Plea Deal Ends FBI, Chinese Double-Agent Case

LOS ANGELES – The government ended its crippled spy case against a woman once accused of being a Chinese double agent, accepting her guilty pleas to lesser charges of making a false statement to the FBI and filing a false tax return.

Katrina Leung, 51, admitted Friday she lied to the FBI about her intimate relationship with her FBI handler, James J. Smith, and that she failed to include all her income on her tax returns for the year 2000.

The case against Leung virtually collapsed early this year when the judge rebuked prosecutors for "deliberate misconduct" and dismissed all charges. The judge said prosecutors purposely kept the defense from contacting Smith as they prepared for Leung's trial and, in so doing, violated her due process rights to a key witness.

The government appealed to the 9th U.S. Circuit Court of Appeals to reinstate the charges and that appeal was pending when the plea bargain was announced.

Leung, a socialite who lives in the wealthy suburb of San Marino, stood between her attorneys as she addressed U.S. District Judge Florence Marie Cooper.

"I want to say that it's great to be an American. I love America. I love American values," said Leung, a naturalized citizen.

"I'm looking forward to putting this behind me and continuing on in this beautiful country," she said. "God bless America."

Leung, who already spent three months in jail and 18 months in home detention, agreed to be immediately sentenced. The plea deal provided for no more time in custody, three years of probation, 100 hours of community service and a $10,000 fine. She agreed to government debriefings, including use of polygraph devices.

Leung acknowledged that when she was questioned by the FBI about Smith she told them that he was "just a good family friend" and that she had never traveled with him abroad. In her plea she said she traveled with him to Hong Kong and England and they did have an intimate relationship.

She said she concealed $35,000 in payments from the FBI and $16,389 in rental income on her tax return.

The tax return was filed for her and her husband. The judge said the plea agreement relieves him of all further tax consequences as well. Her husband, Kam Leung, sat in the front row of the courtroom as she entered the plea.

Smith pleaded guilty in connection with the case and was sentenced earlier this year to probation and a fine of $10,000. He admitted that he had lied to the FBI about his affair with Leung.

Leung was recruited to work for the FBI, gathering intelligence during frequent business trips to China. Smith was her FBI handler and vouched for her trustworthiness during briefings with his superiors.

Prosecutors claimed Leung began working for China as a double agent around 1990. An indictment contended she had access to classified documents from Smith's briefcase which she copied with the intent of using them to benefit a foreign nation.

But neither she nor Smith was ever charged with espionage. Smith was charged with gross negligence for allegedly allowing her access to the classified material. He ultimately pleaded to a single count of making a false statement about their affair.

Leung was paid a total of $1.7 million by the FBI for her information as an intelligence asset code-named "Parlor Maid."