An Espionage Bombshell

The biggest bombshell from the Cox Report so far came when the Clinton Administration leaked to the Wall Street Journal on January 7 classified information about three instances in which American scientists passed classified information from U.S. energy labs to China. The espionage cases involved information about the design and capabilities of an advanced nuclear warhead, the neutron bomb and laser secrets. These lapses in security occurred in the 1970s and 1980s.

The Department of Energy conceded to The Washington Weekly that China "may have" stolen military secrets from its weapons laboratories, but declined to confirm any of the details in the Journal report.

Meanwhile, China has harshly criticized the House report and warned it could potentially damage growing U.S.-China ties.

"That is a concern," says Gerrit W. Gong, Director of the Asian Studies Program at the Center for International and Strategic Studies. If there is an over-reaction in Washington, "it could lead to a new Cold War with China," he says.

Gong applauds the Cox committee's work as addressing "a correct and appropriate concern," but warns that the U.S. should be careful that is does not "create a new adversary going forward." Says Gong, "International relations is a balance, as always, between cooperation and competition."

The Embassy of China in Washington did not return calls for comment. However, Reuters News Agency on January 8 quoted a Chinese embassy official, He Yafei, as strongly denying any conclusions of the Cox Report that U.S. national security was
harmed by technology transfers to China.

"If there should be such conclusions in the report, they are very much absurd, irresponsible and unwarranted," said He Yafei, a former deputy director general for arms control and disarmament, according to Reuters.

The premature release of information in the Cox Report has raised questions about why information damaging to past Administrations has been leaked by the Clinton Administration.

"This is being leaked for political purposes," suggests Ivan Eland, Director of Defense Policy Studies at the Cato Institute. "It means that probably other damaging information, including possible incidents of espionage, is going to come about the
Clinton Administration. It may be an attempt to say 'It's been going on for a long time, so don't blame us,'" Eland says.

Leaking information now on prior cases of Chinese espionage might, Eland argues, weaken the explosive potential of new allegations yet to come out that might involve the Clinton Administration.

No Recommendations For Prosecution

Larry Klayman of Judicial Watch faulted the Cox committee last week for failing to recommend prosecution of any firms or individuals involved with any of the technology transfers that have harmed U.S. interests.

A Congressional source confirms Klayman's charge that there are no recommendations in the Cox Report that deal with prosecution. "It was not part of our authorization," says the source. "We're aware of everything the Justice Department is investigating, of
everything they're looking at, and there is a certain comfort level that we don't need to worry about that," the source says.

Chairman Cox also expressed confidence that all relevant matters are being investigated by law enforcement authorities. "The Justice Department already has ongoing criminal investigations into the substance of the matters that we are looking at, including the classified matters that we can't discuss," Cox said.

Klayman says the Cox committee erred in relying on the Department of Justice to fully investigate and prosecute wrongdoing in the matters the committee uncovered in its
investigation without any firm guidance from Congress. "It's just a whitewash if you let DOJ do it," Klayman said. "The DOJ is a joke. It's not an opinion. It's a demonstrable fact."

"Unless Congress tells Janet Reno what to do in no uncertain terms, she's not going to do anything. And even then, she may not," says Klayman.

Attorney General Janet Reno has been widely criticized for failing to appoint an independent counsel to investigate whether 1996 election campaign contributions to President Clinton and the Democratic National Committee -- some funneled from
sources with ties to the Chinese military and others from Loral -- are tied to activities by the Clinton Administration to facilitate technology transfers to China that have harmed national security.

Reno has claimed that the situation does not warrant the appointment of an independent counsel that the Department Justice is vigorously pursuing the investigation and prosecution of related cases.

Wallop also quarrels with the Cox committee's failure to recommend prosecution.
"Justice doesn't appear willing to look at any campaign-related influence-peddling behavior on the part of anyone," he says. "I don't think we're going to get an investigation into the Commerce Department," which Judicial Watch claims sold seats on trade missions to China and other countries in return for campaign contributions from businessmen who could gain financial benefits from being part of the trade missions.

Klayman insists that prosecution of past wrongdoing is necessary as a deterrent. "It's a service to correct what has been broken," he says, "but it's an equal service to make sure people are prosecuted. This is the only preventative measure that will keep
companies from doing this again."

Klayman says the failure of the Cox Committee to recommend prosecution or an independent counsel is a bipartisan plot to avoid embarrassment for important campaign donors. Hughes is a Republican donor while Loral is a Democratic donor, he notes. "They agreed they would not act on past conduct as a way to get the Democrats to go along" with a report that is damaging to the Clinton Administration, Klayman says.

Judicial Watch has pursued a range of Clinton scandals through the courts, including Filegate and Chinagate. The watchdog group uncovered the scandal in the Commerce Department involving trade missions.

Last November Judicial Watch filed a shareholder lawsuit against Bernard L. Schwarz, Chairman of Loral, charging that he engaged in a pattern of racketeering with the President Clinton, First Lady Hillary Rodham Clinton, Vice President Al Gore, the Democratic National Committee, and various Clinton Administration officials, including John Huang, a Democratic fund-raiser who took a job in the Commerce Department.

The Judicial Watch lawsuit charges that Loral's racketeering has harmed Loral and its shareholders.

Revelations So Far and Those To Come

At the December 30 press conference, Cox, flanked by ranking minority member Norm Dicks (D-Wash.), revealed the barest of information about the findings of the committee's intensive investigation.

"I can tell you today that we have found that national security harm did occur," said Cox. The damage, he said, extends beyond China's conversion of commercial technology to military use and included the illegal transfer of unspecified secret American military technology -- presumably at least the instances reported later in the Wall Street Journal.

"We hope that when this is finished," said Dicks, referring to the declassification process, "that we'll be able to be more explicit about the problems that occurred." The report is now in the hands of the CIA, the FBI and the Congressional intelligence
committees.

The committee's investigation uncovered a systematic effort by the Chinese going back at least to the Carter Administration to acquire U.S. military secrets. "The seriousness of these findings, and their enormous significance to our national security led us to a
unanimous report," Cox said.

The committee unanimously agreed to 38 recommendations in the report aimed at preventing the abuses that have occurred over the last 20 years. Those recommendations, even though not classified, were not released for fear they might inadvertently compromise classified information, Cox stated.

The committee, made up of five Republicans and four Democrats, was assisted by a staff of defense, intelligence and legal experts headed by Rick Sinquegrana, deputy inspector general of the CIA.

The Cox committee conducted 22 top secret hearings and heard 75 witnesses who gave 200 hours of testimony. The committees staff also conducted another 500 hours of testimony and deposition.

There were four witnesses who were granted "use immunity," agreed to by the Department of Justice, "to require them to answer questions," says Brent Bahler, press secretary for the Cox committee. The investigators reviewed 500,000 documents, "more than any other investigation" of U.S. technology transfers to China, he says.

The most pressing question at the time the study began last July was whether Loral Space & Communications Ltd. and Hughes Electronics Corp. had harmed national security when they helped the Chinese perfect their missile technology in order to help
them launch American commercial satellites.

It was the committee's chief assignment to determine if this technology transfer by Loral and Hughes helped China obtain the capability of launching nuclear weapons from intercontinental ballistic missiles that could hit the Western U.S.

If the committee found that national security was harmed, it was asked to assess the roles of the Clinton Administration, Loral, Hughes, the government of China, and any other person or entity in bringing about the harm.

The panel was also asked to come up with policy recommendations to prevent such harm reoccurring in the future.

The committee was asked to determine if campaign contributions to the Democratic National Committee during the 1996 elections played a role in the Administration's granting of waivers for technology transfer to Hughes or Loral -- or affected other
policies that may have harmed national security.

The panel was also asked to determine if decisions on technology transfers were affected by any bribery, influence-peddling or other illegal activities by Chinese authorities and their surrogates.

So far, only one of the questions has been publicly answered by the committee -- the finding of national security harm and only in a general way.

Spotlight on Loral and Hughes

Congressman Rohrabacher says he declined an offer to be officially briefed on thecontents of the Cox Report because he would also have to refuse to talk about it publicly. Thus, he says, his information on what is in the report comes from what he has
"gleaned" from those who have read it.

"If nothing else, the report confirms what I said all along. National security has been harmed in a dramatic way. American companies knowingly, intentionally broke the law in order to upgrade Communist China's rocket systems. This was not some case of
someone who left a piece of paper on a table, or someone blurting something out accidentally."

Rohrabacher also claims that Loral and Hughes "went over the line of legality and loyalty to their country -- there's no doubt about that." He is, however, not sure they should be prosecuted because he claims the Administration and the President Clinton -- by its actions and statements -- was "cheering them on."

Explains Rohrabacher: "They may have been looking for guidance from the Administration and got a wink and a nod." This may prove difficult to prosecute, he adds, because "winks and nods are difficult to document."

Some observers doubt the severity of the national security harm done by the technology transfers. "I'm not saying that Loral and Hughes may not have violated rules, but I'm very skeptical that a lot of secret military technology was passed," says Eland at Cato.

More harm to national security may have been done when the U.S. approved the transfer of its global position systems technology to China, Eland says. With that technology, "they can use our satellites to target their weapons."

As for Loral and Hughes, Eland suggests that "they probably gave too much information to China because they had a commercial incentive to help China with their rockets."

Other observers point out how difficult it is to prevent China from obtaining dual-use technologies -- those which have commercial and military applications.

Once new technology is commercially available anywhere in the world, "it will be in Hong Kong multi-story retail outlets for high tech before you can finish a regulatory review," according to Douglas H. Paal, President of the Asia Pacific Policy Center in
Washington.

The best strategy, Paal says, is to be sure the U.S. promotes an environment at home that encourages the rapid development of technology "to keep people from catching up with us."

Loral denies it has done anything wrong. "We remain convinced that we did not violate the law and did nothing to harm national security," a company statement claims. "In our submission to the Select Committee, we believe we demonstrated that any material
exchanged with the Chinese was from open sources, readily available in standard engineering text books."

Loral also claims it has cooperated fully with the Select Committee and the Justice Department.

Hughes, in a prepared statement, also denies any wrongdoing. "Hughes believes it has fully complied with the law and acted in accordance with the guidance of the executive branch agencies with jurisdiction over satellite-licensing and export control matters, and is unaware of any evidence to the contrary."

Hughes did express contrition. "Nevertheless, we respect the concerns of those in the national security community and in the Congress, and we intend to work together in addressing those concerns.

Hughes claims that it has cooperated fully with the investigation. Seventeen current or former Hughes officers and employees have provided testimony before the committee. The company has also made available to the committee 175,000 pages of Hughes
documents.

Three Cases of Chinese Espionage

The Cox Report's most egregious case of espionage may be the theft of nuclear warhead secrets in the 1980s from Los Alamos National Laboratory in New Mexico, according to defense and intelligence experts inside and outside the government.

The Wall Street Journal provided a partial view of the details of this and other cases of Chinese espionage in its January 7 report by Carla Anne Robbins.

The Journal reported that unnamed U.S. officials claim a scientist at Los Alamos labs passed to China secret design information about the W88 nuclear warhead, one of the nation's most advanced nuclear warheads and one that was designed for the submarine launched Trident II ballistic missile.

The Journal reported that FBI officials continue to investigate the theft. The Los Alamos scientist accused of passing classified information continues to work there, but has been reassigned away from sensitive areas.

Unnamed U.S. officials told the Journal that China may have obtained only general information about the warhead's internal configuration that revealed how designers were able to reduce the weight and size of the warhead without losing any of its power.
"The most important thing is they learned it could be done this way," one U.S. official told the Journal.

Brooke Anderson, director of public affairs at the Department of Energy, told The Washington Weekly, "We're aware that China may have gathered some information on our strategic nuclear technology. The extent to which these disclosures may have
helped parts of the Chinese weapons program is unclear. We don't believe they have acquired any equipment or blueprints or advanced designs related to these matters."

Unnamed U.S. officials also told the Journal they believe China tested a weapon similar to the W88 in the mid-1990s. The information stolen from Los Alamos could eventually help China design a new generation of mobile nuclear weapons, some with
multiple warheads, according to the Journal.

Two other incidents of Chinese espionage were also reported by the Journal and identified as part of the Cox Report.

One is the case of an unidentified Taiwan-born American scientist working at the Lawrence Livermore National Laboratory in California, who passed classified information in the 1970s to China about the U.S. neutron bomb program, according to the Journal. Ten years later China tested a neutron bomb, but is not believed to have deployed any neutron bombs.

The third case involves a Taiwan-born American named Peter Lee, who passed to China classified information on U.S. laser technology from Los Alamos National Laboratory in the mid 1980s, according to the Journal.

The Department of Energy, which oversees the labs where the incidents were alleged to have occurred, has stepped up its security operations in a joint effort with the White House and U.S. intelligence agencies, according to Anderson.

In February 1998 President Clinton signed the Presidential Decision Directive 61 (known in government jargon as PDD-61), titled "The Department of Energy's Counterintelligence Program." This directive established an independent Office of
Counterintelligence at the Department of Energy.

Edward J. Curran was transferred from the FBI to head the office in April 1998.

Curran reports directly to Secretary of Energy Bill Richardson. "The first thing he did on his arrival was to consult with counter-intelligence experts at the CIA and FBI," says
Anderson.

In a prepared statement Curran states: "I have completed an exhaustive review of the counterintelligence program, and we are implementing a series of extensive recommendations to improve DOE counterintelligence. The new plan is built on lessons learned in the aftermath of the [Aldrich] Ames case, and it has been endorsed by the FBI and the CIA."

Among other things, DOE has placed counterintelligence agents at each of the weapons labs and changed the screening and approval process for foreign scientists seeking access to DOE labs.

Published in the Jan. 11, 1999 issue of The Washington Weekly. Copyright © 1999 The Washington Weekly (http://www.federal.com). Reposting permitted with this message intact.