to 1996 and a CIA contractor from 2010 to 2012. 

It was not clear when he worked for the DIA.
Antoinette Shiner, an information review officer for the CIA, confirmed in a declaration filed in court Friday that Mallory’s documents contained sensitive CIA intelligence, analysis of that intelligence and, in some instances, the actual human or technical sources of the intelligence.
One of the documents he has passed on to the Chinese “reveals the breadth and depth” of the CIA’s understanding of “a specific hostile foreign intelligence service,” according to Shiner, including details on that foreign service’s approach to counterintelligence.
Handwritten notes found in Mallory’s house, she said, concern sensitive human sources and “could reasonably be expected to cause the loss of critical intelligence and possibly result in the lengthy incarceration or death of clandestine human sources.”
According to the criminal complaint against Mallory, he told the Chinese operatives that he had notes to offer as well as documents.
Mallory is not accused of selling intelligence that led to the death of any U.S. officer. If he were, he would be facing the death penalty. 

Instead he could be sentenced with up to life in prison, if convicted.
Prosecutors also played in court a phone call from jail in which Mallory asked his wife and son whether a particular memory card had been seized by FBI agents. 

The card had been seized, and the eight documents were on it. 

It was found wrapped in foil inside a shoe in Mallory’s closet, according to Assistant U.S. Attorney John Gibbs.
At the end of the call, Mallory says it’s “good” that agents found the card and that he had merely hoped to give it to his lawyer first so he would know it hadn’t been tampered with in some way.
Prosecutors have repeatedly emphasized that wigs, fake scar liquid and other disguise makeup were found in Mallory’s bedroom closet. 

Defense attorney Geremy Kamens said the items are given to every CIA officer who trains for clandestine service and that they were over a decade old. 

In recent years, he said, Mallory had used them only on Halloween.
Kamens pointed out that Mallory repeatedly reached out to his former CIA colleagues about his contact with the Chinese agents, even before the first of his two trips to China this spring. 

It was after his second trip that Mallory was caught lying to Customs agents about how much money he was carrying home.
Kamens suggested Chinese intelligence runs “a very sophisticated organization” and could have put the classified documents on the phone themselves in hopes of “blackmailing him so they could obtain information in the future.” 

He also implied, in Ellis’s words, that Mallory was working as a freelance “double agent,” aiming to expose Chinese attempts at espionage.
The judge was not persuaded by either suggestion, noting that according to the criminal complaint Mallory was paid $25,000 by the Chinese.
While the Chinese operatives represented themselves as working for a Shanghai think tank, according to the complaint, Mallory told FBI agents he believed they were intelligence agents. 

The think tank, the Shanghai Academy of Social Sciences, functions as both a legitimate academic institution and a cover for Chinese intelligence officers, according to the FBI.
“He’s cleverer than most,” Ellis said. 

By going to the CIA at the same time, “he’s trying to make sure he has a way out.”
He ruled that Mallory was both a flight risk and a danger to the community, because he might trade the rest of his intelligence for help getting out of the country.
The Chinese, Ellis said, “would love to have him so they could drain him of information and make sure he doesn’t talk very much.”

Chinese Fifth Column: VOA Blocks Businessman From Revealing Chinese Spying Secrets

Guo Wengui details PRC intel operations, a potential intelligence windfall for FBI, CIA
By Bill Gertz

Guo Wengui 

An exiled Chinese businessman with close ties to the government has begun revealing secrets about Beijing's intelligence operations after China pressured the official Voice of America radio to curtail a lengthy interview with him.
Four VOA employees were suspended last month after more than an hour of the radio's exclusive interview with billionaire businessman Guo Wengui exceeded a time limit imposed under radio rules.
The four employees of the Chinese language radio division are now calling on Congress to investigate whether VOA managers gave in to pressure from China's government to shorten the Guo interview and as a result undermined the radio's integrity.
Sasha Gong, one of the four suspended employees and chief of VOA's Mandarin language service, says Congress should probe the matter.
"I would like the Congress to investigate if the management of the taxpayer-funded Voice of America caved in to the request and demand of the Chinese government. If so, what is the reason behind their decision?" she said.
A VOA spokesman defended the decision to cut off the interview after an hour based on the radio's practices limiting time devoted to live interviews.
"Pressure from the Chinese government played no role in any decision-making," said the spokesman, George Mackenzie. 

"VOA and the [parent organization Broadcasting Board of Governors] have decades-long histories of producing full fair and balanced journalism in the face of even the most extreme pressures."
VOA is the official U.S. government radio broadcaster providing news in 40 languages.
Critics have charged VOA is poorly managed and its news reports are too friendly toward anti-democratic states such as China.
Guo has close ties to senior Chinese Communist Party leaders, including government ministers and Politburo members. 

In April, he began disclosing detailed information on what he says is corruption among senior Chinese leaders, along with details of Chinese intelligence activities.
The four employees charged in an open letter to Congress that "a series of arguments and debates" led VOA to halt the April 19 on-air interview with Guo after one hour and 19 minutes. 

They said said cutting off the interview "gravely damaged" the "integrity and credibility of VOA as a media outlet."
"Furthermore, as VOA is a federal entity, the U.S. government's integrity and credibility have been greatly damaged, too," they said. 

"Therefore, the U.S. national interests have been greatly undermined as well."
MacKenzie, the VOA spokesman, said decisions on handling the Guo interview were based on journalistic guidelines requiring verification, balance, and fairness that apply to all VOA's various language services.
"There was no input whatsoever from the U.S. government, nor would the firewall permit any such input," MacKenzie said, referring to limits of official U.S. government controls.
China, meanwhile, has taken steps to intimidate Guo's family members and the businessman himself who is said to be in hiding in New York.
Guo's knowledge of Chinese intelligence operations could provide an intelligence windfall for the CIA and FBI, based on his access to Ministry of State Security (MSS) operations overseas and in the United States.
Ma Jian, a former MSS vice minister who was imprisoned for corruption last year, recently surfaced in an online Chinese video charging that he was in the pay of Guo and that they shared information.
After the VOA curtailed his interview, Guo, who has claimed to be working with Chinese intelligence and security services, took to social media and began providing daily videos and reports revealing Chinese spying and other sub rosa activities.
Writing on Twitter under the name @KwokMiles, Guo recently disclosed that MSS operatives work closely with wealthy Chinese nationals like him who are tasked with funding and conducting intelligence operations on behalf of MSS.
For example, in the United States, Chinese surrogates have funded private investigators to spy on the offspring of high-ranking Chinese officials, many of whom are in the real estate business or attend American universities.
In a bid to silence Guo, China detained two of his brothers. 

The brothers were eventually released and Guo said they had been tortured by authorities.
Additionally, Guo's wife and daughter currently have been allowed by Chinese authorities to visit him in New York but are required to return to China after 20 days where they can be used for political leverage against Guo.
Guo stated in one recent video that he fears his family is being used by the government to pressure him into silence or to force his return to China.
Guo also announced that he is offering $100 million to anyone who can produce evidence, such as bank records, revealing high-level corruption by Chinese officials.
In the portion of the VOA interview that aired, Guo dismissed the Interpol red notice as part of Chinese effort to silence him. 

China spent $60 million annually to arrange for Interpol to pick a Chinese national as its director. 

The current director is Meng Hongwei.
Guo said he has been in the United States since 2015 and holds several foreign passports. 

Asked about MSS activities, Guo said the ministry uses Chinese businessmen as agents called "commercial anchors" who assist MSS.
Ma Jian, the imprisoned MSS official, was in charge of directing his overseas business activities on behalf of the service, Guo said, adding that he has no formal relationship with MSS beyond the use of his business resources.
Guo also alleged he has information about corruption involving the family of Wang Qishan, the senior Party official in charge of Xi Jinping's nationwide anti-corruption drive. 

Wang is a member of the Politburo Standing Committee, the seven member collective dictatorship that rules China.
On Capitol Hill, committee aides said both the Senate Foreign Relations Committee and House Foreign Affairs Committee are monitoring the issue.
A House committee spokesman said: "The Foreign Affairs Committee is aware of the matter and following it. Sadly, this appears to be one more example of the need for reform at VOA."
A Senate Republican aide added: "Since the reports first surfaced, we have been tracking the suspensions and are prepared to conduct further oversight if necessary."
Sen. James Lankford (R., Okla.) is also looking into the matter, a spokesman said.
A Justice Department spokesman declined to comment.
According to the suspended VOA employees, Guo earlier this year contacted the radio and said he wanted to go public with details of corruption by senior Chinese officials.
The employees who signed the statement to Congress are Sasha Gong, Fred Wang, Huchen Zhang, and Robert Li. 

They have denied any wrongdoing and are asserting that VOA management is treating them unfairly over the Guo interview.
Days before the planned three-hour live interview on VOA, China issued an arrest warrant for Guo in Dalian, and then an Interpol "red notice" calling for Guo's detention, claiming he was wanted for unspecified bribery charges.
An official at China's embassy then called VOA on April 18 and demanded the radio cancel its upcoming interview with Guo.
VOA managers, including director Amanda Bennett and deputy director Sandy Sugawara, decided to limit the Guo interview to one hour and ordered it halted after the interview exceeded that limit.
A White House petition was set up May 18 calling on the U.S. government to protect Guo as a "whistleblower."
"Chinese billionaire Guo Wen Gui is hunted by Chinese communist party by all means, he is exposing the massive corruption on highest level of Communist party and launching a campaign to push for Chinese Constitutional reform," the petition states.
The petition also said China has issued "an assassination bounty reward" for Guo and his family.
The dissident Chinese news outlet China Digital Times has documented some of Guo's charges and reported that Guo is planning an international news conference at an unspecified time in the future.
Disclosure of the Chinese intelligence activities come as the New York Times reported last weekend that China executed or imprisoned up to 20 of the CIA's recruited agents, based on a Chinese mole in the agency or a compromise of its secure communications.
The newspaper quoted intelligence sources as saying the damage began in 2010 and continued for two years, effectively neutralizing the CIA's sources of information on a major intelligence target.