FBI Handling of China Spy Case Criticized

Among them was a tip from a source that a Chinese spy was "in bed with" the FBI's Los Angeles office, according to the report. The FBI agent, James J. Smith, headed the China squad in Los Angeles and was told about the tip.

The federal review was classified, but the Justice Department released a summary Wednesday that was sharply critical of the agency's response to repeated questions about the loyalty of Katrina Leung of San Marino during her career as an FBI informant.

A separate review of spies against China concluded in December that FBI relationships with several of them should be "closed" because of "control and reliability issues," according to Wednesday's report.

The secret report also said that an FBI task force was created to investigate persistent allegations against Leung after counterintelligence operations had been compromised and several of its operatives "had been detained and interrogated in China."

The inspector general's office of the Justice Department declined to comment Wednesday, offering no information about the fate of the spies caught in China, or the finding that the loyalty of several operatives working for the FBI was suspect.

Leung was originally accused of providing classified information to China and of using information she obtained from Smith in her espionage activities. Under Smith's direction, she had been groomed to become a double agent: to be recruited by Chinese intelligence to spy for China while in fact working for the FBI.

Code-named Parlor Maid, Leung was a business consultant who traveled frequently to China and ingratiated herself with top officials in Beijing and Chinese diplomats in the United States. The FBI paid her $1.7 million over 20 years.

Smith and Leung pleaded guilty to reduced charges after a judge found government prosecutors guilty of misconduct and threw out the spy allegations. Smith was originally charged with gross negligence in handling classified documents. Like Leung, he pleaded guilty to lying about their affair. He was sentenced to three months of home detention; she was sentenced to three years of probation.

Before he retired in 2000, Smith had received numerous commendations for his work with Leung, whom he recruited in 1983. Their sexual liaison began about that time.