U.S. Wants to Keep Building Russia Ties, Despite Cracking Deep-cover Spy Ring

FBI arrests 10 alleged Russian spies who had posed as innocent civilians while trying to infiltrate U.S. policymaking circles.

The United States will continue to work diplomatically with Moscow to cement gains in their relationship despite the cracking of an alleged Russian spy ring, a senior State Department official said on Tuesday.

FBI Russian spies

The FBI has arrested 10 people who allegedly spied for Russia for up to a decade - posing as innocent civilians while trying to infiltrate U.S. policymaking circles and learn about U.S. weapons, diplomatic strategy and political developments. An 11th defendant - a man accused of delivering money to the agents - remains at large.

"We feel that we have made significant progress in the 18 months that we have been pursuing this different relationship with Russia. We think we have something to show for it," Assistant Secretary of State Philip Gordon told a news briefing, adding that that the new cooperation would continue despite the spy case.

"We would like to get to the point where there is just so much trust and cooperation between the United States and Russia that nobody would think of turning to intelligence means to find out things that they couldn't find out in other channels," Gordon added. "We're apparently not there yet. I don't think anyone in this room is shocked to have discovered that."

"And so yes, you know, we're moving towards a more trusting relationship. We're beyond the Cold War," he said. I think our relations absolutely demonstrate that. But as I say, I don't think anyone was hugely shocked to know that some vestiges of old attempts to use intelligence are still there.‬"

There was no clue in the court papers unsealed Monday about how successful the agents had been, but they were alleged to have been long-term, deep cover spies. Among them were four couples living in suburbs of New York, Washington and Boston. One Peruvian-born woman was a reporter and editor for a prominent Spanish-language newspaper in New York whom the FBI says it videotaped contacting a Russian official in 2000 in Latin America.

These deep-cover agents are the hardest spies for the FBI to catch and are dubbed "illegals" in the intelligence world because they take civilian jobs with no visible connection to a foreign government, rather than operating from government jobs inside Russian embassies and military missions. In this case, they were spread out and seeking a wide swath of information.

The FBI said it intercepted a message from Moscow Center, headquarters of Russia's intelligence service, the SVR, to two of the defendants describing their main mission as to search and develop ties in policymaking circles in U.S. Intercepted messages showed they were asked to learn about a wide range of topics, including nuclear weapons, U.S. arms control positions, Iran, White House rumors, CIA leadership turnover, the last presidential election, Congress and the political parties.

The blockbuster series of arrests of purported deep cover agents following a multiyear FBI investigation could rival the bureau's famous capture of Soviet Col. Rudolf Abel in 1957 in New York.

Also a deep cover agent, Abel was ultimately swapped to the Soviet Union for downed U-2 spy pilot Francis Gary Powers in 1962.

The court papers also described a new high-tech spy-to-spy communications system used by the defendants: short-range wireless communications between laptop computers - a modern supplement for the old-style dead drop in a remote area, high-speed burst radio transmission or the hollowed-out nickels used by Abel to conceal and deliver microfilm.

But there was no lack of Cold War spycraft. According to the court papers, the alleged agents used invisible ink, stayed in touch with Moscow Center through coded bursts of data sent by a radio transmitter, used innocent-looking brush encounters to pass messages in public, hid encrypted data in public images and relied on fake identities and false travel documents.

On Saturday, an undercover FBI agent in New York and another in Washington, both posing as Russian agents, met with two of the defendants, Anna Chapman at a New York restaurant and Mikhail Semenko on a Washington street corner blocks from the White House. The FBI undercover agents gave each an espionage-related delivery to make. Court papers indicated Semenko made the delivery as instructed, but apparently Chapman did not.

The court papers cited numerous communications intercepted by the FBI that spelled out what information was sought.

The timing of the arrests was notable given the efforts by Presidents Barack
Obama and Dmitry Medvedev to reset U.S.-Russia relations. The two leaders met last week at the White House after Medvedev visited high-tech firms in California's Silicon Valley, and both attended the G-8, G-20 meetings over the weekend in Canada.

Intelligence on Obama's foreign policy, particularly toward Russia, appears to have been a top priority.

In spring 2009, the documents say, alleged conspirators, Richard and Cynthia
Murphy, who lived in New Jersey, were asked for information about Obama's impending trip to Russia that summer, the U.S. negotiating position on the START arms reduction treaty as well as Afghanistan and the approach Washington would take in dealing with Iran's suspect nuclear program, the documents said.

They were also asked to send background on U.S. officials traveling with Obama
or involved in foreign policy.

"Try to outline their views and most important Obama's goals [sic] which he expects to achieve during summit in July and how does his team plan to do it arguments, provisions, means of persuasion to 'lure' [Russia] into cooperation in U.S. interests," Moscow asked.

Moscow wanted reports which should reflect approaches and ideas of four sub-Cabinet U.S. foreign policy officials.

One intercepted message said Cynthia Murphy, had several work-related personal meetings with a man the court papers describe as a prominent New York-based financier active in politics.

In response, Moscow Center described the man as a "very interesting target and urged the defendants to try to build up little by little relations. ... Maybe he can provide Murphy with remarks re US foreign policy, 'roumors' about White house internal 'kitchen,' invite her to venues (to major political party HQ in NYC, for instance. ... In short, consider carefully all options in regard to the financier."

Each of the 10 was charged with conspiracy to act as an agent of a foreign government without notifying the U.S. attorney general, which carries a maximum penalty of five years in prison. Two criminal complaints outlining the charges were filed in U.S. District Court for the southern district of New York.

Nine of the defendants were charged with conspiracy to commit money laundering, which carries a maximum 20 years in prison.

The papers allege the defendants' spying has been going on for years.

One defendant in Massachusetts made contact in 2004 with an unidentified man who worked at a U.S. government research facility.

"He works on issues of strategic planning related to nuclear weapon development," the defendant's intelligence report said.

"The defendant had conversations with him about research programs on small yield high penetration nuclear warheads recently authorized by U.S. Congress [nuclear 'bunker-buster' warheads]," according to the report.

One message back to Moscow from the defendants focused on turnover at the top level of the CIA and the 2008 U.S. presidential election. The information was described as having been received in private conversation with, among others, a former legislative counsel for Congress. The court papers deleted the name of the counsel.

In the papers, FBI agents said the defendants communicated with alleged
Russian agents using mobile wireless transmissions between laptop computers, which has not previously been described in espionage cases brought here. They established a short-range wireless network between laptop computers of the agents and sent encrypted messages between the computers while they were close to each other.

FBI agents arrested the defendants known as Richard Murphy and Cynthia Murphy at their Montclair, New Jersey, residence.

A neighbor, Louise Shallcross, 44, said she often saw Richard Murphy at the school bus stop.

"We were all very excited to have a stay-at-home dad move in," Shallcross said.

Three other defendants also appeared with the Murphys in federal court in Manhattan - Vicky Pelaez and a defendant known as Juan Lazaro, who were arrested at their Yonkers, New York, residence and Anna Chapman, arrested in Manhattan on Sunday.

Richard and Cynthia Murphy, Juan Lazaro, Vicky Pelaez and Anna Chapman were ordered held without bail. The defendants - most dressed in casual clothes like blue jeans, shorts and T-shirts - answered "Yes," when asked if they understood the charges. None entered a plea.

The evidence is truly, truly overwhelming, said Assistant U.S. Attorney Michael Farbiarz. Another hearing was set for Thursday.

Waldo Mariscal, Pelaez' son, said in federal court that his mother was innocent. This is a farce, he said. We don't know the other people.

Pelaez is a Peruvian-born reporter and editor and worked for several years for El Diario/La Prensa, one of the country's best-known Spanish-language newspapers. She is best known for her opinion columns, which often criticize the U.S. government.

A senior editor at the newspaper confirmed the arrest but declined to comment on the allegations. The editor, who spoke on the condition of anonymity, was not authorized to speak for the company.

In January 2000, Pelaez was videotaped meeting with a Russian government official at a public park in the South American nation, where she received a bag from the official, according to one complaint.

According to one of the complaints, Lazaro and Pelaez discussed plans to pass covert messages with invisible ink to Russian officials during another trip Pelaez took to South America.

An attorney for Chapman, Robert Baum, argued that the allegations were exaggerated and that his client deserved bail.

"This is not a case that raises issues of security of the United States," he said.

The prosecutor countered that she was a flight risk, calling her a "highly trained Russian agent who is a practiced deceiver."

Two other defendants, known as Michael Zottoli and Patricia Mills, were arrested at their Arlington, Virginia, residence. Also arrested at an Arlington, Virginia, residence was Mikhail Semenko.

Zottoli, Mills and Semenko appeared before U.S. Magistrate Theresa Buchanan early Monday afternoon in Alexandria, Virginia, according to the U.S. attorney's office. The hearing was closed because the case had not yet been unsealed in New York. The three did not have attorneys at the hearing, U.S. attorney spokesman Peter Carr said.

In Arlington, where Zottoli and Mills lived in a ninth-floor apartment, next-door neighbor Celest Allred said her guess had been that they were Russian, because they had Russian accents.

Two defendants known as Donald Howard Heathfield and Tracey Lee Ann Foley were arrested at their Cambridge, Massachusetts, residence Sunday. They appeared briefly in Boston federal court on Monday afternoon. A detention hearing was set for Thursday.

In Moscow, calls to the Foreign Ministry and the Foreign Intelligence Service
(SVR) were not answered early Tuesday.

The two most prominent cases involving the SVR in the past decade may have been those of Robert Hanssen, the FBI counterintelligence agent who was convicted of passing along secrets to the agency, and Sergei Tretyakov, deputy head of intelligence at Russia's U.N. mission in 1995-2000.

Tretyakov, who defected in 2000, claimed in a 2008 book that his agents helped the Russian government steal nearly $500 million from the U.N.'s oil-for-food program in Iraq before the fall of Saddam Hussein. He said he oversaw an operation that helped Saddam's regime manipulate the price of Iraqi oil sold under the program and allowed Russia to skim profits.