Judge OKs Plea Deal in Spy Case

Closing its books on a troubled spy case, the government on Friday allowed a former FBI operative who had been accused of being a Chinese double-agent to plead guilty to lying about a sexual affair and filing a false income tax return.

Approving a plea bargain between prosecutors and defense lawyers, U.S. District Judge Florence Marie Cooper sentenced Katrina Leung to three years' probation and fined her $10,000 but spared her from serving any time in prison.

In exchange, the prosecution agreed to drop more serious charges in which the 51-year-old Southern California businesswoman and socialite was accused of illegally copying and possessing national security documents that she allegedly stole from her FBI handler and lover, now retired FBI counterintelligence officer James J. Smith.

The government also agreed to scrap a pending criminal tax investigation targeting Leung and her husband, Kam, 54.

The prosecution's case was already seriously hobbled. Earlier this year, Cooper threw out the government's indictment, accusing the U.S. attorney's office of willful and deliberate misconduct.

Cooper ruled that prosecutors acted unethically by exacting a commitment from Smith that effectively barred him from talking to Leung's defense team. Prosecutors are prohibited from obstructing a criminal defendant's access to witnesses.

Denying any misconduct, the prosecution asked the U.S. 9th Circuit Court of Appeals to reinstate the charges. That appeal will now be withdrawn.

Both sides claimed victory after Friday's court proceeding.

"Today, the case against Katrina is over, and she has been vindicated," defense lawyers Janet I. Levine and John D. Vandevelde said in a statement. "Prosecutors agreed to drop forever all claims of espionage and mishandling of classified documents. They agreed to resolve all IRS claims against her, plus the IRS will return most of the funds they seized and lift the liens that tied up the property Katrina and her family own."

U.S. Atty. Debra Wong Yang, who attended the plea hearing, issued a statement saying she was "pleased that Ms. Leung has acknowledged criminal culpability related to her activities while employed as an intelligence asset by the FBI."

For her part, Leung, a naturalized U.S. citizen, told the judge, "I love America and I love American values." She said she was looking forward to putting her 2 1/2 -year ordeal behind her.