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73–205 2001

S. HRG. 106–1013

THE PETER LEE CASE

HEARINGS

BEFORE THE

SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT

AND THE COURTS

OF THE

COMMITTEE ON THE JUDICIARY

UNITED STATES SENATE

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

MARCH 29, APRIL 5, and APRIL 12, 2000

Serial No. J–106–73

Printed for the use of the Committee on the Judiciary

(

(II)

COMMITTEE ON THE JUDICIARY

ORRIN G. HATCH, Utah, Chairman

STROM THURMOND, South Carolina

CHARLES E. GRASSLEY, Iowa

ARLEN SPECTER, Pennsylvania

JON KYL, Arizona

MIKE DEWINE, Ohio

JOHN ASHCROFT, Missouri

SPENCER ABRAHAM, Michigan

JEFF SESSIONS, Alabama

BOB SMITH, New Hampshire

PATRICK J. LEAHY, Vermont

EDWARD M. KENNEDY, Massachusetts

JOSEPH R. BIDEN, JR., Delaware

HERBERT KOHL, Wisconsin

DIANNE FEINSTEIN, California

RUSSELL D. FEINGOLD, Wisconsin

ROBERT G. TORRICELLI, New Jersey

CHARLES E. SCHUMER, New York

MANUS COONEY, Chief Counsel and Staff Director

BRUCE COHEN, Minority Chief Counsel

SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT AND THE COURTS

CHARLES E. GRASSLEY, Iowa, Chairman

JEFF SESSIONS, Alabama

STROM THURMOND, South Carolina

SPENCER ABRAHAM, Michigan

ROBERT G. TORRICELLI, New Jersey

RUSSELL D. FEINGOLD, Wisconsin

CHARLES E. SCHUMER, New York

KOLAN DAVIS, Chief Counsel

MATT TANIELIAN, Minority Chief Counsel

(III)

C O N T E N T S

WEDNESDAY, MARCH 29, 2000

STATEMENTS OF COMMITTEE MEMBERS

Page

Grassley, Hon. Charles E., a U.S. Senator from the State of Iowa ..................... 2

Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama .......................... 4

Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 1

WITNESSES

Cook, Thomas L., Nonproliferation and International Security Division, Los

Alamos National Laboratory, Los Alamos, NM ................................................. 25

Preston, Stephen W., General Counsel, Department of the Navy, Washington,

DC .......................................................................................................................... 33

Sayner, Daniel K., Assistant Special Agent-in-Charge, Los Angeles Division,

Federal Bureau of Investigation, Los Angeles, CA ........................................... 5

Schuster, John G., Jr., Branch Head, Submarine Security and Technology,

Department of the Navy, Washington, DC ........................................................ 44

Twogood, Richard, Former Program Leader, Imaging and Detection Program,

Lawrence Livermore National Laboratory, Livermore, CA .............................. 22

WEDNESDAY, APRIL 5, 2000

STATEMENTS OF COMMITTEE MEMBERS

Grassley, Hon. Charles E., a U.S. Senator from the State of Iowa ..................... 60

Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama .......................... 62

Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 55

Thurmond, Hon. Strom, a U.S. Senator from the State of South Carolina ........ 61

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 64

WITNESSES

Shapiro, Jonathan S., Former Assistant U.S. Attorney, Central District of

California, Los Angeles, CA ................................................................................ 69

Robinson, James K., Assistant Attorney General, Criminal Division, U.S.

Department of Justice, Washington, DC; accompanied John C. Keeney,

Deputy Assistant Attorney General, Criminal Division, U.S. Department

of Justice, Washington, DC ................................................................................. 106

WEDNESDAY, APRIL 12, 2000

STATEMENT OF COMMITTEE MEMBER

Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 111

WITNESSES

Dion, John, Acting Chief, Internal Security Section, Criminal Division, U.S.

Department of Justice; accompanied by Bruce C. Swartz, Deputy Assistant

Attorney General, Criminal Division, U.S. Department of Justice, Washington, DC ............................................................................................................. 155

Keeney, John C., Principal Deputy Assistant Attorney General, Criminal

Division, U.S. Department of Justice, Washington, DC ................................... 112

Page

IV

Liebman, Michael, Line Attorney, Internal Security Section, Criminal Division, U.S. Department of Justice; accompanied by Bruce C. Swartz, Deputy

Assistant Attorney General Criminal Division, U.S. Department of Justice,

Washington, DC ................................................................................................... 123

SUBMISSIONS FOR THE RECORD

Beach, Kenneth L., letter to Terry J. Hatter, Judge, U.S. District Court,

Los Angeles, CA ................................................................................................... 300

Chesnut, Robert C., former Assistant U.S. Attorney, Santa Cruz, CA, letter .... 113

CRS Report for Congress, Investigative Oversight: An Introduction to the

Law, Practice and Procedure of Congressional Inquiry .................................... 171

Department of Energy documents ‘‘5’’, ‘‘6’’, and ‘‘7’’ .............................................. 100

Department of the Navy memorandum ................................................................. 97

Exhibit 1, Declaration of Technical Damage to United States National Security Assessed in Support of United States v. Peter Hoong-Yee Lee .................. 26

Exhibit 2, Impact Statement .................................................................................. 28

Exhibit 3, Memorandum for General Counsel of the Department of Defense .... 34

Exhibit 4, Letter from Stephen W. Preston, General Counsel of the Navy ........ 34

Exhibit 5, Memorandum for Request for Classification Guidance (U) ................ 44

FBI document ‘‘Royal Tourist’’, November 25, 1997 ............................................. 74

Henderson, James D., Attorney for Defendant, Defendant’s Sentencing Memorandum, March 26, 1998 ..................................................................................... 345

Honigman, Steven S., memorandum to John Dion, Acting Chief Internal

Security Section, Criminal Division, Department of Justice ............................ 255

Holt, Daniel C., Studio Director, South Bay Studio, Recording for the Blind

and Dyslexic, Los Angeles, CA, letter ................................................................ 381

Industrial Security Manual for Safeguarding Classified Information, Department of Defense .................................................................................................... 243

Kulla, Donna, Program Manager, Advanced Sensors Applications Program,

Intelligence Systems Support Office ................................................................... 52

Latta, Robert M., Chief Probation Officer, United States District Court, Central District of California, Los Angeles, CA, letter, December 17, 1998 .......... 378

Lawrence Livermore National Laboratory Website, Radar Ocean Imaging ....... 128

Lee, Peter, letter to Terry J. Hatter, Judge, U.S. District Court, Los Angeles,

CA, January 12, 1998 .......................................................................................... 278

Linford, Gary J., letter to Terry J. Hatter, Judge, U.S. District Court, Los

Angeles, CA, March 9, 1998 ................................................................................ 299

List of Committee Requests to the Department of Justice and the Attorney

General .................................................................................................................. 57

Manella, Nora M., United States Attorney, Central District of California,

News Release, March 26, 1998 ........................................................................... 292

New York Times, ‘‘Reports Show Scientist Gave U.S. Radar Secrets to Chinese’’; Article, May 10, 1999 ................................................................................ 271

New York Times, ‘‘An Earlier China Spy Case Points Up Post-Cold War

Ambiguities’’, article, March 13, 1999 ................................................................ 276

‘‘OPCA Front Office’’ documents 1, 2, and 3 .......................................................... 91

Raben, Robert, Assistant Attorney General, Office of Legislative Affairs, U.S.

Department of Justice, letter, July 17, 2000 ..................................................... 382

Ruby, Cheryl, Acting Assistant Secretary of Defense, Department of Defense,

memorandum, ‘‘Possible Espionage Arrest Update’’ ......................................... 256

Shapiro, Jonathan S., Assistant United States Attorney, United States District Court for the Central District of California:

filing of Plea Agreement, December 5, 1997 .................................................. 257

Government’s Response to Defendant’s Position with Regard to Sentencing Factors .............................................................................................. 365

Judgment and Committment/Probation Order .............................................. 301

Memorandum of Points and Authorities and attachment ............................. 284

Smith, Dennis A., Assistant Studio Director, South Bay Studio, Recording

for the Blind and Dyslexic, Los Angeles, CA, letter, August 16, 1999 ............ 380

Storm, Erik: letters to Terry J. Hatter, Judge, U.S. District Court, Los Angeles, CA:

January 31, 1998 .............................................................................................. 279

March 18, 1998 ................................................................................................. 295

Thomson, Jeff:

letter to Peter Lee ............................................................................................ 375

Page

V

Thomson, Jeff—Continued

letter to Terry J. Hatter, Judge, U.S. District Court, Los Angeles, CA,

September 11, 1998 ...................................................................................... 376

Twogood, Richard E., Lawrence Livermore National Laboratory, statement

on the Independent, Non-Acoustic, Anti-Submarine Warfare Program .......... 130

Washington Post ‘‘Taiwan-Born Scientist Passed Defense Data’’; article, December 12, 1997 .................................................................................................... 269

Wilson, Wayne, Director, Office of Technology and Evaluation, Office of the

Deputy Assistant Secretary of Defense, Department of Defense ..................... 52

Zaccaro, Beth E., Offical Court Reporter, United States District Court, Central District of California, Western Division, Transcript of Proceedings,

United States of America v. Peter Lee, March 26, 1998 .................................... 304

(1)

THE PETER LEE CASE

WEDNESDAY, MARCH 29, 2000

U.S. SENATE, SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT

AND THE COURTS, COMMITTEE ON THE JUDICIARY,

Washington, DC.

The subcommittee met, pursuant to notice, at 9:30 a.m., in room

SD–226, Dirksen Senate Office Building, Hon. Arlen Specter presiding.

Also present: Senators Grassley, Thurmond, Sessions, and

Torricelli.

OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S.

SENATOR FROM THE STATE OF PENNSYLVANIA

Senator SPECTER. Good morning, ladies and gentlemen. The hour

of 9:30 a.m. having arrived, the subcommittee will now proceed.

Our hearing today is a continuation of oversight on the activities

of the Department of Justice and related Federal departments and

agencies, and we are continuing to take a look at activities which

relate to alleged espionage efforts by the People’s Republic of China

as those efforts relate to the PRC’s efforts to become a nuclear

power.

In conjunction with the technology transfers, there is an apparent development of this kind of nuclear power by China, and our

inquiry is to make a determination as to how effective the Department of Justice and related Federal departments and agencies have

been in dealing with that issue.

The subject matter of today’s hearing is Dr. Peter Lee, who confessed to two major breaches of security, one involving the disclosure of a hohlraum, which is a very important aspect of nuclear

power for nuclear weapons, in 1985, when he made disclosures to

key scientists in the People’s Republic of China, and later disclosures by Dr. Peter Lee relating to the physics of submarine detection.

We will be looking at a series of questions on the handling of this

investigation. One of our inquiries will be directed to finding out

why there was not a renewal of warrants under the Foreign Intelligence Surveillance Act, where a renewal was not made by the Department of Justice at a time when there was very substantial information about Dr. Lee’s suspect activities.

We will inquire further to determine why the Department of Defense, the Navy, took a stand in issuing a memorandum before

there was a damage assessment. The memorandum, according to

2

the Department of Justice, caused very substantial so-called Brady

problems on providing what could have been exculpatory evidence

on Dr. Lee’s defense, and then a determination as to why the plea

bargain was entered into before there was a full damage assessment as to what Dr. Lee had disclosed on the submarine detection

issue.

There is a very serious question as to whether the assistant U.S.

attorney in charge of the case knew that there had been authorization for the prosecution of Dr. Lee under section 794 which contains the potential of the death penalty and the alternative of a life

sentence. I am not saying that Dr. Lee would have been subjected

to that, but that he could have been charged. But according to

some information, the assistant U.S. attorney was not advised of

that.

And then the sentencing occurred without the judge having

knowledge of what was in the pre-sentence report—pardon me—the

pre-sentence report did not contain the damage assessment and the

sentence was imposed where the judge had not been informed of

the damage assessment. And where Dr. Lee could have received a

very stiff penalty under the applicable laws, he ended up with community service and a fine and probation, and the Government recommendation was only for a short period of incarceration as opposed to asking for anything more substantial than that, another

point that the subcommittee will be inquiring into.

That is a very brief statement of some of the issues we will be

looking at, so that the witnesses who are here today can direct

their attention to those points of inquiry.

We are joined by the distinguished chairman of the subcommittee, Senator Grassley. Again, let me publicly acknowledge

my thanks to Senator Grassley for his willingness to cooperate with

the subcommittee on this inquiry. We have been colleagues since

January 3, 1981, and he handed me the gavel for the limited purpose of conducting this oversight on the Department of Justice.

Senator Grassley.

STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S. SENATOR

FROM THE STATE OF IOWA

Senator GRASSLEY. Well, I am proud to be associated with your

leadership in this area because you have a fine record both before

coming to the Congress and after coming to the Congress of getting

to the truth. So I thank you very much for taking on the additional

responsibilities.

I would just like to say a few general comments before you start

your testimony, if I could, Senator Specter, and that is that a lot

of this work has had to be done behind closed doors, and that is

justifiable when much of the information is classified. And that

would be true whether it is Waco or whether it is Wen Ho Lee or

whether it is this case that we are looking at today, and I hope the

public understands that and you would expect it of issues that are

of this importance.

There seems to be a common thread throughout each of these

cases, and that thread is something that we can talk about so that

the public will be informed. We will be seeing that thread pop up

during today’s hearing. Our investigation into these cases has

3

shown a pattern of failed coordination between Government agencies.

For whatever reason, agencies, it seems to me, have done a poor

job of communicating with each other. It could be a turf battle, it

could be negligence, or it could be outright stonewalling, and I

would give you a couple of examples. This morning, I think we are

going to be treated to what I believe is a gross lack of communication between the Navy and the FBI and the Justice Department in

this Peter Lee case.

The FBI and the Department of Justice didn’t provide enough information that it had to the Navy so that the Navy could do a proper damage assessment caused by Dr. Lee’s disclosures. The Navy,

in turn, it seems to me, did nothing to proactively seek out more

information that they should have known existed. And a vaguely

worded communication from the Navy about the damage caused by

Peter Lee probably contributed to the Department of Justice’s reluctance to go tougher on Dr. Lee. The Department of Justice did

nothing to seek clarification of the vagueness of that memo.

To me, this is a total breakdown of communication and coordination among agencies charged with protecting our national security.

In the Wen Ho Lee case, we witnessed the brazen withholding of

documents from both Congress and the Justice Department by the

Federal Bureau of Investigation. Those documents had a direct

bearing on who fell down on the job when the Department of Justice turned back a FISA warrant application from the FBI. The

withholding of those documents and the later discovery makes it

look like the FBI withheld important information from the Congress and the Department of Justice to hide its own mistakes in

that case.

This matter is still under investigation by the task force, and I

would just remind the Federal Bureau of Investigation that they

are neither above constitutionally-mandated congressional oversight nor are they above accountability from the Department of

Justice. Stonewalling by the agency continues to undermine public

confidence in Federal law enforcement.

Now, these are just two significant examples that we have uncovered so far of failures of coordination and cooperation between Government agencies and between branches of Government. It is something that I hope the subcommittee’s efforts can and will address.

I believe it is an area that the chairman and the ranking member,

meaning Senator Specter and Senator Torricelli, have shown leadership in, particularly in the crafting of the legislation that builds

a consensus on how to fix these problems that we have uncovered.

So I look forward to continuing to work with my colleagues as we

learn these lessons and we seek corrective action.

Thank you.

Senator SPECTER. Thank you very much, Senator Grassley.

We are joined by our distinguished colleague, Senator Sessions,

who brings to this subcommittee’s work a very extensive background in law enforcement as U.S. Attorney, attorney general, and

a very competent lawyer.

Senator Sessions.

4

STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR FROM

THE STATE OF ALABAMA

Senator SESSIONS. Thank you, Senator Specter. I won’t take but

just a minute to say that this case strikes me as too much like a

number of cases I have seen over the years as a Federal prosecutor

when agencies and departments whose employees and contractors

are under supervision would just as soon not have the case go to

trial. It is just not a pleasant experience for them to have to have

their employees come forth and testify and it oftentimes could result in some embarrassment to the supervisors and to the agency

involved. I don’t know if that is the matter here or not, but that

is probably one aspect of it.

I am also troubled that the Department of Justice apparently has

not had experienced litigators making these decisions. Too often,

those who haven’t tried a lot of cases take counsel of their fears.

They see the problems and difficulties and lose sight of the moral

imperative that if someone is transmitting important secrets of the

United States to a foreign power, that is a matter of the most highest national importance and they ought to be prosecuted vigorously

and effectively. And if they promise to cooperate and testify truthfully, and if they flunk polygraph tests that say they are not cooperating truthfully, then the Government should not give them a

lenient sentence.

Frankly, I think we need to have some people looking at the

death penalty for providing some of the breaches of security we

have seen in this country. I think we need to make sure that everybody involved in laboratories and top-secret agencies of this Government understand completely that we do not accept this kind of

behavior. It is not a college campus mentality that people who violate the law will go to jail for long periods of time.

I think this conclusion of this case is insufficient, in my opinion,

and I am interested in trying to figure out what happened. And

thank you for providing the leadership on the issue, Senator Specter.

Senator SPECTER. Thank you very much, Senator Sessions.

We are joined by the President Pro Tempore of the U.S. Senate,

former chairman of the full committee.

Senator Thurmond, do you care to make an opening statement?

Senator THURMOND. You have had enough talk. I don’t think it

is necessary.

Senator SPECTER. That is the shortest opening statement in the

history of the Judiciary Committee.

We have now been joined by our very distinguished ranking

member, Senator Torricelli, whom we give the floor to at this time.

Senator TORRICELLI. I would like to break Senator Thurmond’s

record. No.

Senator SPECTER. It looks like it is a tie to me.

We have a distinguished panel of witnesses today from the Department of Defense, the Department of Energy, the Department

of Justice, including the FBI. And our lead witness to give us an

outline as to the activities of Dr. Peter Lee will be Assistant Special-Agent-in-Charge of the Los Angeles Field Office, Mr. Dan

Sayner.

5

Our witnesses are Mr. Stephen Preston, Mr. John G. Schuster,

Mr. Dan Sayner, Dr. Richard Twogood, and Dr. Thomas Cook. And

before we start the testimony, if you gentlemen will all rise for the

administration of the oath?

Do each of you solemnly swear that the testimony and information that you will provide before this subcommittee of the Judiciary

Committee of the United States Senate will be the truth, the whole

truth, and nothing but the truth, so help you God?

Mr. SAYNER. I do.

Dr. TWOGOOD. I do.

Mr. COOK. I do.

Mr. PRESTON. I do.

Mr. SCHUSTER. I do.

Senator SPECTER. May the record show that each of the witnesses has responded ‘‘I do.’’

Mr. Sayner, would you state your full name and title, please?

STATEMENT OF DANIEL K. SAYNER, ASSISTANT SPECIALAGENT-IN-CHARGE, LOS ANGELES DIVISION, FEDERAL BUREAU OF INVESTIGATION, LOS ANGELES, CA

Mr. SAYNER. My name is Daniel K. Sayner. I am an Assistant

Special-Agent-in-Charge of the Los Angeles Field Office of the Federal Bureau of Investigation.

Senator SPECTER. And what role, if any, did you have on the investigation of Dr. Peter Lee?

Mr. SAYNER. I was the program manager for foreign counterintelligence, which includes espionage investigations.

Senator SPECTER. And for what period of time did you hold that

position?

Mr. SAYNER. From November 1996 to present.

Senator SPECTER. So that your tenure encompassed the key portions of the FBI investigation of Dr. Lee?

Mr. SAYNER. Yes, sir.

Senator SPECTER. OK; would you proceed to give a chronology of

the FBI investigation of Dr. Lee?

Mr. SAYNER. I have an opening statement to go with that, sir.

Senator SPECTER. You may proceed as you choose. All statements

will be made a part of the record, but handle it in any way which

is comfortable for you, Dr. Sayner.

Mr. SAYNER. Good morning, Mr. Chairman and members of the

subcommittee. I am Daniel Sayner, currently Assistant SpecialAgent-in-Charge of the Los Angeles Division of the FBI. I am here

this morning to discuss certain aspects of the foreign counterintelligence investigation of Peter Lee conducted by the Los Angeles

Field Office.

I would first like to provide the subcommittee with a brief description of my background. I joined the Bureau in 1982 as a special agent. I was assigned to Baltimore and Atlanta to work violent

crimes, assigned to New York City from 1984 to 1988 in foreign

counterintelligence, then to Washington, DC, as a headquarters supervisor in foreign counterintelligence for 2 years. And then in

Newark, New Jersey, from 1990 to 1995, I was in charge of the terrorism task force, and then for 11⁄2 years organized crime and drug

6

investigations, until I was assigned to the Los Angeles Division as

Assistant Special-Agent-in-Charge.

While in Los Angeles, I also oversee other programs which would

include civil rights, hate crimes matters, domestic terrorism, international terrorism, national infrastructure protection program, and

foreign counterintelligence, and I had that responsibility to oversee

in the Peter Lee case.

Mr. Chairman, I would like to reaffirm the FBI’s commitment to

cooperate with the subcommittee in its important oversight mission. As you know, we have provided subcommittee staff with unprecedented access to our case files and to our personnel. Last

month, subcommittee staff traveled to the Los Angeles FBI office,

where they interviewed myself as well as Peter Lee case agents,

Special Agent Gil Cordova, C-o-r-d-o-v-a, and Special Agent Serena

Alston, A-l-s-t-o-n, and their supervisor—— Senator SPECTER. It wasn’t just the staff, it was me, too.

Mr. SAYNER. I am coming to that, sir. That was prior to your

visit.

And their supervisor, Special Agent James J. Smith. Several

weeks later, Mr. Chairman, you also traveled to the Los Angeles

FBI office to conduct on-the-record interviews of these FBI agents

and others. At your request, we tape recorded and transcribed

those interviews in order that you would have a record to utilize

at hearings such as this.

I am ready now to provide a chronology of the investigation.

Senator SPECTER. Please proceed.

Mr. SAYNER. In April 1991, the Los Angeles Division opened its

case on Peter Lee based on sensitive information. Shortly thereafter, in 1993, we elevated that case to a full investigation, and in

February 1994 started technical surveillance on the subject.

In May 1997, Peter Lee traveled to China, and in June 1997 the

FBI conducted a nonconfrontational interview of Peter Lee to discuss this trip to China. At that time, knowing before he had made

the trip, it was concluded after the interview of Peter Lee that he

lied to the FBI, stating that he engaged in no technical scientific

discussions with the People’s Republic of China, PRC, and that he

paid for the trip himself, which was found to be not true.

On August 5, 1997, the FBI again interviewed Lee and he admitted that he lied to his employer, TRW, on post-travel questionnaire

about the purpose of his travel and about the contacts during the

trip, but maintained at that point that he still paid for the trip.

I can now go into a verbatim on the affidavit regarding the interviews that were conducted August 5 through October 7 through 8,

which also included his admissions to passing classified documents

in 1985, Senator, if you wish.

Senator SPECTER. Please do.

Mr. SAYNER. On August 5 and August 14, 1997, agents interviewed Peter Lee in a Santa Barbara, California, hotel room. During these interviews, Peter Lee confessed to the agents that he had

knowingly lied on both his foreign travel form and post-travel questionnaire regarding the purpose of his trip to the PRC and his foreign national contacts during that trip.

Peter Lee admitted that he traveled to the PRC with the intention of giving scientific lectures to the PRC scientists. In addition,

7

Peter Lee admitted to agents that he lied when he said that he had

not received requests from foreign nationals for technical information, and lied when he said that no attempts were made to persuade him into revealing or discussing classified information.

Peter Lee admitted that he had received requests from foreign

nationals for technical information, and attempts were made to

persuade him into revealing and/or discussing classified information. Lee also admitted that he did not report personal contact with

several PRC scientists January 1993 and April 1994, when they

visited the United States.

In answer to specific questions, Peter Lee continued to claim that

he had paid for his trip to the PRC with his own money. During

the August 5, 1997, interview, Peter Lee agreed to voluntarily take

a polygraph examination administered by the FBI. During the August 14, 1997, interview, the agents asked Peter Lee to provide

them with any receipts which would verify that he paid for his May

1997 trip to the PRC.

Based on the investigation, we were able to obtain information

that Peter Lee did not indeed pay for those trips to the PRC and

that the trips were paid by a scientist in the PRC. And in late August, Peter Lee contacted that scientist and requested him to provide receipts indicating that he had made that trip to the PRC, and

asked him that those receipts contain his and his wife’s name in

English and that they were paid in cash.

On September 3, 1997, Peter Lee then provided the agents of the

FBI with copies of the hotel and airline receipts for his 1997 May

trip to the PRC which appeared to indicate that Peter Lee paid

cash to cover his expenses for the trip. Peter Lee indeed did not

pay for the trip to the PRC.

On October 7, 1997, Peter Lee voluntarily underwent a polygraph examination at the FBI office in Los Angeles, California,

which was administered by an FBI polygraph examiner. According

to the polygraph examiner, the examination results indicated deception on three pertinent questions, which were: have you deliberately been involved in espionage against the United States. His

answer: no. Have you ever provided classified information to persons unauthorized to receive it? Answer: no. Have you deliberately

withheld any contacts with any non-U.S. intelligence service from

the FBI? No.

Agents then conducted a videotaped interview of Peter Lee immediately following the administration of the polygraph examination. Peter Lee was told that he appeared to have been deceptive

in answering the three questions described above. Peter Lee confessed that he had indeed been deceptive.

In summary, Peter Lee then confessed to having communicated

classified national defense information to representatives of the

PRC, knowing that it could have been used by the PRC to its advantage. Specifically, Peter Lee confessed to having passed classified national defense information to the PRC twice in 1985, and to

lying on his post-travel questionnaire in 1997.

When asked why he did it, Peter Lee told agents that he did it

because the PRC ‘‘is such a poor country,’’ and one of the scientists

asked for his help. Peter Lee said he wanted to bring the PRC’s scientific capabilities closer to the United States. Specifically, Peter

8

Lee described the two events in which he passed the classified information to the scientists of the PRC.

Now, we will go back to the 1985 trip which Peter Lee then describes. The first event during that trip, Peter Lee said that on or

about January 9, 1985, while in a hotel room, he met by a Chinese

scientist in Beijing, PRC. The scientist asked Peter Lee to help

after telling him that China needed help because it was a poor

country. Peter Lee described a detailed conversation in which the

scientist indicated that he had questions to ask that were classified, that Peter Lee did not have to answer these questions verbally, but could nod his head yes or no.

Peter Lee said he knew the scientist was asking for classified information. The scientist drew for Peter Lee a diagram of what

Peter Lee believed was a hohlraum and asked Peter Lee questions

about the drawing. Peter Lee specifically remembered answering

questions about the hohlraum, what the hohlraum looked like, and

where the capsule of the target was located in the hohlraum. Some

other questions that the scientist asked Peter Lee he could not specifically answer.

Peter Lee said that he knew this information was classified when

he provided it to the scientist. The scientist then told Peter Lee

that other PRC scientists would be interested in talking to him.

The scientist asked Peter Lee to come the next day to meet with

these scientists and Peter Lee agreed.

The second event then occurred when Peter Lee, on or about January 10, 1985, was picked up at his Beijing hotel by a PRC scientist and driven to another hotel where a group of PRC scientists

were waiting for him in a small conference room. Peter Lee said

for approximately two hours he answered questions from the group

and drew several diagrams for them, including several hohlraum

diagrams, specific numbers which described the hohlraum design

experimental results, and he discussed some problems the U.S. was

having in its weapons research, in simulation programs.

Peter Lee also admitted to discussing with the Chinese scientists

at least one portion of a classified Department of Energy document

which Peter Lee wrote in 1982. This document, titled ‘‘An Explanation for the Viewing Angle Dependence of Temperature from

Care and Targets,’’ was authored by Peter Lee when he worked at

Lawrence Livermore National Laboratory. It was declassified in

1996. Peter Lee said he knew that when he provided this information to PRC scientists in 1985, it was classified. Peter Lee identified several of the Chinese scientists that were in attendance.

On October 14 and 15, agents of the FBI did interviews with

Lawrence Livermore to corroborate a lot of this information.

Senator SESSIONS. 1997?

Mr. SAYNER. 1997, yes, sir.

Going back to September 3, Peter Lee provided the fraudulent receipts which he obtained from PRC scientists to the agents, and at

that time our technical surveillance had expired. The arrest warrant we had prepared in October, then, was never issued inasmuch

as Mr. Lee retained counsel and entered into plea negotiations with

the Department of Justice in the Assistant U.S. Attorney’s Office

in Los Angeles.

9

On December 8, Dr. Lee pled guilty to one count of violating 18

U.S.C. 793(d), and one count of violating 18 U.S.C. 1001. As part

of his plea agreement, Mr. Lee agreed to provide full cooperation

with the Government. The FBI conducted a polygraph of Dr. Lee

on February 26th, 1998, which showed deception when asked

whether he had lied to the FBI since his first polygraph. The FBI

followed up with additional discussions, after which Dr. Lee’s counsel advised that he would not submit to further polygraph examinations.

The FBI supplemented its arrest affidavit and converted it for

use at Dr. Lee’s sentencing hearing on March 26, 1998. The fact

that Dr. Lee failed the polygraph, the February 26, 1998, polygraph, was included with the affidavit in the form of a declaration

from Special Agent Cordova. Therefore, at the time of sentencing

the court was made aware that Dr. Lee had shown deception on a

polygraph administered after the plea agreement had been entered.

Dr. Lee was sentenced March 26, 1998, to 5 years’ suspended

sentence with 3 years’ probation, 1 year incarceration in a halfway

house, and 3,000 hours of community service.

That is all I have, Senator Specter.

Senator SPECTER. Thank you very much, Mr. Sayner. We will

proceed with 5-minute rounds of questions by the Senators.

With respect to the warrant under the Foreign Intelligence Surveillance Act, was that renewed while this investigation was being

conducted?

Mr. SAYNER. It went through several—— Senator SPECTER. Start the lights at 5 minutes, please.

Mr. SAYNER. Senator Specter, it was initiated February 1994 and

it went through several renewal processes up until September

1997, when it expired.

Senator SPECTER. And was it renewed after September 3, 1997?

Mr. SAYNER. No, sir.

Senator SPECTER. With respect to the hohlraum issue, did the potential violation come within the purview of Section 794 which relates in part, ‘‘directly concerning nuclear weaponry,’’ to raise the

potential of a sentence of life imprisonment or death?

Mr. SAYNER. At the time that it was passed in 1985, yes, sir.

Senator SPECTER. Was there an authorization given, according to

the FBI records, for a charge to be made under section 794 if there

was not a plea agreement to a slightly reduced charge?

Mr. SAYNER. There were discussions between Internal Security

Section, Department of Justice, and the Assistant U.S. Attorney’s

Office on the use of 794 as leverage in the plea agreement or plea

negotiations.

Senator SPECTER. And was authorization given that there could

be a prosecution under 18 U.S.C. 794?

Mr. SAYNER. That, I think, is something you need to discuss with

the Assistant U.S. Attorney, Jonathan Shapiro. It is my understanding that he was orally advised that he could use it in his negotiations.

Senator SPECTER. Is there an e-mail among the FBI records

which states the following, ‘‘according to J.J., ISS/Dion said that if

R.T. doesn’t accept the plea proffer, then he gets charged under 18

U.S.C. 794, the heftier charge?’’

10

Mr. SAYNER. Yes, sir.

Senator SPECTER. And who is J.J.?

Mr. SAYNER. He is Supervisory Special Agent James J. Smith,

who was the line supervisor for this investigation.

Senator SPECTER. And who is ISS/Dion?

Mr. SAYNER. He is a trial attorney with the Internal Security

Section of the Department of Justice.

Senator SPECTER. And who is R.T.?

Mr. SAYNER. That is a code name for the case at the time, Royal

Tourist.

Senator SPECTER. With respect to the hohlraum material and declassification, what occurred?

Mr. SAYNER. I don’t think I have the technical expertise to address the hohlraum and when it was declassified, sir.

Senator SPECTER. With respect to the plea agreement for cooperation from Dr. Lee, what, in fact, occurred on that after the

post-plea interviews?

Mr. SAYNER. He was interviewed approximately ten times, one of

which there was a polygraph administered which he failed. That

information that he failed the polygraph was provided as a declaration to the affidavit that was submitted to the sentencing judge.

His cooperation was limited at that point, sir.

Senator SPECTER. What do the FBI records show with respect to

the earliest point at which Dr. Lee—the information showed that

Dr. Lee was compromising the anti-submarine information? Was

that as early as the 1990’s?

Mr. SAYNER. It would be—he began work at TRW in 1991. It appears that his trip in 1997, he may have compromised some antisubmarine warfare technical information at that point.

Senator SPECTER. And was that information compromised as

early as the early 1990s?

Mr. SAYNER. We don’t have it documented as occurring. It could

have, since he worked at TRW.

Senator SPECTER. What information did Dr. Lee write about in

1999?

Mr. SAYNER. Dr. Lee—in 1999?

Senator SPECTER. 1995. That was the date of that article which

Dr. Lee wrote.

Mr. SAYNER. I have provided that information. Let me find it

here. All I have, Senator, is the title of the article. I don’t know

the content.

Senator SPECTER. Let me yield at this time to—my time is expired. I will yield to Senator Torricelli.

Senator TORRICELLI. Thank you, Mr. Chairman, very much.

Mr. Sayner, when the FISA coverage of Dr. Lee expired in September of 1997, was there consideration given to reapplying for

FISA coverage?

Mr. SAYNER. Yes, sir.

Senator TORRICELLI. And what was the determination?

Mr. SAYNER. We made an application to our headquarters and

there was discussion between our headquarters and the Department of Justice to renew the FISA at that time.

Senator TORRICELLI. And what was the determination?

Mr. SAYNER. Not to renew.

11

Senator TORRICELLI. And on what was that judgment based?

Mr. SAYNER. I think one of the key points was the information

in the preceding 90 days which you have to use to renew FISAs

was stale.

Senator TORRICELLI. It was considered stale, after only 90 days?

Mr. SAYNER. Yes.

Senator TORRICELLI. Do you consider, based on your experience,

that 90 days has been an operational standard in all cases in which

you have been involved?

Mr. SAYNER. I can’t really speak for negotiations between our

headquarters and DOJ, but——

Senator TORRICELLI. The only thing I know that goes stale in 90

days is a loaf of bread. That does not seem to me to be very much

of a history.

Mr. SAYNER. The FISA had been ongoing for several years, and

they took the take of the FISA into account to make that judgment,

also, not only——

Senator TORRICELLI. But you don’t personally feel that you have

enough experience with these cases to know whether or not 90 days

is the standard?

Mr. SAYNER. That alone shouldn’t be the standard for——

Senator TORRICELLI. That alone should not be the standard?

Mr. SAYNER. You should take in previous—what occurred in a

case previously to 90 days.

Senator TORRICELLI. So who made this judgment ultimately not

to proceed with the FISA request?

Mr. SAYNER. It would be Department of Justice Office of Intelligence Policy Review.

Senator TORRICELLI. And to the best of your knowledge, that is

where the judgment was made?

Mr. SAYNER. Yes.

Senator TORRICELLI. Do you believe that the Department of Defense and the Navy genuinely understood and were informed by

the FBI of the severity of Dr. Lee’s revelations to the Chinese?

Mr. SAYNER. We passed the information that we had to our headquarters. It is my understanding that they passed it on to the Department of the Navy.

Senator TORRICELLI. You don’t know for a certainty, however?

Mr. SAYNER. No.

Senator TORRICELLI. Therefore, you are not in a position really

to know either whether the Department of Defense or the Navy

knew that if they did not participate and cooperate that there

might never be a case developed against Dr. Lee?

Mr. SAYNER. No, Senator, I am not.

Senator TORRICELLI. You are not aware of that either.

Thank you, Mr. Chairman.

Senator SPECTER. Senator Grassley.

Senator GRASSLEY. Mr. Chairman, I am not going to have any

questions. And I also wanted to explain that the Budget Committee

is marking up the budget, so I am going to have to be gone the rest

of the morning.

Senator SPECTER. Senator Thurmond.

Senator THURMOND. Thank you, Mr. Chairman.

12

Mr. Sayner, during an interview with the staff of this committee

regarding the Peter Lee investigation, FBI Field Supervisor John

Smith stated that the Foreign Intelligence Surveillance Act, or

FISA, process is very slow, especially with so many levels of approval having to sign off.

Would you please describe the FBI review and approval process

regarding the application for a FISA warrant?

Mr. SAYNER. Senator, the field would prepare a document, the

letterhead memorandum, which would be an extensive summary of

the investigative results that would be forwarded to our headquarters for review and then transmitted to the Office of Intelligence Policy and Review at the Department of Justice, where an

application would be made for a FISA warrant. A FISA court would

be held and a judge would then sign that FISA warrant, sir.

Senator THURMOND. Mr. Sayner, what suggestions or recommendations can you make to this committee that you believe

would streamline the FISA review and approval process in order to

enhance and prioritize this law enforcement tool and its use by

field investigative personnel?

Mr. SAYNER. Senator, I understand that the Director met about

this issue recently and he supported the committee’s recommendation for legislative change which would include the staleness factor

being reviewed and not as much weight put on the 90-day staleness

of information.

Senator THURMOND. Mr. Sayner, Special Agents Cordova and Alston stated to the staff members of this committee that Dr. Lee

was not truthful and was not cooperative when they interviewed

him after the plea bargain was entered into. This interview took

place prior to sentencing. Would you explain how this lack of truthfulness and lack of cooperation was ultimately reported to the

court, and if not reported, why not?

Mr. SAYNER. Senator, that lack of cooperation, as I stated earlier,

was attached to the affidavit in the form of a declaration of Special

Agent Cordova that was used—that was provided to the sentencing

judge.

Senator THURMOND. Thank you, Mr. Chairman.

Senator SPECTER. Thank you very much, Senator Thurmond.

Senator Sessions.

Senator SESSIONS. Mr. Sayner, I am looking at the affidavit of

Gilbert Cordova for complaint and arrest warrant that was prepared. In it, he says Peter Hoong-Yee Lee, an American citizen and

employee of TRW, Inc., has been acting clandestinely, corruptly,

and illegally as a conduit of classified information to the PRC, the

People’s Republic of China. By his actions, he has committed violations of 18 U.S.C. 793(d); that is, with reason to believe that it

would be used to the injury of the United States and the advantage

of a foreign nation, he has unlawfully and knowingly conspired to

communicate, transmit, and deliver to representatives of a foreign

government, specifically the PRC, information relating to the national defense of the United States.

That is a pretty serious charge.

Mr. SAYNER. Yes, sir.

Senator SESSIONS. That was under your supervision?

Mr. SAYNER. Yes, sir.

13

Senator SESSIONS. Were you the Assistant Special-Agent-inCharge of the Los Angeles field office?

Mr. SAYNER. Yes, sir.

Senator SESSIONS. And you had foreign counterintelligence under

your supervision?

Mr. SAYNER. That is one program of several, yes, sir.

Senator SESSIONS. One of the programs you had. Did Agents Cordova and Alston report directly to you or was there another level

of reporting?

Mr. SAYNER. Their supervisor—actually, Agent Cordova was an

agent in one of our resident agencies at that time, Redondo Beach,

which had its own line supervisor. But a determination to streamline case reporting was that SA Cordova, along with SA Alston,

who is on a headquarters Los Angeles city squad, would report to

one supervisor, and that is the supervisor James J. Smith.

Senator SESSIONS. And Smith reported to you?

Mr. SAYNER. Yes, sir.

Senator SESSIONS. So who in terms of dealing with the Department of Justice and the United States Attorney in Los Angeles—

well, first, let me ask you, were your primary communications with

the Department of Justice with the assistant U.S. attorney or the

U.S. attorney in Los Angeles, or were they with Washington?

Mr. SAYNER. Well, in an espionage case the U.S. Attorney’s Office

isn’t aware. Initially, the call to go into prosecution on an espionage case or an intelligence case, to be converted into a criminal

matter, is made at the Department of Justice, and that is in consultation with our headquarters here. So there are discussions between our headquarters substantive desk here, and in this case it

would be ISS, Internal Security Section, of the Department of Justice.

Senator SESSIONS. Now, who talks with whom? Does the paperwork go up through the FBI to the FBI headquarters and they talk

to the Department of Justice, or were Department of Justice employees and attorneys at this time dealing directly with Agents

Cordova and Alston who were working the case?

Mr. SAYNER. Senator, the reporting would go to our headquarters, who would then go to DOJ.

Senator SESSIONS. So to your knowledge, there was little, if any,

direct contact between the Department of Justice people who were

reviewing this case and the actual agents investigating it?

Mr. SAYNER. Not until they notified and we briefed in the U.S.

Attorney’s Office in California. At that time, most of the communications were between the Department of Justice and Assistant

U.S. Attorney Jonathan Shapiro.

Senator SESSIONS. With regard to the plea agreement that was

entered into, who called the shots on that?

Mr. SAYNER. That would be in the purview of the U.S. Attorney’s

Office, with consultations with us.

Senator SESSIONS. What about the Department of Justice in

Washington? Is that Mr. Dion?

Mr. SAYNER. Yes, they would be involved also, sir.

Senator SESSIONS. They would be involved. Is anybody assuming

final responsibility for this plea bargain, if you had to state here—

14

you are under oath—who was responsible finally for the approval

of this plea bargain?

Mr. SAYNER. The Department of Justice.

Senator SESSIONS. And would you say that was delegated to the

Los Angeles U.S. Attorney’s Office or was it to Mr. Dion in Washington, or did the Attorney General herself sign off on it?

Mr. SAYNER. Sir, that is something I think that should be asked

of the Department of Justice, U.S. Attorney’s Office.

Senator SESSIONS. But as you understand it, the Department of

Justice handles the pleas and does the plea agreement. The FBI

does not have the final say-so in that.

Mr. SAYNER. The FBI would still have some input with the U.S.

Attorney’s Office in his negotiations with the Department of Justice, yes, sir.

Senator SESSIONS. Now, you indicated that in October, after

these interviews, this arrest warrant affidavit was prepared, and

then it was not issued because the defendant, Lee, got counsel and

entered into plea discussions. Is that right?

Mr. SAYNER. Yes, sir.

Senator SESSIONS. How soon after this was prepared did that

occur?

Mr. SAYNER. It was occurring almost simultaneously.

Senator SESSIONS. So throughout all this bureaucratic process,

the people in the headquarters of the FBI, local FBI, local assistant

U.S. attorneys, and U.S. attorneys in Washington—within days, a

plea agreement was reached?

Mr. SAYNER. There were several items that had to be straightened out, including attempting to get the classified documents from

DOD, getting authority to use those possibly in a trial on 794, or

if 793 went to trial; discussions with scientists regarding the results of the discussions that—— Senator SESSIONS. Well, I guess my time is out, but my question

was——

Senator SPECTER. That is all right. Go ahead, Senator Sessions.

Senator SESSIONS. How did this happen so quickly? How do we

have a plea agreement so quickly after this interview in which he

made confessions? It seems to me like this is a matter of national

importance, and very great care should have been undertaken before up and committing to a plea agreement without fully understanding the ramifications of it.

Mr. SAYNER. I don’t think we went into a plea agreement immediately. It was actually entered early December. We had to know

what we could go——

Senator SESSIONS. It would be in October he made the confession. In early December, you were entering a plea.

Mr. SAYNER. The plea was entered in early December.

Senator SESSIONS. That is still pretty quick, isn’t it?

Mr. SAYNER. Yes.

Senator SESSIONS. And you probably reached the agreement

sometime before the plea actually went down in court. How long

before?

Mr. SAYNER. Well, during that time again, Senator, we had to

find out or figure what we had a result of that confession. We

weren’t expecting to get all the information that we did in that OcVerDate 26-SEP-2001 06:22 Oct 03, 2001 Jkt 073205 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 E:\HR\OC\A205.XXX pfrm04 PsN: A205
15

tober confession. We were very fortunate to the degree of the experience of the two special agents that interviewed Mr. Lee. We got

a lot of information that had to be corroborated, and we also had

to find out just where it was as far as the classification process.

Senator SESSIONS. Well, I guess that was my concern. It seems

like there was quite a fast moving to a guilty plea and some decisions were made that look to me to have been made in haste, such

as according to the affidavit of Agent Cordova, Lee confessed to

having passed classified national defense information to the PRC

twice in 1985 and once in 1997. Yet, 1997 seemed not to be a part

of the plea agreement.

Mr. SAYNER. Senator, those questions should be best directed to

Assistant U.S. Attorney Jonathan Shapiro.

Senator SESSIONS. Well, I will just say, Mr. Chairman, it seemed

like to me there were some big decisions being made in an awfully

hurried point of time.

Senator SPECTER. I think the record will bear you out on that.

Senator Thurmond.

Senator THURMOND. I have another engagement and have to

leave. I will ask that the rest of my questions be answered for the

record.

Senator SPECTER. We will do just that, Senator Thurmond.

Thank you very much.

We are in the last stages of a vote and we will recess very briefly

and we will return very promptly to proceed with the hearing.

Thank you.

[The subcommittee was recessed from 10:21 a.m. to 10:45 a.m.]

Senator SPECTER. Mr. Sayner, let me review some of the material

on information which has been provided by the FBI to the subcommittee on unclassified comments. And if anything comes up

which is classified, I know I don’t have to say to you, say so, and

we will do it in closed session. But these have all been reviewed

by my staff and the FBI, and I want confirmation from you as to

the January 7, 1997, Los Angelas headquarters teletype that, ‘‘The

FBI investigation raised concerns that Dr. Lee could have been

compromising antisubmarine information in the early 1990’s.’’

The first question is, is that in the teletype?

Mr. SAYNER. That information would be correct. I am not aware

of that teletype. Since he worked at TRW and that was the area

of his expertise, that was our fear, yes, Senator.

Senator SPECTER. You say you are or are not aware of the teletype?

Mr. SAYNER. I don’t know the content of that communication, sir.

Senator SPECTER. Well, are you familiar with the fact that the

FBI provided to the subcommittee this data that on January 7,

1997, there was an Los Angelas headquarters teletype that I just

read?

Mr. SAYNER. If that was provided by Los Angelas, then that is

the information that was put together.

Senator SPECTER. Well, the question is whether you know it was

provided by the FBI.

Mr. SAYNER. No, I was not aware of that particular document,

no, Senator.

16

Senator SPECTER. Ms. Kalisch, for the record would you confirm

that that teletype has been provided to the subcommittee?

Ms. KALISCH. The teletype itself has not been provided. We have

provided access to your staff.

Senator SPECTER. Would you step forward here so we can hear

you?

Ms. KALISCH. I believe that your staff has had access to our documents, including that teletype.

Senator SPECTER. Well, the question is, for the record, has the

FBI provided to the subcommittee this information, quote, ‘‘January 7, 1997, Los Angelas HQ teletype, ’the FBI investigation raised

concerns that Dr. Lee could have been compromising anti-submarine information in the early 1990s.’’’

Ms. KALISCH. Yes, sir, that is correct.

Senator SPECTER. And would you identify yourself for the record,

please?

Ms. KALISCH. My name is Eleni Kalisch, that is K-a-l-i-s-c-h.

Senator SPECTER. And your position?

Ms. KALISCH. I am Special Counsel in the Office of Public and

Congressional Affairs.

Senator SPECTER. Thank you.

For the record, again, Mr. Sayner, would you confirm that the

FBI has provided this information—or maybe it will be Ms. Kalisch

again—August 28, 1997, Los Angelas Headquarters, NSD, ‘‘In August 1997, the FBI was aware that allegedly in the early 1980’s Dr.

Lee gave the Chinese classified information that greatly assisted

their nuclear weapons program?’’

The question is has the FBI provided that information to the

subcommittee?

Mr. SAYNER. It was the 1985 results of the confession going back

to the mid-1980s, and possibly with his previous trips to the PRC

that would be a conclusion, yes, Senator.

Senator SPECTER. Ms. Kalisch, you have nodded in the affirmative. Would you confirm that, please?

Ms. KALISCH. That is correct.

Senator SPECTER. OK, and similar confirmation that in June

1998, in the Royal Tourist FBI analysis, one of the scientists said,

quote, ‘‘It seems likely that Peter Lee at least partially compromised every project, classified or unclassified, he was involved

with at Livermore, LLNL, and TRW.’’

Can you confirm that, Mr. Sayner?

Mr. SAYNER. Yes, Senator.

Senator SPECTER. Ms. Kalisch, can you confirm that?

Ms. KALISCH. Yes, sir.

Senator SPECTER. And on April 3, 1998, ‘‘FBI files indicated that

Dr. Lee gave the antisubmarine lecture not once, but twice, with

the second lecture coming several days after the first and in a different city.’’ Can you confirm that, Mr. Sayner?

Mr. SAYNER. Yes, Senator.

Senator SPECTER. Ms. Kalisch.

Ms. KALISCH. Yes, sir.

Senator SPECTER. Mr. Sayner, are you able to confirm that the

Department of Defense and Navy did not have the transcripts and

17

the tape of Dr. Lee’s confession at the time Mr. Schuster wrote the

memorandum of November 14, 1997?

Mr. SAYNER. I am not able to confirm that, no, sir.

Senator SPECTER. Well, do you know when the transcript and

tape was transmitted to the Department of the Navy?

Mr. SAYNER. No, Senator. I can get that information, though.

Senator SPECTER. Well, Agents Cordova and Alston have that information, but you do not?

Mr. SAYNER. I don’t have the date that it was transmitted to our

headquarters, no, Senator.

Senator SPECTER. Well, OK. It may be necessary to bring in

Agents Cordova and Alston to get that kind of information.

Are you in a position to confirm that the damage assessment

which was completed in February of 1998 was not provided to

Judge Hatter, the sentencing judge, for his consideration imposing

sentence?

Mr. SAYNER. No, Senator.

Senator SPECTER. Senator Torricelli.

Senator TORRICELLI. Nothing at this time, Mr. Chairman.

Senator SPECTER. Senator Sessions?

Senator SESSIONS. This is a troubling memorandum. What troubles me on the most basic level is that you had evidence that Mr.

Lee was not cooperating. I am sure that Senator Specter before I

did noted the part where you said you were more interested in

gaining intelligence that punishing felons, which I think is an unwise way to articulate the matter.

But this was in November. As I understand it, prior to the entry

of the plea, he had flunked the polygraph test and the judge was

advised of that.

Mr. SAYNER. Correct, Senator.

Senator SESSIONS. But isn’t it a fact that particularly in a case

of espionage, an espionage-type case, that a judge is going to tend

to rely on the recommendations of the FBI and the Department of

Justice, and it is your responsibility to make sure when a plea is

recommended that it is a good one? Would you agree with that?

Mr. SAYNER. I agree, yes, sir.

Senator SESSIONS. Did the FBI recommend this plea agreement

and support this plea agreement, or who initiated it? As I read

this, it looks like the FBI recommended to the Department of Justice that the plea go down in a light fashion.

Mr. SAYNER. No, it wasn’t—it is not our recommendation, sir. It

is the Department of Justice.

Senator SESSIONS. Well, you told me earlier you talked with

them about it.

Mr. SAYNER. We spoke to pre-sentencing that prepares the report

for the judge that gives out the sentence. Both agents and I believe

Jonathan Shapiro had an opportunity to talk to pre-sentencing to

give them all the details of his not being cooperating with us and

his deception.

Senator SESSIONS. All right. Well, let me go back to this point.

Do you now dispute that the affidavit that Cordova filed saying

that Lee had confessed to 1997 violations of the law—do you dispute the accuracy of that or do you continue to believe that was

accurate?

18

Mr. SAYNER. That was accurate.

Senator SESSIONS. So we go down to a plea now and I want to

know, did the FBI and Mr. Shapiro—were they in accord with this

recommendation? I am sure you discussed it—Mr. Shapiro, what

are we going to recommend—recognizing ultimately the Department of Justice attorney speaks for the Department of Justice and

the FBI. But did you agree with his recommendation or not?

Mr. SAYNER. The departmental attorney from ISS—I think it is

Michael Liebman—actually flew out here and had discussions with

Jonathan Shapiro.

Senator SESSIONS. ISS. That is the Department of Justice?

Mr. SAYNER. Yes, Internal Security Section, sir. They had discussions, and I know there was a great deal of frustration on the part

of Jonathan Shapiro and that he just was not given enough leverage to be able to use 794, and that may have been what went into

his reasoning if he did go along with the sentencing that was approved by the Department of Justice.

Senator SESSIONS. And Mr. Shapiro was the person handling the

case?

Mr. SAYNER. That is correct, sir.

Senator SESSIONS. He was living with it on the ground in Los

Angeles?

Mr. SAYNER. He was the assistant U.S. attorney.

Senator SESSIONS. And it was assigned to him?

Mr. SAYNER. Yes.

Senator SESSIONS. So you noted frustration from Mr. Shapiro in

terms of what information or for what leverage or ability he was

given to charge more serious charges?

Mr. SAYNER. Yes.

Senator SESSIONS. And that was denied him by the Department

of Justice, Mr. Liebman?

Mr. SAYNER. I don’t know what went on between their discussions. I just know—— Senator SESSIONS. But apparently he was not being given the liberty to be as aggressive as he would like to be. That is your impression?

Mr. SAYNER. That is my impression, yes, sir.

Senator SESSIONS. Now, with regard to this plea, was the FBI

told we want to recommend this, do you agree?

Mr. SAYNER. Yes.

Senator SESSIONS. And what did the FBI respond?

Mr. SAYNER. Our reasoning was that if he had a period of confinement, which we felt he would get out of this, we would have

more time to debrief him to find out what else he may have done

and more serious intelligence matters that may have occurred if he

had been incarcerated for at least a year.

Senator SESSIONS. But, of course, there was no need to rush this

plea in any case, was there? I mean, the plea could have been

taken 6 months later.

Mr. SAYNER. I can’t answer for the process.

Senator SESSIONS. Well, you are an experienced agent. You know

that if a person comes in with a lawyer and wants to plead guilty

and you want to discuss some things and work out some details,

you don’t have to run to court tomorrow to offer a plea. I mean,

19

you can hold that off, keep it secret, and nobody would know for

months, even years. Isn’t that right?

Mr. SAYNER. But I would have to—I can’t think for Jonathan

Shapiro or ISS. They may have felt that this was the best they

could do to get it, and that we could get—the national security reward of having him confined and being able to access for him while

he is incarcerated would outweigh not rushing a plea. He may have

not negotiated a plea any further.

Senator SESSIONS. Well, Mr. Sayner, the point is this. Once that

plea is taken and the judge imposes a sentence, the leverage is

gone. You have no leverage, isn’t that correct?

Mr. SAYNER. That is correct.

Senator SESSIONS. And why did not the FBI, who apparently

wanted further intelligence, take the position that if he flunked the

polygraph test which indicated he was not fully cooperative on

what he was sharing with the FBI—why would you want to go on

and rush this plea and give him this sweetheart deal?

Mr. SAYNER. I can’t answer that. That was—I can’t answer that,

Senator.

Senator SESSIONS. Well, maybe you can tell me why all references to Peter Lee’s confession as it related to the 1997 disclosures were omitted from Agent Cordova’s two sworn affidavits for

sentencing purposes. They were submitted to the Federal judge.

Why was that left out?

Mr. SAYNER. That was—the only thing he was charged in 1997

with was 1001 because we were having difficulty getting a read on

the classification of the material that may have been passed in

1997 from DOD.

Senator SESSIONS. What was the 1001 false statement?

Mr. SAYNER. That is lying to—— Senator SESSIONS. To the agent?

Mr. SAYNER. Lying to the agent on the travel.

Senator SESSIONS. But it appeared that, and his lawyer argued,

did he not, to the judge that he hadn’t done anything wrong since

1985? Why wasn’t the judge told there were very serious matters

involving 1997?

Mr. SAYNER. The judge was apprised through pre-sentencing of

everything that occurred in this investigation.

Senator SESSIONS. Well, it is not in the pre-sentence report, I

don’t believe.

Mr. SAYNER. Presentence was advised by the two agents, and I

believe Jonathan Shapiro, on everything that had occurred.

Senator SESSIONS. Well, the fact is ultimately there was a question of the will and determination of the prosecutor and the FBI

to reject this plea or accept it.

The way I would see it, Mr. Chairman, is the opportunity was

there. What normally should have happened in any two-bit robbery

case or whatever you are prosecuting in the country is if the person

agrees to cooperate and you run a polygraph and he flunks it, then

you don’t go forward with the plea. You say we are going to go to

the wall; we are going to lock you up as long as we can unless you

want to tell the full truth.

Were you able to obtain any valuable information from Mr. Lee,

if you are able to say that in this hearing?

20

Mr. SAYNER. At the debriefings, afterwards?

Senator SESSIONS. After the plea went down.

Mr. SAYNER. No, sir.

Senator SESSIONS. Which is not unusual, is it?

Mr. SAYNER. No, sir.

Senator SESSIONS. Once he got his sentence and his halfway

house 6 months and his little fine, he had no incentive to cooperate

any further.

Mr. SAYNER. Correct, sir.

Senator SESSIONS. And under the law, double jeopardy would

apply and he couldn’t be reprosecuted for it, is that right?

Mr. SAYNER. Right.

Senator SPECTER. Well, are you sure about that now? I don’t

want this record to close off—— Senator SESSIONS. Well, that is a good question. It may not.

Senator SPECTER. I don’t want to answer for Mr. Sayner, but

that is a complex legal question and it may well be that there is

still a possible prosecution for the 1997 disclosures.

Senator SESSIONS. I would just say that with regard to what he

pled to, he couldn’t be resentenced or sentenced any more severely

for it.

Senator SPECTER. I agree with you about that, Senator Sessions.

Senator SESSIONS. And I would withdraw my other statement as

being overbroad, as the chairman, a good prosecutor, knows.

Senator SPECTER. Senator Sessions, let me associate myself with

your remarks about the questionable plea bargain, and we are

going to get into that in greater detail. And I think it is true that

Mr. Sayner does not have the information which Mr. Shapiro has,

or Mr. Liebman, and we haven’t been able to talk to Mr. Liebman,

which is why we had to issue a subpoena for him. But we will have

that hearing next week.

[The prepared statement of Mr. Sayner follows:]

PREPARED STATEMENT OF DANIEL SAYNER

Good morning, Mr. Chairman and members of the Subcommittee. My name is

Daniel Sayner and I currently serve as Assistant Special Agent in Charge (ASAC)

of the Los Angeles Division of the FBI. I am pleased to be here this morning to discuss certain aspects of the foreign counterintelligence investigation of Peter Lee conducted by my office.

I would first like to provide the Subcommittee with a brief overview of my FBI

employment. I have been a Special Agent with the FBI for eighteen years. Upon

joining the Bureau in 1982, I was assigned primarily to violent crimes investigations

in both the Baltimore and Atlanta Divisions. From 1983 to 1988, I was assigned to

Foreign Counterintelligence, or FCI, investigations, in the New York Division followed by two years as FCI supervisor at Headquarters in Washington, DC. From

1990 to 1995, I was assigned to the Terrorism Task Force in Newark, New Jersey

and also served as the Organized Crime Drug Coordinator in Newark.

Since November 1996, I have served in my current position as ASAC of the Los

Angeles Division. As ASAC, my responsibilities include Program Manager of several

important FBI programs including Civil Rights, Hate Crimes, Domestic Terrorism,

National Infrastructure Protection, and Foreign Counterintelligence. It is as FCI

Program Manager that I have had responsibility for overseeing the Peter Lee investigation.

I understand that the Subcommittee would like for me to provide a chronology

of the FBI’s involvement in the Peter Lee investigation, from the time the case was

opened in 1991 until the time that Dr. Lee was sentenced in 1998. I am happy to

do so.

* * * * * * *

21

4/1991—FBI opens Preliminary Inquiry on LEE.

3/1993—FBI opens Full Field Investigation on LEE.

2/1994—FBI initiates technical surveillance on LEE.

5/1997—LEE travels to China.

6/1997—FBI conducts non-confrontational interview of LEE to discuss his trip to

China; LEE lies to FBI by stating that he engaged in no technical scientific discussions with the PRC and that he paid for the trip.

8/5/1997—FBI again interviews LEE; he admits that he lied to his employer, TRW,

on post-travel questionnaire about the purpose of his trip and about contacts

during the trip, but maintains that he paid for the trip.

8/14/1997—FBI again interviews LEE and asks him to produce receipts to prove he

paid for trip to China. Also, LEE agrees to take polygraph.

8/25/1997—LEE contacts PRC scientist (GUO HONG) and asks him to provide

fraudulent receipts indicating that LEE paid for the trip to China.

9/3/1997—LEE provides FBI with fraudulent receipts; technical surveillance expires.

10/7–8/1997—FBI interviews LEE and he confesses to unauthorized disclosure of

confidential information to PRC in 1985 and in 1997.

At this point, Mr. Chairman, I would like to step back in time and discuss the

1985 disclosures that Dr. Lee confessed to in the October 7, 1997 interview.

1/9/85—LEE visited China and was approached by an individual (CHEN

NENGKUAN) who asked LEE technical questions and suggested that LEE

shake his head yes or no. LEE was aware that his responses were disclosing

classified information relating to hohlraums.

1/10/1985—LEE is taken (by CHEN NENGKUAN) to meet with PRC scientists (including YU MIN) to provide the hohlraum information.

Following Dr. Lee’s confession on October 7 and 8, 1997, the FBI consulted nuclear weapons experts at the Department of Energy regarding the substance of Dr.

Lee’s confession. According to DOE experts, the information Dr. Lee admitted to disclosing to the PRC was, in fact, classified. On October 21, 1997 the FBI completed

a draft affidavit for the arrest of Dr. Lee on charges of Title 18 USC Section 793(d)

(attempting to transmit national defense information in aid of a foreign government)

and Title 18 USC Section 1001 (making a material, false statement to a federal official).

The arrest warrant was never issued for Dr. Lee inasmuch as he retained counsel

and enterer plea negotiations with the Department of Justice. On December 8, 1997,

Dr. Lee pled guilty to one court of violating Title 18 USC Section 793(d) and one

count of violating Title 18 USC 1001. As part of his plea agreement, Dr. Lee agreed

to provide full cooperation with the government. The FBI conducted a polygraph of

Dr. Lee on February 26, 1998 which showed deception when asked whether he had

lied to the FBI since his first polygraph. The FBI followed up additional discussion,

after which Dr. Lee’s counsel advised that he would not submit to further polygraph

examination.

The FBI supplemented its arrest affidavit with a declaration stating that Dr. Lee

had shown deception on the February 26, 1998 polygraph examination. The declaration and the arrest affidavit, which had been converted to a government pleading,

were presented to the court at Dr. Lee’s sentencing hearing on March 26, 1998.

Therefore, at the time of sentencing, the court was made aware that Dr. Lee had

shown deception on the polygraph administered after the plea agreement had been

entered.

Dr. Lee was sentenced on March 26, 1998 to a five-year suspended sentence with

three years probation, one year incarceration in a half-way house and 3000 hours

of community service.

Mr. Chairman, I would like to conclude by reaffirming the FBI’s commitment to

cooperate with the Subcommittee in its important oversight mission. As you know,

we have provided the Subcommittee Staff with unprecedented access to our case

files and to our personnel. Last month, Subcommittee Staff traveled to the Los Angeles FBI office where they interviewed myself as well as the Peter Lee case agents,

SA Gil Cordova and SA Serena Alston, and their supervisor, SSA J.J. Smith. Several weeks later, Mr. Chairman, you also traveled to the Los Angeles FBI office to

conduct on-the-record interviews of these FBI agents and others. At your request,

we tape interviewed and transcribed those interviews in order that you would have

a record to utilize at hearings such as this.

I would like to thank the Subcommittee for allowing me the opportunity to testify

this morning. I will be happy to respond to any questions you may have.

Senator SPECTER. Dr. Twogood, thank you very much for joining

us. We turn to you at this point. Would you give us your full name

and position for the record?

22

STATEMENT OF RICHARD TWOGOOD, FORMER PROGRAM

LEADER, IMAGING AND DETECTION PROGRAM, LAWRENCE

LIVERMORE NATIONAL LABORATORY, LIVERMORE, CA

Dr. TWOGOOD. Richard Twogood, and I am Deputy Associate Director for Electronics Engineering at the Lawrence Livermore National Laboratory.

Senator SPECTER. And that is part of the Department of Energy?

Dr. TWOGOOD. Yes.

Senator SPECTER. And would you state briefly your qualifications, your background and your experience, education?

Dr. TWOGOOD. I have a short statement I will read. Mr. Chairman, I appreciate the opportunity to appear before your subcommittee to testify regarding your assessment of how the Peter

Lee investigation was conducted.

Since 1996, I have held the position of Deputy Associate Director

for Electronics Engineering at the Lawrence Livermore National

Laboratory. In that role, I manage the 750-person department

which provides electronics engineering support to all laboratory

programs.

From 1988 to 1996, I held the position of Program Leader for the

Imaging and Detection Program at LLNL. The single largest

project in that program was the Joint UK/US Radar Ocean Imaging Program, which was a DOD-sponsored program executed by

OASDI/C3I in the Department of Defense. LLNL was the lead U.S.

technical organization, and I was the Technical Program Leader for

the Joint UK/US Radar Ocean Imaging Program from 1990

through 1995. Peter Lee worked as a contractor employed by TRW

on that same OSD program.

The Joint UK/US radar program has made important discoveries

and significant advances in the development of methods to detect

submarine signatures with remote sensing radars. Many of the important details of this work are classified. While at TRW, Dr. Lee

had access to these results at the DOD secret level. Dr. Lee also

admitted to revealing classified information regarding this program

while in China in 1997.

To fully understand what may have been inappropriately revealed to the Chinese, as well as its potential significance, requires

a detailed analysis of Dr. Lee’s statements and an understanding

of the R&D thrusts of the Joint UK/US radar program. A complete

analysis would require discussion of classified material. Several

such discussions have taken place since 1997 within the Department of Justice and most of these issues have been explored in

some detail.

I welcome the opportunity to assist the committee in addressing

any concerns you have regarding these issues. Thank you.

Senator SPECTER. Thank you very much, Dr. Twogood. Did you

have occasion to examine the transcript and videotape of Dr. Lee’s

confession?

Dr. TWOGOOD. Yes.

Senator SPECTER. And what was the appropriate classification

for the kinds of information that he turned over to scientists from

the People’s Republic of China?

Dr. TWOGOOD. Peter himself admitted that he had passed confidential information and stated it was confidential. When I saw

23

the videotape and the audio tape, my immediate response was that

it is at least confidential, and I thought it was likely DOD secret

and that—— Senator SPECTER. You say you thought it was secret?

Dr. TWOGOOD. Yes, that is how I would have classified it.

Senator SPECTER. And what is your background and experience,

credentials, on classification of security matters?

Dr. TWOGOOD. Well, formally I am an authorized derivative classifier, so I do take materials, usually technical materials, not videotape confessions, and make appropriate judgments based on classification guidance written by others, and that is what I did in this

case. I also personally wrote some of the guidance that we were

using in the OSD program.

Senator SPECTER. Would you say that his disclosures constituted

the key to the whole program?

Dr. TWOGOOD. I would say that his disclosures went right to the

heart of what I consider the number one technical achievement of

the UK/US program up until 1995.

Senator SPECTER. And are you familiar with the total cost of the

research on this program?

Dr. TWOGOOD. It is on the order of $100 million on the U.S. side

and a smaller amount in the UK.

Senator SPECTER. Order of how much again?

Dr. TWOGOOD. 100 million.

Senator SPECTER. Dr. Twogood, when did you review the video

and transcript?

Dr. TWOGOOD. October 15, 1997.

Senator SPECTER. Dr. Twogood, did you ever talk to anybody

from the Department of Justice about your conclusions that the information disclosed by Dr. Lee was secret?

Dr. TWOGOOD. Yes, I did. I believe on October 15, 1997, I speculated that it probably was secret, and then in a further—— Senator SPECTER. You talked to whom?

Dr. TWOGOOD. Well, Mr. Cleveland, who—and I believe Ms. Alston was at the October 15th discussion at Livermore.

Senator SPECTER. Special Agent Alston was there?

Dr. TWOGOOD. I believe that is correct, yes.

Senator SPECTER. And you gave her the information that you believed that this was secret information?

Dr. TWOGOOD. Yes.

Senator SPECTER. And Mr. Cleveland?

Dr. TWOGOOD. Mr. Cleveland, who was former FBI, I believe, and

at that time in 1997 was responsible for the security programs at

Livermore. So he had become a Livermore employee.

Senator SPECTER. Did you talk to anybody else from the Department of Justice?

Dr. TWOGOOD. There were at least one or two others in the room

where I saw these videotapes and audio tapes, but I don’t recall

who they were.

Senator SPECTER. Were you ever contacted by Mr. Jonathan Shapiro?

Dr. TWOGOOD. Yes.

Senator SPECTER. And what conversation did you have with him

and when was it?

24

Dr. TWOGOOD. I do not know when that date was. I believe he

was not present at the first meeting, but then at a subsequent

meeting I had the same discussion with Mr. Shapiro. And probably

more importantly, there was an interim period for the month after

the October 15 review when I provided to Mr. Cleveland the classification guidelines that I would use to base the secret classification

on.

Senator SPECTER. Well, approximately when did you talk to Mr.

Shapiro? Was it in the October time frame?

Dr. TWOGOOD. October-November, I believe, yes.

Senator SPECTER. Did anybody from the main Department of

Justice contact you?

Dr. TWOGOOD. Mr. Cleveland was basically the liaison. I provided

all my information to him and he provided it to the FBI. I did fly

to Los Angeles on March 11, 1998, and Ms. Alston was there and

Mr. Cordova was there, and that is the date when I actually interviewed Peter with his lawyer present.

Senator SPECTER. But did Mr. Liebman or Mr. Dion or Mr. Richards from Main Justice, Washington, ever contact you?

Dr. TWOGOOD. Not to my recollection, no.

Senator SPECTER. Did anybody from the Department of the Navy

ever contact you?

Dr. TWOGOOD. No.

Senator SPECTER. Mr. Schuster, Mr. Preston, or anybody from

the Navy, Captain Dewispelaere?

Dr. TWOGOOD. No.

Senator SPECTER. Senator Sessions.

Senator SESSIONS. So you reported in 1997 based on your analysis of the classification procedure that you thought it was secret?

Dr. TWOGOOD. Yes.

Senator SESSIONS. Is this assessment the same one you gave to

Agent Cordova?

Dr. TWOGOOD. Yes.

Senator SESSIONS. Has anything occurred that would cause you

to change your assessment on that?

Dr. TWOGOOD. No. Let me stress it is a judgment call.

Senator SESSIONS. My question was did you ever change your assessment to anyone?

Dr. TWOGOOD. Not to my recollection. I believe from the first day

I thought it was, at least confidential and possibly secret. And then

after further review between October and November 1997, I made

the recommendation that it be considered secret, and that was documented in a memo sent from Livermore to the FBI.

Senator SESSIONS. That would have been in November, prior to

the plea agreement that went down in December of 1997, I believe.

Dr. TWOGOOD. Yes.

Senator SESSIONS. I believe Cordova’s affidavit that he filed in

October 1997 quotes you as saying it was confidential.

Dr. TWOGOOD. I have always thought that it was at least confidential and possibly secret.

Senator SESSIONS. I think you have made yourself clear. Thank

you.

Senator SPECTER. Thank you very much, Senator Sessions.

Dr. Cook, thank you for joining us.

25

STATEMENT OF THOMAS L. COOK, NONPROLIFERATION AND

INTERNATIONAL SECURITY DIVISION, LOS ALAMOS NATIONAL LABORATORY, LOS ALAMOS, NM

Senator SPECTER. We know you and Dr. Twogood have come

from the West Coast, is that correct?

Dr. COOK. Dr. Twogood from the West Coast and I am from New

Mexico.

Senator SPECTER. New Mexico. Well, they are long distances.

Do you have a prepared statement?

Dr. COOK. Yes, sir, I do.

Senator SPECTER. Would you proceed to present it to the subcommittee at this time?

Dr. COOK. Surely.

Senator SPECTER. Thank you.

Dr. COOK. It is a pleasure for me to testify before this subcommittee as the DOE technical witness in the case United States

v. Peter Hoong-Yee Lee, which was heard March 26, 1998, in U.S.

district court, Central District of California, the Hon. Judge Terry

J. Hatter presiding.

Dr. Lee confessed in a plea bargain to having knowingly passed

a document classified secret/restricted data to——

Senator SPECTER. Could you speak up just a little?

Dr. COOK. Oh, sorry.

Senator Specter. Senator Thurmond always says, ‘‘pull the machine a little closer.’’

Dr. COOK. OK. Dr. Lee confessed and plea bargained to having

knowingly passed a document classified secret/restricted data to

China Academy of Engineering Physics, CAEP, associates during

one of his trips to the People’s Republic of China. The CAEP and

its subordinate institutes and laboratories are responsible for the

nuclear weapons design and development programs in China.

My involvement in the case began in the fall of 1997 when I was

on a change of station at Department of Energy headquarters in

the Office of Energy Intelligence working for Notra Trulock, who at

the time was serving both as the Director of Intelligence and of

Counterintelligence, Acting Director.

I supported the FBI investigation, code name Royal Tourist, and

my role was to provide DOE assessments of technical information

emerging from the FBI interrogations. In February 1998—let’s see;

I guess I stand corrected on that now. It must have been March

11th that we were out there. I participated in the two-day interrogation session with the FBI agents assigned to the case and Dr.

Twogood, and we were interrogating Dr. Lee at the classified level

and were asking questions S/RD and secret level. Also present was

a laser fusion expert assigned to the Department of Energy, formerly from Lawrence Livermore, and the ones I have already mentioned.

We were allowed to ask these questions at the classified level,

and Dr. Peter Lee repeatedly denied any knowledge of or any interest in classified programs and publications. He was, however, the

author and/or the technical editor on some of these publications

which he denied knowledge of. Some of his work would be declassified by post-1993 guidelines and some of it would not have been.

26

I attended the sentencing of Dr. Peter Hoong-Yee Lee, and DOE

Headquarters Safeguards and Security Officer Director Joe

Mahaley and I were declared witnesses for the U.S. Government.

If Judge Hatter had requested additional testimony beyond the

written submissions, Mr. Mahaley would have taken the stand in

open court and I would have testified in camera at the secret, no

foreign, SRD level.

Department of Energy Headquarters Intelligence Office Director

Notra Trulock was also present as a potential witness, and security

personnel Don Temple and Larry Wilcher from DOE, Germantown.

And I had worked with Don and Larry throughout this entire interaction in the support that the DOE provided to the FBI, Los Angeles.

Had we gone in camera, my testimony would have included a description of detailed classified Nevada test site diagnostic systems

that Dr. Lee worked on or helped develop, and it would have expanded my assessment of the impact such knowledge could have

had on PRC nuclear weapons science. I would not have been able

to declare that I knew with certainty of specific additional classified information passed beyond that plea bargained.

It is my assessment that Dr. Peter Lee is a world-class diagnostician who has expertise relevant to nuclear weapons science. Development of methods for measuring the nuclear weapons performance was a serious challenge for the PRC in the 1980s, and this

would have been especially true if, as has been reported in the

press, they moved underground and tested neutron bomb concepts

and more modern strategic weapons.

At this time, I would read my official damage assessment with

the court or I will answer questions, as you choose.

Senator SPECTER. Was your damage assessment made available

to Chief Judge Hatter?

Dr. COOK. Yes, sir, it was.

Senator SPECTER. Well, we will have that made part of the

record. Do you have a copy of that with you?

Dr. COOK. Yes, sir.

Senator SPECTER. Would you hand that to the court reporter? We

will make it part of the record. Mark it Exhibit 1 on this hearing

date.

[The document referred to follows:]

EXHIBIT 1

DECLARATION OF TECHNICAL DAMAGE TO UNITED STATES NATIONAL SECURITY

ASSESSED IN SUPPORT OF UNITED STATES V. PETER HOONG-YEE LEE

I, Thomas L. Cook, being duly sworn, do hereby depose and say:

A. Introduction

1. I am a Technical Staff Member at the Los Alamos National Laboratory. I have

spent more than 26 years in professional research associated with various aspects

of US nuclear weapon programs. I have actively participated in Atomic Energy Commission and Department of Energy (DOE) research programs at the Nevada Test

Site and in weapons effects simulations sponsored by Defense Nuclear Agency and

Department of Defense.

2. Through the Counter Intelligence Division of DOE/OEI, I have assisted the

Federal Bureau of Investigation (FBI) in their assessment of the impact on the PRC

nuclear weapon program of classified technical information determined to have been

transferred by Peter Hoong-Yee Lee to representatives of institutions in, subordinate to, or associated with tasks in support of programs of the Chinese Academy

27

of Engineering Physics (CAEP). My review of Peter Hoong-Yee Lee’s publications

lead me to assess that he is an excellent diagnostician whose focus has been on the

development and implementation of, and on the interpretation of data from, experimental systems that measure radiation-matter interactions at extreme conditions,

such as those attainable in direct and indirect laser-produced and nuclear-weaponproduced plasmas. I expand these concepts below.

B. Technology discussion

1. The research and development programs pursued by Peter Hoong-Yee and coworkers during this years at two DOE national laboratories, Lawrence Livermore

National Laboratory and Los Alamos National Laboratory, generally relate to the

design of diagnostic schemes and equipment associated with measuring the interaction of electromagnetic radiation with matter. The research related to the design

and evaluation of fusion capsules and to measuring and engineering the transport

of radiation in special cavities. During the early 1980’s the DOE spent billions of

dollars in classified research, conducted in underground nuclear tests at the Nevada

Test Site and in high-energy laser laboratories, to explore the physics of these processes. The studies had both military and commercial objectives. The laser simulation component of the U.S. science based stockpile stewardship program, which is

so important to certifying nuclear weapon reliability under the ‘‘zero-yield’’ constraints of a Comprehensive Test Ban Treaty (CTBT), has its foundations in this

early research.

2. Information contained in the classified DOE document that Peter Hoong-Yee

Lee admits to having transferred to the PRC presents a scheme for interpreting

temperature measurements made with x-ray detectors on radiation emerging from

a plasma in a hollow cavity. References in the paper document Lee’s formal participation in broad classified intertial confinement fusion (ICF) diagnostic development

programs. These programs had specific classified objectives; including the measurement of material properties necessary for benchmarking classified computer code

simulations, calibration of underground nuclear test (UGT) data in fusion laboratories, and adaptation of ICF diagnostic techniques for use in UGT’s. Some technologies with which Peter Hoong-Yee Lee was associated are now unclassified because of academic developments in ICF research; others remain classified nuclear

weapon science.

c. Significance

1. The measurement of radiation-matter interactions and time-resolved and timeintegrated laser-plasma diagnostics represent exactly the critical technologies important to a developing nuclear weapon state that has an active nuclear testing program. The capability to measure the performance of various parts of the nuclear

weapon facilitates the evolution from rudimentary nuclear devices to intermediate

and advanced designs. These characteristics of the warhead determine the deployment options and the appropriateness of mission. Possession of only rudimentary

and/or intermediate class warheads limit these military options. Advanced nuclear

warheads could be important to the Chinese for use on cruise missiles, on road-mobile intercontinental ballistic missiles (ICBMs), and on submarine launched ballistic

missiles (SLBMs) and as multiple re-entry vehicles (MRV) and multiple independent

re-entry vehicles (MIRVs).

2. The above facts are true and correct to the best of my knowledge and belief.

THOMAS L. COOK, PHD.,

Technical Staff Member, Los Alamos National Laboratory.

Senator SPECTER. Dr. Cook, what was the total cost to the Federal Government of the hohlraum research?

Dr. COOK. The programs with which Dr. Lee was associated

which had to do with both the inertial confinement fusion programs

and the underground testing programs have been estimated at a

total cost by the Department of Energy of about $6 billion.

Senator SPECTER. A total of $6 billion?

Dr. COOK. Six billion, yes, sir.

Senator SPECTER. With respect to declassification, what occurred

there?

Dr. COOK. In the early days of the programs, which were referred

to as Haylight Centurion where one was taking laser-driven capsules and testing them in underground nuclear tests, as well as in

28

the laboratory with lasers, the concepts of the radiation drive of

these capsules—certainly, the details have been classified because

they not only relate to the production of energy, but also to the performance of a secondary and a nuclear weapon.

As the inertial confinement fusion programs matured and became more widely disseminated in the university scene, some of

those kinds of physics have been declassified, but not all, and the

move to declassify—— Senator SPECTER. So some of the information which Mr. Lee gave

to the People’s Republic of China scientists has not been declassified?

Dr. COOK. The specific document with which he plea bargained,

the document that he confessed to having passed in 1985, has been

reviewed by our classifiers and by Livermore’s classifiers and Department of Energy classifiers, and post-1993 it would be unclassified.

Senator SPECTER. But there are indications that Dr. Lee told the

PRC scientists materials which he did not confess to?

Dr. COOK. Yes, sir, that is our assessment, and it was the assessment of all of the technical people with whom I was associated who

debriefed him.

Senator SPECTER. Including you?

Dr. COOK. Yes, sir, including me.

Senator SPECTER. And that was based on what?

Dr. COOK. Dr. Lee repeatedly denied knowledge of classified information that there is absolutely no doubt that he had knowledge

of. For example, in 1981–82, a classified technical document was

published by Livermore and in that document there is a very classified section with weapons information and with the hohlraum

kinds of studies to which Dr. Lee was the technical editor. It was

the diagnostic section. So if he is the technical editor, he has to

have had some interest in or some knowledge of the things he denied having knowledge of.

The second thing that really bothered me was when we discussed

physics with Dr. Lee, he very willingly would share information

that he had taught the representatives of the China Academy of

Engineering Physics. And these concepts were basically freshman

physics and the people with whom he was interacting were the pillars of Chinese nuclear weapons science. I mean, these men were

extremely capable scientists.

Senator SPECTER. Dr. Cook, I am about to have handed to you

the impact statement prepared by Robin Staffin, Notra Trulock and

Joseph Mahaley, and ask if you had an opportunity to review that?

Dr. COOK. Yes, sir, I did.

Senator SPECTER. Take a look at it. We are going to mark it

number 2 for the record.

[The document referred to follows:]

EXHIBIT 2

IMPACT STATEMENT

Dr. Peter Lee, a former employee of Lawrence Livermore National Laboratory

(LLNL), has confessed to providing US classified information to the Peoples Republic of China (PRC) in 1984 and 1985. He admits to providing information from documents classified as Secret/Restricted Data concerning the Inertial Confinement Fusion (ICF) Program. ICF Program information was classified as Secret/Restricted

29

Data under the Atomic Energy Act of 1954, as amended. Dr. Lee further acknowledges that he knew the information was classified when he revealed it to the PRC.

Dr. Lee has stated during debriefings that his activities have not damaged US national security. Contrary to Dr. Lee’s suggestion that US ICF technology is not related to nuclear weapons technology, it remains an integral part of the US nuclear

weapons program.

Dr. Lee was recently interviewed by LLNL and US Government technical experts.

These experts believe that Dr. Lee’s intimation that the classified information he

released to the PRC is limited to what he has confessed, is not credible. For example, Dr. Lee claimed to the interviewers to have very little knowledge of certain sensitive classified programs; however, former colleagues of his at the national laboratories have stated he did have a working knowledge of these programs. In addition,

Dr. Lee engaged in over 300 e-mail messages with his Chinese colleagues between

1994 and 1997. There were also in excess of 300 letters between Dr. Lee and his

PRC contacts between 1981–1987. After 1987, and until 1997, Dr. Lee continued to

exchange numerous letters with his Chinese colleagues. These communications contain details of other, non-ICF related classified programs. Many of these messages

describe activities at LLNL far beyond his area of assignment; although none were

specifically found to contain classified information. Given the nature of the subjects

addressed, however, and his access to other program areas in the laboratory, there

is a strong possibility that in addition to the classified ICF related data, other information may have been passed by Dr. Lee that would have caused serious damage

to national security.

With respect to the ICF information Dr. Lee has admittedly compromised, the following information is provided:

• In basic terms, the ICF process involves striking a cylindrical gold container with

several laser beams arranged concentrically around the cylinder. When all the

laser beams strike the cylinder at once (within several trillionths of a second),

the cylinder is super-heated and causes the resultant x-ray energy from the cylinder wall to strike and compress an ICF target resulting in thermonuclear fusion. • The ICF Program, when developed in conjunction with an already existing nuclear

weapon program, could assist in the design of more sophisticated nuclear weapons. Therefore, certain details of this technology can be used by other countries

or proliferants to assist in the design of a thermonuclear weapon. Through December 1993, the Department of Energy (DOE) classified most of the details of

the ICF process to prevent the spread of nuclear weapons. • Scientists working in the ICF Program recognized that it could be used for peaceful purposes, such as the generation of electricity. A great deal of research on

ICF has been performed in foreign countries for use in non-weapon applications.

As a result of the large number of foreign publications on ICF, DOE declassified

many, though not all, aspects of the ICF process in 1993. Nevertheless, DOE

ICF research is much more advanced than that of foreign research in this area,

and plays an important role in the US nuclear weapons program. Indeed, ICF

experiments have been fielded on a series of underground nuclear tests during

the 1980’s. The data resulting from these tests are key to the design of nuclear

weapons relevant experiments to be conducted on the National Ignition Facility

for nuclear weapons stockpile maintenance and reliability. One indication of its

importance is the greater than $5.8 billion spent on the ICF Program since its

inception in 1972 to the present.

• US intelligence analysis indicates that the ICF data provided by Dr. Lee was of

significant material assistance to the PRC in their nuclear weapons development program. [Details to be provided in camera]. For that reason, this analysis

indicates that Dr. Lee’s activities have directly enhanced the PRC nuclear weapons program to the detriment of US national security.

• As a US government-cleared LLNL employee with an access authorization (security clearance), Dr. Lee was obligated by National Security Decision Directive

and DOE Order to advise the Department each time he had contact, in any

form, with citizens of the PRC. Dr. Lee had continuous unreported contact with

representatives from the PRC. Dr. Lee failed to adhere to this requirement,

which resulted in the compromise of classified information.

In summary, Dr. Lee has confessed to compromising classified nuclear weapon design information. The information was properly classified at the time of compromise

and US intelligence analysis indicates that this information, in conjunction with

other information, was of material assistance to the Peoples Republic of China in

advancing their nuclear weapons program. Compromise of this information reasonably could be expected to cause serious damage to US national security. Of equal

importance, we do not believe Dr. Lee has been fully cooperative in identifying or

30

describing other classified information he may have compromised. We believe Dr.

Lee has confessed to compromising selected classified information in the hope his

other, more damaging activities would not discovered or fully investigated.

ROBIN STAFFIN,

Deputy Assistant Secretary, for Research and Development, Office of Defense

Programs.

NOTRA TRULOCK, III,

Senior Intelligence Officer, Office of Energy Intelligence.

JOSEPH S. MAHALEY,

Director, Office of Security Affairs, Office of Nonproliferation and National

Security.

Mr. Chairman, I appreciate the opportunity to appear before your subcommittee

to testify regarding your assessment of how the Peter Lee investigation was conducted.

Since 1996, I have held the position of Deputy Associate Director for Electronics

Engineering at the Lawrence Livermore National Laboratory. In that role, I manage

the 750-person department, which provides electronics engineering support to all

Laboratory programs.

From 1988 to 1996, I held the position of Program Leader for the Imaging and

Detection Program at LLNL. The single largest project in that program was the

Joint UK/US Radar Ocean Imaging Program, which was a DoD-sponsored program

executed by OASD/C3I in the Department of Defense. LLNL was the lead US technical organization, and I was the Technical Program Leader for the Joint UK/US

Radar Ocean Imaging Program from 1990 through 1995. Peter Lee worked as a contractor employed by TRW on that same OSD program.

The Joint UK/US Radar program has made important discoveries and significant

advances in the development of methods to detect submarine signatures with remote sensing radars. Many of the important details of this work are classified.

While at TRW, Dr. Lee had access to these results at the DoD Secret level. Dr. Lee

also admitted to revealing classified information regarding this program while in

China in 1997.

To fully understand what may have been inappropriately revealed to the Chinese,

as well as its potential significance, requires a detailed analysis of Dr. Lee’s statements and an understanding of the R&D thrusts of the Joint UK/US Radar program. A complete analysis would require discussion of classified material. Several

such discussions have taken place since 1997 within the Department of Justice, and

most of these issues have been explored in some detail.

I welcome the opportunity to assist the committee in addressing any concerns you

may have regarding these issues.

DR. RICHARD E. TWOGOOD.

Senator SPECTER. Is that an accurate copy of the referenced report?

Dr. COOK. Yes, sir, it is.

Senator SPECTER. And do your report and this report elaborate

upon the fact that it was concluded that Dr. Lee provided classified

information to the PRC scientists beyond that which had been declassified in 1993?

Dr. COOK. It is our assessment and it is my assessment that he

did provide more information than that on which he plea bargained, and that that information was essential and crucial to the

development of modern nuclear weapons.

Senator SPECTER. And with respect to the information which was

declassified in 1993, was there substantial value to the PRC in

having that information in the interim between 1985 and 1993,

when it was classified?

Dr. COOK. Yes, sir, I believe there was and——

Senator SPECTER. And why?

Dr. COOK [continuing]. That is an assessment, but the value of

the information provided depends not only on the content of the information, but on the degree of maturity in the nuclear weapons

program which acquires it. And in that time frame, the information

31

provided was a semi-analytical treatment of a method for interpreting temperature inside a hohlraum, basically for interpreting

experiments for the way radiation and matter interact.

Now, at Livermore and Los Alamos, we had moved beyond semianalytical treatments. We were using computer models, and I assessed that the Chinese program at that time would not likely have

been advanced enough to have taken full advantage of computer

modeling.

Senator SPECTER. So the essence is that when China had that information in 1985, 1986, 1987, 1988, 1989, 1990, 1991, 1992 and

into 1993 before it was declassified, it was of material assistance

to the PRC in developing their own nuclear weapons system?

Dr. COOK. That is my assessment.

Senator SPECTER. And that information had been acquired by the

U.S. Government at a very high cost?

Dr. COOK. Yes, sir, the programs were very expensive.

Senator SPECTER. Up to $6 billion?

Dr. COOK. Yes, sir.

Senator SPECTER. With respect to the possible charge under Section 794 which relates to nuclear weaponry—that is the statutory

language—does this fall into the category of nuclear weaponry?

Dr. COOK. In my opinion, it does, given that I am an amateur

at understanding those kinds of guidelines. However—— Senator SPECTER. Well, you may be an amateur at the statute,

but you are not an amateur at what is nuclear weaponry, are you?

Dr. COOK. No, sir. And, in fact, if I—my assessment has always

been that if you were moving, as China, we assess, was doing in

the early 1980’s, from large, heavy, crude nuclear weapons to neutron bombs and more sophisticated strategic ones in the 1980’s, the

one thing you would need would be a diagnostician to help you

measure the performance of those weapons.

Senator SPECTER. And Dr. Lee was that kind of a diagnostician?

Dr. COOK. Dr. Lee was that kind of diagnostician.

Senator SPECTER. Senator Sessions.

Senator SESSIONS. I believe your report here refers to him as a

world-class diagnostician.

Dr. COOK. That was my impression. When I first became involved and I scanned down the publications list that Dr. Lee had

and the diverse interests that he had, he kept moving from one

technology to another. And to be able to do that and continue to

publish without a large gap in time, I think, takes a first-class scientist.

Senator SESSIONS. Well, Dr. Cook, I appreciate your approach to

this. I think it is common sense and sound. My experience in thousands of cases is that when people admit something, they usually

don’t admit all they did. I mean, that is just basic criminal law that

you deal with people and they will admit what they think you can

prove, but don’t want to admit any more. So I think it is quite possible, and even likely, that more was given out than Dr. Lee admits

that he gave out.

And in addition to that, I think you made two excellent points

that he was lying about other matters by saying he denied knowledge of classified information and material that he had written

about specifically and been involved in. It also was interesting that

32

he would rapidly tell you all about basic physics matters he was

discussing with China’s greatest scientists, but would be reluctant

to discuss anything of a technical matter. So I think that indicates

deception. In addition to that, we have the FBI’s polygraph showing deception.

So it would be pretty clear to me that regardless of proof beyond

a reasonable doubt in court, reasonable leaders of the United

States of America concerned about trying to make a decision about

what he actually gave out would have to conclude he gave out more

than he admitted. And I think you are correct to have concluded

that and I thank you for your analysis.

I was interested in that there were reports produced by Doctors

Storm and Lindford. Do you know who caused those analyses of

this matter to be conducted?

Dr. COOK. I don’t know. I have passing familiarity with their

comments, I believe.

Senator SESSIONS. My understanding was that the Defense Department asked for that independent review, basically, of your

analysis. Is that correct?

Dr. COOK. I believe that is correct. Refresh my memory. Is this

the analysis that suggested that he was never involved in anything

beyond academic ICF science?

Senator SESSIONS. There was a report, yes, that really minimized

the damage by Doctors Storm and Lindford, and it strikes me as

almost bizarre that that would happen. Do you have any thoughts

about it?

Dr. COOK. Yes, sir, I do.

Senator SESSIONS. Would you share those with me?

Dr. COOK. Surely, thank you. One has to ask that if ICF and ICF

science has no relevancy to nuclear weapons science, then why is

it a major part of our stockpile stewardship program. Furthermore,

the words that you are obviously familiar with in my damage assessment that I filed with the court—I pulled three of those

phrases directly out of a Lawrence Livermore classified document

that had been declassified. At least that paragraph had been declassified where they state the relevance of the Haylight Centurion

research in the early 1980’s to nuclear weapons science.

And those were, one, they were conducting experiments in their

laser laboratories that would allow them to certify, normalize, validate their computer code models of radiation matter interaction.

Two, they were helping design classified experiments and the Nevada test site. And, three, they were helping interpret classified experiments at the Nevada test site. And so those are direct Livermore quotes that are now no longer classified, and that is in opposition to Dr. Storm and——

Senator SESSIONS. Well, I misspoke. I think I said they were Defense Department, but they were the defense lawyers’ report. That

is quite a difference.

Well, thank you for your cooperation and assistance, and for, I

think, your accurate analysis of this matter.

Senator SPECTER. Thank you, Senator Sessions.

Dr. Cook, returning to this evaluation from Staffin, Trulock and

Mahaley, it contains the notion, ‘‘U.S. intelligence analysis indicates that the ICF data provided by Dr. Lee was of significant and

33

material assistance to the PRC in their nuclear weapons development program. Details to be provided in camera. For that reason,

this analysis indicates that Dr. Lee’s activities have directly enhanced the PRC nuclear weapons program, to the detriment of U.S.

national security.’’ Do you agree with that?

Dr. COOK. Absolutely.

Senator SPECTER. And another paragraph, quote, ‘‘In summary,

Dr. Lee has confessed to compromising classified nuclear weapon

design information. The information was properly classified at the

time of compromise, and U.S. intelligence analysis indicates that

this information, in conjunction with other information, was of material assistance to the People’s Republic of China in advancing

their nuclear weapons program. Compromise of this information

reasonably could be expected to cause serious damage to U.S. national security. Of equal importance, we do not believe Dr. Lee has

been fully cooperative in identifying or describing other classified

information he may have compromised. We believe Dr. Lee has

confessed to compromising selected classified information, in the

hope his other more damaging activities would not be discovered or

fully investigated.’’ Do you agree with that?

Dr. COOK. Yes, sir, I do.

Senator SPECTER. Thank you very much.

[Responses of questions from Senator Leahy follows:]

RESPONSES OF THOMAS COOK TO QUESTIONS FROM SENATOR LEAHY

SUBJECT: Disagreement over the Significance of PHY Lee’s 1985 Disclosures

Question A. Are you aware of any scientists or experts who disagree with your

conclusions about the nature and significance of the information disclosed by Lee

in 1985?

Answer A. Yes.

Question B. The answer to (1)(A) is affirmative, please provide the names of any

such scientists or experts and the nature of the disagreement.

Answer B. I think several experts working in Inertial Confinement Fusion (ICF)

programs at Lawrence Livermore National Laboratory (LLNL) disagreed with the

damage assessment. The paper Dr. Lee admitted to having passed to the PRC was

declassified by the time of the hearing—about 10 years after the transfer of information. I understand that this/these scientist(s) wrote a letter to Judge Hatter in Dr.

Lee’s defense. The one name I know is Dr. Eric Storm.

Regarding the nature of the disagreement, I have not spoken with Dr. Storm, but

I assure that he will argue that Lees involvement in the classified Halite-Centurion

programs was only on the academic side of ICF research. But in fact, Dr. Lee published several reports classified SECRET RESTRICTED DATA in the early 1980’s

and he was the technical editor of a classified LLNL Laser Monthly specifically

dedicated to a Halite-Centurion test during that time frame as well.

The physics involved in ICF research is also the physics of thermonuclear weapons (TNWs), albeit at very different pressures, temperatures and length scales. If

ICF science is not relevant to TNW science why is the National Ignition Facility

(NIF) a component of the US science-based-stockpile-stewardship (SBSS) program?

Senator SPECTER. Mr. Preston, thank you for joining us here

today, and if you would identify yourself, and I believe you have

a prepared statement and we will be pleased to hear it at this time.

TESTIMONY OF STEPHEN W. PRESTON, GENERAL COUNSEL,

DEPARTMENT OF THE NAVY, WASHINGTON, DC

Mr. PRESTON. Thank you, Mr. Chairman and Senator Sessions.

My name is Stephen Preston. I am General Counsel at the Department of the Navy. I do have a prepared statement. I think in lieu

34

of reciting it for the committee, I would just ask that it be submitted for the record.

Senator SPECTER. All right. It will be made a part of the record,

as you have requested.

Do you care to make an opening statement?

Mr. PRESTON. No, sir. I would be happy to answer your questions, though.

Senator SPECTER. Have you had an opportunity to examine the

memorandum for General Counsel of the Department of Defense

submitted by Mr. Wayne W. Wilson, Director of Technology and

Evaluation; Mr. John G. Schuster, CNO; and Ms. Donna Kulla, Intelligence Systems Support Office, dated March 9th, which says,

‘‘As requested, my office, the Navy, in 1987, and the Intelligence

Systems Support Office undertook a review of the FBI transcript

of interviews with Mr. Peter Lee dated October 7, 1997, and October 8, 1997. We found these transcripts substantially consistent

with the affidavit provided to the Department in 1997. The statements provided by Peter Lee and the transcripts are consistent

with the previous determination that the material he provided to

the People’s Republic of China was confidential,’’ close quote.

Mr. PRESTON. Yes, sir, I have seen that memo.

Senator SPECTER. Referring to your letter of May 21, 1999—and

we will have this March 9, 2000, memorandum marked next in sequence, and your letter of May 21, 1999, marked subsequently in

sequence.

[The documents referred to follow:]

EXHIBIT 3

MEMORANDUM FOR GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE

SUBJECT: Classification Review of Peter Lee Material

As requested my office, the Navy (N87), and the Intelligence Systems Support Office undertook a review of the FBI Transcripts of interviews with Mr. Peter Lee

dated 10–7–97 and 10–8–97.

We found these transcriptions substantially consistent with the affidavit provided

to the Department in 1997. The statements provided by Peter Lee in the transcripts

are consistent with the previous determination that the material he provided to the

People’s Republic of China was Confidential.

WAYNE W. WILSON,

Director, Technology & Evaluation DASD(I).

DONNA KULLA,

Intelligence Systems Support Office.

JOHN G. SCHUSTER,

CNO N875.

EXHIBIT 4

GENERAL COUNSEL OF THE NAVY,

Washington, D.C., May 21, 1999.

The Hon. CHRISTOPHER COX, Chairman,

The Hon. NORM DICKS, Ranking Minority Member,

Select Committee on U.S. National Security and Military/Commercial Concerns

With the People’s Republic of China,

U.S. House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN and REPRESENTATIVE DICKS: Following up on recent discussions with Committee staff concerning the Peter Lee matter, I am writing to express

the Department’s continuing concern that the draft Committee report is inaccurate

in its account of Lee’s May 1997 disclosure, and to provide information and documentation that we hope will assist the Committee in clarifying the facts as it finalizes its report.

35

1The assessment was originally classified and has been reviewed for declassification. The redacted version attached is unclassified.

We believe that the draft report mischaracterizes the substance and significance

of the disclosure made by Lee during his trip to Beijing in 1997. for example, the

report repeatedly suggests that the disclosure of Lee’s research, ‘‘if successfully completed, could enable the PLA to threaten previously invulnerable U.S. nuclear submarines.’’ There is no support for this proposition in the affidavits submitted by the

Government at sentencing (public records that we understand the Committee has).

Nor is there any support for it in the contemporaneous assessment of the 1997 disclosure provided by the Navy to the Justice Department in connection with the

latter’s consideration of prosecution (a copy of which is attached).1 To the contrary,

that assessment indicated that the information disclosed by Lee, while possible classified in part, was similar to information available from unclassified publications.

Accordingly, the Navy concluded, it would be difficult to make a case that significant

damage had occurred.

The draft report’s description of the Defense Department’s input into the Justice

Department’s determination not to prosecute Lee for the 1997 disclosure in Beijing

is likewise incomplete and thus remains misleading. The report states: ‘‘In 1997, the

decision was made not to prosecute Lee for passing this classified information on

submarine detection to the PRC. Because of the sensitivity of this area of research,

the Defense Department requested that this information not be used in a prosecution.’’ As noted above, in connection with the Justice Department’s consideration of prosecution, the Navy advised that the information disclosed by Lee was similar to information available from unclassified publications and that it would be difficult to

show significant damage as a result. In addition, the Navy was concerned about a

prosecution that could lead to a broader inquiry, quite apart from the substance of

Lee’s 1997 disclosure, in the area of anti-submarine warfare, and it conveyed that

concern to the Justice Department.

The Department condemns any disclosure of classified information on Lee’s part

and supported the prosecution in which he ultimately pled guilty. However, the current draft Committee report creates the erroneous impression that the technology

Lee discussed during his 1997 Beijing trip was highly sensitive and previously unknown, and that his disclosure to the PRC caused grave harm to the national security, imperiling our submarine forces. In the considered judgment of the Navy, fortunately that is not the case.

We appreciate your consideration in this matter.

Sincerely yours,

STEPHEN W. PRESTON.

Senator SPECTER. Had you had access to the tapes and transcript

of Dr. Lee’s confession which has been testified to by Dr. Twogood?

Mr. PRESTON. No, sir.

Senator SPECTER. In your letter of May 21, 1999, to Congressman Cox, you took issue in the second paragraph with the Cox

Commission’s statement, ‘‘If successfully completed’’—I will start a

little earlier. This is your letter, and first I ask if this is accurately

read. ‘‘For example, the report repeatedly suggests that the disclosure

of Lee’s research, if successfully completed, could enable the PLA

to threaten previously invulnerable U.S. nuclear submarines.’’ Is

that an accurate reading?

Mr. PRESTON. I believe so, yes, sir.

Senator SPECTER. And when you said PLA, what do you mean by

that?

Mr. PRESTON. I believe that is a reference to the Chinese military.

Senator SPECTER. At the time that you wrote this, did you have

access to any information beyond Mr. Schuster’s memorandum of

November 14, 1997?

Mr. PRESTON. Senator, that was the principal record evidence

that we had of damage and classification assessment. In addition,

36

we had an affidavit and submission that had been submitted in

connection with the sentencing, and we also had the recollections

of those DOD and Navy personnel who had been previously involved in this and the views of the cognizant offices. But the principal document reflecting and constituting the communications

with Justice about the assessment of the disclosures was the

memorandum prepared by Dr. Schuster.

Senator SPECTER. Well, what do you mean by previous recollections? You have identified three things. You have identified the affidavit by the special agent, you have identified Mr. Schuster’s letter, and you talk about previous recollections.

Mr. PRESTON. I am just referring, sir, in the process leading up

to the preparation and transmission of this letter, a number of people were involved in addressing the situation and——

Senator SPECTER. Well, who were they and what did they say?

Mr. PRESTON. I allude to a number of them in my prepared statement. Within the Department of the Navy, I was assisted by Special Assistant to the Under Secretary for Special Projects and Intelligence, the Deputy Director of the Special Programs Division. That

was Captain Dewispelaere’s successor.

Senator SPECTER. Well, did any of them have access to Dr. Lee’s

confession tapes and transcript?

Mr. PRESTON. Not to my knowledge, sir, I don’t believe so.

Senator SPECTER. Did you make any effort to talk to Dr. Twogood

before writing this letter of May 21st?

Mr. PRESTON. No, sir.

Senator SPECTER. Did you make any effort to obtain the transcripts or tapes of Dr. Lee’s confession before writing this letter of

May 21st?

Mr. PRESTON. No, sir.

Senator SPECTER. Had you known about the specifics of the tapes

and the transcripts and Dr. Twogood’s evaluation of Dr. Lee’s confession as classifying secret information and, as you have heard

him testify here, giving away the essence of this Navy program,

would you have written this line disagreeing with the Cox Commission’s conclusion?

Mr. PRESTON. Sir, in the May 1999 time frame the issue that we

were wrestling with and the concern at DOD was not focused on

the level of classification of the information, but rather on the assessment as to damage done and the availability or non-availability

of the information or similar information that was disclosed in public, open sources.

So the specific level of classification—my understanding had

been that it was classified as confidential, although that was a

proposition that was not free from doubt or in the sense of possible

challenge to the extent that there was information in the public domain concerning this, as well as the method by which the classification guide would be applied.

But our focus in May 1999 was on the extent to which there had

been actual damage to the national security and the extent to

which Peter Lee’s disclosures disclosed things that were or were

not already in the public domain.

37

Senator SPECTER. Well, Mr. Schuster’s memorandum—we are

about to get to that—was ambiguous even as to whether it was

confidential. Isn’t that a fact?

Mr. PRESTON. I would have to concede, sir, that it is not a model

of clarity. I understood it to be saying that the information was

confidential, but that that was a matter that was not free from

doubt.

Senator SPECTER. So it was ambiguous? I don’t want to settle for

‘‘not a model of clarity.’’ If you think it was not ambiguous, say so,

or if you agree it was ambiguous, say so.

Mr. PRESTON. I don’t believe it was deliberately ambiguous.

Senator SPECTER. I am not asking about deliberateness. Was it

ambiguous or not?

Mr. PRESTON. I could see how it could admit of different readings, yes, sir.

Senator SPECTER. Dr. Twogood, I think you have testified to this,

but let’s sharpen it up even more. Was the material which you

heard Dr. Lee confess to on the tapes in the public domain?

Dr. TWOGOOD. Not to my knowledge, no.

Senator SPECTER. And I think you have already testified to

this——

Dr. TWOGOOD. There were some classified portions. Much of what

was on the tapes might have been in the public domain, but a few

key segments which included the classified information——

Senator SESSIONS. Well, there was classified information in Dr.

Lee’s confession that was not in the public domain.

Dr. TWOGOOD. That is correct.

Senator SPECTER. And you have already testified to this, but let’s

sharpen it up. There was significant damage to U.S. national security interests by what Dr. Lee had told the PRC scientists, correct?

Dr. TWOGOOD. That is my opinion, yes.

Senator SPECTER. Well, Mr. Preston, if you had had access to

those tapes and had talked to Dr. Twogood, would you have written

this letter of May 21, 1999?

Mr. PRESTON. Sir, I am not sure my access to the tapes would

have made any difference. What I was doing—what we were doing

in the May 1999 time frame was relying on the professional judgment of the program experts which was reflected chiefly in Mr.

Schuster’s memorandum and——

Senator SPECTER. Well, they didn’t have——

Mr. PRESTON. Excuse me.

Senator SPECTER. Go ahead.

Mr. PRESTON. And the views of virtually every cognizant office

within DOD and the Navy that——

Senator SPECTER. Cognizant office?

Mr. PRESTON. An office with an interest in the program area, the

program legal policy, as well as program. We——

Senator SPECTER. Well, those are a lot of big, fancy words, but

did anybody there talk to Dr. Twogood or examine the tapes or the

transcript?

Mr. PRESTON. Well, as I said earlier, I don’t know of anyone that

examined the tapes or transcripts, and I couldn’t speak to whether

anyone had had any conversations with Dr. Twogood.

38

Senator SPECTER. Well, I think the answer is no, and we are

going to talk to Mr. Schuster, but we have talked about this on the

record before. But let me repeat the question. If you had talked to

Dr. Twogood and had examined the tapes or not examined the

tapes—perhaps you are not competent to make an evaluation, but

if you talked to Dr. Twogood and heard that there was classified

information which was not in the public domain and there was

damage to national security—had you taken the time to make

those inquiries, would you have written this letter of May 21?

Mr. PRESTON. Sir, I would have had to have deferred to the program experts on that.

Senator SPECTER. Well, does that mean you wouldn’t have written that letter unless the program experts had backed up this letter?

Mr. PRESTON. I believe that the concern at that point in time was

that the Cox committee report had the potential of creating a widespread misperception that by virtue of Lee’s disclosures the submarine force had been rendered vulnerable to adversaries. And I

frankly as I sit here am unable to parse between what I have heard

Dr. Twogood say, what I understand Dr. Schuster and others to

have believed, and frankly is not within my area of expertise to

make that judgment.

Senator SPECTER. Well, all right. If you can’t parse it and you

couldn’t come to a conclusion, then would you have written this letter which does come to a conclusion?

Mr. PRESTON. I don’t know that I can answer your question any

more satisfactorily than I have, sir.

Senator SPECTER. Well, I will try some more. We are about to

take up Mr. Schuster’s memorandum. Mr. Schuster hadn’t talked

to Dr. Twogood either. Mr. Schuster hadn’t reviewed the tapes. Mr.

Schuster didn’t know the full import as to what Dr. Lee had said

and the Navy was not operating with all the information. Nobody

had taken the trouble to go back and find out.

I think somebody should have told you about that. I think the

Department of Justice should have told you about that.

Mr. PRESTON. Well, sir, let me speak to that. My understanding,

and I think the understanding of others in the May 1999 time

frame was that the classification and damage assessment that was

performed was performed on the basis of the product of the FBI’s

investigation of the Peter Lee matter.

Senator SPECTER. Well, was there a damage assessment? There

wasn’t a damage assessment by the Navy, was there?

Mr. PRESTON. Well, sir, I am referring, of course, to Mr.

Schuster’s memorandum which reviewed the matter for classification as well as damage to national security.

Senator SPECTER. Isn’t it a fact, Mr. Preston, that there wasn’t

a damage assessment based on those tapes and the scientific information until after this subcommittee asked the Navy to do that?

Mr. PRESTON. I don’t believe that the program people looked at

tapes or transcripts prior to that time. What I was getting at, Senator, was my understanding of your interest in the process that

was followed here, interest in improving the process, one which we

share. And to be frank, if this was a circumstance where the program people did not have access to material that they felt they

39

needed and that would make a difference, I think that is an issue

with the process.

But all I can tell you is in the May ’99 time frame, our understanding was that the assessment was performed on the basis of

information provided by the FBI reflecting the product of their investigation. And I was not aware of, and I don’t know of anyone

else that was aware of any deficiencies in that information at that

time.

Senator SPECTER. Well, Mr. Preston, you are correct that what

we are looking for here is a way to prevent these problems from

recurring. There may also be some inquiry as to whether there can

still be a prosecution of Dr. Lee for this issue on these disclosures

in 1997.

But it seems to me that your letter of May 21st was based upon

totally incomplete information, and it should have been presented

to you by the Department of Justice or you could have made an inquiry on your own. But I don’t think it is a very complicated matter

that this statement disagreeing with the Cox Commission has no

foundation in light of what information was available from Dr.

Twogood and the specifics of Dr. Lee’s confession and the scientific

assessment that there had been damage to national security.

Now, if you say you still weren’t certain because there was a contrary opinion—I don’t know that you had a contrary opinion; we

are going to talk to Dr. Schuster in a moment or two—you still had

no basis for saying this if you were not convinced that Twogood

was right or wrong.

Mr. PRESTON. Senator, I think there were two propositions of

which we were aware and of which we understood the Cox committee not to be aware that we thought were material to understanding the circumstance in terms of damage to the national security and the security of the submarine force.

One of those propositions was the fact that information that Dr.

Lee disclosed in May of 1997 was similar to information found in

unclassified briefings and publications, according to Mr. Schuster’s

memo. The second proposition was the judgment by Mr. Schuster

and the program people that it would be difficult to show that

there had been significant damage to the national security.

We felt that we should provide that information to the Cox committee so that their report—they would have an opportunity to provide a complete report, or a more complete report, and therefore a

report that was less subject to misinterpretation, less subject to the

misperception that Lee’s disclosures had in themselves rendered

the submarine force vulnerable.

Senator SPECTER. Had you known of what Dr. Twogood found,

would you have written this letter of May 21?

Mr. PRESTON. I think it would be fair to say that I would have

consulted—I think all of us involved in this would have consulted

the program experts to find out whether they viewed that as material to their assessment.

Senator SPECTER. So you wouldn’t have written this letter until

you had taken another step. That is what you just said, consulting

your experts.

Mr. PRESTON. I guess what I am trying to say is if we had had

additional information or additional input, presumably we would

40

have taken that into account. It wouldn’t have been my personal

judgment, frankly, but the judgment of the program professionals.

Senator SPECTER. Well, I can understand your writing this letter

not knowing the facts. I can’t understand your defending this letter

knowing the facts.

Senator Sessions.

Senator SESSIONS. Thank you, Senator Specter. You have raised

some very important points.

You are the General Counsel for the Navy?

Mr. PRESTON. Yes, sir.

Senator SESSIONS. And so when you write a letter to a Congressman of the recognized brilliance and capability and dedication of

Congressman Cox, that is a serious matter, is it not?

Mr. PRESTON. This most certainly was a serious matter.

Senator SESSIONS. Don’t you owe it to him to have complete information?

Mr. PRESTON. Senator Sessions, we provided that information

that was available to us based on the findings of the program professionals, based on the views of those who had some contemporaneous involvement of this in the fall of 1997, and based on the

views of virtually every cognizant office we could identify in both

the Navy and the Office of the Secretary of Defense.

Senator SESSIONS. Well, you have already acknowledged there

was other information readily available that you didn’t obtain.

Mr. PRESTON. I am not sure I agree with that proposition. It is

my understanding now that when the damage and classification review was performed in the fall of 1997 that it was based on an affidavit, a draft affidavit summarizing the findings of the FBI and

their investigation, and that the transcripts and tapes of the confessions were not provided.

Senator SESSIONS. Did you ask for them?

Mr. PRESTON. I don’t know whether anyone asked for them in the

fall of 1997. I was not in office during that period.

Senator SESSIONS. When you wrote your letter.

Mr. PRESTON. I beg your pardon?

Senator SESSIONS. When you wrote your letter.

Mr. PRESTON. In May 1999, we did not ask for tapes and transcripts.

Senator SESSIONS. How did it come to the General Counsel of the

Navy that this matter needed to be responded to?

Mr. PRESTON. Well, sir, as I recite in my prepared statement, our

attention to this in the May——

Senator SESSIONS. I mean, who within the Navy contacted you

to say there is a problem with this, or outside the Navy?

Mr. PRESTON. I couldn’t tell you from recollection what the first

contact was. There were press reports in May, on May 10, that generated a good deal of attention and concern in both the Office of

the Secretary of Defense and the Department of the Navy. I was

one of the people involved in responding to that situation.

Senator SESSIONS. Well, it looks pretty clear to me that this was

a political response through and through, and it was designed to

attack the integrity of the Cox report. And it does appear to me

that it was hastily drawn and inaccurate and not possessed of sufficient information.

41

As a lawyer, particularly chief counsel for the Navy, when a lawyer goes to court and makes a representation, doesn’t he indicate

that he has exhausted all reasonable opportunities to receive information and that that representation is based on a good-faith and

honest analysis of all pertinent information? Isn’t that a duty of a

counsel in a court of law?

Mr. PRESTON. Senator, most respectfully, I cannot accept your

characterization of what the impetus was for this letter, nor the

process that generated it.

Senator SESSIONS. Well, it was first drafted as a press release,

was it not?

Mr. PRESTON. It was—the substance of it was first prepared in

the form of a press statement, in the form of a letter to the editor

of the New York Times, the principal concern being the possibility

of a widespread public perception with respect to damage to national security and the security of the submarine force and an effort to dispel that misimpression.

Senator SESSIONS. I think you are stretching that.

Mr. PRESTON. I feel compelled to point out, sir, that that press

release wasn’t issued. Instead, we engaged with the Cox committee

prior to the issuance of its report, and that effort eventuated in

sending a letter which was not released to the press. It was sent

to the Cox committee and the Cox committee staff for their benefit

to try to apprise them of information and to provide them with a

pertinent document that we understood they were unaware of.

Senator SESSIONS. The Cox report—how did it get released?

Mr. PRESTON. How did the Cox report get released?

Senator SESSIONS. The letter get released?

Mr. PRESTON. To my knowledge, sir, the Department of Defense

and the Department of the Navy have never released this document publicly.

Senator SESSIONS. You are not aware of how it became public?

Mr. PRESTON. It was provided to the chairman and the vice

chairman.

Senator SESSIONS. Well, of course, it would be provided to the minority members of the committee, too, wouldn’t it?

Mr. PRESTON. It was provided to the chairman and the vice

chairman.

Senator SESSIONS. And the vice chairman, the minority—— Mr. PRESTON. It was provided to this subcommittee early in its

work last fall.

Senator SESSIONS. Well, how long did it take that thing to pop

out of the Cox committee and into the newspapers?

Mr. PRESTON. I will be honest with you, sir. I have not made a

study of the matter. I have not seen this letter referred to in the

press.

Senator SESSIONS. Well, the fact that this analysis was challenged has been in the press, has it not?

Mr. PRESTON. I have no idea what sort of coverage this subcommittee’s efforts is getting. I will just repeat—— Senator SESSIONS. I mean back at the time you wrote the letter.

Mr. PRESTON. No, sir, I am not aware of any press coverage making reference to the letter. I have not done a database search or

read all the papers for that purpose. As a matter of fact, when the

42

Cox committee report came out, the determination was made that

we would not release the letter because there was nothing to be

achieved by further airing the disagreement in interpretation.

Senator SESSIONS. Let me ask this just to get the record straight.

How did it fall to you to do the letter? Do you normally respond

to inaccurate congressional reports within the Department of Defense, reports you believe to be inaccurate?

Mr. PRESTON. Sir, I think it probably fell to me in two respects.

First of all, in the November of 1997 time fame, it had been a Navy

assessment that was prepared that was transmitted by the then

Navy General Counsel in November of 1997. If you fast-forward to

May 1999, this was an issue that was being actively worked in

both OSD and the Department of the Navy. And in terms of trying

to deal at a staff level with the Cox committee, it fell to me as a

matter of being assigned the laboring oar to interface with the Cox

committee.

Senator SESSIONS. Did you personally talk with the Secretary of

Defense about it?

Mr. PRESTON. I have never spoken to the Secretary of Defense

about this.

Senator SESSIONS. Has there been any reference to you at any

time leading up to the preparation of this letter that the White

House had requested the Navy to respond?

Mr. PRESTON. I don’t recall any White House request to the Navy

to respond.

Senator SESSIONS. So there could have been?

Mr. PRESTON. I am just offering you my best recollection.

Senator SESSIONS. So there could have been. You don’t recall?

Mr. PRESTON. I think if there had been, I would recall, but I

don’t recall.

Senator SESSIONS. Thank you, Mr. Chairman.

Senator SPECTER. Thank you, Senator Sessions.

[The prepared statement of Mr. Preston follows:]

PREPARED STATEMENT OF STEPHEN W. PRESTON

Stephen W. Preston is the General Counsel of the Department of the Navy. He

was appointed, with the advice and consent of the Senate, on September 25, 1998.

The General Counsel is the chief legal officer of the Department and serves as the

principal legal advisor to the Secretary of the Navy. He oversees an office of 650

attorneys in this country and abroad, providing legal counsel to the Secretariat and

components of the Navy and Marine Corps.

For the previous three years, Mr. Preston served as a Deputy Assistant Attorney

General at the U.S. Department of Justice, where he was in charge of the Appellate

Staff of the Civil Division. He was responsible for civil litigation in the courts of appeals on behalf of the United States.

From 1993 to 1995, Mr. Preston served in the Office of General Counsel of the

Department of Defense, initially as Deputy General Counsel (Legal Counsel), then

as the Principal Deputy General Counsel and, from March 1994 through September

1994, as Acting General Counsel. Upon his departure, he was awarded the Department of Defense Medal for Distinguished Public Service.

Before entering government service, Mr. Preston was a partner in the Washington, D.C. law firm of Wilmer, Cutler & Pickering. There, from 1986 to 1993, he

was engaged in a trial and appellate litigation practice with emphasis on federal

securities law.

From 1984 to 1985, Mr. Preston was a visiting fellow in the Washington, D.C. office of the Center for Law in the Public Interest. From 1983 to 1984, he served as

a law clerk to the Honorable Phyllis A. Kravitch on the U.S. Court of Appeals for

the Eleventh Circuit.

43

A member of the District of Columbia bar, Mr. Preston is active in the American

Bar Association’s Section of Litigation, currently serving as Co-Chair of the Government Litigation Counsel Committee.

In 1979, Mr. Preston received his bachelors degree (summa cum laude) from Yale

University. He completed a graduate program (with First Class Honors) at Trinity

College, University of Dublin, in 1980. In 1983, he received his law degree (magna

cum laude) from Harvard University.

Thank you, Mr. Chairman and members of the Subcommittee.

I have been asked to appear before the Subcommittee today in connection with

its inquiry as it pertains to the matter of Peter Lee, specifically Lee’s disclosure to

the Chinese during a trip to Beijing in May 1997. As I did not become General

Counsel of the Navy until September 1998, I have no first-hand knowledge of events

in 1997 relating to Lee, including communications between the Department of Justice and the Department of Defense in the fall of 1997 concerning possible prosecution. I am, however, familiar with the circumstances of a May 21, 1999 letter to the

Cox Committee, in which the Subcommittee staff has expressed interest. I will endeavor to address that aspect of the matter at this time.

The Peter Lee matter received a great deal of attention within the Department

of Defense between May 10, 1999, and May 25, 1999. Beginning on May 10th, a

number of newspaper stories referring to Lee’s May 1997 disclosure caused considerable concern in the Office of the Secretary of Defense and the Department of the

Navy over a misperception that Lee had disclosed highly sensitive and previously

unknown technology imperiling America’s submarine force. One or more of these

stories pointed out that the Peter Lee case would figure in the report of the Select

Committee on U.S. National Security and Military/Commercial Concerns with the

People’s Republic of China (referred to as the ‘‘Cox Committee’’), the release of

which was said to be imminent.

Examination of the relevant portion of a draft of the Cox Committee report compounded the concern over misperception of Lee’s May 1997 disclosure in terms of

its substance and significance, as well as the account of later contacts between DOJ

and DOD. There followed an effort to apprise the Cox Committee of that concern

and provide clarifying information, which was received apparently in all good faith,

but unfortunately to limited effect. DOD’s continuing concern prompted transmission of my May 21, 1999 letter to the Cox Committee and, as an attachment,

the assessment of Lee’s May 1997 disclosure provided by the Navy to DOJ in November 1997. The report of the Cox Committee was produced over the holiday weekend and issued on May 25, 1999.

My understanding of events in the fall of 1997 is as follows: In connection with

DOJ’s consideration of prosecution, the Navy was asked to review a draft affidavit

summarizing the product of the FBI’s investigation of Peter Lee in order to assess

the level of classification of the information disclosed by Lee in Beijing and the extent of damage to the national security resulting from the May 1997 disclosure. The

Navy’s assessment, set forth in a memorandum dated November 14, 1997, was

transmitted to DOJ on November 19, 1997. That assessment found that the information disclosed by Lee, evidently drawn from a document previously classified

CONFIDENTIAL by compilation, was similar to information available from unclassified publications. The assessment further concluded that it would be difficult to

make a case that significant damage had occurred as a result of the May 1997 disclosure. Finally, the memorandum expressed concern about public proceedings that

could draw attention to the area of antisubmarine warfare.

From DOD’s perspective, the problem with the draft Cox Committee report, as of

May 21, 1999, was essentially one of omission. The draft report alluded to the impact of Lee’s disclosure on the security of the submarine force, as well as contacts

between DOJ and DOD concerning possible prosecution. It did not, however, make

any reference to the fact that the techniques Lee discussed with the Chinese were

discussed in open sources and the judgment that it would be difficult to show significant damage to the national security. In this sense, the draft report was viewed

as incomplete in its treatment of the May 1997 disclosure and subject to misinterpretation. The Cox Committee presumably was unaware of the Navy’s contemporaneous assessment before it was brought to the staff’s attention in mid-May 1999.

It was to stress DOD’s concern in this regard, and to furnish a copy of the November 14, 1997 memorandum, that the May 21, 1999 letter was sent to the Cox Committee.

In understanding the circumstances of the May 21, 1999 letter to the Cox Committee, it may be useful to consider the process by which that letter was generated.

First, underlying the letter was the November 14, 1997 memorandum setting forth

the Navy’s assessment of the May 1997 disclosure. That assessment was performed

by the Science and Technology Branch of the Submarine Warfare Division on the

44

Chief of Naval Operations Staff. It was signed out by the Head of the Branch

(N875), and concurred in by the Deputy Director of the Division (N87B), the Assistant Deputy Chief of Naval Operations for Resources, Warfare Requirements and Assessments (N8B) and the Vice Chief of Naval Operations (and, in addition, the General Counsel of the Navy). In short, the assessment was the work of the Navy experts responsible for submarine warfare science and technology, and it was approved all the way up the OPNAV chain of command.

The substance of the May 21, 1999 letter was originally drafted as a press statement (in the form of a Letter to the Editor). This was a collaboration of the Office

of the Under Secretary of Defense for Acquisition and Technology, the Office of the

Under Secretary of Defense for Policy, the Office of the Assistant Secretary of Defense for Command, Control, Communications and Intelligence, the Office of the Assistant Secretary of Defense for Public Affairs, the DOD Office of General Counsel

and myself. During this timeframe, I was assisted by the Deputy Director of the

Special Programs Division (N89B), the Assistant to the Under Secretary of the Navy

for Special Programs and Intelligence, a Special Agent in the Counterintelligence

Department of the Naval Criminal Investigative Service and Counsel for the Special

Projects Division. The letter to the Cox Committee itself was prepared by DOD OGC

and myself, and then distributed for coordination. The final draft received concurrences from OASD(C3I), DOD OGC, OUSN/ASP&I, the Deputy Director of Naval Intelligence (N2B), the Deputy Director of the Special Programs Division (N89B) and

the Vice Chief of Naval Operations, as well as the OSD and DON legislative offices.

The principal cognizant offices—OSD and DON, program, policy and legal, civilian

and military—having participated in its preparation and review, I was (and remain)

confident that the May 21, 1999 letter reflected the considered judgment of program

professionals with respect to Lee’s May 1997 disclosure and the corporate view of

DOD with respect to the draft Cox Committee report.

I appreciate your attention and am prepared to answer questions.

Senator SPECTER. Dr. Schuster, the memorandum that you prepared dated November 14, 1997, will be marked part of the record.

[The memorandum referred to follows:]

EXHIBIT 5

MEMORANDUM FOR REQUEST FOR CLASSIFICATION GUIDANCE (U)

1. (u) The signal analysis techniques briefed by the subject are UNCLASSIFIED

when applied to environmental data and they have been presented and published

in several unclassified forums. Any application of the technique to submarine wake

signatures, however, would be classified at the SECRET level, as called but in current classification guides.

2. (u) The material that was briefed appears to have been extracted from a CONFIDENTIAL document. This classification was applied based on concern that the

document, taken as a whole, might suggest a submarine application even though it

was not explicitly stated. Given that the CONFIDENTIAL classification cannot be

explicitly supported by the classification guides and that material similar to that

briefed by the subject has been discussed in unclassified briefings and publications,

it is difficult to make a case that significant damage has occurred. Further, bringing

attention to our sensitivity concerning this subject in a public forum could cause

more damage to national security than the original disclosure.

3. (u) Based on the above, it is recommended that the disclosure of this material

should not be considered as the sole or primary basis for further legal action.

J.G. SCHUSTER. JR.,

Head, Science & Technology Branch.

Senator SPECTER. I will ask you at the outset if that is an accurate memorandum that you prepared?

STATEMENT OF JOHN G. SCHUSTER, JR., BRANCH HEAD, SUBMARINE SECURITY AND TECHNOLOGY, DEPARTMENT OF

THE NAVY, WASHINGTON, DC

Mr. SCHUSTER. Yes, sir.

Senator SPECTER. Thank you for joining us and we would be

pleased to hear any opening statement you care to make.

45

Mr. SCHUSTER. Yes, sir. My name is John G. Schuster. I am the

Branch Head for Submarine Security and Technology, and I report

to the Director of Submarine Warfare on the staff of the Chief of

Naval Operations. In this position, I am responsible for the SSBN

security program, including all the projects in submarine warfare

related to non-acoustic anti-submarine warfare.

In the fall of 1997, I received a request from Captain Earl

Dewispelaere, who was then OPNAV N89B, to review an FBI affidavit regarding the disclosure of potentially classified material by

Mr. Peter Lee to the People’s Republic of China. I was asked to

give my opinion on the seriousness of the disclosure made by Mr.

Peter Lee and to evaluate whether level of damage caused justified

a prosecution that might risk exposure of other non-acoustic ASW

information.

I reviewed the affidavit, as well as additional published information authored by Mr. Peter Lee, and wrote an internal memorandum to Captain Dewispelaere summarizing my conclusions on

November 14, 1997, which is the letter just referred to. In this letter, I stated that classified information at the confidential level had

been divulged, but that the information released did not cause significant damage to national security. Moreover, it was my opinion

that bringing attention to our sensitivity concerning this subject in

a public forum could cause more damage to national security than

the initial disclosure.

In the spring of 1999, I was asked by Captain Dewispelaere to

review the classification of the November 14 memorandum for release to the Cox committee. I concluded that the memorandum was

unclassified and could be released.

The above actions describe my total involvement in the Peter Lee

case prior to being questioned in connection with the investigations

of the Senate Judiciary subcommittee starting last fall.

Senator SPECTER. Dr. Schuster, the memorandum which you cosigned with Mr. Wilson and Ms. Kulla dated March 9, 2000, had

been prepared after you had an opportunity to review what materials?

Mr. SCHUSTER. That was after we reviewed the transcripts of

the, I believe, October 7 and 8 interviews with Mr. Peter Lee.

Senator SPECTER. And was that review essentially done at the

request of this subcommittee?

Mr. SCHUSTER. Yes, sir.

Senator SPECTER. In this memorandum, you say that the statements of Dr. Lee constituted a disclosure of confidential information?

Mr. SCHUSTER. Yes, sir.

Senator SPECTER. Had you reviewed the transcripts before you

wrote your memorandum of November 14, 1997——

Mr. SCHUSTER. No, sir.

Senator SPECTER. Well, I was about to say, had you done so,

would you have come to a firm conclusion in that November 14,

1997, memorandum that Dr. Lee’s disclosures were confidential?

Mr. SCHUSTER. My intention on November 14th, ’97, was that

they were confidential.

Senator SPECTER. Do you think that memorandum says they

were confidential?

46

Mr. SCHUSTER. I believe it does. That was my interpretation.

That is the way I wrote it.

Senator SPECTER. You don’t think it is ambiguous?

Mr. SCHUSTER. I understand that question has been asked. I

didn’t think so at the time.

Senator SPECTER. It hasn’t been asked to you.

Mr. SCHUSTER. I’m sorry, sir?

Senator SPECTER. It hasn’t been asked to you today.

Mr. SCHUSTER. Yes, sir. I understand the statement has been

made.

Senator SPECTER. Do you think your memorandum is ambiguous?

Mr. SCHUSTER. I understand, you know, as I said, that perhaps

there could be different interpretations. My intention was to make

it clear, but—— Senator SPECTER. You have heard Dr. Twogood’s testimony that

he thinks the information disclosed by Dr. Lee was appropriately

classified at the secret level. Why do you disagree with that?

Mr. SCHUSTER. Based on my review—— Senator SPECTER. I don’t want you to get into anything, I don’t

have say, classified.

Mr. SCHUSTER. I will not.

Senator SPECTER. But if you can’t answer it without doing so— but if you can, we would like to know your answer.

Mr. SCHUSTER. It was based on my review of the—I mean, certainly, in the affidavit the information he was alleged to have disclosed and the sources of that information which were classified at

the highest level, confidential. And the majority of that information

that was classified confidential had been previously published at

the unclassified level.

Senator SPECTER. Well, isn’t Dr. Twogood—whether you may disagree with his classification or not, isn’t it true that, as Dr.

Twogood has testified, there were materials disclosed by Dr. Lee to

the PRC scientists that had not been in the public domain?

Mr. SCHUSTER. There was a confidential report. Clearly, that was

not in the public domain. Peter Lee, in the information we had,

said that he released the details of that report. So therefore he did

release confidential information that was not in the public domain.

However, the majority of that information, the confidential report,

had been separately published in unclassified publications.

Senator SPECTER. Well, but isn’t Dr. Twogood correct that there

were portions as to what Dr. Lee admitted giving to the PRC which

was not in the public domain?

Mr. SCHUSTER. Certainly, I understand.

Senator SPECTER. Although you have evaluated the materials as

confidential and Dr. Twogood has evaluated the materials as secret, would you say that there was a rational basis for the disagreement, and that is that Dr. Twogood had a rational basis for a different classification at the secret level?

Mr. SCHUSTER. There certainly can be disagreements on the interpretation of these sorts of things. I believe the evidence supports

the confidential classification and that is what I have stated.

Senator SPECTER. But was there sufficient latitude here for a

reasonable classification by Dr. Twogood of secret?

47

Mr. SCHUSTER. I don’t agree with the classification at the secret

level based on the information I have seen.

Senator SPECTER. So there was no reasonable basis for his classification of secret?

Mr. SCHUSTER. I am not aware of a basis for secret classification.

Senator SPECTER. Dr. Twogood testified that he gave away the

heart, the core—you heard his testimony; I am paraphrasing it—

of the information. Would you disagree with that?

Mr. SCHUSTER. He was talking about the information in the program. This is not my program and I don’t know that I could speak

to the hard core of that program.

Senator SPECTER. So that is beyond the purview of your expertise

or knowledge?

Mr. SCHUSTER. Yes, sir, relative to the program.

Senator SPECTER. So based on your knowledge, you wouldn’t

have a basis for disagreeing with what Dr. Twogood said?

Mr. SCHUSTER. Not in that sense. I couldn’t comment, no, sir.

Senator SPECTER. And how about Dr. Twogood’s conclusion that

there was significant damage done to U.S. national security interests? Would you disagree with that?

Mr. SCHUSTER. I would disagree with that, yes, sir.

Senator SPECTER. Well, what is the basis for your disagreeing

with that if you don’t have sufficient information to evaluate Dr.

Twogood’s conclusion that Dr. Lee gave the core and heart of the

information to the PRC?

Mr. SCHUSTER. My understanding was he said the core and heart

of the program information. I mean, that depends on what the program is, I mean, and it was not my program. It was an OSD program. We were only asked to comment on the information in the

affidavit.

Senator SPECTER. Okay, so you don’t know the details of the program. I understand that, and that is why you didn’t disagree with

Dr. Twogood’s statement about giving away the heart and core of

the program. But the next question which logically follows is what

is the import for national security, and if you don’t know the program, what is your basis for disagreeing with Dr. Twogood’s conclusion that it was a serious national security breach?

Mr. SCHUSTER. My basis for the assessment of the lack of serious

damage was my review of the materials of Peter Lee. The details

of that assessment obviously get into classified information.

Senator SPECTER. Senator SESSIONS.

Senator SESSIONS. Is your analysis and your statement based

solely upon what Peter Lee admitted having said? Did you analyze

his confession?

Mr. SCHUSTER. Yes, Senator.

Senator SESSIONS. Are you aware or do you dispute the fact that

he could have given away more?

Mr. SCHUSTER. Not at all.

Senator SESSIONS. What do you mean?

Mr. SCHUSTER. I don’t dispute that at all.

Senator SESSIONS. That he couldn’t have given away more?

Mr. SCHUSTER. It is possible.

48

Senator SESSIONS. If it had given away more, would your analysis be correct? In other words, your basic analysis in this memorandum was based solely on the specific information he provided?

Mr. SCHUSTER. Yes, sir.

Senator SESSIONS. That he admitted he gave?

Mr. SCHUSTER. Yes, sir.

Senator SESSIONS. Do you acknowledge, as Dr. Cook does, and

would you dispute my statement I made earlier that it is likely he

gave away more than he admitted?

Mr. SCHUSTER. It is certainly possible. I mean, I didn’t attempt

to speculate at that, and at the time, based on the affidavit, we certainly didn’t have the information in the affidavit that would allow

us to draw that conclusion.

Senator SESSIONS. Do you dispute the fact that he had access to

more information?

Mr. SCHUSTER. He did have a secret clearance and my understanding is that he had access to more classified information. But

I don’t know the—again, it is not my program. I don’t know the

level. I mean, I don’t know the details of all the access he had.

Senator SESSIONS. Well, how did you come to write this memo?

Mr. SCHUSTER. I was asked to review the affidavit, to look at

what was in the affidavit and make an assessment based on that

as to what the seriousness of disclosure was.

Senator SESSIONS. So if we are dealing with systemic problems,

wouldn’t you recognize that you have to be real careful here because your memorandum is based solely on the information that he

admitted giving to the Chinese?

Mr. SCHUSTER. Yes, sir.

Senator SESSIONS. And could be misinterpreted?

Mr. SCHUSTER. It could be.

Senator SESSIONS. Would you have any comment on the view

that this memorandum was a body blow to the prosecutor’s case?

Mr. SCHUSTER. I have no opinion. I did not write the memorandum for the Justice Department.

Senator SESSIONS. But ultimately it could have that effect. You

would recognize that an internal Department of Defense memorandum, Department of the Navy memorandum, could have the effect of undermining the ability of a prosecutor to proceed with his

case in a case like this?

Mr. SCHUSTER. I assume that could be possible. I mean, the

memorandum I wrote was what I wrote to the best of my ability,

given the information I had.

Senator SESSIONS. Well, given the information you had, would

you admit that that is a dangerous situation? Did you realize at

the time that this memorandum could eventually have to be produced for the defense and that it could undermine the prosecution

of the case when you wrote it?

Mr. SCHUSTER. No, I did not.

Senator SESSIONS. Do you think that would be something important for people to know in the future?

Mr. SCHUSTER. Yes, sir.

Senator SESSIONS. Did you have any occasion to discuss with any

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49

tents of your memorandum? Was it ever reviewed and sent back

to you with suggestions for change and that kind of thing?

Mr. SCHUSTER. No, sir. I only talked to Captain Dewispelaere.

Senator SESSIONS. Captain who?

Mr. SCHUSTER. Captain Dewispelaere, who was the one who

asked me to generate the memorandum.

Senator SESSIONS. Well, I think that is how we get in a fix. It

is dangerous business to have memorandums floating around by

people who don’t have access to all of the facts, because when the

prosecutor has got to try this case, he has got to say that Mr.

Schuster, head of the Science and Technology Branch of the Navy,

has said thus and so. And so he has got to prove his case beyond

a reasonable doubt and if you have generated some internal document or a document that was expected to be used outside or otherwise that hastily makes opinions about the validity of a prosecution, those can be devastating blows. I am not sure this document

is that. I am not sure it is that clear, but it is certainly not a positive event for the Department of Justice, in my view.

Thank you.

Senator SPECTER. Thank you, Senator Sessions.

Dr. Schuster, you didn’t talk to Jonathan Shapiro about this matter?

Mr. SCHUSTER. No, sir.

Senator SPECTER. Or anybody from the Department of Justice?

Mr. SCHUSTER. No, sir.

Senator SPECTER. Turning to your memorandum, and this is an

unclassified memorandum, correct?

Mr. SCHUSTER. Yes, sir.

Senator SPECTER. You start off, quote, ‘‘The signal analysis techniques briefed by the subject are unclassified when applied to environmental data and they have been presented and published in

several unclassified forums. Any application of the techniques to

submarine wake signatures, however, would be classified at the secret level, as called out in current classification guides.’’

Doesn’t that statement lend some support to Dr. Twogood’s conclusion of a secret classification contrasted with your conclusion on

March 9 of a confidential classification?

Mr. SCHUSTER. The intent of that paragraph was to summarize

the range of the classification guide. The reference to the secret

level is the threshold that I would take to make the material secret, and I saw no evidence in any of the material I saw that he

released information on submarine wake signatures.

Senator SPECTER. Going on, the memorandum says, ‘‘The material that was briefed appears to have been extracted from a confidential document. This classification was applied based on concern that the document taken as a whole might suggest a submarine application even though it was not explicitly stated. Given

that the confidential classification cannot be explicitly supported by

the classification guides and material similar to that briefed by the

subject has been discussed in unclassified briefings and publications, it is difficult to make a case that significant damage has occurred.’’ Isn’t it a fair reading of that sentence, Dr. Schuster, that you are

raising a question as to even a confidential classification?

50

Mr. SCHUSTER. Yes, sir. I think the issue is, if you look at the

classification guides, there is no clear statement that says at this

level it is unclassified and at this level it is confidential. The confidential determination on the report was made by the program

manager of the program when the report was published and it was

based on their concern that the compilation of several sources of

data was at the confidential level.

But you can’t go back and say here is a statement in the classification guide and clearly when these two things happened it became confidential. It was classified confidential, however, and he

knew that. It was a report that had been classified at the confidential level. It was a report that he was involved in and he should

have been aware it was confidential.

Senator SPECTER. Well, I don’t understand your answer. Would

you say that this does raise a question or an ambiguity as to

whether you thought it was confidential?

Mr. SCHUSTER. I clearly—I thought I clearly stated that the document was confidential that he took this material from. Therefore,

the material was confidential. If you try to go back and prove that

it is confidential based on the classification guides, it is very difficult because the classification guides don’t make an explicit statement of, coupling these two things together, they are confidential.

Senator SPECTER. But when you later found out that there was

more to it after reviewing the transcript and tapes, as noted in

your March 9, 2000, memorandum, there was no doubt that it was

confidential, at least confidential?

Mr. SCHUSTER. There was no doubt at that time, and previously,

that it was the material from the confidential report and therefore

was confidential.

Senator SPECTER. No doubt previously that what you had just

from the affidavit and not the tapes that it was confidential?

Mr. SCHUSTER. Yes, that the material he took was from a confidential report and he disclosed that material.

Senator SPECTER. So that what he had disclosed, even before you

saw the transcript and tapes, was confidential?

Mr. SCHUSTER. Yes, sir.

Senator SPECTER. And your last line here, ‘‘Based on the above,

it is recommended that the disclosure of this material should not

be considered as the sole or primary basis for further legal action.’’ As you and I have discussed before when we talked in closed session, that is because you thought that it might be appropriate for

prosecution along with the hohlraum issue?

Mr. SCHUSTER. Yes, sir.

Senator SPECTER. Dr. Schuster, when the classification talks

about filtering techniques, doesn’t that put it into the secret category?

Mr. SCHUSTER. Sorry, sir. Filtering techniques?

Senator SPECTER. Filtering techniques. When the classification

guide refers to filtering techniques, doesn’t that put it in the secret

classification?

Mr. SCHUSTER. I don’t believe so.

Senator SPECTER. In the affidavit which you had reviewed prior

to your November 14 letter, there is a statement, ‘‘Peter Lee said

he told his audience that his lecture was on microwave scattering

51

from ocean waves. Someone from the audience questioned Peter

Hoong-Yee Lee about its application to antisubmarine warfare and

Peter Hoong-Yee Lee said that he agreed with the questioner that

that was its application.’’ So isn’t there really an issue here of the application which is contrary to what you said earlier?

Mr. SCHUSTER. No, sir, I don’t believe it is contradictory. Certainly, Peter Lee worked in anti-submarine warfare. There were

other authors on unclassified papers that worked in anti-submarine

warfare, and the extension to say that there was a possibility that

this stuff could be related, I think, is a conclusion somebody could

draw.

What I didn’t see in any of the information was that there was

specific data given as this is how you would apply it to submarine

warfare or that submarine signatures were involved in any of the

data he showed, or that performance for any submarine warfare

was disclosed, which is what I think you would need to make it secret.

Senator SPECTER. Anything further, Senator Sessions?

Senator SESSIONS. Well, I think the memorandum was ill-advised. And we are talking about Peter Lee being in some Chinese

hotel room, after having lied about how he got there and what he

was doing originally, talking about the application. According to

this affidavit, he said he told the PRC scientists that you filter the

Doppler spectrum at the void and peak to enhance detection. It

sounded like to me he admitted talking about some of the matters

that would have been perhaps something at the secret level.

Mr. SCHUSTER. I believe what he was referring to was surface

ship detections which were part of the confidential report. I mean,

that is my interpretation based on the data I saw.

Senator SESSIONS. I suppose we will be talking more about the

plea bargain later. Is that what you are—— Senator SPECTER. Lots.

Senator SESSIONS. OK; well, I will withhold my comments on

that.

Senator SPECTER. Gentlemen, thank you very much for coming.

The thrust of what we are looking for is to improve the procedures.

That is what we want to do here, and I think that when we deal

with matters of this importance—and I think everyone will agree— there has to be the kind of communication, interaction and thought

so that we all know what is involved.

The Department of the Navy should have been provided with information by the Department of Justice, beyond any question, and

the matter should have been deferred until that was done. And it

is a different question as to the duty of the Navy to make inquiries

in the absence of that information being provided.

But we request what you all are doing. You are all in very, very

important positions, carrying out very, very important matters for

the U.S. Government, and we appreciate what you are doing. We

are all on the same team and Congress has the responsibility to

take a look from time to time at what is going on.

The whole theory of oversight, which is a constitutional responsibility, is that there will be a lot of people paying attention to what

we are doing here, so that when Congress does take the time to

52

take a look, it has a ripple effect throughout the entire Government. We are too busy and too preoccupied to do very much of this.

Very, very little oversight is done.

We will be getting into the heart of the matter next week when

we take up the issues of the plea bargain, and on those occasions

Senator Sessions and I may know a little more about what we are

talking about than getting into the details of the hohlraum and

wakes and all the rest of it.

We thank you for what you do generally and we thank you for

coming here today.

Mr. SAYNER. Senator, before we conclude I would like to just pass

on that we will give to the subcommittee information regarding

when those tapes were sent to our headquarters, the confession

tapes. I have a summary here that there were repeated efforts to

contact DOD, and I don’t have the dates from our headquarters or

who they talked to, but we will provide that information to you.

Senator SPECTER. Well, that is very important as to what the

FBI did in an affirmative way.

We have other potential witnesses who were not called upon to

testify because their testimony would have been cumulative, but

we thank Ms. Donna Kulla and Mr. Wayne Wilson, and their prepared statements will be made a part of the record.

[The statements of Ms. Kulla and Mr. Wilson follow:]

PREPARED STATEMENT OF DONNA KULLA

I was the Program Manager for the Advanced Sensors Applications Program

(ASAP) from October 1990 through October 1999. I was then, and still am, an employee of the Intelligence Systems Support Office (ISSO). This office primarily supports OSD (Command, Control, Communications and Intelligence (C3I)).

In the fall of 1997, I participated in meetings with representatives of the Department of Justice, DoD General Counsel, and the Department of the Navy regarding

Peter H. Lee, a TRW employee. These meetings concerned the Department of Justice’s request for the relevant classification guide and for an evaluation of the appropriate classification of information reported to have been passed by Dr. Peter Lee

to the PRC, as described in an affidavit prepared by Special Agent Cordova of the

Federal Bureau of Investigation.

I reviewed the affidavit and publicly-available information on non-acoustic ocean

imaging, including several articles by Dr. Lee. I also reviewed charts I received directly from Assistant U.S. Attorney Jonathan Shapiro, which he told me during the

course of a telephone conversation Peter Lee had used during his lecture in the

PRC. Subsequently, my office complied and forwarded a literature review, including

Peter Lee’s articles and the charts noted above, as well as a classification guide, to

the DOD General Counsel.

The above actions describe my total involvement in the Peter Lee case prior to

being questioned in connection with the investigation of the Senate Judiciary Subcommittee on Administrative Oversight and the Courts starting last fall.

PREPARED STATEMENT OF WAYNE WILSON

I am the Director of the Office of Technology and Evaluation in the Office of the

Deputy Assistant Secretary of Defense (intelligence) in the Office of the Secretary

of Defense. Since late 1996 I have had oversight responsibility of the Department’s

Advanced Sensor Applications Program (ASAP). ASAP is directly managed in the

Intelligence Systems Support Office (ISSO) which I also oversee.

In the fall of 1997 my staff participated in one meeting that included the Justice

Department, the DoD General Counsel, and the Department of the Navy regarding

Peter H. Lee, a TRW employee. The DoD General Counsel tasked my staff to provide the classification guide to the Justice Department and to search for related unclassified information. We provided that information to the Justice Department and

to the DoD General Counsel. That package of information has been provided to the

Subcommittee. During this time, my staff also participated in telephone conversations with members of the Justice Department on these same subjects.

53

Apart from internal DoD discussions on the details of the incident, this describes

my staff’s involvement prior to being questioned by this Subcommittee.

Senator SPECTER. That concludes the hearing.

[Whereupon, at 12:24 p.m., the subcommittee was adjourned.]

(55)

THE PETER LEE CASE

WEDNESDAY, APRIL 5, 2000

U.S. SENATE, SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT

AND THE COURTS, COMMITTEE ON THE JUDICIARY, Washington, DC.

The subcommittee met, pursuant to notice, at 9:35 a.m., in room

SH–216, Hart Senate Office Building, Hon. Arlen Specter, presiding.

Also present: Senators Grassley, Thurmond, Sessions, Torricelli,

and Leahy (ex officio).

OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S.

SENATOR FROM THE STATE OF PENNSYLVANIA

Senator SPECTER. We have waited for a few minutes here for the

arrival of some of the Senators from the minority, but we are a little past starting time, and we are going to have a complicated

morning because two votes have been scheduled at 11 o’clock. So

we will start at this time.

The Subcommittee on Oversight of the Department of Justice is

going to proceed now with its second hearing on the plea bargain

of Dr. Peter Lee, which involves a matter which is very, very serious, concerning two matters of espionage, one where Dr. Lee in

1985 informed scientists of the People’s Republic of China about

nuclear secrets, and again in 1997 when Dr. Lee informed scientists of the People’s Republic of China about ways to detect submarines.

The Department of Justice entered into a plea bargain which, in

the face of offenses that could have carried the death penalty or life

imprisonment, resulted in a recommendation by the Department of

Justice of a short period of incarceration, which not unexpectedly

resulted in a sentence which had no jail at all but had only community service, a fine, and probation. That plea bargain was entered

into without any damage assessment by the Department of Defense.

The assistant U.S. attorney, the trial attorney, was unaware, according to testimony or according to a statement which I took from

Mr. Jonathan Shapiro in Los Angeles on February 15, that he was

authorized to proceed under 794, which is a tough provision, but

said that his only instruction was to secure a plea bargain, 793 and

1001, and could get nothing more by way of authorization from the

Department of Justice.

56

In interviews with ranking DOJ officials, that was never disclosed to this subcommittee. But documents have been discovered

from the FBI and the Department of Defense that if that plea bargain was declined, there was authorization to prosecute under 794,

again, a fact, at least according to the assistant U.S. attorney, not

made known to him.

We have had a request by Attorney General Reno not to subpoena line attorneys and had an extended meeting with the Attorney General yesterday afternoon, a meeting attended by Senator

Hatch, Senator Grassley, Senator Torricelli, Senator Leahy, and a

good many officials from the Department of Justice, FBI, and staff.

After considering the request of the Attorney General, it was my

judgment that this hearing ought to proceed and it ought to proceed with the subpoena standing. The Attorney General raised an

objection that it was inappropriate to subpoena a line attorney, but

there is an overwhelming weight of authority to the contrary. The

Congressional Research Service has summarized the issue, and I

will make a part of the record a memorandum on this subject.

Senator SPECTER. But suffice it to say for these purposes at this

time that there are many, many, many authorities supporting congressional—many precedents supporting congressional authority to

subpoena line attorneys. As recently as last June 9, 1999, a line attorney was subpoenas by the Governmental Affairs Committee. In

1992 to 1994, Government line attorneys were subpoenaed with respect to the DOJ influence on the Environmental Protection Agency. Line attorneys testified in the Rocky Flats investigation in

1992. In 1975, line attorneys were subpoenaed by the FBI and the

Department of Justice on domestic intelligence issues. Line attorneys were subpoenaed in Watergate, testified in Iran-contra. In

many of the situations, line attorneys were not subpoenaed but testified voluntarily, and this authority goes all the way back to Teapot Dome and is as recent as last year.

The Attorney General raised an issue about morale in the Department of Justice, and I do believe it is a fair observation that

the Department of Justice survived on the morale issue on these

many, many other occasions where line attorneys testified.

I have had some experience myself in the field, having been a

line attorney, as an assistant district attorney in Philadelphia for

some 4 years, and I know what that is like. And then I was district

attorney there for 8 years, so I have some appreciation and insights

as to what it is to have an office. The Attorney General said to me

yesterday that I didn’t understand what it was like being Attorney

General. And I didn’t disagree with that because I haven’t been Attorney General. But I have had some experience both as a prosecutor and as a Senator on the Judiciary Committee for almost 20

years now. And I commented about the scope of my office, 160-plus

attorneys, 30,000 prosecutions, and 500 homicide cases, and said

that if one of my assistants was called upon or if I had been called

upon under circumstances that are present in this matter, I

wouldn’t object; and that, in fact, I think it can have a salutary effect on the morale of the Department of Justice, or should have,

when these questions are raised. And if there are answers, I am

prepared to hear them.

57

But this subcommittee has conducted a far-ranging search and

hasn’t found answers. And what we have found is a concerted and

persistent pattern by the Department of Justice in obstructing Senate oversight, a consistent and persistent pattern of obstructing

Senate oversight.

When we have made requests for documents, they have not been

produced. When we have made requests for eliminating redactions,

we have had no cooperation. When we have interviewed ranking

DOJ officials and have come to the subject of what was done in this

case, nobody told us that there was authority for prosecution under

794. And it was only last night that we received from the Department of Justice information that the Department of Energy damage

assessment had been provided to the Department of Justice, a fact

concealed from this committee.

Now, we are going to inquire about that as well. And it may well

be that the so-called Department of Justice is guilty of obstruction

of justice. And we intend to get to the bottom of that. Mr. Robinson, shaking your head in the negative. We sit and deliberate on

subpoenas, and the Department of Justice, Mr. Robinson, who apparently disagrees with my last statement, sends a letter to the

ranking Democrat commenting about me without sending me a

copy.

I will also make a part of the record a long list of requests which

have been made to the Department of Justice and the Attorney

General specifically where commitments at hearings were made by

Attorney General Reno, commitments were made by her which she

did not fulfill, including my request on May 5th for the specifics on

the plea bargain as to Peter Lee and my request again on June 8th

as to the specifics on the report of the plea bargain on Peter Lee.

[The list follows:]

HEARINGS

July 15, 1998—Judiciary Committee Hearing—Oversight of the Department of Justice

• You asked for the Attorney General’s opinion as to whether it was ‘‘specific and

credible’’ evidence of a legal violation when Mr. Karl Jackson testified that Mr.

Huang said within earshot of President Clinton, ‘‘elections cost money, lots and

lots of money, and I am sure that every person in this room will want to support the reelection of President Clinton.’’ The Attorney General responded that

she would be ‘‘happy to review it with the task force and get back to you.’’ She

did not do so.

March 12, 1999—Judiciary Committee Hearing—Dept. of Justice FY2000 Budget

Oversight

• You requested that the Attorney General make available to the Committee any

writings, memoranda or documents which ‘‘deal with Mr. LaBella with respect

to his recommendations on independent counsel . . ., or whether that issue

came up in any of the Department of Justice documents which led to the appointment of Mr. Vega. Attorney General Reno responded that she would be

‘‘happy to furnish you anything that I can appropriately furnish you on any

matter relating to that.’’ The Attorney General did not follow up by furnishing

information or even to say that there was nothing she could ‘‘appropriately’’ furnish.

• When you stated that Mr. LaBella was quoted as saying that he did not even get

a phone call from the Justice Department that Mr. Vega was going to be nominated, the Attorney General responded that it was her understanding that he

did, but that she would check and let you know. Notwithstanding this commitment to respond, she did not do so.

58

May 5, 1999—Judiciary Committee Hearing—Oversight of the Department of Justice

• The Attorney General agreed to respond in writing as to whether there were any

ongoing investigations as to Mr. Fowler and Mr. Sullivan. She did not do so.

• The Attorney General agreed to respond in writing as to her thoughts on the plea

bargain of Peter Lee, specifically the propriety of the sentence given the seriousness of the offense. Notwithstanding this commitment, the Attorney General did

not respond.

June 8, 1999—Judiciary Committee Hearing—Closed Hearing

• In response to your questions, the Attorney General promised to provide you with

the following three things:

1. A report within a month on where DoJ stood on prosecuting WHL.

2. A report on the Peter Lee plea bargain.

3. Details of the Chung plea bargain.

Notwithstanding this commitment, the Attorney General did not provide any

of these items.

LETTERS

December 2, 1997

• You wrote to the Attorney General requesting that a copy of the Freeh memorandum be made available to the Judiciary and Governmental Affairs Committees. You received a response from Attorney General Reno and Director Freeh

on December 8 stating that they must decline your request.

July 10, 1998

• You wrote to the Attorney General reiterating your request from December 2,

1997, that a copy of the memorandum from FBI Director Freeh recommending

appointment of Independent Counsel on campaign financing reform matters be

made available. No response.

July 23, 1998

• You wrote to the Attorney General requesting a copy of the LaBella report recommending Independent Counsel. No response.

July 22, 1999

• You wrote to the Attorney General (Senator Hatch signed on) requesting all documents in the Department’s possession relating to (1) the Department’s investigation of illegal activities in connection with the 1996 federal election campaigns, and (2) the Department’s investigation of the transfer to China of information relating to the U.S. nuclear program. DOJ staff responded by providing

very little information.

September 9, 1999

• Together with Senators Hatch and Torricelli, you wrote to the Attorney General

regarding the redactions in the transcript of the June 8 closed session hearing.

The Attorney General did not respond to you, but instead met separately with

Senators Hatch and Leahy on the issue.

September 29, 1999

• You wrote to the Attorney General to request the ten pieces of intelligence information mentioned in the United States Department of Justice, Office of Inspector General Special Report on the Handling of FBI Intelligence Information Related to the Justice Department’s Campaign Finance Investigation (July, 1999).

You further requested any analysis available to the Department of Justice related to the validly of the information and its suitability for use in a prosecution

or relevance to a plea agreement. No response.

September 29, 1999

• You wrote a follow-up letter to the Attorney General regarding the documents you

requested on July 22, 1999. Again, no response.

March 15, 2000

• Your counsel, David Brog, was invited to DOJ offices to review the partially

unredacted LaBella memo which had already been reviewed by other members

of Congress. When he arrived, he was informed that he could not review the

memo, since the new head of the Campaign Finance Task Force had to review

it in order to see if further redactions were necessary in light of some ongoing

cases.

59

March 24, 2000

• You wrote to the Attorney General regarding a letter from Assistant Attorney

General James Robinson which was sent to Senator Leahy in time for the Judiciary Committee executive business meeting on March 23. You asked her for

her view of whether it was proper for Mr. Robinson not to send you a copy of

the letter even though you were a topic of the letter. No response.

Senator SPECTER. When Attorney General Reno has appeared at

oversight hearings, she has had the consistent response, ‘‘I will review that and get back to you.’’ So yesterday at the session, while

Attorney General Reno was present and we were talking about the

Peter Lee plea bargain, I asked her what participation she had. I

knew the answer was she had none because I had found that out.

But I said to her, eyeball to eyeball, this is a matter that the Attorney General should have supervised. And she gave me the same

answer: ‘‘I am not going to answer that at this time, but I will

later.’’ Now, in this context, it seems to me that this subcommittee

would not be doing its job if we didn’t pursue this matter at this

time in this open session. This is not the only matter that this subcommittee has to work on, and to get information has been a long,

tortuous struggle. And if at the last minute the Attorney General

is going to come in and say don’t proceed with your hearing, submit

written interrogatories, which is, as any trial attorney knows, totally unsatisfactory because of the absence of follow-up, or take a

deposition and re-evaluate at a later time, we wouldn’t be doing

our duty.

And this is not the only matter on the agenda of this subcommittee. We have to pursue Wen Ho Lee where we have met

fierce resistance from the Department of Justice on getting at the

Attorney General’s redacted statement from June 8 so badly you

can’t tell what the testimony was. We have under request now subpoenas for FBI Director Louis Freeh and former special assistant

Charles LaBella. We have questions outstanding for the plea bargains in John Huang and Charlie Trie and Johnny Chung. We

have the Pauline Kanchanalak case to investigate. We have the

Maria Hsia matter to look into. We have the issues of Vice President Gore’s soliciting hard campaign contributions from the White

House, the refusal of the Attorney General to appoint independent

counsel. And if we take a long, tortuous road, tougher than extracting bicuspids, and at the last minute fooled and say we will do

something else, we wouldn’t be doing our job, and we would have

no chance to finish this investigation in the 9 months remaining in

this administration.

Now, those are just a few of my thoughts. If in the course of this

hearing we approach any classified information, we will adjourn

and have a closed session.

I don’t know if it is worth noting or not, the letter which was put

on my desk from the National Association of Former U.S. Attorneys

objecting to the calling of line attorneys, representing to speak for

a great many people with a single signature. But let it be noted

that the author did not hear the subcommittee’s point of view. And

if the association has anything to say, we would be glad to hear

them in a formal session.

I want to yield to my distinguished colleague, Senator Grassley,

who has shared the podium with me since January 3, 1981, who

60

is the chairman of this full subcommittee, and I again thank him

for allowing me to take the lead on this limited DOJ oversight aspect.

STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S. SENATOR

FROM THE STATE OF IOWA

Senator GRASSLEY. Well, and I feel very comfortable having a

very competent person like you, not only a competent Senator but

also the reputation you had as a prosecutor, to take the lead on a

very difficult situation. And it is too bad that you have to go

through so many hoops to just do our constitutional responsibility

of oversight, and I thank you for being willing to fight hard for that

and to tell you how proud I was yesterday to listen to you at your

meeting with the Attorney General to stand up for the right of

Congress having the information that we need to carry out our constitutional responsibility of oversight. And every Senator should be

proud of what you are doing because the extent to which you would

be run over in this process, every Senator would be diminished to

a considerable degree in each of us fulfilling our constitutional responsibility of oversight.

And so let me thank you for that, and let me say that probably

the credibility of the Justice Department in the case of line attorneys testifying might be a little more legitimate and credible if

there had not been a history of several other instances of

stonewalling in efforts of Congress to get information or even getting answers to our questions in open hearing when they didn’t

have the information available or there wasn’t time to give that information. So thank you very much for doing that.

I have got just a short statement on a small concern of mine that

I want to give today, and as I did last week in our first hearing

on the Peter Lee case, I would like to commend you, first of all,

for your hard work and diligence. And as I also mentioned last

week, this case seems to show a communication breakdown among

the various agencies involved. I think today’s hearing should answer a lot of those questions. I think it is important that we find

out who in the Justice Department made key decisions about how

the case would be prosecuted and charged and why. And it is also

important to find out how much of the evidence was shared or not

shared with the Navy and who made that decision and why that

decision was the way it was.

Was the prosecuting attorney as aggressive as he should have

been? Or were his hands tied by Main Justice? We expect that the

witnesses today from the Justice Department can help answer

these and other questions so that we can gain some accountability

and make some reasonable judgment as to their actions.

As a side note, but an important one, we have uncovered a discrepancy since last week’s hearing, and I think it is something we

need to get to the bottom of. Last week, we received testimony from

the FBI’s Daniel Sayner from the Los Angeles office. He was asked

about the FISA coverage expiring September 1997 and if there was

a request for it to be renewed. Mr. Sayner said yes, but it was

turned down by the Justice Department because the activity in

question was stale.

61

This week, representatives from the Justice Department briefed

us that there was no such record of their turning down a FISA renewal, and they would never have characterized the activity as

stale for what they called ‘‘obvious reasons.’’ We had this exact

same problem in the Wen Ho Lee case. It was also on a FISA application.

The Federal Bureau of Investigation blamed the Justice Department for turning down the FISA request in 1997. The Justice Department says the FBI was told it needed to do more homework.

Subsequent documents that we have discovered show the Justice

Department may have been right, in my view. I hope this subcommittee does what it can to resolve these discrepancies. If we

allow finger-pointing to go unchallenged, we fail to get accountability, which is what we are here for and what this whole set of

hearings are all about under the direction of Senator Specter.

To really learn the lessons from these cases, we have to know

who played what role. We have the first matter under investigation, and I believe this discrepancy should be investigated as well.

I look forward to today’s testimony, and once again, Mr. Chairman, I thank you and commend you for your hard work.

Senator SPECTER. Thank you very much, Senator Grassley.

Senator Thurmond.

STATEMENT OF HON. STROM THURMOND, A U.S. SENATOR

FROM THE STATE OF SOUTH CAROLINA

Senator THURMOND. Mr. Chairman, I commend you for holding

these hearings to discuss the Dr. Peter Lee espionage investigation,

the plea-bargaining process that was involved, and the subsequent

sentencing of Lee.

The damage done by espionage, whether nominal or egregious, to

our national security interests is something that each of us must

consider very seriously. After gathering full information and facts,

we on this committee must take a positive approach regarding this

oversight to determine what we can do to assist our law enforcement agencies not only to curtail espionage but also to focus on

swift, certain, and proper punishment to those involved in any type

of espionage against our country.

I have serious concerns about the plea bargain allowed in this

case. It appears that Lee’s sentence was extremely light given the

seriousness of his conduct, his failure to cooperate, and his failure

even to be truthful with authorities.

I believe these hearings are important in regard to protecting our

national security interests. Mistakes and shortcomings of the past

cannot be wiped clean, but we can take steps that will hopefully

serve to preclude identified mistakes of the past from occurring in

the future.

I welcome our witnesses to this hearing and look forward to discussing this important matter with them today.

Thank you, Mr. Chairman.

Senator SPECTER. In order of sequence, which is our practice,

Senator Sessions?

62

STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR FROM

THE STATE OF ALABAMA

Senator SESSIONS. Thank you, Chairman Specter.

I have served as an assistant U.S. attorney, a line prosecutor, for

two and a half years and as a U.S. attorney for 12. I have seen this

matter from both sides. I have had hearings in this committee

where my assistants have testified on matters, at least in the

House committee, and it strikes me odd that people would suggest

that a public servant could never be called and should never be

called to discuss matters occurring.

I have read your questioning of Mr. Shapiro, Senator Specter,

and I think his testimony is a crystal-clear, ringing testimony of a

competent, experienced, capable assistant U.S. attorney whose

knowledge of the case was extraordinary, whose dedication to justice was total, and who was blocked time and time and time again

by people in the Department of Justice from doing what he knew

to be his duty. It is plain. Anybody who reads it knows it, who has

been there and who has dealt with prosecutors knows it. And I

have seen people in the Department of Justice and I have seen the

line prosecutors on the question of the validity of a case, whether

or not it will be successful at trial, experienced trial attorneys in

the field have the best judgment time and time and time again.

And this is a classic example of it. The people in Washington who

were denying him the right to go forward in the way that case in

my view should have gone forward were far less experienced in actually handling cases in court than he was. And I think we need

to look at that. That is a systemic problem.

There is also a systemic problem with institutions like the Navy

who don’t want cases to go forward because they are afraid some

of their people will have to testify under oath and the institution

may be embarrassed in the course of it. So they are more concerned

about the embarrassment potential to their institution and some

terror that somebody might say something that would embarrass

them or give away some secret that they just don’t want any case

to go forward. And that is the responsibility of the Department of

Justice. They are the Department of Justice, and they have to say

to institutions we are not concerned about that. We have a responsibility, we have an individual who was a spy against the United

States, who met in a hotel room in Beijing with a top scientist of

China and gave away and discussed American secrets.

I will tell you one thing: I don’t think Mr. Shapiro would have

had a problem getting a conviction on that. He confessed to it and

I don’t think any jury is going to believe that he was there for his

health and a casual conversation to have two different meetings in

Beijing hotel rooms with top Chinese scientists. There is no business for that, and anyone with common sense would understand it.

So I just would suggest that we ought not to lightly subpoena

line attorneys. I think that is a legitimate concern. But we have

had a number of plea bargains here in recent weeks that have

come to my attention by this Department of Justice that raises

troubling concerns. We don’t have a special prosecutor law anymore. Who is going to—is the fox going to guard the henhouse? Is

the Department of Justice able to say you can’t subpoena line atVerDate 26-SEP-2001 06:22 Oct 03, 2001 Jkt 073205 PO 00000 Frm 00068 Fmt 6601 Sfmt 6602 E:\HR\OC\A205.XXX pfrm04 PsN: A205
63

torneys so nobody anywhere can ever really find out what happened in a case that went awry? We can never do that?

The constitutional responsibility of this Senate is to provide oversight, and how can we do it if we can’t talk to the people who were

actually involved? What if we have got political appointees who are

not actually giving us a clear picture? We have had testimony on

this matter previously in secret hearings, but the tone of it was

quite different when you heard the testimony of Mr. Shapiro and

how his perspective of it was from the field and wanted to go forward. I think we needed his testimony.

So the Department of Justice is just going to have a right to say

to the Congress of the United States we are never going to submit

an assistant U.S. attorney under oath to testify about a case? It

ought not to be lightly done, but to say it is never going to be allowed to be done, I do not believe that is sound. How can we ever—

the defendant is happy with the outcome of the case. He got a

sweetheart deal. He ought to be happy. Who is going to challenge

the prosecutor? Who is going to ask the questions? We don’t have

an independent counsel. I submit it only can be the Congress that

does that.

I care about the rule of law. I care about Justice in America. And

I care about spying and giving away American secrets to a communist nation. And we have had a lot of that lately, and I haven’t

observed that we have done a very good job of prosecuting it.

So I think it is time to go forward, Chairman Specter. Thank you

for your leadership. I thought your work has been extraordinary.

You have had frustration after frustration. The Department of Justice and the White House have delayed in a stonewall mode from

day one. You have had a hard time even getting any additional

help. You have personally committed your personal time to mastering this case. And we wouldn’t be here today if you hadn’t

showed the kind of determination to overcome these obstacles that

you have, and I thank you for it.

Senator SPECTER. Thank you very much, Senator Sessions.

Senator THURMOND. Mr. Chairman?

Senator SPECTER. Yes, Senator Thurmond.

Senator THURMOND. I have another commitment and have to

leave. I have some questions I would like to be answered for the

record.

Senator SPECTER. Senator Thurmond, they will be answered for

the record. Thank you very much for joining us, and we understand

your other commitments.

Senator SPECTER. Thank you, Senator Sessions, for your comments based on your experience as a U.S. attorney and an Attorney

General, and I think the indignation in your voice ought to be

shared by everyone.

Senator Torricelli, the ranking on the subcommittee, declines an

opening statement, and Senator Leahy, while not a member of this

subcommittee, maybe ex officio, ranking of the full committee, but

regardless of any of the technicalities, we will call on him now for

an opening statement.

64

STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR

FROM THE STATE OF VERMONT

Senator LEAHY. I thank you, Mr. Chairman, for your usual courtesies.

Senator Specter has been an advocate for pursuing this investigation of how the Justice Department, the FBI, the Defense Department, the Navy, and the Energy Department handled the case

against Peter Lee. He has raised questions that our agencies responsible for protecting our national security failed—in this case,

the Justice Department, the FBI, the Defense Department, the

Navy, and the Energy Department.

Those are serious allegations. They have profound implications,

both for how our friends and our enemies view our Nation’s response to espionage that is targeted at our nuclear secrets.

Now, I should state at the outset that while we may have some

disagreements in this case, Senator Specter has every right to raise

questions about the prosecution of Peter Lee and to leave no stone

unturned. I do feel, however, that this oversight investigation into

the prosecution of Peter Lee does not reveal new items of significance. So I will state my reasons for earlier objecting to the Senator from Pennsylvania’s request for and the Judiciary Committee’s

approval on a party-line vote of subpoenas to two of the witnesses

appearing here today.

Michael Liebman, who is a current line attorney at the Department of Justice, and Jonathan Shapiro, a former assistant U.S. attorney in Los Angeles, are not and were not supervisory lawyers

or political appointees within the Department of Justice. These attorneys were not ultimately responsible for the prosecutorial decisions in the Peter Lee matter, though they certainly helped execute

those decisions.

To the extent there are factual questions about which Mr.

Liebman and Mr. Shapiro could testify, the answers to those questions could and should have been obtained from the Justice Department by other means, whether by deposition, interviews, closed

session, or otherwise. This was not done. I feel, as I said before,

that Mr. Liebman and Mr. Shapiro should not be here today.

I remain concerned about this committee subpoenaing line attorneys. Compelling line attorneys to testify publicly before congressional oversight committees runs the serious risk of chilling the

free exchange of opinions within prosecutors’ offices and making

prosecutors look over their shoulders at the politicians when they

decide to make a particular charge or not and whether they will

then be second-guessed in this kind of a forum.

Now, I know well that internal discussions and debates and even

disagreements between and among line prosecutors and supervisors about the course of a prosecution and the merits of a case

are invaluable. And line prosecutors should be free to express their

candid opinions about a prosecution, even free to play devil’s advocate on a particular case if they wish, without feeling that they are

someday going to be testifying about it. We want them to express

their opinions candidly without second-guessing.

Now, my concerns are not new, nor are they partisan, nor do

they have anything to do with the subject matter of this particular

hearing about which I have other unrelated questions. They preVerDate 26-SEP-2001 06:22 Oct 03, 2001 Jkt 073205 PO 00000 Frm 00070 Fmt 6601 Sfmt 6602 E:\HR\OC\A205.XXX pfrm04 PsN: A205
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viously have been voiced by others, including the chairman of this

committee, Senator Hatch, who has said that line attorneys should

never be subjected to congressional inquiry, not even in exceptional

circumstances.

Now, whether such an exception should be warranted is irrelevant here because there has been no showing of need in this investigation. Let me summarize.

First, Senator Specter says that the Department of Justice did

not tell Mr. Shapiro when he was serving as a Federal prosecutor

in California that he was authorized to charge Peter Lee with violating the most serious espionage law, 18 U.S.C. 794. Well, that is

not right. At the time of the plea agreement, the Federal prosecutor had not been authorized to indict Lee on the 794 charge. Internal FBI and DOD memoranda relied upon by the chairman of

the subcommittee suggest only that if Lee had refused to accept the

plea offer that the Justice Department may then have authorized

and brought a 794 case. Since that contingency never came to pass,

there was never any such authorization.

Second, he said that the Department of Justice agreed to a plea

bargain with Peter Lee before a damage assessment had been completed regarding the information Lee confessed to passing to the

Chinese. That is wrong. Prior to Lee’s plea, Justice Department attorneys had numerous contacts with representatives of both DOD

and the Navy. Representatives of DOJ and the FBI met with the

agencies and provided a copy of FBI Special Agent Gil Cordova’s

draft affidavit, which summarized Lee’s disclosures. In addition,

there were numerous telephone conversations about the issue between the prosecutors and the officials at DOD and the Navy.

To the extent the claim that no damage assessment had been

completed is based on the fact that DOD and Navy officials reviewed only the case agent’s affidavit to assess the information Lee

disclosed, instead of his own statements, is immaterial. DOD and

Navy officials have now reviewed the transcripts of Lee’s confessions and confirmed they are substantially consistent with the affidavit that had been provided in 1997.

Third, he said that when the damage assessment was completed,

the Navy agreed with the Department of Energy that the information Peter Lee confessed to passing to the Chinese was classified.

That is not the point. The Navy has always agreed with the Department of Energy that the information was classified, though

healthy and thoughtful internal debate occurred among the agencies over the appropriate level of classification.

The point is that the Navy and the Department of Energy looked

at the information Peter Lee confessed to passing and determined

that most of it was in the public domain, either at the time he

passed it to the Chinese or shortly thereafter. It does not take a

prosecutor to realize that when you are arguing to a jury that classified information turned over to foreigners could hurt the United

States, the jury might not believe you. They could go on the Department of Energy Web site and find most of the same information right there.

To the extent the information Peter Lee disclosed to the Chinese

was not in the public domain, the Navy made clear that focusing

on the reasons that this information would harm our national secuVerDate 26-SEP-2001 06:22 Oct 03, 2001 Jkt 073205 PO 00000 Frm 00071 Fmt 6601 Sfmt 6602 E:\HR\OC\A205.XXX pfrm04 PsN: A205
66

rity would not be helpful and, in fact, ‘‘bringing attention to our

sensitivity concerning this subject in a public forum could cause

more damage to national security than the original disclosure.’’ That was in John Schuster’s memorandum of November 14, 1997.

We should look at the scope and intensity in the investigation of

Peter Lee’s activities. He is a naturalized U.S. citizen who worked

from October 1976 until 1991 at Lawrence Livermore National

Laboratory as a research physicist. He was cleared to have certain

access, and he worked at TRW—and I will put all this in the

record.

But the FBI has been investigating him since 1991. In February

1994, the FBI sought and obtained permission to conduct secret

electronic surveillance under FISA, and this secret surveillance

continued for over 3 years, until September 1997. During the time

of this surveillance, Lee, with the knowledge of the FBI, traveled

to China, maintained his secret-level clearance at TRW, and had

access to classified material.

In June 1997, he was interviewed by the FBI about a trip he had

taken to China a month earlier, and he falsely told the FBI that

he had not engaged in technical scientific discussions in the PRC

and that he had paid for his trip. Later he said that he had participated in scientific discussions. He was given a polygraph examination, and his answers were found to be deceptive.

After he failed the polygraph, he was interviewed at length by

the FBI over the course of 2 days, and then he confessed to providing confidential information to the PRC on two separate occasions. He admitted that 12 years earlier he had passed information

relating to hohlraums, devices used in the simulation of nuclear

detonations. Then in May 1997, he relayed information about the

radar ocean imaging project he had worked on at TRW.

The case was brought by the FBI to the U.S. Attorneys Office for

the Central District of California. Then, because it involved espionage, all decisions were coordinated with the Internal Security Section of the Department of Justice. The supervisors in that unit

were ultimately responsible for the decisions in the case. Jonathan

Shapiro was the line assistant U.S. attorney assigned in California.

He is here. Michael Liebman, also here, was the line attorney assigned to the case in the Internal Security Section.

The case against Dr. Lee, as I have seen it, was a tough one to

make. As I understand it, the primarily, if not only, evidence

against Lee were his confessions. But there may have been problems anyway.

The information Lee said he disclosed in 1985 has since been declassified. In 1993, all or virtually all of the information relating

to hohlraums was declassified. Now, this would not have stopped

them bringing a case, but it certainly hurt the jury appeal of the

case, again, if this matter is all in the public domain anyway. As

a defense attorney, I can imagine him saying, when asked how

much this was hurting the Government, he might say let’s just

click on the Web site.

Every appropriate charge relating to the 1985 hohlraum disclosure was barred by the statute of limitations. Now, one exception,

of course, section 794, which includes the death penalty, that could

have been brought. I suspect on the facts in this case, juries, if not

67

the presiding judge himself, might say that might be a tad bit of

overreaching on the part of the prosecution.

Third, significant exculpatory information would have undermined a prosecution of Lee for his 1997 disclosure about the radar

imaging project. Among other things, Mr. Schuster said that the

confidential classification cannot be explicitly supported by the

classification guidelines and raised other questions that I have already said. In fact, prosecutors described this memorandum as a

body blow to the 1997 case. Not only did it suggest some equivocation as to the classification of the material disclosed, but it also

revealed that similar information was available in the public domain.

Problem 4: No expert from the Department of Defense or the

Navy was prepared to testify on behalf of the Government. Although Dr. Richard Twogood, a former director of the radar imaging program, was available to testify, prosecutors believed that his

testimony could have been rebutted by a plethora of experts from

the Defense Department and Navy who would have had to testify

on behalf of Dr. Lee.

So I think in light of all these problems, one could make a very

strong argument for the plea agreement. Considering the nature of

the evidence against Dr. Lee and the formidable obstacles of a trial,

the plea agreement negotiated by former AUSA Shapiro and his supervisors at the Department of Justice should be praised. Under

the terms of the agreement, Dr. Lee agreed to cooperate. He pled

guilty to two counts. Both counts were felonies. They did expose

Lee to a maximum of 15 years in jail. What is remarkable, actually, is that the prosecutors convinced Lee to plead guilty to a serious count, the 793(d) charge, even though the statute of limitations

had expired on it. We ought to be praising the prosecutors for getting somebody to plea to something when the statute had run.

Now, questions have been raised about why the prosecutor did

not push harder for a lengthy prison term for Peter Lee. I happen

to agree with Senator Specter that Peter Lee got a lenient sentence. We are in agreement on that. But the prosecutor’s role in

sentencing is limited. That is up to the judge.

So, Mr. Chairman, as I said, there are a number of areas where

we do agree. I disagree, however, that there has been obstruction

of Senate oversight. The Justice Department has cooperated. They

have provided thousands of documents. They have made personnel

available for interviews. They have provided Congressional staff

with access to raw investigative files and to classified files, something that I have rarely ever seen happen.

Senator SPECTER. I am sorry that Senator Leahy was not here

for my opening statement, and I would refer him to the detailed

report filed by Dobie McArthur, all of which are at substantial variance with his representation of the facts.

Senator LEAHY. I understand, and I will read both——

Senator SPECTER. Excuse me, Senator Leahy. Excuse me, Senator Leahy. You are not recognized, and I am speaking.

Senator LEAHY. I am awfully sorry. I am terribly——

Senator SPECTER. You are not—you—when you say you are awfully sorry, I might have to agree with that.

68

As I was saying very briefly in response to that lengthy statement, when Senator Leahy makes the statement that the Navy always said the matter was classified, it is not true. And he then

comes back to a comment that Dr. Schuster raised a question about

classification. And it is not true that the nuclear matters were all

declassified or that the submarine detection was all in the public

domain. And when the assertion is made about being barred by the

statute of limitations, there is an immediate correction on that by

Senator Leahy himself that there was no statute of limitations to

bar section 794.

But since Senator Leahy has absented himself, there is not much

point in continuing the dialogue in his absence.

Senator Torricelli had said he did not have an opening statement, but let me call on you.

Senator TORRICELLI. Well, Mr. Chairman, I am just anxious because of the constraints of time to get to our witnesses. There are

things I would like to say, but I think it is better we proceed to

the witnesses before we lose members of the committee.

Senator SPECTER. Fine. Thank you very much, Senator Torricelli.

Mr. Jonathan Shapiro, would you step forward? And you have an

attorney with you. He is welcome to come.

Mr. ROBINSON. Mr. Chairman, may I inquire? I understood that

I was going to be allowed to make a brief statement.

Senator SPECTER. Well, you will be, but that will be when you

come forward with your own witnesses at that time.

Mr. Shapiro, will you raise your right hand, please? Do you solemnly swear that the testimony you will give before this subcommittee of the Judiciary Committee of the U.S. Senate will be

the truth, the whole truth, and nothing but the truth, so help you

God?

Mr. SHAPIRO. I do.

Senator SPECTER. Mr. Shapiro, at the outset, I thank you for

meeting with me in Los Angeles on February 15 and for responding

to an entire series of questions. We appreciate your coming in

today, and as I said to you at the time of our session on February

15, with respect to your participation, there is no criticism, expressed or implied, and that we have questions which we appreciated your answering before and we appreciate your answering

now.

There has been an issue raised by your attorney as to some classified matters which you may have to refer to, and if you do, we

will defer those answers, and we will conduct that inquiry in a

closed session to protect any area of confidentiality. We think that

this is a very important case on its own, and it is a very important

case as to how espionage cases have to be handled and a very important case as an example as to what Senate oversight means in

this country.

Mr. Shapiro, if you would identify your counsel, I would appreciate it.

69

STATEMENT OF JONATHAN S. SHAPIRO, FORMER ASSISTANT

U.S. ATTORNEY, CENTRAL DISTRICT OF CALIFORNIA, LOS

ANGELES, CA; ACCOMPANIED BY TOM CONNOLLY, COUNSEL

Mr. SHAPIRO. I would like to introduce my attorney, Mr. Tom

Connolly, who has a brief statement he would like to make.

Mr. CONNOLLY. Mr. Chairman, good morning.

Senator SPECTER. Your name, sir, again, is what?

Mr. CONNOLLY. My name is Tom Connolly. Good morning, Mr.

Chairman and other members of the subcommittee. I represent Mr.

Shapiro, Jonathan Shapiro, a former Assistant United States Attorney in the Central District of California, who was an integral member of the prosecution of Peter Lee.

We are honored to appear before you today. I volunteered to represent Mr. Shapiro because of my longstanding admiration for him

as a prosecutor and as a person. I believe he chose me as his attorney because of my experience as a Federal prosecutor.

I had the honor, gentlemen, of also prosecuting espionage cases.

In the last few years, I prosecuted two of the most significant espionage cases in this country: the case of James Nicholson, who was

a CIA spy, the highest-ranking CIA officer ever convicted of espionage, and David Seldon Boone, who was—we prosecuted him. He

was an NSA cryptologist who provided documents to the Russians.

Mr. Shapiro is here with my help with recognition that espionage

cases are inordinately complex and difficult. I don’t think there is

any question about that. The Peter Lee case also was very complex.

I believe, however, after the subcommittee hears from Mr. Shapiro

shortly and has the full story of this case, there is no question that

his conduct in this case was extraordinary in an effort to bring

Peter Lee to justice.

Now, Mr. Shapiro has prepared his own opening statement. I respectfully ask that he can read that, and after he reads that, he

will be available to answer any questions. I will note, however, for

the record the following: We are not—I do not represent the Department of Justice. I am not—we have not fought this battle with

respect to Mr. Shapiro appearing before you. He has appeared, sir,

in front of Senator Specter for interview. He has answered, I believe, any question posed to him by Senator Specter in that interview. And the subcommittee has a full transcript of that interview

before it.

He is now available—he is volunteering today—it is a voluntary

appearance today before this subcommittee, and I just want to note

that for the record.

Senator SPECTER. Thank you, Mr. Connolly.

Mr. Shapiro.

Mr. SHAPIRO. Mr. Chairman, distinguished members of the committee, my name is Jonathan S. Shapiro. I am currently the chief

of staff for California Lieutenant Governor Cruz M. Bustamante,

and I am also an adjunct law professor at the University of Southern California School of Law, where I teach criminal procedure. I

am a 1985 graduate of Harvard University where I received my

bachelor’s and master’s degree in history. I received a Rhodes

scholarship in 1987 and studied at Oriole College, Oxford University, where I received my second master’s degree. I am a graduate

of the University of California-Berkeley, Boalt Hall School of Law,

70

1990, and while I was in law school, I also worked full-time as a

staff writer for the San Francisco Recorder newspaper covering the

courts.

In 1990, I received what I consider to be the finest opportunity

of my life. I was hired as a trial attorney with the U.S. Department

of Justice Criminal Division through the Honors Program. To my

parents’ horror and pride, I turned down a high-paying job with a Los Angeles law firm to make what I believe was $23,000—it may have been $27,000—a year. After approximately 2 years of service,

I transferred home to the U.S. Attorney’s Office for the Central

District of California, where I served as an assistant U.S. attorney.

During my 8 years as a Federal prosecutor, I handled countless

cases, every kind of drug, fraud, violent crime, civil rights violation,

gambling, government procurement case. I received numerous

awards and commendations. But like most prosecutors, the cases

that I am most proud of were the tough ones, the cases where, but

for my work, the defendant would have escaped justice.

When California officials declined to pursue a gynecologist who

sexually abused his patients, I spent 2 years building a fraud case

against him, convicted him at trial, and brought some justice to his

victims.

When local officials declined to pursue two sheriff’s deputies accused of civil rights violations, I pursued the case and obtained convictions based on irrefutable evidence that they beat confessions

out of suspects.

I spearheaded what became the prosecution of the largest HUD

fraud in the history of California. I obtained the first convictions

that stuck against operators of illegal gaming establishments. I

was always willing, I was eager to try tough cases, and I was always willing to lose them if I thought the case merited prosecution.

My last case as a prosecutor, I attempted to convict an officer,

a police officer accused of excessive force against a victim who was

a heroin addict. The jury hung. But I am very proud that I tried

that case, and I am very, very proud of the work I did in helping

to bring Peter Lee to justice.

It is no secret that in the Peter Lee prosecution I strongly advocated for the most aggressive approach in pursuing Mr. Lee on

charges of espionage. It is also no secret that I had disagreements

with my supervisors at the U.S. Attorney’s Office and with the Department of Justice about how the case should be investigated and

charged.

I took a more aggressive approach. I do not believe my supervisors were operating in anything other than good faith. And I

would like to emphasize four points.

First, there has been a suggestion that, as a line assistant U.S.

attorney, I made charging and plea decisions in this case. This is

not true. As reflected in the March 23, 2000, letter from Mr. Robinson, chief of the Criminal Division, to Senator Hatch, these decisions were made by my supervisors, each of whom the subcommittee has already interviewed. Moreover, the Department’s

supervisory personnel and not its line attorneys make prosecution

decisions in espionage cases.

Second, there has been a suggestion that the Department of Justice officials negotiating the plea did not appear to have consulted

71

with the FBI or the Department of Defense. This is not true. The

committee has before it hundreds of pages of documents, numerous

declarations, witness statements, court filings, and correspondence

showing that I and members of DOJ were in extensive and constant contact with both the FBI and the Department of Defense.

Indeed, every step I took was in concert and consultation with the

FBI and my supervisors at DOJ.

Third, there has been a suggestion that the seriousness of Peter

Lee’s conduct was not brought to the attention of the sentencing

judge. This is not true. The subcommittee has before it my personal

numerous, extensive sentencing position papers in which I outlined

in detail all of the criminal conduct described to the committee, including impact statements from the FBI, the Department of Energy, Dr. Richard Twogood, who was my witness, and others.

Furthermore, the subcommittee has before it the entire sentencing transcript in which I again articulated the seriousness of

the crimes, and I urge you to read it. I am proud of the advocacy

that you will read in that transcript.

Moreover, an independent branch of the criminal justice system,

the U.S. Probation Department, produced a lengthy pre-sentence

report to the judge, which, as I recall, is about 70 pages long and

which I do not have access to as a former prosecutor, in which the

judge was provided yet another detailed analysis of the seriousness

of the crime.

Finally, there has been a suggestion that DOJ entered into the

plea agreement before a sufficient damage assessment was conducted. Let me make this point as clear as I possibly can. This is

not true. I am eager to explain why I can make that assertion in

full confidence. However, I cannot—I cannot do so in an open public setting for reasons that we have explained to staff because of

my continuing sworn obligation to maintain the security of specific

classified information. That is why, as late as yesterday, we urged

that at least a portion of these hearings be conducted in closed session.

Representing the United States of America was more than a job

for me. It—it was the greatest honor of my life. No one cared more

about the results. No one fought harder for the client. And I am

very proud of the work that I did, both in the Peter Lee case and

in the hundreds of other cases that I handled.

Senator SPECTER. Thank you very much, Mr. Shapiro.

I repeat that we appreciate your being here. We appreciated your

responding to questions on February 15, and there is no criticism,

expressed or implied, as to anything you have done. And all we

seek to do is to inquire to find out what happened here, both as

to this case and as to a guide for future cases.

Mr. Shapiro, as you have emphasized, you wanted to prosecute

under section 794. Would you state briefly what 794 provides and

why you felt you had a case to proceed under 794?

Mr. SHAPIRO. My attitude about the case, Senator—and I appreciate your comments—I think were expressed pretty clearly by Senator Sessions. In my view, coupling the 1985 charge with the 1997

charge with what I thought was a dead-bang case—and I think

there is total agreement on the false statement, the 1001 case.

Those counts added together I felt I was going to convict him of

72

something, and I had a very strong sense that at sentencing all

that information could have been considered by the judge.

My frustration with this case—and I have made reference to the

fact that I took an aggressive approach in this case—was that unlike the hundreds of other cases I prosecuted, I did not have a free

hand in making these decisions. The line assistant in an espionage

case wouldn’t. In my experience as a Federal prosecutor, there

were a handful—there were three cases where I didn’t have—— Senator SPECTER. Mr. Shapiro, before you come to that, would

you focus on the provisions of 794, what they are, and why you felt

the evidence was worth prosecuting under 794?

Mr. SHAPIRO. Well, at what point? Because I do want to be clear

on one fact. My feelings about the case—and I can’t—I don’t know

that the subcommittee has focused on this. My attitude about the

case has got to be understood a little bit in the context of when I

got involved, when we got involved. There apparently was a FISA

investigation of Peter Lee. Obviously, the U.S. Attorney’s Office

was not involved in that. FISA is not a tool for obtaining evidence

in criminal prosecution.

My involvement in the case started when Peter Lee’s wife found

a listening device in their phone. At that point the FBI came to the

U.S. Attorney’s Office and explained the situation and asked: Is

there anything we can prosecute this man for?

At that point, the only count that was available to us was 1001.

There had been no confession at that point. So at that point, I

didn’t know or really have any reason to think that there could be

a 794 count.

As the case developed, I began to think perhaps the elements

could be met, the elements being that an individual, the defendant,

provided information of a classified nature that could help a foreign

nation or could be a hindrance to the United States with the specific intention of doing so, and, in fact, did so.

As far as the 794 in this case, both in 1985 and 1997, the information was to have referred to nuclear weaponry—would have had

to have referred to nuclear weaponry. So those were my elements.

And as the Federal prosecutor, I don’t classify information. I can’t

testify. We needed to find a witness who would say this stuff is

classified, this nuclear weapon material.

Now, if this was your run-of-the-mill drug case or if this was

your run-of-the-mill fraud case, I personally would have gone out

and gotten the evidence together and pursued my case. Because of

the nature of the espionage case, this went to Internal Security,

and it was their responsibility to get the classifications, although——

Senator SESSIONS. Security in Washington, DC, Department of

Justice.

Mr. SHAPIRO. Yes, that’s right. And I have to say beyond that

there is more I can say on this issue, and I’d like to do, and I think

it gives a good context to what happened. But I cannot in an open

session.

Senator SPECTER. Well, when you talk about the classification,

we will proceed later into closed session to hear that testimony.

Isn’t it true, Mr. Shapiro, that you were only given authorization

to prosecute under 1001, false official statement?

73

Mr. SHAPIRO. I was given authority to pursue a plea agreement

and obtain a plea agreement on 793 for the 1985 offense, if I could

manage to get the defendant to waive the statute of limitations and

take that plea, and the count of 1001. Had I had authority, Senator, to charge 794, I would have charged 794.

Senator SPECTER. Mr. Shapiro, were you aware of an FBI document dated November 25, 1997, which states in part—and this will

be made a part of the record.

[The document follows:]

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Insert offset folio 184 here 73205A.001
75

Senator SPECTER. ‘‘According to J.J.’’—who is J.J. Smith of the

FBI—‘‘ISS/Dion said that if R.T.’’—referring to Dr. Lee—‘‘doesn’t

accept the plea proffer, then he gets charged with 18 U.S.C. 794,’’ the heftier charge.

When you handled this case, had you been aware of that document?

Mr. CONNOLLY. Pardon me, Senator. Mr. Shapiro just got his security clearance reinstated on Monday. We have been hampered in

our efforts to get every single document before him because we did

not have an opportunity because of classification issues to provide

everything. I believe Mr. Shapiro has seen that document, but

maybe only on one occasion, and that was in the last day or so.

If there is a copy available, I would ask that the Senator provide

a copy to Mr. Shapiro to talk on it, because I don’t think he has

a familiarity with this, having not seen something in three and a

half years.

Senator SPECTER. Mr. Connolly, the subcommittee provided both

of those copies on Monday, which was as early as we could do it.

Mr. CONNOLLY. No blame whatsoever do I suggest to your staff

or anyone else, Your Honor. I am just suggesting that I don’t want

him to answer any questions on a document that he doesn’t have

before him.

Senator SPECTER. Fine.

Mr. SHAPIRO. Thank you. Senator, I saw this document for the

first time on Monday.

Senator SPECTER. Referring now to a document from Acting Assistant Secretary of Defense to the Secretary of Defense and the

Deputy Secretary of Defense—and I believe this was provided to

you on Monday as well. We did that as soon as we—— Mr. SHAPIRO. Senator, can I ask you a question about the first

document? Because as you’ve been talking, I just got it and I just

read it.

As I said, I saw this document for the first time Monday. I don’t

know who created it, and I don’t know where it came from. I do

note that it says, ‘‘I told J.J.’’—which you just, I think, quoted, and

that’s J.J. Smith who I worked with—‘‘that he must remind AUSA

Shapiro vigorously and repeatedly that the FBI is much more interested in the intel yet to be garnered than in punishing felons.’’

And I bring this to your attention because I don’t—again, I don’t

know who generated this, but this sentence reflects, I think, an important point for the subcommittee, which is from my experience,

part of my problem in this case was there were individuals who

weren’t interested in prosecuting Peter Lee so much as they were

interested in, as they say here, garnering intel, getting intelligence.

And that was one of the fundamental frustrations that the Department of Justice and I faced, particularly with the FBI, but also

with other agencies. I’m—I’m a one-trick pony. I do one thing. I

prosecute cases. They bring them to me. I prosecute them, I investigate them. I’m not an intelligence gatherer.

Senator SPECTER. It is not inconsistent with having a tough prosecution to get intelligence. That sentence refers to a line which the

FBI has expanded upon otherwise that they wanted him convicted

so that there would be leverage to get intelligence information.

They——

76

Mr. SHAPIRO. Absolutely.

Senator SPECTER. They weren’t adverse to a conviction or a jail

sentence.

Mr. SHAPIRO. I completely agree. I just wanted to point out—and

perhaps you could give me, provide to us the expansion of the FBI’s

statement. But this I think is an important point for the subcommittee’s consideration.

Senator SPECTER. The point that I want to come to—and want

to come to in fairly short order, because there are many other Senators to question and we have got a vote which has now been

moved up to 10:45, but we will be back. Referring to the DOD document, which is about the same, the second full paragraph, ‘‘Should

Lee decline the offer, the U.S. Attorney will seek an indictment

against him for violation of Section 794.’’ Have you ever seen that document before this week?

Mr. SHAPIRO. I don’t know what document you’re referring to. I

will—I will tell you that without more information I am a little

hamstrung in commenting on it. If it’s the document that—I mean,

you know, maybe you could give me a document so I could see it.

Senator SPECTER. Mr. Shapiro, I believe you have had the document just at the same time you had the companion document.

Mr. SHAPIRO. Again, Senator, I’m sorry. I don’t have it. Could

you show me—— Senator SESSIONS. It is in that next to the last paragraph, alternative situation, down toward the bottom. You may have missed

that language in the—— Mr. SHAPIRO. I’m sorry. It’s another document, Senator Sessions.

But I see it.

Again, the first time I saw this memo, your staff person was the

one who showed it to me, I believe.

Senator SPECTER. Well, had you ever been told, Mr. Shapiro, by

the supervisors, your supervisors in the Department of Justice or

anyone else, that if Dr. Lee didn’t accept the plea bargain, you had

the authority to charge him under 794?

Mr. SHAPIRO. In reference to this document?

Senator SPECTER. Well, I first covered the documents you hadn’t

seen.

Mr. SHAPIRO. Yes.

Senator SPECTER. And now the question is: Beyond that, did anybody tell you that if Dr. Lee did not accept the plea bargain, you

had authority to prosecute him under 794?

Mr. SHAPIRO. Again, Senator—and I think we covered this when

I spoke to you in Los Angeles.

Senator SPECTER. We covered it in great detail.

Mr. SHAPIRO. And I remember it well. But I don’t—as I said then

and as I say now, I never had authority to charge 794. If I had it,

I’d have charged it. And if anyone told me I had authority to

charge 794, I’d have charged it.

Senator SPECTER. When Dr. Lee lied after the plea bargain was

entered into and the plea bargain required his cooperation, I had

asked you in some depth—I am going to try to abbreviate this so

we can turn to other Senators. I had asked you in some detail

about why you didn’t go after him on the lies and seek a tougher

sentence. At that time you told me—and I just want to confirm it

77

now—that you didn’t because you had nothing to fall back on, because if you didn’t get the limited plea bargain which you had with

the limitations on it, that you couldn’t charge on anything else,

that you couldn’t charge him on 794 or any tougher charge. Is that

correct?

Mr. SHAPIRO. I think I said two things. I said that and, in fact,

I think I went further. I said it would have been—it would have

been asinine, it would have been stupid for me to withdraw a plea

agreement where in doing so I would have lost the most significant

charge I had obtained. If I withdraw the plea agreement, Senator,

the statute of limitations barred me going on the 793 for the 1985

offense. And I never would have done that. I’d have been up in

front of OPR if I had done that.

Senator SPECTER. And since you had no 794 authority, you had

nowhere to go.

Mr. SHAPIRO. Well, the second thing I told you was, if I had authority to charge 794, I’d have charged it. I mean, that’s what I

was spending my days and nights trying to get.

Senator SPECTER. Abbreviating the conclusions again here, Mr.

Shapiro, when I questioned you in detail about why you asked for

a short period of incarceration, your explanation was that you

couldn’t do anything more because that is the best you could get

on the plea agreement where you had no authority to charge 794.

Is that correct?

Mr. SHAPIRO. Well, I think I even said more than that, Senator.

I said that was the best I was going to do in front of Judge Hatter.

And you must understand the context. Senator Sessions, I really

appreciate what you said about the line assistant in the field. You

know, we know the judges because we’re in front of them all the

time. Judge Hatter, a wonderful man, is a man who, from the U.S.

Attorney’s Office—and I can say this because I’m no longer there— is seen as being a little lenient at sentencing. I’m saying that with

all due respect, and I’m—I’m minimizing it.

To be in front of Senator Hatter——

Senator TORRICELLI. With all due respect.

Mr. SHAPIRO. With all due respect, in light of the strong advocacy

I made at sentencing, in which I laid out all the lies, in which I

provided all the evidence that any judge in my view would have

needed to hammer him for the lies—the judge knew about the

failed polygraph. The judge knew about the lies. The judge knew

about the e-mails. I very strenuously noted that he had passed nuclear weapons research material. I talked about how in Los Angeles

our economy is very much tied into national defense and how scientists throughout the Southland have a responsibility to keep the

secrets, and Peter Lee violated those. I thought Judge Hatter had

more than enough to hammer him. You know that he didn’t. I’m

not the first prosecutor to not be happy with the sentence.

Senator SPECTER. Well, didn’t Chief Judge Hatter say that he

found out more about this case after it was over than he did before

he imposed sentence?

Mr. SHAPIRO. Not to me. He didn’t say that to me.

Senator SPECTER. Mr. Shapiro—— Mr. SHAPIRO. And I must say, I’ve had lunch with Judge Hatter

since, and he didn’t say it to me.

78

Senator SPECTER. Mr. Shapiro, why was there no damage assessment, if you know, by the Department of Defense prior to the plea

bargain?

Mr. SHAPIRO. Senator, thank you for asking me that because it

gives me a chance to say again, to suggest there was no damage

assessment is wrong. And in order for me to tell you why that’s

wrong, I need to be in closed session. And I don’t want to be in

closed session, but as late as Monday, the Department of Justice

asked me to once again sign, to reaffirm an oath that I didn’t need

to reaffirm because I know that oath follows me for the rest of my

life, which is to maintain classified information. And I’m not going

to release it in an open setting here, but I’d be more than

happy—— Senator SPECTER. Well, Mr. Shapiro, nobody is asking you to.

The fact is—— Mr. SHAPIRO. But I can’t answer that question, Senator, unless

you allow me to do so.

Senator SPECTER. If you think you can’t, I will accept that.

Mr. SHAPIRO. Thank you.

Senator SPECTER. There was a damage assessment made by Dr.

Twogood of the Department of Energy. Can you answer that?

Mr. SHAPIRO. Which—and I don’t mean to be funny here, but

which assessment from Dr. Twogood are you referring to?

Senator SPECTER. I am referring to a damage assessment made

by Dr. Twogood November 17, 1997.

Mr. SHAPIRO. Mr. Connolly informs me I don’t have it front of

me. Maybe someone could—— Senator SPECTER. Well, we will proceed with this in another way,

but the facts are and the subcommittee is prepared to establish

that Dr. Twogood of the Department of Energy had a damage assessment classifying what Dr. Lee disclosed as secret, and that, in

fact, Dr. Lee had confessed to disclosing matters about the submarine detection beyond what had been in the public domain, and

that the Department of Defense did not have any damage assessment and did not make one until this subcommittee asked that one

be made.

Mr. SHAPIRO. Senator, that’s not true. I don’t know what you’re

referring to. What I put in the affidavit and what I as an officer

of the court swore to and what Gil Cordova swore to as my affiant

was the damage assessment that Dr. Twogood issued that I believe

classified the information as confidential.

I’ll also tell you as a prosecutor that as a witness Dr. Twogood— who was, by the way, the best I could come up with. I mean, there

was a host of scientific angels on the other side who were prepared

to testify, and you have the documents because the defense lawyer

gave them to the judge that the stuff that he passed wasn’t classified.

Nevertheless, I had Twogood and I was going to use Twogood.

However, I had a bit of a Brady problem with Twogood, I think,

in that Dr. Twogood’s opinion evolved. And this happens. I don’t

think it’s inappropriate so long as any inconsistencies are provided

to the defense, and I fully intended to provide them. I know the defense was aware of it. But Dr. Twogood, in my view, would have

gone down in blue flames on cross-examination.

79

Now, I still think I’d have gotten by based on the 1985, the 1997,

the 1001. But, you know, Dr. Twogood—the Navy didn’t give me

anybody. I was stuck with Dr. Twogood.

Senator SPECTER. Well, if you are disagreeing with what I said,

I said that Dr. Twogood made a damage assessment classified secret, and you say it was confidential.

Mr. SHAPIRO. And you have the document. It’s Gil Cordova’s affidavit and it lists Dr. Richard Twogood giving his classification.

Senator SPECTER. And then I also said that the Department of

Defense did not make a damage assessment until this subcommittee asked the Department of Defense to a little while—— Mr. SHAPIRO. And I said that—I said that was wrong, and I can

explain why that’s wrong if you’ll allow me to go into closed session.

Senator SPECTER. We certainly will, but we have the facts to the

contrary. But we will be glad to listen to what you have to say on

that subject, and that the matters related to the nuclear disclosures were secret until 1993, and some of them remained secret

after partial declassification in 1993.

And my question to you is: Was there a significant damage to the

United States security interest by having matters disclosed in 1985

by Dr. Lee even if they were partially declassified in 1993?

Mr. SHAPIRO. Senator, my view was that what he did in 1985

was a viable 794, and to me, I’d have prosecuted it. And I wanted

to.

The response of Main Justice is, you know, valid, I guess, because, frankly, if you’re going to pursue—and Senator Leahy’s

point is well taken. If you’re going to pursue an espionage case

which is about secrets, you’re going to have a tough time in Los

Angeles in front of a jury where the secret that you’re accusing the

guy of is available on the Internet, and not only available on the

Internet, we were going to have—and I recognize this—a bunch of

scientists who were going to say—and, in fact, I got—you know,

this criticism today is not the first criticism I received. We heard

from scientists——

Senator SPECTER. But those scientists, Mr. Shapiro, were character witnesses for Dr. Lee.

Mr. SHAPIRO. No, I’m talking about those, Senator. I’m talking

about the scientists who called me up to complain that I was destroying First Amendment academic freedoms by prosecuting a guy

for being a scientist and accused me of racism on top of it.

I’m talking about the other criticism of all the scientists who

worked at Lawrence Livermore and Los Alamos, and, frankly, I

kind of wish the subcommittee would consider that issue because

that’s why this case was so important. It was the lax attitude of

the scientific community—— Senator SPECTER. We are—we are considering that issue.

Mr. SHAPIRO. I think that is——

Senator SPECTER. But there were disclosures made by Dr. Lee in

his confession above and beyond what was on the Internet. Isn’t

that correct?

Mr. SHAPIRO. You would have—again, Senator, we agree that the

1985 charge was a viable 794, and if they had given me authority,

I’d have charged it.

80

Senator SPECTER. And with respect to the 1997 disclosures, there

were matters confessed to by Dr. Lee beyond what was in the public domain and on the Internet.

Mr. SHAPIRO. Again, my view of the 1997 disclosure was that it

was a viable 794.

Senator SPECTER. Senator Torricelli.

Senator TORRICELLI. Thank you, Mr. Chairman, very much.

Mr. Shapiro, thank you very much for being with the committee

today. I think it bears repeating that it is not the interest or intention of this committee to involve itself in the prosecution of individual cases. It is not our role or responsibility to provide oversight

to individual line attorneys.

This Senate does confirm appointees of the President of the

United States to senior positions at the Justice Department. It is

our constitutional responsibility to ensure that they are doing their

duty, that the laws are being enforced, and that the Department

is run consistent with the objectives of elected officials of this Government.

Now, that is important because I don’t want other line attorneys

to think that in each and every case in which they are involved

there is an elected official looking over their shoulder. But I do

want everyone confirmed by the Senate to understand we are looking over their shoulder.

So that goes to the heart of the issue here about the judgments

that were made. Judgments could be right or they could be wrong.

We are interested in whether they were made for the proper reason

and on an informed basis as a matter of policy, because this is not

only illustrative of the past, it is instructive for the future.

I want to go to inquire then into where decisions were made in

addition to, as Senator Specter has attempted, whether or not they

were proper. Were your contacts at the Department limited to Mr.

Liebman and Mr. Dion in your communications about the judgments to be made in prosecuting the case?

Mr. SHAPIRO. I’m only hesitating—my initial answer is yes. I’m

only hesitating because I reached out to other prosecutors in the

Department of Justice throughout the country who had done espionage cases to obtain SEPA information——

Senator TORRICELLI. That wasn’t really the thrust of my question.

Mr. SHAPIRO. I’m sorry.

Senator TORRICELLI. But in terms of the judgments that were

being made, the counseling that you were getting from superiors,

that was generally limited to Mr. Liebman and Mr. Dion?

Mr. SHAPIRO. Yes.

Senator TORRICELLI. During your conversations with them, as

they related the policy judgments being made about prosecuting

the case, is it your belief that those judgments were resting with

Mr. Dion and Mr. Liebman, or they simply were transmitting decisions made elsewhere?

Mr. SHAPIRO. Certainly at Mr. Dion’s level or higher up.

Senator TORRICELLI. So, indeed, you believe Mr. Dion himself

was receiving instructions elsewhere about the policy judgments to

be made?

81

Mr. SHAPIRO. Well, and I could speak more fully on that issue

in closed session, but yes.

Senator TORRICELLI. Do you believe that Mr. Liebman and Mr.

Dion had, in retrospect, access to everything that was at your disposal? Indeed, did you allow them to make a full, fair, and complete judgment based on everything that you had learned and you

now know the FBI knew about the case?

Mr. SHAPIRO. Absolutely. I had an obligation to do so in this kind

of a case, and they had access to everything I had.

Senator TORRICELLI. In retrospect, do you believe that you could

have as a matter of law succeeded with the 794 case?

Mr. SHAPIRO. Look, every trial lawyer thinks he can win every

case, and I thought I could win the case. But I have—I have——

Senator TORRICELLI. But you retained some doubts?

Mr. SHAPIRO. Well, I—I’m not a magician, but I thought I would

have had a pretty good shot.

I should also say I viewed my role in this chain of command as

being the grunt who advocated for the most serious charge that he

thought he could support, and I did that.

Senator TORRICELLI. Was it made clear to you that the decision

by your superiors not to proceed with the case was a questioning

of whether the evidence was sufficient to prevail or whether it was

a policy judgment for some other reason not to pursue the case?

Mr. SHAPIRO. Oh, I should also say—when you asked—just before I answer that, I was also reporting to my supervisors at the

U.S. Attorney’s Office as well as Mr. Dion and Mr. Liebman. So

that was Mr. Drurian and the U.S. Attorney.

But in answer to your question whether it was evidence or policy,

at least I felt it was—it was evidence. But I never know when the

next questions——

Senator TORRICELLI. In your conversations with them, it was—

that is your impression. But in your conversations with Mr.

Liebman and Mr. Young, it was not made clear that, for example,

notwithstanding the evidence and their extraordinary confidence in

you personally, nevertheless, for a policy reason they decided not

to pursue the case.

Mr. SHAPIRO. Well, you’re talking about—my difficulty is you’re

talking about a mixed question of evidence and policy. I thought

their decisions——

Senator TORRICELLI. That is the way life works, and I am asking

you to make a judgment.

Mr. SHAPIRO. It’s the way it seems to work here, but the fact of

the matter is there was policy based on the evidence, I think. And

what they conveyed to me was they didn’t think the evidence was

as strong as I saw it. They also saw other problems with the case,

particularly with the open source questions, and so to the degree

Internal Security has policies about when they let line assistants

go forward, I guess that evidentiary consideration informed their

policy decisions. But, to me, it was evidence.

Senator TORRICELLI. In fact, you are giving me a mixed answer,

that there was a question of confidence in the evidence and sustaining the case, but there were elements of a policy decision not

to proceed as well.

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Mr. SHAPIRO. You asked me a mixed question. I gave you a

mixed answer.

Senator TORRICELLI. OK; so——

Senator SPECTER. Senator Torricelli, time has elapsed on the

vote, and we are now in the 5-minute overtime. So my suggestion

would be that we go vote and we will be able to do both of them

very close and come right back.

We will stand in recess for just a few minutes.

[Recess 11:02 a.m. to 11:30 a.m.]

Senator SPECTER. The subcommittee will resume.

Senator Torricelli has not yet returned, but in consideration of

our limited time, I think we will proceed with Senator Sessions,

and then we will return to Senator Torricelli at the conclusion of

Senator Sessions so that Senator Torricelli may finish.

Senator Sessions.

Senator SESSIONS. Thank you, Mr. Chairman.

Mr. Shapiro, I have seen over the years instances in which good

prosecutors—and I consider you one. You are experienced; you have

tried a variety of cases. That is the kind of background you need

to make a tough decision in any case, in my view, whether it is a

complex white-collar fraud cause or an espionage case. Once the

statute is studied a little bit, it is pretty clear what you have got

to prove, isn’t it? It is not that complex. The statute said whoever

with reason to believe this information could be used to injure the

United States or to the advantage of another nation.

So I think, first of all, that your experience and judgment on this

matter strikes me as precisely correct. And Mr. Dion testified before, and I respect him. He has been there for a long time. I am

sure he knows all kinds of things about the intricacies of espionage

law. But in answering my question, he has never tried a case, and

he is not prepared to, in my view, make the kind of judgment on

the ground that you were able to make uniquely.

The question about proceeding with 794 in the memo that was

raised to you before that indicated that the FBI had said that 794

could be charged if the plea was rejected, from what I understand

you to be saying, you were flying back to Washington, calling on

a daily basis, asking for the right to charge 794, and you were really not likely to be mistaken about that, are you?

Mr. SHAPIRO. I don’t feel I am mistaken about that.

Senator SESSIONS. And if they had told you that if this plea bargain attempt you had to make, last-ditch plea attempt fails, you

can charge 794, you would have gone in with a lot different attitude, wouldn’t you?

Mr. SHAPIRO. Well, I was——

Senator SESSIONS. You would remember that, wouldn’t you?

Mr. SHAPIRO. Yes, and I was given—I was given the authority to

use the 794 as leverage. I do need to make that clear, although I

think the subcommittee understands that I was not flying solo

here. Main Justice was involved in all the decisions, including the

decision to allow me to use the 794 as leverage in the plea agreement.

The question as to whether I had authority to charge 794, no, I

think I’m very clear on that.

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Senator SPECTER. You are very clear that you did not have authority to charge 794 even if the plea bargain broke down?

Mr. SHAPIRO. I did not believe I did.

Senator SPECTER. OK.

Mr. SHAPIRO. But I do believe that—I know I had authority to

use 794 as leverage in plea negotiations, and I know both of you

understand the distinction—— Senator SPECTER. Well, pardon me for interrupting, Senator Sessions.

That is an important distinction. You can talk about 794, but the

critical factor—and you have already answered this—is that if the

plea bargain broke down, you did not know you had authority to

charge 794.

Mr. SHAPIRO. I think I have answered that before, yes, that is

right.

Senator SPECTER. My statement is correct?

Mr. SHAPIRO. Yes.

Senator SPECTER. Thank you.

Senator SESSIONS. And that was the hammer that could allow

you to drive the plea agreement on the terms that you were concerned with?

Mr. SHAPIRO. That is right.

Senator SESSIONS. And as it went down, not having that even

when you are in the process of the plea and the defense lawyer said

some things that I think you were not happy with and minimized

the defendant’s involvement in matters beyond justice and fairness,

you are still handicapped because you know ultimately you are not

able to bring the one charge that could have brought order to the

chaos you were involved in.

Mr. SHAPIRO. I think that is right. I should also add, as a former

U.S. attorney, I am sure you can appreciate if you have an espionage case in your office, you know about it. And I was reporting

to the first assistant U.S. attorney, Richard Drurian, every step of

the way, and I kind of want to clear this up because I want to

make sure Senator Torricelli’s answer is clear.

I was not just trying to serve supervisors at Main Justice. I was

also serving, more pointedly, the supervisors at the U.S. Attorney’s

Office, Richard Drurian, the first assistant, and Nora Minella, the

U.S. attorney. And they approved everything, as did Main Justice.

Now, you know, I don’t particularly like having a lot of supervisors;

it is something I dislike.

It is my right, as a guy who never became a supervisor, to complain about it, and in this case I had more supervisors than you

could imagine. I mean, I had my supervisors at the U.S. Attorney’s

Office who I was reporting to several times a day. I had the supervisors at Main Justice, not all of whom I was even talking to.

Senator SESSIONS. Well, let me ask you about there in the U.S.

Attorney’s office, your direct supervisor, Mr. Drurian. Did he also

believe you should not charge 794? Was that his position?

Mr. SHAPIRO. Mr. Drurian, again—and I said before, I will say

it again—I thought my supervisors, who were also my friends, and

the people at the Department of Justice all operated in good faith.

We disagreed, and an absolute brutal, no-holds-barred disagreement among prosecutors is not only common, it is appropriate, beVerDate 26-SEP-2001 06:22 Oct 03, 2001 Jkt 073205 PO 00000 Frm 00089 Fmt 6601 Sfmt 6602 E:\HR\OC\A205.XXX pfrm04 PsN: A205
84

cause if we don’t fight it out, we are going to get killed in front of

the jury.

Senator SESSIONS. Well, I would just say to you that this concern

over the Schuster memorandum that waffles by the Navy whether

or not there was a classification, this Web site matter and some of

the other Brady material matters, I believe you would have handled.

I believe Mr. Schuster couldn’t withstand your cross-examination

because I believe he virtually couldn’t withstand Senator Specter’s

examination. It was classified material, and the facts were the

truth would have come out in a fully contested trial. And if any of

these scientists had come in there with their half-baked ideas that

this was some sort of free speech question, I think you would have

handled them, also, and I believe the jury would have seen a fair

and complete picture.

And I am absolutely confident that he would have been convicted

on 794, and I believe your people, at best—the best spin I can put

on the Department of Justice view is they took counsel of their

fears. They are over there worried about all these, oh, there is

Brady material, oh, oh, oh. But sometimes when you have got an

important case, you have got to take it to the jury.

Let me ask you this. Was the standard they were utilizing on to

what extent the classifications were violated—was that standard

based on what he admitted to having given to the Chinese?

Mr. SHAPIRO. They will have to answer that. My understanding

was they were considering everything that I provided them, as well

as the open source material.

Senator SESSIONS. Well, it is a complex point, but the point is

this. To my way of thinking, Mr. Lee undoubtedly gave a lot more

than he said he gave. In evaluating the case from a strictly legal

point of view, you may have to say, well, we ought to consider only

what he has admitted giving, but I am confident he gave more than

that.

My experience is they never tell everything they have done. Do

you agree with that?

Mr. SHAPIRO. I do, and that is why it is frustrating for me to sit

here because I have information that I could provide the committee

that would alleviate those concerns, because they alleviated them

for me. And I will tell you, in the many cases I had with a cooperating defendant or a defendant who pled guilty who was debriefed,

I never had the kind of information to corroborate what was said

as I did in this case. And, you know, I have traveled 3,000 miles

to be here voluntarily and I am looking forward to the chance to

go another 28 feet in a closed session so that I can tell you why

I can say that with total confidence.

Senator SESSIONS. Well, I want you to talk about some things

here in public, and maybe we have done it. The point, I believe, is

the Department of Justice was in error. I believe you were correct.

Everybody has made mistakes. I have made mistakes in my career.

But I believe when you shake this down, there wasn’t but one clear

decision, and that is to charge him with espionage. And if he got

a light sentence, it would be because of serious cooperation.

85

As it turned out, the FBI said they wanted intelligence. That was

even more important to them than a plea, but they didn’t get intelligence, did they?

Mr. SHAPIRO. You would have to—again, you would have to ask

them that, but I take your point.

Senator SESSIONS. But it appears that his cooperation was less

than candid and less than complete. You wouldn’t dispute that,

would you?

Mr. SHAPIRO. I would agree with your statement that very often

it isn’t.

Senator SESSIONS. And had he been facing the most serious

charge that could have even carried a death penalty, perhaps the

clarity of that event would have caused him to be fully cooperative.

As a professional, isn’t it true that when you are negotiating a

plea, you have to get the defendant’s full attention because they

generally don’t like to talk about what they have done?

And to obtain that cooperation, they have to be faced with a

choice and cooperating has got to be less painful than not cooperating. And you were not allowed to proceed with the leverage that

you had, and two bad things occurred. You did not get full and honest cooperation. And, number two, you got a sentence too light, in

my opinion.

Mr. SHAPIRO. Well, Senator, I would let—DOJ and my attorney

supervisors at L.A. could answer this as well. From my standpoint,

the most important leverage that we could have had on Peter Lee

was through an arrest, and it was my desire to arrest him as soon

as the confession was obtained.

Again, just on my experience, the period of time where the cuffs

are placed on the suspect very often, particularly in this case, I

think would have produced perhaps more information. Again, in

any other case I would have been the person calling the shots and

I would have made the—in fact, I did fill out the arrest complaint.

Gil Cordova’s affidavit was initially an affidavit in support of an arrest warrant and a search warrant.

Senator SESSIONS. And what caused the arrest not to go forward?

You could have arrested him on 1001.

Mr. SHAPIRO. And that is what we intended to do. The original

complaint—— Senator SESSIONS. And 1001 is, just for the record, a false statement on a travel voucher or any false statement to the Government, which carries a maximum of 2 years still?

Mr. SHAPIRO. Yes, I believe so, and it would have been—but it

would have been sufficient for our purposes, which was to put the

cuffs on him and let him taste incarceration. Because this was an

espionage case, even the decision to arrest was not mine, nor was

it one that my supervisors at the U.S. Attorney’s Office could make

on their own, nor was it one, frankly, that my supervisors at the

U.S. Attorney’s Office were comfortable in making without DOJ approval. And so my frustrations in this case began when I wasn’t allowed to hook Mr. Lee up.

Senator SESSIONS. I think that is correct, and your judgment

strikes me as being correct on that issue, also, and it is unfortunate

that did not occur because later you did get cooperation, and so

forth, or at least progress toward that.

86

Mr. Chairman, I don’t want to take too much of your time.

Senator SPECTER. We will come back to you, Senator Sessions.

Senator SESSIONS. Could I proceed with one more thing, lest it

gets off my mind?

Senator SPECTER. Sure.

Senator SESSIONS. In the sentencing disclosures to the judge,

there was excised from the sentencing memorandum Agent Cordova’s original—lines from his original affidavit referring to the

1997 activities. Was that your decision or was that a decision from

any other source?

Mr. SHAPIRO. I am not quite sure what we are referring to. I

don’t have the document in front of me. I will tell you that my actions at the sentencing hearing were informed primarily by the information that I cannot reveal in open setting.

Senator SESSIONS. Well, I will just the original arrest converted

affidavit had this sentence in it: ‘‘Peter Hoong-Yee Lee admitted to

knowing this lecture, in 1997, was providing information to the

PRC scientists which was classified confidential.’’ That was left out

of the—— Mr. SHAPIRO. But it was contained in the position papers that I

provided, and was also contained, as I recall, in the pre-sentence

report. And I think if you look at my allocution at sentencing, I

made reference to the 1997 material very clearly. As a matter of

fact, I recall Mr. Henderson talking about the submarine material

first.

Senator SESSIONS. Well, our review of the record indicates there

is nothing in the record that indicates that Lee had actually confessed to passing classified information.

Mr. SHAPIRO. I am very confident it was in the pre-sentence report. And I think if you look at the sentencing allocution, both Mr.

Henderson’s comments and my comments, and the judge’s comments, I do think it is in there.

Senator SESSIONS. It seems almost the affidavit of March 1998

was crafted to avoid saying that he confessed.

Mr. SHAPIRO. And to that point, Senator, I would like to answer

that point on that issue, but I cannot in this setting.

Senator SESSIONS. Well, very good, thank you.

Senator SPECTER. Senator Grassley.

Senator GRASSLEY. Thank you, Mr. Chairman.

Going back to his second to the last question, why weren’t you

allowed to arrest Mr. Lee, and did Main Justice have a rationale?

Mr. SHAPIRO. As I recall, Senator, the request was made of Main

Justice from the U.S. Attorney’s Office after my supervisors at the

U.S. Attorney’s Office reviewed the matter for some period of time.

The affidavit was sent to Main Justice and the decision to not go

forward with the arrest, as I recall—and I don’t have documents

here, but as I recall, the decision was based in part because of the

need for an assessment of the information that Peter Lee passed;

that is, Main Justice did not want to proceed with an arrest warrant until they had had an opportunity to assess what it is that

he passed to determine, first of all, if, in fact, it was classified because I think they felt if you are going to arrest somebody on 1001

but you are going to make reference to potential 794 charges, this

becomes a very public case.

87

My feeling was obviously that the complaint and the arrest warrant would be sealed and that we wouldn’t necessarily have to get

into that. Nevertheless, DOJ had to go to the Navy, had to go to

the Department of Energy, and had to get the information before

they could make an assessment as to the damage before they could

give me the approvals.

As a result, I asked, and the FBI agreed at some expense, to

place Mr. Lee on 24-hour, 7-day-a-week surveillance, my fear being

that he would flee. And so my concern from that period of time in

the case was that we not lose him and allow him to avoid prosecution entirely.

Senator GRASSLEY. Do you agree with Main DOJ’s rationale in

this matter?

Mr. SHAPIRO. I don’t know how to answer that. I had my position. I didn’t have the authority to make the call. They made their

call and my job was to accept it. I recognized that they had concerns, and I think the concerns were in good faith. And I must tell

you, when I complained about it to my supervisors at the U.S. Attorney’s Office, which I did with some regularity, my supervisors

at the U.S. Attorney’s Office did agree with that decision.

Senator GRASSLEY. I want to go back to prior to the vote and a

word you used in answering a question for Senator Specter, the

word ‘‘evolved.’’ It was in regard to Dr. Twogood’s assessment. You

said it evolved. What did you mean by ‘‘evolved?’’ Explain what you

mean by ‘‘evolved.’’ Mr. SHAPIRO. Well, Senator, it was my feeling, and it is not an

uncommon experience particularly in dealing with complicated

issues—and I had never dealt with a case with so many complicated scientific issues. Either because I am not asking the right

questions or perhaps the person is not focused on what I am asking, Dr. Twogood’s initial position on the classification was different than what his ultimate decision on the classification was.

I have been told that at some point he has said recently that it

was secret, and that is news to me. I will also tell you that Dr.

Twogood, who was a witness that I put in my affidavit and I would

have put up, used a specific form of classification, a mosaic form

of classification, which was not the form of classification that people in the Navy used.

I will tell you—and I know Senator Sessions will understand

this—you know, sometimes witnesses’ egos get involved, and the

more one side says it is A, the harder the other side says it is B.

Sometimes you wonder if it is on the merits or if it is based on

other reasons, but Dr. Twogood’s opinion evolved. And I think it is

in the paperwork that I have seen, the documents, that it has

evolved. You have documents where he says at one point it is confidential and at another point it is something else.

And I in no way am casting aspersions because this is not uncommon. Nevertheless, it is material for a defense lawyer, which I

would have turned over and which he knew about, that would have

been brutal on Dr. Twogood. But I would have prepared him for

trial and we would have gotten through it.

Mr. CONNOLLY. Senator, may I have just one moment with Mr.

Shapiro?

[Witness conferring with counsel.]

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Mr. SHAPIRO. Senators, if I could just add one more—Senator

Sessions, my attorney has provided to me the affidavit—oh, I am

sorry. My sentencing position paper of March 26, 1998, which I

provided to Judge Hatter and which has been provided to this committee, it was my response to the defendant’s position with regard

to sentencing factors. And at page 16, paragraph 30, which takes

all of 16, 17, and paragraphs 31, 32, I do discuss the issue that we

talked about, namely the submarine information and Peter Lee’s

giving the lecture, his admissions about it, and so forth.

That was my recollection, and I brought up Mr. Henderson having brought it up first because in my mind I recall it was sort of

a counter-punch to what Mr. Henderson was saying and it was my

response to his position paper.

Senator SESSIONS. Well, it was omitted from Agent Cordova’s two

sworn affidavits of February 27, and March 23, 1998, for some

strange reason.

Mr. SHAPIRO. And I can tell you why, I think, without violating

classification, and I think you will understand it if I say it. I took

it out of his declaration and put it in my papers so that he could

not be cross-examined at sentencing on that issue.

Senator GRASSLEY. Despite the evolution of Dr. Twogood’s position, why did you still have confidence in him as a witness?

Mr. SHAPIRO. Well, two reasons. One, he was the only one I had.

And, two, he was, in my view, sincere in his beliefs. I did not think

he was dishonest. I felt he was a truth-teller. I would never put

him up there if I thought he was a liar.

Having said that, you put witnesses on the stand sometimes who

have inconsistent statements that you are going to have to deal

with, and he had those. Now, I do know that my supervisors at the

U.S. Attorney’s Office were particularly because they said, if he is

your whole case, doesn’t he have to basically be unimpeachable?

And I was never fortunate enough to have unimpeachable witnesses, so I was prepared to go forward with Twogood. And, again,

the 1985, with the 1997, with the 1001—even I would have convicted him of something. I am sure of it.

Senator GRASSLEY. I appreciate your testimony and your candor,

and I thank you for helping the subcommitte with its work of oversight.

Thank you, Mr. Chairman.

Senator SESSIONS. Mr. Chairman, can I ask one little follow-up

on that?

Senator SPECTER. Sure.

Senator SESSIONS. It strikes me that on examination, study, and

what you could have brought out on cross-examination, Dr.

Twogood was correct. Even the defendant himself admitted that it

was classified information. He never waffled on whether or not it

was classified information, and I think the danger from all that is

exaggerated. I think you could have handled that fine at trial.

Senator SPECTER. Thank you, Senator Grassley. Thank you, Senator Sessions.

Mr. Shapiro, coming back to what Dr. Twogood said at what

time, there is a document which I have asked to be provided to you

which is dated November 10, 1997, which goes to some of the

89

points which we have raised here that Dr. Twogood had a conclusion that this material was secret at the very outset.

Now, the subcommittee did not get this information until late

yesterday. And may I inquire of you, Mr. Iscoe, why so late in coming? Mr. Iscoe, why is this memorandum dated November 10 so

late in coming to the subcommittee?

Mr. ISCOE. Can I see that memorandum, Senator?

Senator SPECTER. Would you identify yourself for the record, Mr.

Iscoe?

Mr. ISCOE. Craig Iscoe from the Department of Justice.

I have a memorandum in front of me dated 11/13/97 addressed

to Michael, James J. Smith at the bottom. I don’t see one with a

November 10 date on it.

Senator SPECTER. Well, part of this sequence is a memorandum

dated—— Mr. ISCOE. I have just been handed another one dated November

10, 1997. I received these—— Senator SPECTER. Aren’t they all together, Mr. Iscoe?

Mr. ISCOE. Well, they were not in the way they were handed to

me, Senator.

Senator SPECTER. But aside from the way they were handed to

you, don’t they all fit together as part of the same memo transmission?

Mr. ISCOE. I am not certain. I have a fax cover sheet that is page

2 of 34. The November 10 one is page 6 of 34, and the November

13 one is page 3 of 34. I haven’t been able to determine how they

fit together. I received these for the first time, Senator, at approximately 5 p.m., as the date line on the fax indicates, ‘‘OPCA front

office.’’ That, Senator, is the FBI’s congressional and public affairs

front office.

I received them for the first time at the time indicated, April 4,

2000, and then when I got those I promptly transmitted them to

the Senate Judiciary Committee. I had not seen them before that

time, Senator. That is the most I can say as to my knowledge of

how they came to get to us. I can say that upon learning that they

were in my office, I immediately transmitted them to the Judiciary

Committee.

Senator SPECTER. Well, would you make an inquiry as to why

you didn’t get them until the time you specified, because this subpoena has been outstanding for a long time and we got them on

the eve of the hearing today and the subcommittee would like to

know what the sequence was in their coming to light and why we

got them so late.

Mr. ISCOE. Well, Senator, we will be glad to do that. It may be

other witnesses can shed light on that as well, but I do want to assure the committee that as soon as we obtained these documents,

we did provide them to you.

Senator SPECTER. OK, let’s find out the details behind that.

Mr. Shapiro, these three documents have been presented to me

as going together and it is a maze and a labyrinth to find out exactly what is what, but the representation made to my staff is that

they go together.

We are going to make these as 1, 2, 3, and the one marked number 1 will be the one of November 10th, which at the bottom says,

90

‘‘This is in response to Jonathan Shapiro’s request of 10/30/97,’’ and

the subject is radar ocean imaging.

There is a second document which shows that the matter is to

DOJ/ISS, attention Michael Liebman. And the third page has on

item number 3, ‘‘Application of classification Crimson Stage experimental data and analyses.’’ And it is represented to me that this

is the analysis by Dr. Twogood and says, ‘‘Processing techniques

which, when applied to unclassified or classified data, yield a significant enhancement and signature detectability which might

apply to the submarine case, Secret/Crimson Stage.’’ [The documents referred to follow:]

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Insert Offset Folio 222 Here 73205A.002
92


Insert Offset Folio 223 Here 73205A.003
93


Insert Offset Folio 224 Here 73205A.004
94

Senator SPECTER. Had you seen these documents before today?

Mr. SHAPIRO. This is the first time I have seen these documents,

I can guarantee you, in the past 21⁄2 years. As far as whether I

have seen them before, I have difficulty saying. You know, this is

some time ago.

Senator SPECTER. Well, I can understand that. We are going to

go into closed session this afternoon at 3:00, so we will be able to

talk about the other materials.

Mr. SHAPIRO. I think the subject matter, as I just perused it,

would be appropriate to talk about in closed session. I think I could

add something.

Senator SPECTER. Well, I made a representation earlier and I

have confirmed it with Dobie McArthur that we have the classified

details from Dr. Twogood on a secret level. But these documents

confirm what Mr. McArthur had pointed out to me earlier this

morning that Dr. Twogood had made the classification of secret as

early as November 10, and that it had been transmitted to the attention of Mr. Liebman. We will have to ask him whether he ever

saw it. And as noted, it was, ‘‘in response to Jonathan Shapiro’s request of 10/30/97.’’

So you are really not in a position to say with certainty whether

you had seen this before or not?

Mr. SHAPIRO. Well, I wouldn’t want to without having a greater

recollection. I will tell you that I was constantly requesting that

the Bureau obtain from Dr. Twogood a clear classification, as I was

asking the Bureau to get clear classifications from the Navy and

from the Department of Energy. I mean, those were the elements

that I needed to meet. This was the stuff of my case. And I see that

these were sent at my request, which doesn’t surprise me because

I was making these requests of everybody all the time.

Senator SPECTER. Well, this is a clear classification of secret.

Mr. SHAPIRO. I will read the document. I will tell you that the

affidavit that Gil Cordova signed under oath, where he said that

the information was confidential, Gil Cordova was telling the truth

absolutely. And I recall when Dr. Twogood said the information

was confidential classified. Now, if that changed or if that

evolved——

Senator SPECTER. What was the date of Agent Cordova’s statement?

Mr. SHAPIRO. You have it, Senator. It is the declaration both in

support of the arrest search warrant and also part of the declaration in regard to sentencing.

Senator SPECTER. Well, I am advised by Mr. McArthur that it

was October 21. So there may have been—well, we will have to find

out from Agent Cordova what the basis was for his saying confidential as opposed to secret. But as of November 10—that is a short

time after Agent Cordova’s affidavit—Dr. Twogood says it is secret.

Mr. SHAPIRO. And as we talk about this, I also recall in the context of trying to get the Navy to come forward me saying, you

know, we think this stuff is secret. I mean, my approach to the Department of Defense and Navy was always I think this stuff is secret. That was my understanding, probably based, the more I think

about it, on talking to Dr. Twogood ultimately and others.

95

But the reason we were going to the Navy is we wanted them

to say the stuff is secret. That was going to be the witness, in my

view, was the Navy. The Navy should have been the witness in this

case.

Senator SPECTER. Let me read into the record at this point Dr.

Twogood’s testimony from last week. My question: ‘‘Did you have

occasion to examine the transcript and videotape of Dr. Lee’s confession?’’ ‘‘Mr. Twogood: yes.’’ ‘‘Senator Specter: And what was the

appropriate classification for the kinds of information that he

turned over to scientists from the People’s Republic of China?’’ ‘‘Mr.

Twogood: Peter himself admitted that he had passed confidential

information and stated it was confidential. When I saw the videotape and the audiotape, my immediate response was that it is at

least confidential and I thought it was likely DOD secret.’’ ‘‘Senator

Specter: You say you thought it was secret?’’ ‘‘Mr. Twogood: Yes,

that is how I would have classified it.’’ Mr. SHAPIRO. And, Senator, I will completely agree that that evolution was exactly what I recall, Dr. Twogood seeing the tape, saying it is confidential, then growing into a belief that it was secret.

Those problems aside, as I have said a number of times, and you

have the documents, Dr. Twogood was my witness. When I went

to the Navy asking for someone to step forward and say it was secret so I could try my case, it was Dr. Twogood that I was using.

So as I see these documents, my memory is refreshed, and that

is why in answer to Senator Sessions’ question I was willing to try

the case with Dr. Twogood, despite the warts that he may have

had.

Senator SPECTER. Well, if by evolution you mean as early as November 10, which was pretty early in the process, then I understand what you are saying because at least the information we

have is that by November 10 he had submitted to Main Justice and

Mr. Liebman the document classifying it as secret.

Mr. SHAPIRO. But I had been in touch with Dr. Twogood for a

period of time before that. I mean, I had gone to Lawrence Livermore. I had talked to him and to others, and so this document, you

know, to me, reflects sort of the end of the process. I had been talking to Dr. Twogood——

Senator SPECTER. But by November 10?

Mr. SHAPIRO. If that is what the date is, certainly.

Senator SPECTER. But that is well in advance of the plea bargain

agreement.

Mr. SHAPIRO. And well after I first talked to Dr. Twogood, in my

recollection. I mean, we were trying to push the process, push the

Navy into stepping up and provided a witness, and I was using Dr.

Twogood to do that. And the way I was able to do that was by talking to Dr. Twogood.

Senator SPECTER. Well, the plea agreement was entered into on

December 8, so you had at least Dr. Twogood’s classification of secret subject to the considerations you have already raised. And you

have testified that you thought you could have defended your witness, but I just wanted to put on the record these documents we

got last night.

When we talk about the Navy—we will have this one marked No.

4—you have the memorandum from—I am not sure whether it is

96

Mr. Schuster or Dr. Schuster, so I am going to call him Dr.

Schuster, dated November 14, 1997, which we have talked about

at length before and is the height of ambiguity on its face.

We questioned Dr. Schuster about this at length last week, and

then we questioned him about the classification that the Department of the Navy and the Department of Defense finally put on

this matter as confidential—that is dated March 9, not even a

month ago, March 9, 2000—which they finally did at the request

of this subcommittee. And we will be interested to hear in closed

sessions your comments about any other classification that you

have from the Department of Defense.

[The memorandum referred to follows:]

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Insert offset folio 231 here 73205A.005
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Senator SPECTER. With respect to the disclosures from 1985, I

think we have already covered your judgment that there were very

serious disclosures detrimental to the U.S. Government on the nuclear matters, the hohlraum, disclosed by Dr. Lee in 1985. Even

though some of it was declassified in 1993, that interim did substantial damage to the national security interests of the United

States Government.

That is correct?

Mr. SHAPIRO. My feeling on that, and I will say it again, was supervisors at the U.S. Attorney’s Office and the Department of Justice did know—and I think it is still true—that a hundred percent

of what Peter Lee passed was declassified. And the Department of

Energy wasn’t going to do me any good when I am trying to convict

a guy of passing a secret that is on their Web site.

However, to me—and I was the defense procurement fraud coordinator at the time for the U.S. Attorney’s Office—I thought that

the message had to be sent to the scientific community that works

on these defense projects that whether the stuff has been declassified or not, you have an obligation to keep it secret. And as I said

at sentencing, we don’t leave it up to the individual scientist to

make that call, and that, to me, was why that case had great validity.

Senator SPECTER. Well, when Dr. Lee disclosed the information

in 1985, it hadn’t been declassified.

Mr. SHAPIRO. That is just my point, that is just my point, Senator. And as I told Judge Hatter at sentencing, this is precisely the

kind of case we ought to prosecute. I mean, 21⁄2 years after I have

left the U.S. Attorney’s Office, not even you, with all due respect,

Senator, can make me divulge something that I have been told is

secret, and I won’t. For Peter Lee to do it, in light of the access

that he had, was wrong.

And I have to tell you, the reason I am proud of having brought

Peter Lee to justice is because if it hadn’t been for the work of the

FBI in Los Angeles, Michael Liebman at DOJ, Peter Lee would not

have been brought to justice. He would have walked on that 1985

and no one would have known about it.

So I don’t say that I am proud of that case for no reason. My father was a Russian language specialist for 4 years in the U.S. Air

Force 17 miles off the Siberian coast monitoring Soviet air traffic

during the Korean War. In my family, we take these secrets kind

of seriously.

Senator SPECTER. Well, Mr. Shapiro, everything that you have

testified to shows your diligence in your pursuit in trying to bring

Dr. Lee to justice. I just don’t want to be silent here for my participation in agreeing that he was brought to justice. I think you did

what you could, but we have to pursue the matter further because

I do not think he was brought to justice.

I had asked you this question before, but I think it is worth putting on the record now. Do you think there is some possibility, however slight, that Peter Lee could still be prosecuted for the 1997

disclosures?

Mr. SHAPIRO. If they were coupled—I end with where I began

this whole case. If the 1997 count had been coupled with the 1985

count and the 1001 count, I think that that was a viable prosecuVerDate 26-SEP-2001 06:22 Oct 03, 2001 Jkt 073205 PO 00000 Frm 00104 Fmt 6601 Sfmt 6602 E:\HR\OC\A205.XXX pfrm04 PsN: A205
99

tion. I say that and recognize that the Navy’s Schuster memo was

a knockout punch in some ways as a piece of Brady if one was just

going to charge the 1997, and that we were going to have a whole

lot of scientists on the other side for the defense, as well as apparently nobody from the Navy for Mr. Lee.

Senator SPECTER. Well, my question doesn’t go to whether it is

viable. He cannot be prosecuted now for the 1985 matter because

he has been prosecuted. That is barred by double jeopardy, or the

1001. And I understand your point on viable if they were joined together; they can’t be.

But there is a different question as to whether he could technically be prosecuted for the 1997 disclosures, and that is my question to you.

Mr. SHAPIRO. You would have to ask the lawyers of the Department of Justice, of whom I am no longer one, unfortunately.

Senator SPECTER. Well, they might not have the final answer either.

On the 1985 matters, Mr. Shapiro, you have testified that, or as

I understand your testimony—or perhaps I should ask you, do you

think that everything that Peter Lee told the PRC in 1985 was declassified in 1993, because we got information just last night, again

very late—and I would ask Mr. Iscoe to have the same pursuit as

to why we got this late.

And I will ask that these pages be marked in sequence, a DOE

fax which itemizes the declassification. It has a 1993 fax stamp and

then an April 4, 2000, fax imprint. And on page 2, it refers to some

information which has not been declassified that Dr. Lee disclosed.

‘‘There is some inertial confinement fusion information that will remain classified.’’ This relates to weapons research, and there is a

chart which shows the percent of matters declassified.

[The document referred to follows:]

100


Insert offset folio 236 here 73205A.006
101


Insert offset folio 237 here 73205A.007
102


Insert offset folio 238 here 73205A.008
103

Senator SPECTER. Prior to today, have you ever seen that before?

Mr. SHAPIRO. Even to this moment, I haven’t seen it. I don’t have

it in front of me and I don’t know what you are talking about.

Senator SPECTER. Well, would you take a look at it and—— Mr. SHAPIRO. As soon as I get it, I would be happy to.

Senator SPECTER. You don’t have a copy?

Mr. CONNOLLY. If you would identify it by the fax number page,

because that is where we got lost here.

Senator SPECTER. Ok; these are fax pages 19/34, 20/34, 21/34.

Mr. CONNOLLY. Very good, thank you. And, again, we understand

the Senator got this information late last night and this is the first

time we have had an opportunity to see this. Your staff has been

very kind in getting information as it has come across the transom

and we don’t suggest otherwise. I just wanted to make that note.

Mr. SHAPIRO. I have the document in front of me, Senator, and

I—is your question have I ever seen this before?

Senator SPECTER. Well, that is question one, and I know the answer is no. And you are looking at it now, and on page 2, to try

to abbreviate this—and I don’t know that you can really add much

to the statement, but would you confirm that page 2 says, ‘‘There

is some inertial confinement fusion information that will remain

classified which relates to weapons research?’’ Mr. SHAPIRO. It does seem to say that on page 2.

Senator SPECTER. Well, OK, let’s leave it there. You really can’t

add anything to that. This goes to the issue which the subcommittee concludes, or this Senator concludes and I think the subcommittee will ultimately, that some of the materials passed in

1985 were not ultimately declassified in 1993.

And you just don’t know about that, correct?

Mr. SHAPIRO. That is right.

Senator SPECTER. When Senator Torricelli’s line of questioning

was interrupted, he was asking you about supervisors disagreeing

on policy. And again to abbreviate, you and I went into this at

some length on February 15, and at that time you had said that

they wouldn’t authorize the case, one, either already available in

the public domain, and that it was not nearly enough classified for

them to pursue it.

This is on page 60 of a long answer, big paragraph, starting

about a third of the page down. The question is that your view as

to why you couldn’t get authority from Main Justice to go forward

on the 794.

Mr. SHAPIRO. Well, the answer I gave was in response to your

question about the limited approach and whether it would have

satisfied the Navy’s interests. And I attempted to answer your

question regarding dealing with the Navy in Washington and the

problems with classification and I——

Senator SPECTER. Well, you answered a little more broadly, and

you——

Mr. SHAPIRO. Yes, I did.

Senator SPECTER [continuing]. Included Internal Security’s view

as well, as you see there.

Mr. SHAPIRO. Yes, and my purpose in doing so was to explain to

you, as I have, that Internal Security and the U.S. Attorney’s Office supervisors looked at the case, and as I recall it, among the

104

problems they had with it was the open source material, the fact

that so much of the stuff was out there.

I must tell you there was also some concern about the judge we

were in front of and the sort of evidentiary rulings we might get.

Not uncommon, as you know, to consider those things, I guess, if

you’re a supervisor.,

The Internal Security Office, besides the open source information, was concerned about the fact the Navy would not step up and

give us a classification. And as I think I reflected, is reflected here

in the transcript, I told you that I gave them the—I forwarded all

the information I had, including, I specifically told you, the

Twogood information.

Senator SPECTER. And you also forwarded them the tapes of Dr.

Lee’s confession and the transcript of the tapes of Dr. Lee’s confession.

Mr. SHAPIRO. That’s right. And I—that’s right.

Senator SPECTER. Well, at that stage, you did not have a damage

assessment by DOD?

Mr. SHAPIRO. At what stage?

Senator SPECTER. At the stage that you were testifying about on

page 60?

Mr. SHAPIRO. I don’t think we were talking about a particular

stage then, Senator. I was answering your question about the Navy

at that point.

Senator SPECTER. Well—— Mr. SHAPIRO. I’m happy to answer the question, but what stage

are you talking about?

Senator SPECTER. At what stage did you—you say you did have

a damage assessment by the Department of Defense.

Mr. SHAPIRO. I had a damage assessment which I cannot relate

or refer to in this hearing, and I won’t—— Senator SPECTER. Well, I understand that, but can you tell me

when you had it?

Mr. SHAPIRO. My understanding in consultation with DOJ is to—

to even tell you—I can give you the date, but to do that even is

classified. And I don’t like that.

Senator SPECTER. It is classified. I am not asking you to say anything that is classified.

Mr. SHAPIRO. I understand that, and—— Senator SPECTER. I recall your statement that even I couldn’t get

you to say something was classified.

Mr. SHAPIRO. Right, and that includes the date——

Senator SPECTER. But even I wouldn’t try.

Mr. SHAPIRO. I appreciate that. But that even includes dates of

things that are classified, so I’m not going to answer that.

Senator SPECTER. Well, let me just say, not as to you, but that

is ridiculous as to a date of classification.

Mr. SHAPIRO. Well, Senator, your staff, when this issue came up,

did say that it’s your feeling or the staff’s feeling that this classification issue specifically is ridiculous. But I got to tell you, I’m in

no position, just like Peter Lee was in no position, to on my own

declassify information.

Senator SPECTER. OK; I agree, and we will handle that through

the Senate. The Senate can declassify information over the objecVerDate 26-SEP-2001 06:22 Oct 03, 2001 Jkt 073205 PO 00000 Frm 00110 Fmt 6601 Sfmt 6602 E:\HR\OC\A205.XXX pfrm04 PsN: A205
105

tion of the executive branch. We have ways to do that. We don’t

do it lightly, but we can do that. But we have found the Department of Defense hiding behind a tremendous amount of material

which they classify. We have the Attorney General’s June 8, 1999,

testimony so badly redacted you couldn’t tell anything. You have

the LaBella report so badly redacted you couldn’t tell anything.

And we are getting it unredacted, and it is a slow laborious, tortuous process, but we are doing it.

Mr. Shapiro, would it be convenient for you to come back into

closed session at 3 o’clock this afternoon?

Mr. SHAPIRO. Senator, whatever you’d like. Although it would be

more convenient to do it sooner, I would do it whenever would be

convenient for you.

Senator SPECTER. Well, it is 12:22 p.m. now, and there are

other—I have other commitments in the Senate. But what I would

like to do is do it at 3 p.m. and get you out as soon as we can.

Mr. SHAPIRO. I’ll be here.

Senator SPECTER. It is going to be in S–407. Mr. Connolly, do you

have a statement you want to make?

Mr. CONNOLLY. Just for scheduling purposes. Mr. Shapiro—I just

want to make this clear—is not hiding behind classification for any

subject matter. He is more than willing to share with this subcommittee information that he has that he believes would take less

than 5 minutes to share with the subcommittee. We just want to

make that clear in terms of scheduling at 3 o’clock. We don’t think

it will take any longer than 5 to 10 minutes for him to get the information out. And, more importantly, we want to make it clear

that he is not hiding behind this——

Senator SPECTER. Well, that is fine. I would like to do it in 5

minutes or 10 minutes. Mr. Shapiro and I haven’t been able to get

too much done in 5 or 10 minutes up until now, but I would be

willing to accept the responsibility for that, or at least part of it.

Mr. SHAPIRO. Well, I’ll accept part of it, too.

Senator SPECTER. We are going to be in S–407, and we will do

it—we have S–407 at 3 o’clock.

Mr. Robinson, we are going to have to proceed with the testimony of Mr. Dion and Mr. Liebman at a later date. We just cannot

do it now. And if you want to make a statement now, I would be

glad to entertain it, or if you want to wait until we come back, we

can do it then, at your pleasure.

Mr. ROBINSON. I would leave it to the Senator in terms of when

you would like me to do it. I would like to make a brief statement.

Senator SPECTER. Ok; fine. Thank you very much, Mr. Shapiro

and Mr. Connolly. Thank you, Mr. Connolly, for representing Mr.

Shapiro. Thank you, Mr. Shapiro, for all of the good work you have

done for the U.S. Government.

Senator SPECTER. Yes, come forward.

106

STATEMENT OF JAMES K. ROBINSON, ASSISTANT ATTORNEY

GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC; ACCOMPANIED BY JOHN C.

KEENEY, DEPUTY ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC

Mr. ROBINSON. Senator, I want to thank you for affording me

this brief opportunity to make our position clear on the subject of

the subpoenas. I know there is some disagreement. I know the Senator has strongly held views, and Senator Sessions, and I respect

that and I hope you will respect my concern and the fact that I

would like to——

Senator SPECTER. Mr. Robinson, I think you should have an opportunity to say whatever you want to publicly and put it on the

record, and we will take it from there.

Mr. ROBINSON. Thank you very much.

Senator, as you know, since you were there at my confirmation

hearing, I have been the Assistant Attorney General for the Criminal Division since June of 1998. I am here today with Deputy Assistant Attorney General John Keeney, who was Acting Assistant

Attorney General for the Criminal Division during the Peter Lee

prosecution. My purpose in making these brief remarks is to express the Department’s continuing concern about the subpoenas

issued to non-supervisory line prosecutors.

In my view, the actions of the subcommittee in forcing line prosecutors under the threat of subpoena to testify in a public proceeding for actions that they took in their official capacities in a

particular case is contrary to the public interest. These are career

prosecutors, not political appointees or supervisors.

There was a time in this country, thankfully, many, many years

ago, when with each change of national administration United

States Attorneys would replace on a patronage basis Assistant

United States Attorneys throughout the country. Fortunately, for

the last 30-plus years, that method of selecting our Nation’s prosecutors has been abandoned, and these critical positions have been

filled on the basis of merit without regard to political considerations.

The career prosecutors in this country served the people of America well under both Republican and Democratic administrations,

and I think that Mr. Shapiro’s testimony here today indicates that

we have outstanding prosecutors serving in these capacities.

The power of public prosecutors is awesome. They decide who to

investigate. They decide how intrusive those investigations will be.

They decide who to charge with crimes and for what alleged

crimes. They determine what terms to accept in plea agreements.

They decide what punishment to seek from the courts and what

consideration, if any, will be given for cooperation with the Government.

These are difficult, delicate, quasi-judicial judgment calls. The

fairness of our system, in my view, depends on entrusting this

power to people who will not be making these important decisions

on the basis of any factors other than the merits of the case at

hand, and I know the Senator agrees with that.

107

Certainly, political considerations can have no place in the process, and I know the Senator agrees with that as well.

It is critical that prosecutorial decisions by line prosecutors not

be made in a climate where those decisions by line prosecutors— not supervisors, not political appointees, who I think are expected

and given the Senate’s oversight to come up here and answer the

questions, but to line prosecutors who are not making these judgment calls. I believe that the rights of persons who may be subject

to Federal investigation can be seriously implicated by the measures we take as a Government to insulate career prosecutors, nonsupervisory prosecutors from the political process.

There are ample ways of responding to the needs of congressional

oversight, in my view, without subjecting these dedicated prosecutors to the glare of public second-guessing of some of their decisions.

The objections to this process have been bipartisan. Former Attorneys General Barr and Civiletti have argued against it, as has

former Acting Attorney General Stuart Gerson. The American Bar

Association has also argued against it. The ABA made the point

worth repeating here that congressional oversight ‘‘must be carried

out in a manner that is consistent with this country’s longstanding

commitment to the doctrine of separation of powers and prosecutorial independence from political interference.’’ The bipartisan National Association of Former United States Attorneys in a letter to me yesterday, which has been shared and the

Senator has commented on, made the point that the effect on the

morale and ability to perform of Assistant United States Attorneys

as a result of the awareness of the possibility that they may be

called before a congressional committee to explain their decisions

could be devastating to the prosecutorial process.

The National Association of Former United States Attorneys is

a bipartisan organization of former presidentially appointed United

States Attorneys from every administration since that of President

Eisenhower. I was honored to have once served as the president of

the National Association of Former United States Attorneys.

In my view, the public examination of line prosecutors is not necessary for congressional oversight. The information they have, however, should be made available. We shouldn’t be hiding from that,

and there ought to be as I think over the years efforts have been

made to accommodate the tension between congressional oversight,

a very real and important responsibility the Congress has to conduct that oversight and this very different issue of whether line

prosecutors should be here.

I also understand that the Senator has been of the view that the

Department has not been as responsive in responding to the subcommittee’s requests as it should have been. We have some disagreements about the extent of that cooperation. We have provided

volumes of materials, made our key supervisory people available

for interview and testimony, and we are willing to do more and to

try harder to accomplish that result.

My visa, if you want to call it that, as a politically appointed official in the Government will no doubt expire one day, and perhaps

for those sooner rather than later, but, nevertheless, I will return

to private life. I will not, however, rest easier, and I believe that

108

no American should, knowing that thousands of Federal prosecutors throughout the country will be making their sensitive prosecutorial decisions knowing that if Members of Congress disagree with

them, their judgment may well be second-guessed, they may be

subpoenaed to a public proceeding to explain why they failed to authorize a particular search of someone’s home, why they failed to

seek a tap on someone’s phone, why they failed to seek an indictment or seek particular charges, why they sought to seek the maximum punishment available under the law.

It is for these reasons, unrelated to this matter, which is quite

appropriate for this subcommittee to inquire into, that I am here

to express support for the line prosecutors and to express the reasons why we continue to object, as we will in other matters as well,

to the examination of non-supervisory line prosecutors and hope

that in the future we can work out an accommodation with this

subcommittee as to how they can get their information necessary

to conduct the oversight without subjecting these line prosecutors

to these kinds of proceedings.

I appreciate the Senator’s willingness to allow me to express

these views, and I know we are in disagreement on these matters.

But I do appreciate your willingness to hear me out. Thank you.

Senator SPECTER. Mr. Robinson, I have great respect for you individually and for your position, and I have a very sharp disagreement with the response of the Department. And we had the subpoenas authorized and issued back in November, and there are

many documents which are being dribbled in at the last minute,

and it has been extraordinarily difficult to deal with the Department in many, many ways. And I handed the Attorney General

personally a list yesterday and put it in the Congressional Record,

but her appearances before Senate committees, both this committee

and the Governmental Affairs, where I am also a member, are

available to her to go through.

And when you made a request yesterday to appear here and to

make a statement, you got a response within a matter of minutes.

Now, I didn’t have to rummage through any documents, but I

thought you were entitled to know exactly what my view was, and

I got back to you immediately.

And we are all on the same team, and that is the way I think

it ought to be.

Mr. ROBINSON. Yes.

Senator SPECTER. And when you defend line attorneys, I know

that is your responsibility, but there is an enormous body of authority for line attorneys to testify. And the Governmental Affairs

Committee subpoenaed one last June 9th, and on September 22nd

FBI agents, who are even more sensitive than line attorneys, or as

sensitive, and there are a whole string of investigations which go

back to 1992 and 1994 and the DOJ’s influence on the Environmental Protection Agency, in 1992 Rocky Flats, and Iran-contra

and Watergate in 1975, the FBI, DOJ domestic intelligence, and

the Congressional Research Service has said that, ‘‘A review of congressional investigations that have implicated DOJ or DOJ investigations over the past 70 years, from Palmer Rates and Teapot

Dome to Watergate, through Iran-contra, Rocky Flats, demonstrates that DOJ has been consistently obliged to submit to conVerDate 26-SEP-2001 06:22 Oct 03, 2001 Jkt 073205 PO 00000 Frm 00114 Fmt 6601 Sfmt 6602 E:\HR\OC\A205.XXX pfrm04 PsN: A205
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gressional oversight regardless of whether litigation is pending’’—

which is always the defense DOJ makes—‘‘so that Congress is not

delayed unduly in investigating misfeasance, malfeasance, or maladministration in DOJ or elsewhere.’’

Then continuing a little later, ‘‘In a majority of instances reviewed, the testimony of subordinate DOJ employees such as line

attorneys and FBI field agents was taken, formally or informally,

and included detailed testimony about specific instances of the Department’s failure to prosecute alleged meritorious cases.’’

Now, we aren’t just interested in political appointees, and the Attorney General used the word ‘‘politicize’’ yesterday, which I strenuously resented because espionage is not a matter for politicization.

And I think my record as an individual stands beyond that. I have

cooperated with President Clinton on many, many matters and continue to do so and cross party lines with regularity. And this inquiry is being conducted meticulously and scrupulously to avoid

any sense of politicization. And we have worked against extraordinary difficulties without any staff, without any funding.

And as I said yesterday, the Governmental Affairs Committee

was worn out by the responses of the minority and the responses

of the people who came in from the Government. And we are not

going to be worn out.

Mr. ROBINSON. I am sure that is true, Senator. We are, by the

way, working on being responsive to the list you provided yesterday, and I do have a list I can share with the Senator of the materials provided related to this matter to the subcommittee,

which——

Senator SPECTER. Listen, I know you have given us a lot of materials, but sometimes all the material isn’t too helpful. Sometimes

it is a data dump. But McArthur goes through documents like a

meat grinder. So we read them all.

Listen, we will continue to work with you, and I am sorry to not

be able to finish the hearing today. I did not know that Mr. Keeney

was involved in this matter. I thought that he had not been involved in the Peter Lee case, but has he been?

Mr. KEENEY. I was the final decisionmaker in the plea agreement.

Senator SPECTER. Well, I had thought that you had recused yourself. It may be, Mr. Keeney, that you and I ought to talk in advance of the next hearing.

Mr. KEENEY. I am in no way——

Senator SPECTER. I can’t hear you.

Mr. KEENEY. Senator, I am no way recused in this matter. My

participation was limited in that I was Acting Attorney General

and gave the final approval to the plea agreement.

Senator SPECTER. Well, I think it would be useful if you and I

talked in advance of the next hearing, if that is agreeable with you.

And you are signifying it is.

Thank you.

Mr. ROBINSON. Thank you for your courtesy.

Senator SPECTER. We will be in touch further as to the next

hearing date. That concludes the session.

[Whereupon, at 12:38 p.m., the subcommittee was adjourned.]

(111)

THE PETER LEE CASE

WEDNESDAY, APRIL 12, 2000

U.S. SENATE, SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT

AND THE COURTS, COMMITTEE ON THE JUDICIARY,

Washington, DC.

The subcommittee met, pursuant to notice, at 9:32 a.m., in room

SH–216, Hart Senate Office Building, Hon. Arlen Specter, presiding.

Also present: Senators Grassley and Sessions.

OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S.

SENATOR FROM THE STATE OF PENNSYLVANIA

Senator SPECTER. The hour of 9:30 having arrived, the Judiciary

Subcommittee on Department of Justice oversight will now proceed.

This is our third hearing inquiring into the matter of Dr. Peter

Lee, who had confessed to two serious incidents of espionage involving the disclosure of nuclear secrets to scientists of the People’s

Republic of China in 1985 and the disclosure of important detective

devices for locating submarines in 1997. And there was a plea bargain entered, and Dr. Lee received community service, probation,

and a fine, and no jail.

At the outset I again raise my concerns with the Department of

Justice on the very tardy response to a subpoena which has been

outstanding for many weeks. Yesterday, the Department of Justice

turned over some 800 pages of documents which required a lastminute review by a very limited staff. This same issue was raised

last week when some critical documents were turned over at the

last minute right before last Wednesday’s hearing with the attempted explanation that the Department of Justice thought the

documents were in the hands of the subcommittee from the FBI.

The same excuse was offered yesterday, although, in fact, many of

the documents were not in the possession of the FBI at any time

but were all Department of Justice documents.

It raises a natural question as to whether there are still documents which have not been turned over in response to the subpoena, which would be a very serious matter, could amount to obstruction of justice. And the subcommittee intends to get to the bottom of that in the course of these proceedings.

There has been some comment about the issue of line attorneys

being made available to testify at these hearings, which is a little

hard for me to understand in light of the long line of precedents

112

where line attorneys have testified. They testified on the hearings

in 1992 through 1994 on the Department of Justice’s influence on

the Environmental Protection Agency; in 1992 on Rocky Flats; in

1995 in the FBI-Department of Justice domestic intelligence issues;

on Iran-contra, in Watergate, going all the way back to Teapot

Dome, which led the Congressional Research Service to conclude,

‘‘In the majority of instances reviewed, the testimony of subordinate DOJ employees such as line attorneys and FBI field agents

was taken, formally or informally, and included detailed testimony

about specific instances of the Department’s failure to prosecute alleged meritorious cases.’’ There was an issue raised last week about whether there had

been a damage assessment before the plea bargain was entered

into, and we had a closed session, and in the closed session, there

was nothing to contradict the subcommittee’s earlier conclusion

that there had been no damage assessment prior to the entry of the

plea bargain. The only damage assessment was one by the Department of Energy as to the nuclear issue from the 1985 transmission

of material to the People’s Republic of China scientists. And there

has never been a damage assessment on the submarine disclosures.

There had only been conclusions by Dr. Twogood about the classification of the information which was disclosed, but not a damage

assessment as to what injury was caused to the U.S. Government.

We had a meeting with Mr. Keeney and, after talking to Mr.

Keeney, decided to include him as a witness today when he told us

that had he known that there would be a recommendation by the

trial assistant of only a ‘‘short period of incarceration,’’ he would

not have approved the plea bargain. And then his concern about

using an attempt charge as opposed to a substantive offense, which

is an issue which has concerned the subcommittee since there was

not an attempt but, rather, the completed act of espionage and the

disclosure of materials in both 1985 and 1997 to the scientists from

the People’s Republic of China.

With that very brief introduction, I would like to call Mr. John

C. Keeney now. If you would step forward, Mr. Keeney, and raise

your right hand? Do you solemnly swear that the testimony which

you are about to present to this subcommittee of the Committee of

the Judiciary of the United States Senate will be the truth, the

whole truth, and nothing but the truth, so help you God?

Mr. KEENEY. I do.

Senator SPECTER. Please be seated. I know you have a prepared

statement, and we will proceed at this time with whatever opening

statement you care to make. Your full statement will be made a

part of the record.

STATEMENT OF JOHN C. KEENEY, PRINCIPAL DEPUTY ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC

Mr. KEENEY. Thank you, Mr. Chairman.

I appreciate the opportunity to appear here to clarify the position

of the Department of Justice with respect to the Dr. Peter Lee case.

As you know, Senator, I am the Principal Deputy—— Senator SPECTER. Mr. Keeney, would you pull the microphone

closer to you and speak into it, please?

113

Mr. KEENEY. OK; is that better?

Senator SPECTER. Yes.

Mr. KEENEY. OK; thank you.

I am the Principal Deputy Assistant Attorney General in the

Criminal Division of the Department of Justice. At the time that

Peter Lee pled guilty, the position of Assistant Attorney General

was vacant, and as the Principal Deputy, I became the Acting Assistant Attorney General, and it was I who approved the accepting

of the plea from Peter Lee.

I will return to the plea agreement in a minute, but before doing

so, I would like to clarify, if I may, the relationship between the

U.S. Attorneys’ Offices and Main Justice with regard to espionage

cases.

The U.S. attorney’s manual provides that in espionage cases, the

U.S. attorney must consult with, and seek approval from, Main

Justice. The reason for this is clear. These cases are the among the

most sensitive and difficult faced by Federal prosecutors. They require close coordination and expert advice.

That expert advice is provided by the Internal Security Section

of the Criminal, and that section has helped secure so many important espionage convictions over the years, and that is due in no

small measure to the efforts of John Dion, who will appear today

as a witness. He is the Acting Chief of the section.

Although he would be too modest to cite his achievements to you

himself, Senator, Mr. Dion is one of the most outstanding public

servants I have known during my service at the Department of

Justice. He has served in the Internal Security Section for 20

years. During that time he has played a central role in this Nation’s most critical espionage cases.

He has been repeatedly recognized by both Republican and

Democratic administrations for his espionage prosecutions. In 1987,

Attorney General Meese awarded him the John Marshall Award for

Outstanding Achievement for his work on the prosecution of John

Walker and his confederates for espionage on behalf of the Soviet

Union. He received a second Marshall Award in 1997 for his work

in two other prosecutions: Special Agent Earl Pitts of the FBI and

CIA Case Officer Harold Nicholson, the latter—both for espionage

on behalf of the Soviet Union and the Russian Federation. In 1995,

the Director of Central Intelligence awarded him the Intelligence

Community Seal Medallion.

John has also been consistently praised by the U.S. attorneys

and assistant U.S. attorneys who have worked with him. I would

request that you allow me, Senator, to make part of the record correspondence sent to the Department by a U.S. attorney and two

former assistant U.S. attorneys praising John’s role in the

Squillacote prosecution.

Senator SPECTER. Praising his role in which prosecution?

Mr. KEENEY. Squillacote.

[The correspondence follows:]

Santa Cruz, CA, April 4, 2000.

Hon. ORRIN G. HATCH,

Chairman, Committee on the Judiciary, U.S. Senate, Washington, DC.

DEAR CHAIRMAN HATCH: I am writing to you concerning the upcoming hearings

into the Justice Department’s handling of the investigation and prosecution of Peter

114

Lee. I left the Justice Department last year to work for a private company on the

West Coast, and had no direct involvement in the Lee matter. Nonetheless, as a

former supervisory federal prosecutor who has handled a number of national security prosecutions, I would like to share my views with you about the outstanding

work done by the Justice Department’s Internal Security Section and its Acting

Chief John Dion.

I joined the U.S. Attorney’s Office in the Eastern District of Virginia in 1987, and

from 1994 through 1999 I served as the head of that office’s major crimes unit. In

that capacity, I personally supervised or handled more than twelve national security

prosecutions, including the prosecutions of C.I.A. employees Aldrich Ames and Harold James Nicholson, and F.B.I. Special Agent Edwin Earl Pitts. Through a coincidence of timing, my position offered me the opportunity to work with the Internal

Security Section on more national security related cases than any other Assistant

U.S. Attorney in the country during the last decade. I offer these observations based

on my numerous experiences with Mr. Dion and the Internal Security attorneys on

his staff.

The Internal Security Unit was, to me, the most important section in the Justice

Department. I found espionage cases to be the most complex matters I ever handled

as a prosecutor, more difficult than complex wire frauds, bankruptcy frauds or computer crimes. They present difficult legal issues that do not exist in most criminal

cases, and sensitive issues in dealing with intelligence agencies and national secrets. These cases are often handled in the glare of the public spotlight, with enormous pressures. In these difficult circumstances, federal prosecutors need experienced, capable support from the Department. We always got that support from John

Dion and his team.

In particular, John Dion was always there in difficult cases with unerring good

judgment and advice. Even in my last year as a prosecutor, with a number of espionage cases under my belt; I would not take any significant step in any national security matter without discussing it thoroughly with John Dion. Often, he recommended tough, aggressive positions; at times, when appropriate, he counseled restraint. On many occasions, he saved me from making legal mistakes and poor

strategy decisions, and he presented new angles to issues that I never considered.

I don’t ever recall him being wrong on any issue. Incredibly, I don’t ever recall him

stepping out of the background and taking credit for a successful prosecution, even

though he deserved that credit more than I did.

I have been informed that, in connection with this committee’s review of the Lee

prosecution, some have suggested that the Internal Security Section was insufficiently aggressive. I know little about the Lee case, but I do know John Dion. In

all my experiences with John Dion, he was never afraid to take a tough position,

to insist that more serious charges should be sought, to urge a harder stance in a

plea negotiation, or to take a national security case to trial. John Dion and his staff

were always dedicated to the aggressive prosecution of national security cases, even

in the face of opposition from national security agencies. In all my dealings with

the Internal Security Section. I never saw a lack of prosecutorial zeal or aggressiveness.

I can appreciate that dedicated public servants may have honest differences about

the appropriate disposition in a particular criminal case: I was involved in dozens

of such disputes during my time as a prosecutor. I’ve been on the harder line side

in some of the debates. But I’ve learned that a decision to charge a lesser offense

is not necessarily a sign of weakness or lack of zeal, but is often a sign of good judgment that can protect larger, more important interests. I’ve learned that the person

arguing for a tougher stance is not necessary the better prosecutor, but perhaps the

more inexperienced one. The best lawyers, the ones like John Dion, demonstrate

both zeal and good judgement.

I write this letter to you reluctantly. I don’t write letters to Congress, and my

days as a public servant worrying about particular cases and inter-office battles are

behind me. No one in the Justice Department asked me to write this, or even knows

that I’m writing it. And I’m not writing it because of any personal relationship I

have with John Dion or his staff. I’ve never met John Dion’s family, never been to

his house, and rarely saw him outside of our offices. I haven’t spoken to him or his

staff in months. I’m writing because I know that John Dion is the Department of

Justice’s most important asset, and the finest attorney I served with. His judgment,

his experience, and his knowledge are badly needed in this critical area. I benefited

tremendously from the advice of John Dion and his staff at critical points in some

of the most sensitive criminal prosecutions of the last decade.

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Thank you for the opportunity to share these views with your Committee. If you

have any questions, or if I may provide any further information, please contact me.

Sincerely,

ROBERT C. CHESNUT.

Mr. KEENEY. In short, I know of no prosecutor in the United

States who has had more experience in handling espionage cases

than John Dion. But, of course, John does not work alone. The success of our espionage cases—and there has been tremendous success in espionage cases, Senator, as you well know, over the last

15 years. Prior to that, we brought very, very few espionage cases

because of the classification problems related to such prosecution.

The success of our espionage cases has turned on the work of the

younger trial attorneys in the Internal Security Division—Section.

I say ‘‘division’’ because it used to be a division, and when it was

a division, I was part of that. I worked there. One of the finest of

these attorneys has been Michael Liebman.

As you can see from my statement, he has an outstanding academic record at the University of Michigan and at the George

Washington Law School. He served as a clerk—he served a clerkship and then he came into the Department of Justice under the

Honors Program, the same year as Jonathan Shapiro came in,

whom you had heard from last week.

In his time in the Internal Security Section, Mr. Liebman has

helped prosecute some of the Nation’s most important espionage

cases, most important cases of the 1990s. These include: Steven

John Lalas, a Department of State employee sentenced to 14 years

for spying for Greece; Aldrich Ames, the CIA officer sentenced to

life for spying for the Soviet Union and Russia; Robert Stephan

Lipka, a former NSA analyst sentenced to 18 years for spying for

the Soviet Union; and former DOD lawyer Theresa Squillacote, and

her husband, Kurt Alan Stand, who were sentenced just last year

to 20 years and 18 years, respectively, for spying for East Germany

and the Soviet Union and South Africa.

I mentioned Michael has received commendatory letters from a

number of people, and I would like to offer those for the record.

He is currently assigned to two of our most important cases: Wen

Ho Lee, and the McDonnell Douglas export violations case. As the

members of the subcommittee know, he has had to put off his preparations for these critical prosecutions in order to prepare for these

hearings. Indeed, as you are aware, Senator, Mr. Liebman was supposed to argue this morning on behalf of the United States in a

hearing in the McDonnell Douglas case. In deference to the subcommittee’s request, the Department has made him available to

appear here instead.

Let me just add this: As his record indicates, no one has ever

suggested that Michael Liebman is afraid of a tough case. He has

helped to send more spies to jail than any other lawyer of his generation.

Needless to say, the efforts of the U.S. Attorneys’ Offices are also

essential to these prosecutions. We rely on them for their expertise

in trial work. You had as your witness last week Jonathan Shapiro,

who, as you probably will appreciate, is an outstanding—or was an

outstanding AUSA. And, Senator, you had a chance to speak to

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him former supervisor, the former First Assistant United States

Attorney.

Let me turn now to my involvement in this case. My contact with

the case was relatively brief. As Acting Assistant Attorney General,

I was responsible for all the matters in the Criminal Division.

Nonetheless, I do recall being briefed about this case by Mark Richard, who at the time was the Deputy Assistant Attorney General

who supervised the Internal Security Section.

In his briefing, Mr. Richard made clear that he thought the proposed two felony plea was a good disposition of this case since

there were potential serious obstacles to prosecution. I relied heavily on the advice of Mr. Richard, who was a 30-year veteran of the

Criminal Division and who supervised all our espionage cases for

much of that time.

As you know, Mr. Chairman, from my discussions with you, at

the time I approved the proposed plea agreement, I was not aware

that it would call for only a short period of incarceration or would

charge only an attempted 793 charge. Had this been our opening

position in the plea negotiations, I doubt that I would have approved it, particularly the ‘‘short period of incarceration.’’

But I should add——

Senator SPECTER. Mr. Keeney, on that point, you had said to me

that had you known there would have been a request of sentencing

only for a ‘‘short period of incarceration,’’ you would not have approved the plea.

Mr. KEENEY. I would not have approved it, and I would have told

our people to go back to the table and carry on further discussion.

Senator SPECTER. So you would not have approved the plea bargain under those terms.

Mr. KEENEY. Under those terms at that time, on what I knew at

the time. Now, there were subsequent developments and there was

input from the U.S. Attorney’s Office, and they were of the view

that—they and our people were of the view that this was a difficult

case, we might or might not be successful, and we were getting as

much out of it as we could get.

On that basis, with some reluctance, if it came before me now

with all that before me, I would have approved it, reluctantly, because I still don’t like the idea of a short period of incarceration

for somebody who’s charged with espionage.

Senator SPECTER. But at the time you made the judgment and

made the approval, you did not know there would be a request for

only a short period of incarceration, and at that time you would not

have approved that.

Mr. KEENEY. Would not have approved it as such. No, I would

have sent them back to the table.

Senator SESSIONS. Could I ask about that?

Senator SPECTER. Sure.

Senator SESSIONS. Well, Jack, who is supposed to tell you that?

You are supposed to be—were you the highest official to be briefed

on the plea?

Mr. KEENEY. I was.

Senator SESSIONS. And isn’t it incumbent on those briefing you

to tell you all the facts about the case?

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Mr. KEENEY. As far as I know, Senator Sessions, they did not

know about this short period of incarceration provision at the time

the matter was presented to me.

Senator SESSIONS. Are you saying that was a decision made by

the prosecutor on the ground and was not conveyed to the——

Mr. KEENEY. It was a decision made by the prosecutor on the

ground. It was conveyed at some point to our people, Mr. Dion in

particular, but——

Senator SESSIONS. They didn’t bother to check with you?

Mr. KEENEY. I think—you’re going to have to ask him. I think

he——

Senator SESSIONS. No, you are the responsible highest official,

and you made a decision based on incomplete evidence.

Mr. KEENEY. Right.

Senator SESSIONS. And I want to know why you didn’t have the

complete evidence.

Mr. KEENEY. Well, I didn’t, Senator, and my understanding is

that they became aware of the short period of incarceration period

at a later date when the thing had been agreed to.

Senator SESSIONS. Well, you would then admit the system did

not work well if the approving authority, you, wasn’t given the

complete information about what was to occur?

Mr. KEENEY. Well, it wasn’t perfect, Senator, but as you know,

we U.S. attorneys have a great deal of discretion, and we do defer.

Senator SESSIONS. Not in espionage cases.

Mr. KEENEY. Well, even in espionage cases, Senator, we give a

great deal of deference.

Senator SESSIONS. Well, do you dispute the fact that the prosecutor was denied the right to proceed under 794?

Mr. KEENEY. He was never given the authority to proceed under

794. It was left open. He could discuss 794 with counsel for the defendant, but he did not have authority to proceed under 794. If it

came down to an issue of 794, he was supposed to come back and

discuss it further with us. We didn’t rule it out, but——

Senator SESSIONS. You don’t dispute, then, that he wanted to

proceed under 794 and you didn’t hesitate to tell him no on that,

and now you are criticizing him apparently for using language of

a short sentence when you denied him the ammunition, the

strength that he needed to negotiate a tough plea?

Mr. KEENEY. No, we didn’t, Senator. That’s what I was trying to

make clear. We left on the table for him to discuss with defense

counsel 794. We didn’t rule it out at that——

Senator SESSIONS. But he knew he couldn’t proceed with it.

He——

Mr. KEENEY. We didn’t authorize him to proceed with it, but we

left it open he could come back to us if he thought that he wanted

to press on 794. But he could discuss it with defense counsel.

Senator SESSIONS. Well, I am just going to tell you, if you got a

prosecutor out on the front line and he knows he doesn’t have the

right to charge the one charge that would allow him to negotiate

a good plea or proceed to victory, which I think he would have——

Mr. KEENEY. Well, I’m not sure——

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Senator SESSIONS. He has been undermined, and it is hard—it

is unbelievable to me you are criticizing him now for not being able

to negotiate a tough plea. I think that is unacceptable.

Mr. KEENEY. I am not criticizing him, Senator. I am just—— Senator SESSIONS. Who are you criticizing? You said it is not Mr.

Richard didn’t tell you the truth. You are suggesting he didn’t tell

you——

Mr. KEENEY. I’m telling you that what the facts were with respect to the chronology, and I’m saying that I did not approve the

short term of incarceration. He worked that out and he concluded

that that was the best deal he could get.

Senator, looking back now, I think he got the best deal he could

get, and I stand behind the plea agreement. But I still don’t like

the idea of anybody pleading guilty to espionage and not getting a

jail term.

Senator SESSIONS. He didn’t—he couldn’t charge the 794, the espionage count.

Mr. KEENEY. That’s—— Senator SESSIONS. No wonder he was unable to negotiate a good

plea.

Mr. KEENEY. Well, he negotiated on the basis that the 794 was

an open issue.

Senator SESSIONS. Well, he knew he didn’t have the ultimate leverage, and he had to—you all wanted a plea, and he got a plea,

the best he could do, in my view. He should have been charged and

indicted with it, and then he could negotiate with some strength.

Don’t you agree?

Mr. KEENEY. Senator, don’t let me mislead you. I think that

knowing all the facts as I do now, I think the disposition was a

good one. And I’m not at all positive—and I know you don’t share

this—that we would have convicted this guy. But that’s my judgment. We—— Senator SESSIONS. He met in two motel rooms with Chinese top

scientists in China and admitted to sufficient facts to justify a

guilty plea.

Mr. KEENEY. Senator, there are a lot of—— Senator SESSIONS. He thought our case was going to be lost before a jury, and I know Mr. Dion, you say, is experienced, but he

hasn’t been in a courtroom ever, I don’t think. And I have. And so

had the prosecutor in this case, and he wanted to go forward with

it.

Mr. KEENEY. Mr. Dion is——

Senator SESSIONS. I am sorry, Mr. Chairman. Mr. Keeney is a

great member of the Department of Justice. He has even had the

burden of defending me, when I was U.S. attorney, before congressional hearings, and he is a great man. And I am sorry to suggest

I may not have anything but the greatest respect. Thank you, Jack.

Mr. KEENEY. Thank you.

Senator SPECTER. Mr. Keeney, it is my view to let you finish your

opening statement. I wanted you to clarify that one point, and, of

course, Senator Sessions is welcome to raise the questions which he

has. But what the subcommittee intends to do is to hear your opening statement—— Mr. KEENEY. Well, I have pretty much——

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Senator SPECTER. Let me finish——and then to proceed with Mr.

Liebman and Mr. Dion, and then come back to you for some policy

matters. But you may continue, unless you have finished your

statement.

Mr. KEENEY. Senator, in response to your questions and Senator

Sessions, I pretty much stated what I wanted to say with respect

to these—to the disposition in this case, my confidence in the people who were handling it. And I might also just in conclusion point

out that Mr. Shapiro’s superiors in the United States Attorney’s Office in Los Angeles agreed finally that the disposition that was obtained was the best that could be obtained.

Senator SPECTER. We have been joined by the distinguished

chairman of this subcommittee. We will turn to Senator Grassley.

Senator GRASSLEY. Mr. Chairman, I think that last week’s hearing with Mr. Shapiro was a good case study on why we should have

access to line attorneys. I think we learned a lot from him that we

didn’t know before. Of course, there are legitimate reasons for the

Justice Department to be concerned about Congress talking to line

attorneys. We should take great care, of course, not to politicize law

enforcement or even to leave the perception that we are politicizing

law enforcement.

However, in special circumstances, it is very important to get a

line attorney’s perspective of a case, and I think Mr. Shapiro gave

us valuable information and a perspective that we have been unable to get from either the Department of Justice or the FBI. And

this was the information about that late October 1997 meeting that

he and others attended at the FBI. There was certain information

he gave that we have been unaware of, despite 7 months of briefings, meetings, and testimony from the Department of Justice and

the FBI.

That information was provided by him in a closed session and,

of course, is classified. But to me it is very significant and might

alter our views of how this case was handled.

Today, we hear from another line attorney, Mr. Liebman, and I

think his testimony should also fill in a lot of holes that we still

have in the Peter Lee case. So I hope we remember this experience

and the importance of having access to line attorneys in certain situations in the future, because sometimes it helps break through

the bureaucratic views of what happened and helps us better understand the truth. And I think this is an example that hopefully

is an example of why Members of Congress have some cynicism

about the legitimacies of certain bureaucracies not wanting to give

information and something that could have been handled with Senator Specter in a very early stage and a very open—very open with

Senator Specter, albeit the information is classified, could have

been given and we wouldn’t have had all these problems and built

up the distrust that there might be between branches of Government.

Mr. Keeney, what was the reason why Mr. Shapiro was not given

authority to pursue a 794 charge?

Mr. KEENEY. The judgment was made—and I think you ought to

pursue this better with Mr. Dion—that we couldn’t succeed, that

the probabilities of success on a 794 were pretty low.

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Senator GRASSLEY. Considering the fact that you are a highranking official in the Justice Department, how closely do you read

and examine plea agreements prior to approving?

Mr. KEENEY. I do not go into them in great detail where I’m the

Acting Assistant Attorney General and there is a Deputy Assistant

Attorney General who has charge of the responsibility for that particular section.

Now, if—I am the Deputy Assistant Attorney General and I have

responsibility for organized crime, public integrity, appellate, and

our Office of Enforcement Operations. Now, if any of those litigation sections had come with a plea agreement, I would feel it incumbent upon me to look at them much more closely because I

didn’t have the benefit of the views of the supervisor of that group.

The answer is it depends on what my position is, Senator.

Senator GRASSLEY. Ok; you were present at the closed hearing

last week at which Mr. Shapiro testified about the significance of

the late October 1997 meeting between the Department of Justice

and FBI officials. Did you feel that Mr. Shapiro properly interpreted the significance of that meeting in regard to how it relates

to the prosecution of Peter Lee?

Mr. KEENEY. I’m sorry, Senator. I don’t fully understand what

you’re getting at. I’m sorry.

Senator GRASSLEY. Well, you were present last week.

Mr. KEENEY. I was, yes, sir.

Senator GRASSLEY. And you heard what Mr. Shapiro said about

the significance of that October 1997 meeting.

Mr. KEENEY. With respect to the briefing that he got—— Senator GRASSLEY. Yes.

Mr. KEENEY [continuing]. And new information, yes.

Senator GRASSLEY. So my question, then, let me repeat, is: Did

you feel that Mr. Shapiro properly interpreted the significance of

that meeting in regards to how it relates to the prosecution of

Peter Lee?

Mr. KEENEY. I think so. I think he came away from that, as I

understand it, impressed with the seriousness of what we were

dealing with.

Senator GRASSLEY. That is the end of my questions.

Senator SPECTER. Well, Mr. Keeney, during that session, Senator

Grassley had other commitments and couldn’t be there, but he was

represented by staff. But you told us at that time that you didn’t

place the same emphasis on the information that Mr. Shapiro had.

Didn’t you tell us that?

Mr. KEENEY. I didn’t place the same?

Senator SPECTER. The same emphasis or consider it as important

as Mr. Shapiro had? Senator Grassley has broached an important

subject here which we have to handle in a circumspect way because

it was classified. But on the meeting which we had last week, you

told me and staff that you didn’t agree with Mr. Shapiro and didn’t

place the same emphasis on the information that Mr. Shapiro had.

I think that is the point that Senator Grassley is getting to here.

Mr. KEENEY. Well, Senator, if I said that, I misspoke because I

thought that the briefing we got was very important. It impressed

upon all of us the importance of the prosecution, but it didn’t add

anything whatsoever to the viability of the prosecution.

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Senator SPECTER. Well, I think that is what Senator Grassley

was looking for. It didn’t add anything to the viability of the prosecution. It was a collateral point, didn’t have anything really to do

with the merits of the case, or the viability of the prosecution, as

you just said.

Mr. KEENEY. Well, I make a distinction between the viability and

the merits of the case. It left me with the idea that what we were

doing was right, Senator.

Senator SPECTER. OK; what do you mean by viability, then?

Mr. KEENEY. The ability to prosecute successfully.

Senator SPECTER. OK; I would call that merits, but one way or

another, it is semantics.

Mr. Keeney, if you would stay at the hearing, because there are

some other questions we are going to want to come to in just a moment, but the subcommittee would now like to turn to Mr. Michael

Liebman.

Mr. KEENEY. You want me to step back?

Senator SPECTER. Yes, would you step back, please?

[The prepared statement of Mr. Keeney follows:]

PREPARED STATEMENT OF JOHN C. KEENEY

Mr. Chairman, Members of the Subcommittee, I appreciate the opportunity to appear before you today in connection with the Peter Lee case.

I am the Principal Deputy Assistant Attorney General in the Criminal Division

of the Department of Justice. At the time that Peter Lee pled guilty I was the Acting Assistant Attorney General of the Criminal Division. In that position, I approved accepting a plea from Peter Lee on two felony counts, one under 18 U.S.C.

793(d)—willfully transmitting national defense information to a person not entitled

to receive it—and the other under 18 U.S.C. 1001—false statements.

In a moment, I will return to that plea agreement. Before doing so, however, I

would like to clarify the nature of the relationship between United States Attorneys’

Offices and Main Justice with regard to espionage cases like that involving Peter

Lee. The United States Attorney’s Manual provides that in espionage cases, the

United States Attorney must consult with, and seek approval from, Main Justice.

USAM 9–90.020. The reason for this is clear: these cases are among the most sensitive and difficult faced by federal prosecutors. They require expert advice.

That expertise is located in the Internal Security Section of the Department of

Justice. That the Internal Security Section has helped secure so many important espionage convictions over the years is due in no small part to John Dion, the Acting

Chief of the Internal Security Section, who is one of the witnesses appearing before

you today.

Although he would be too modest to cite his achievements to you himself, Mr.

Dion is one of the most outstanding public servants I have known during my 49

years of service at the Department of Justice. Mr. Dion himself has served in the

Internal Security Section for 20 years. During that time he has played a central role

in this nation’s most critical espionage cases.

John has been repeatedly recognized by both Republican and Democratic Administrations for his espionage prosecutions. In 1987, Attorney General Meese awarded

Mr. Dion the John Marshall Award for Outstanding Achievement for his work on

the prosecution of John Walker and his confederates for espionage on behalf of the

Soviet Union. John received a second John Marshall award in 1997 for his work in

two other prosecutions: those of FBI Special Agent Earl Pitts and CIA case officer

Harold Nicholson for espionage on behalf of the Soviet Union and the Russian Federation. In 1995, the Director of Central Intelligence awarded John the Intelligence

Community Seal Medallion.

John also has been consistently praised by the United States Attorneys and Assistant United States Attorneys who have worked with him. I would request that

you make part of the record a letter sent to the Department by the United States

Attorney for the Eastern District of Virginia praising John’s role in the Squillacote

prosecution. I also would request that you make part of the record two unsolicited

letters sent to Senator Hatch by two former senior Assistant United States Attorneys who worked with John.

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In short, I know of no prosecutor in the United States who has had more experience in prosecuting espionage cases than John Dion. But, of course, John does not

work alone. The success of our espionage cases also has turned on the work of the

younger trial attorneys in the Internal Security Section. One of the finest of those

attorneys has been Michael Liebman.

Mr. Liebman graduated magna cum laude from the University of Michigan and

with honors from the George Washington Law School, where he was an editor of

the Law Review. After a clerkship, he joined the Department of Justice in the Honors program in 1990, the same year as Mr. Jonathan Shapiro. In addition to serving

in the Internal Security Section, Mr. Liebman has been a Special Assistant United

States Attorney, and is currently a Reserve Officer in the Army’s Judge Advocate

General’s Corps.

In his time in the Internal Security Section, Mr. Liebman has helped prosecute

some of the nation’s most important espionage cases of the 1990s. Those cases include: Steven John Lalas, a Department of State employee sentenced to 14 years

for spying for Greece; Aldrich Ames, the CIA Officer sentenced to life for spying for

the Soviet Union and Russia; Robert Stephan Lipka, a former NSA analyst sentenced to 18 years for spying for the Soviet Union, and former DOD lawyer Theresa

Squillacote, and her husband Kurt Alan Stand, who were sentenced just last year

to 22 years and 18 years, respectively, for spying for East Germany, the Soviet

Union, Russia, and South Africa. In connection with his role as a member of the

Squillacote trial team, Mike was awarded last year the Attorney General’s Award

for Excellence in Furthering the Interests of National Security.

Mike is currently assigned to two of our most important cases; Wen Ho Lee; and

the McDonnell Douglas export violations case. As the members of the Subcommittee

know, Mike has had to put off his preparations for these critical prosecutions in

order to prepare for these hearings. Indeed, as you are aware, Mr. Liebman was

supposed to argue this morning on behalf of the United States in a hearing in the

McDonnell Douglas case. In deference to the Subcommittee’s request, however, the

Department has made him available here instead.

Let me just add this: As his record indicates, no one has ever suggested that Michael Liebman is afraid of a tough case. Mike Liebman has helped send more spies

to jail than any other lawyer of his generation.

Needless to say, the efforts of the United States Attorneys’ Offices are also essential to these prosecutions. We rely on the United States Attorneys’ Offices for their

outstanding trial lawyers and their knowledge of the local courts. You had as your

witness last week Mr. Jonathan Shapiro, who, as you know, was one such outstanding AUSA. And, Senator Specter, you have had a chance to speak to his former

supervisor, another highly-experienced trial lawyer who at the time was the First

Assistant United States Attorney in Los Angeles.

Let me turn now to my involvement in this case. My contact with the case was

relatively brief. As Acting Assistant Attorney General, I was responsible for all matters coming before the Criminal Division—which is a tremendous volume of cases.

Nonetheless, I do recall being briefed about this case by Mark Richard, who at the

time was the Deputy Assistant Attorney General who supervised the Internal Security Section.

In his briefing, Mr. Richard made clear that he thought the proposed two felony

pleas was a good disposition of this case, since there were potential serious obstacles

to prosecution. I relied heavily on the advice of Mr. Richard, who was a 30-year veteran of the Criminal Division, and who had supervised all of our espionage cases

for much of that time.

As you know, Mr. Chairman, from my discussions with you, at the time I approved the proposed plea agreement I was not aware, so far as I recall, that it would

call only for a short period of incarceration or would charge only an attempted 793

charge. Had this been our opening position in plea negotiations, I doubt that I

would have approved it, particularly, the ‘‘short period of incarceration.’’

But I should add that this does not mean that I disagree with the ultimate plea

agreement. I stand by that plea. It is critical in plea negotiations to permit the local

United States Attorneys’ Office to have some leeway. Mr. Shapiro explained to you

his reasoning in accepting the short period of incarceration language: that this was

the best that could be hoped for given the sentencing practices of the courts in the

Central District of California.

Indeed, since speaking to you I have been informed that the term ‘‘short period

of incarceration’’ was a term of art in use at the time in pleas in the Central District

of California. In making recommendations, the USAO could choose one of three alternatives: probation; a short period of incarceration; or a long period of incarceration. I certainly think that it was proper to allow the USAO—in a decision that

I understand was ratified by Mr. Shapiro’s experienced supervisors in that Office—

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to elect the alternative that reflected an assessment of what realistically could be

achieved before the Court.

In closing, let me state the obvious: nobody wishes more than the Department of

Justice does that Peter Lee had been incarcerated for his crimes. I promised you,

Mr. Chairman, that I would look again at this case, and I have. After reviewing the

record, I remain convinced that the plea negotiated here was a good one. It is my

view as a 49-year career prosecutor that any trial might well have resulted in an

acquittal in light of at least three factors: the subsequent declassification of the information Lee revealed in 1985; the information publicly available on the Lawrence

Livermore Web Site, and elsewhere, relating to the disclosures Lee made in 1997;

and the highly damaging statements of the Navy in the Schuster memorandum. As

you are aware, of course, there are also factors that would have greatly complicated

this prosecution that cannot be discussed in an open hearing. Mr. Dion and Mr.

Liebman are prepared to discuss these factors in greater detail.

In short, in my judgment, Lee might have escaped conviction had he gone to trial.

Instead, against the odds, we secured a plea to two felonies—one of which was

barred by the statute of limitations. Even more importantly, we brought an end to

the possibility that Lee might disclose further secrets. Imagine, if you will, that we

had taken Lee to trial, and lost, allowing him to continue his employment. I dare

say that we would be up here before you explaining how we could have such a result

come to pass.

I understand that you, Mr. Chairman, and other members of the Committee may

disagree with my analysis. But I hope that we all can agree that, while reasonable

minds can differ about the likelihood of success of any prosecution, that is all that

is at issue here—the disagreement of reasonable minds. Indeed, there was some

such disagreement, obviously, at the time, between Mr. Shapiro, on the one hand,

and his supervisor in the United States Attorneys’ Office and at Main Justice, on

the other.

But there was no abuse here; no bad faith of any kind. Instead, this is a case

in which highly talented, and highly dedicated, public servants—including the two

witnesses appearing before you today—worked long hours, under difficult circumstances, in order to achieve the best result they believed possible for the United

States. John Dion, Michael Liebman, Jonathan Shapiro, and the FBI agents who

worked with them, all did their best to end Peter Lee’s espionage career. They did

end that career. In my opinion, we should be here to praise their hard work on this

and many other espionage cases—work that too often goes unrecognized. Our nation

is safer because of their efforts.

Senator SPECTER. Mr. Liebman, would you step forward? Would

you raise your right hand, please? Do you solemnly swear that the

testimony and evidence you are about to give to this subcommittee

of the Committee on the Judiciary of the U.S. Senate will be the

truth, the whole truth, and nothing but the truth, so help you God?

Mr. LIEBMAN. I do.

Senator SPECTER. Mr. Liebman, at the outset, the subcommittee

thanks you for rearranging your schedule to be here today, and I

believe you have a prepared statement, and you may proceed at

this time, as you wish.

STATEMENT OF MICHAEL LIEBMAN, LINE ATTORNEY, INTERNAL SECURITY SECTION, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC; ACCOMPANIED BY

BRUCE C. SWARTZ, DEPUTY ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE,

WASHINGTON, DC

Mr. LIEBMAN. Thank you, Senator. Mr. Chairman and distinguished members of the subcommittee, good morning. I just have

a few brief opening remarks.

As Mr. Keeney noted, since joining the Internal Security Section

in 1991, I have worked on some of the major espionage cases of the

1990’s: the Lalas case, the Ames case, the Lipka case, and the

Squillacote case. All of these cases were prosecutions under section

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794, and all resulted in prison sentences for the defendants ranging

from 14 years to life.

Of these, I am most proud of a case that actually doesn’t get

much press coverage these days—or even at the time—and that’s

the Lipka case, where I helped build an historical case where the

investigation did not even begin until roughly 25 years after the

crime. And Mr. Lipka received an 18-year prison term.

I also take pride in the 1998 Squillacote and Stand case, where

I was part of the trial team for a 2-week jury trial against a wellfinanced defense, which resulted in guilty verdicts on all counts

and sentences of 22 years and 18 years, respectively. In connection

with that trial, I was awarded last year the Attorney General’s

Award for Excellence in Furthering the Interests of U.S. National

Security. Finally, I am, of course, proud of the Ames case, for which

Mr. Dion and I received an award from the U.S. Attorney for the

Eastern District of Virginia.

Turning to the Peter Lee case, at the time of Peter Lee’s admissions in October 1997, I fully expected that they would lead to another case in my string of section 794 cases.

Within about 2 or 3 days after Peter Lee made his admissions

in early October 1997, I flew out to Los Angeles and I met with

prosecutors from the U.S. Attorney’s Office and FBI special agents

from the Los Angeles Division to discuss the case. Our office, the

Internal Security Section, had first been briefed on the case in August 1997, when it was still just a false statement case because Lee

at that time had merely admitted to telling lies. In my trip in October, I spent several hours meeting with then-Assistant U.S. Attorney Jonathan Shapiro and FBI Special Agents Gil Cordova and

Serena Alston at the Los Angeles Division FBI Office, where we

also listened closely to the tapes of the October 1997 interviews.

To the best of my recollection, it was then that I first learned

that the information Lee had compromised in 1985, while classified

secret then, was no longer classified in 1997, and that the information Lee compromised in 197 was, for the most part, only classified

under a mosaic theory and only at the confidential level. By mosaic

theory, I mean, of course, that the items of information considered

separately are unclassified, but when grouped together they somehow become classified.

I also recall that, with respect to the 1997 compromise, the FBI

in Los Angeles showed me a copy of a 1995 document authored in

part by Lee that was marked confidential. It concerned research

into detecting the wakes of surface ships conducted under Department of Defense auspices through the use of radar directed at the

ocean’s surface.

Although the overall document was classified confidential, every

single portion of the document was separately marked unclassified,

with one exception. The exception was a single paragraph on the

first page that explained that, considered as a whole, the document

was ‘‘sensitive.’’

Later, after I returned to Washington, I obtained tapes of Lee’s

October confession and determined that as to the 1997 compromise,

the 1995 confidential document essentially contained all the significant information Lee had confessed to giving the Chinese in May

1997, with one important exception: The 1995 document was all

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about using radar to detect surface ship wakes. It said nothing

about using radar to detect submarines or anything below the surface of the ocean. I knew that Lee had admitted to the FBI that

he had told the Chinese in May 1997 that the radar technique discussed in the 1995 document could be used to detect submarines,

although he minimized that disclosure by telling the FBI that the

Chinese already knew this.

In my estimation, both then and now, the weakness in the case

was the questionable significance of the information Lee compromised, both in 1985 and in 1997. As to Lee’s 1985 disclosure,

I knew, for instance, that the Department had never prosecuted a

case under 794 where the compromised information, as in the case

of Lee’s 1985 disclosure, had been declassified prior to the crime

being discovered. Let me emphasize this. The information Lee admitted disclosing in 1985 has been declassified. While some aspects

of the government’s research in this area might remain classified,

as shown by updated classification guides, what Lee confessed to

disclosing regarding inertial confinement fusion research in 1985

was fully declassified by 1993.

Furthermore, what I later determined was that the information

was actually declassified over the 1990 to 1993 time period, not

just in 1993. Department of Energy documents I believe this committee has show that inertia confinement fusion research, including

details disclosed by Lee to the PRC, began being declassified on

March 21, 1990, for reasons that included the fact that the rest of

the world was catching up in this important field.

Another reason for the declassification, I was told, was that DOE

considered it in the U.S. national interest to educate countries on

how to simulate nuclear weapons explosions in a laboratory setting

in order to discourage them from actually detonating nuclear devices. Moreover, I was advised—and, again, this is documented— that the debate over declassification in DOE had actually begun at

least as early as January 1989, only 4 years after Lee’s disclosures

and 8 years before the confession.

Now, why is any of this relevant? Why does it matter that the

information was declassified after the crime? Because section 794

does not penalize disclosure of classified information. It does not

use that term. What it penalizes is the disclosure or attempted disclosure of items, documents, and information related to the national defense. And what the case law, including Supreme Court

case law, says is that this is a jury issue, not to be decided by a

classifier merely testifying that certain information or was classified at the time of the offense.

The Government needs to be able to describe how a disclosure of

classified information might benefit an enemy of the United States,

and publicly available information that tends to suggest that the

classified information is not all that significant may well be found

by a court to be relevant and admissible in an espionage prosecution.

The DOE documents indicated to me that there would be a significant issue at any trial whether the ICF disclosures Lee made

in 1985 related to the national defense at the time he made them.

Most alarming to me was the notion that Lee could claim that he

made the disclosures to encourage China not to conduct nuclear

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weapons tests in the field, and he would likely be supported by internal Government documents or even testimony of former U.S.

Government or Livermore officials that that was actually one of the

reasons the U.S. Government declassified the information beginning in 1990.

In other words, Lee would have been able to credibly argue that

his actions were in the U.S. national interest.

I soon discovered there were similar obstacles to bringing a section 794 prosecution based on the 1997 disclosure. To analyze this,

it is helpful to begin with the 1995 confidential document, every

last substantive part of which, when considered independently, is

unclassified. Recall that this document discusses a radar technique

in which the wakes of surface ships can be detected by bouncing

radar signals off the surface of the ocean.

I have a copy of this document right here today. I have it double

wrapped.

The best way to explain the problem with basing a prosecution

on this document is as follows: Under the classification guidance on

this document, I could remove any single paragraph in here, just

cut it out, maybe even a line, and then take the remainder of the

document over to that press table, and I would not be guilty of a

crime. I would not even be guilty of a security violation because

this document is only classified when it is intact as a whole. Remove any single paragraph from it, and you have a group of unclassified paragraphs.

Now, I recognized that problem with the 1997 compromise as

soon as I got to Los Angeles. But there was one crucial piece of

Lee’s admissions that I thought at the time could make the case

viable, even viable under section 794. Lee had confessed to telling

the Chinese scientists that the technique described in the document could also be used to detect submarines. Surely, I thought,

it must be a well-kept secret that the U.S. Government is investigating the detection of submerged submarines by utilizing radar

aimed at the ocean’s surface.

When I returned to Washington, as I said, I began analyzing the

confession in some detail. Approximately 2 weeks after returning,

on October 23, 1997, I attended a meeting in the Main DOJ building with the FBI, Criminal Division attorneys, and Mr. Shapiro

and his supervisor, then First Assistant U.S. Attorney Richard

Drooyan. The problems with the information which I just described

were discussed, along with other issues in the case. Immediately

after that meeting, I attended a briefing by the FBI in the case

along with Mr. Shapiro, and I believe Mr. Drooyan as well, and I

will not go into that briefing here in open session.

A few days after that meeting, I attended a meeting with DOD

officials to discuss the 1997 information. I have recently been reminded by the testimony of DOD and Navy officials to this subcommittee last month that that meeting occurred on October 28,

1997.

The main purpose of that meeting from my perspective was to inquire of DOD as to what publicly available information could potentially undermine an espionage prosecution for the 1997 compromise.

127

Another issue for me was what could the Government say about

the program generally in a public forum if the case were to go to

trial. I did not know, for instance, if I could have said at a trial

what I just said a few minutes ago about the program.

About a week after the meeting, I received a stack of public articles from DOD related to the radar ocean imaging generally. One

thing they also sent me was extremely surprising. Among the articles was a printout from a Lawrence Livermore National Laboratory Website, last updated in March 1995, well in advance of Lee’s

1997 trip to China. I have a copy of the printout right here.

I quickly confirmed after receiving it that the Website was a public one and available to anyone in the world with a computer and

a modem. I offer it into the record now, and I would like to read

some portions of it out loud.

[The information follows:]

128


Insert offset folio 299 here 73205A.009
129


Insert offset folio 300 here 73205A.010
130

Mr. LIEBMAN. The title of the page is ‘‘Radar Ocean Imaging,’’

and the first line of tests states, ‘‘This project focuses on the detection by radars of surface manifestations of moving submerged submarines.’’ Later it says that as a result of ‘‘achievements’’ in the

project, ‘‘there is now no controversy within the community that radars offer any potential for this problem’’—that is, to detect submarines. It concludes, ‘‘This program has made impressive advances in understanding and exploiting radar remote sensing of the

ocean for important national defense needs.’’

In addition, a few days after receiving the Website printout, DOD

gave me a copy of the prepared remarks of Dr. Twogood of the

Lawrence Livermore National Laboratory presenting in open session to a subcommittee of the House Armed Services Committee in

April 1994. I also have a copy of that testimony, and I would like

to offer it into the record and quote from significant portions of it.

[The information follows:]

STATEMENT ON THE INDEPENDENT NON-ACOUSTIC ANTI-SUBMARINE WARFARE

PROGRAM

SUBMITTED TO THE

RESEARCH AND TECHNOLOGY SUBCOMMITTEE HOUSE ARMED SERVICES COMMITTEE

(By Dr. Richard E. Twogood of the Lawrence Livermore National Laboratory, April

1994)

Madam Chairwoman, I appreciate the opportunity to appear before your subcommittee to testify on the technical and programmatic aspects of the Independent

Non-Acoustic Anti-submarine Warfare (INAASW) Program.

I manage the Imaging and Detection Program at the Lawrence Livermore National Laboratory. My primary responsibility is to serve as the technical program

leader for the Joint United Kingdom/United States Radar Ocean Imaging Program,

the single largest project in this DoD program.

The Joint UK/US Radar program has made important progress in the development of methods to detect submarine signatures with remote sensing radars, especially over the last two years. While the details are classified, the following can be

said:

(1) We have discovered new phenomena that are not fully understood, nor explained by any known models, that appear to be very important to the sensing of

surface effects produced by undersea disturbances. These new phenomena are also

likely to be important in the development of environmental remote sensing techniques by radar. We have planned a vigorous program to investigate these phenomena.

(2) We have developed new signal processing and detection techniques that, to our

knowledge, have never before been successfully applied to this problem.

(3) We have applied these new methods in both classified and unclassified experimental settings. Results have been achieved that I believe are not only impressive,

but also offer great promise for future improvement of these capabilities.

(4) These discoveries bring into question the validity of all previous assessments

that were based on models that did not include these effects. In addition, the nature

of our results also raises the possibility that certain claims by Russian scientists

and officials that they have achieved non-acoustic ASW successes with radars merits

serious consideration.

Our results have been briefed extensively at high levels in both the United Kingdom and the United States. The UK view is exceptionally supportive of this work,

and concluded that ‘‘the program has provided new insights into submarine detection and is well balanced and soundly structured.’’ In addition, the UK is devoting

significant resources into this Joint UK/US program, and the Ministry of Defence

has made a 3-year commitment (through 1996) for its continued funding. We have

received uniformly positive feedback from U.S. officials that the results appear significant and merit further work. I would welcome the opportunity to provide a classified briefing on these results to members of the committee or anyone else you wish

be briefed. I have with me a copy of such a recent briefing, at the SECRET level,

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should you desire a copy. Researchers in this program are also publishing these new

results in both the classified and unclassified literature.

I have been told that the Congress in general, and this committee in particular,

is very concerned about the status of this program due to recent actions in the DoD

that have impacted our progress. I am familiar with some of these concerns in some

detail, but have only peripheral knowledge of others. The main concern of immediate importance to me as the Joint UK/US Technical Program Leader is the failure

of the DoD to provide funding for our work this year. As of this date, we have received no FY94 funding despite the fact that Congress appropriated the funding.

This is a recurring problem, and these delays have had major negative impacts on

the UK/US program. I have documented these impacts in memos to the DoD program manager, copies of which I have with me.

In conclusion, I would like to say that I appreciate the support and concern this

committee has demonstrated. We have achieved important new scientific and detection results, and I urge you to take the steps needed to continue this research.

Mr. LIEBMAN. ‘‘The Joint US/UK Radar Program has made important progress in the development of methods to detect submarine signatures with remote sensing radars, especially over the

last 2 years.’’ It also states, ‘‘We have developed new signal processing and detection techniques that, to our knowledge, have never

been successfully applied to this problem. We have applied these

new methods in both classified and unclassified settings. Results

have been achieved that I believe are not only impressive but also

offer great promise for future improvement.’’ So there it was. There was no secret at all that the U.S. Government was working on a program to detect enemy submarines with

radar aimed at the ocean’s surface. There was not even any secret

that we had achieved a potential breakthrough. The Website and

Dr. Twogood’s testimony, coupled with the fact that the underlying

1995 document was only classified under a mosaic theory, convinced me that there was no section 794 case on the 1997 compromise. In my estimation, Senators, it was not even a close call.

I arrived at that conclusion even before I received the Schuster

memorandum of November 14, 1997. That memo only served to reaffirm my position. Particularly significant was the Navy’s determination that it could not support the confidential classification of

the 1995 document, and that, in any event, Peter Lee’s disclosure

did not cause significant damage. I would note that the Schuster

memorandum had the concurrence of the Vice Chief of Naval Operations, the second highest ranking Navy official.

Now, just because a compromise of classified information cannot

be prosecuted under section 794, it does not mean that there are

no other statutes with serious criminal penalties that might apply.

There are other provisions of the espionage code, specifically, 18

U.S.C. 793 and 798. In addition, there is the Internal Security Act,

specifically, title 50, U.S.C. section 783. Each of these carries a 10-

year penalty. The problem was that none of them applied. Section

793 was out because it, too, used the term ‘‘national defense information,’’ just like section 794. Section 798 was out because it applies only to communications intelligence and crytopgraphic information. And the Internal Security Act was out because it applied

only to defendants who ere U.S. Government employees or employees of U.S. Government-owned corporations. That was the biggest

disappointment, and I remember discussing that with Mr. Shapiro

over the phone following my trip out to Los Angeles. The statute

does not apply to employees of Government contractors, such as a

TRW employee.

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Shortly thereafter, I recommended to Mr. Dion that we offer a

plea to Lee under 18 U.S.C. 793 or section 224(b) of the Atomic Energy Act of 1954 for the 1985 compromise. Both statutes carry a

maximum penalty of 10 years and would require Lee to waive the

statute of limitations. The U.S. Attorney’s Office elected to offer

Lee the plea under 18 U.S.C. 793.

At some point in early 1997, it became apparent that Lee was

balking at a plea with a potential 10-year exposure for the 1985 incident. I then recommended to Mr. Dion that, although the section

794 case for that incident in 1985 had problems, it was sufficiently

robust that we could ethically use it as leverage. This was communicated to the U.S. Attorney’s Office by Mr. Dion, I believe, in a

phone call, I think at this point to Mr. Shapiro himself.

Shortly thereafter, the plea agreement was entered. Lee, in fact,

did waive the statute and plead guilty to section 793, along with

a violation of section 1001 of title 18 for lying about the circumstances of his 1997 travel to China.

It goes without saying, I hope, that I was extremely disappointed

that Peter Lee was not sentenced to prison. It is the only espionage

prosecution I have worked on that did not result in a prison term.

But let me add that I am proud of my work on that case and proud

that Jonathan Shapiro and I ensured that Peter Lee would not remain free to continue to make sensitive disclosures to foreign governments.

That concludes my remarks.

Senator SPECTER. Mr. Liebman, would you refer to two memoranda which will be provided to you——

Mr. JENNINGS. Excuse me for interrupting. My name is Jon Jennings, the Deputy Assistant Attorney General in Legislative Affairs. It was our understanding that this was to be a panel of Mr.

Dion, Mr. Keeney, and Mr. Liebman. I respectfully request the subcommittee to allow Mr. Bruce Swartz to sit with Mr. Liebman as

his counsel, and he is also a supervisor of Mr. Liebman.

Senator SPECTER. We would be glad to have Mr. Swartz present.

No problem with that at all.

Mr. JENNINGS. Thank you, sir.

Mr. SWARTZ. Thank you, Mr. Chairman.

Senator SPECTER. There were no commitments given as to a

panel, although I don’t understand the relevancy of the comment

as an introduction to asking Mr. Swartz to be here, but the subcommittee would be pleased to have Mr. Swartz sit with Mr.

Liebman.

Mr. SWARTZ. Thank you, Mr. Chairman.

Senator SPECTER. Mr. Liebman, referring to a memorandum

which is dated November 25, 1997, at about three-fourths of the

way down—and I know you are familiar with this——

Mr. LIEBMAN. A few minutes, Senator. November 25th memorandum.

Senator SPECTER. It is marked in the upper righthand corner.

Mr. LIEBMAN. I have a memo for the Secretary of Defense———

Senator SPECTER. I am referring now to a memorandum from Michael Doris——

Mr. LIEBMAN. I found it, Senator.

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Senator SPECTER. And referring only to one section here to try

to get to the crux of the matter and move ahead, the line, ‘‘According to JJ’’—referring to JJ Smith—‘‘ISS/Dion said that if RT’’—

which refers to Dr. Lee—‘‘doesn’t accept the plea proffer, then he

gets charged with 18 U.S.C. 794, the heftier charge.’’ And now referring to the DOD memo, the line you had referred to earlier,

‘‘Should Lee decline the offer, the U.S. Attorney will seek an indictment against him for violation of 794.’’

Now, those documents state, obviously, that there was authority

to charge Dr. Lee with U.S.C. 794 if he doesn’t accept the plea proffer. And my question to you is: Why wasn’t that information conveyed to Mr. Shapiro?

Mr. LIEBMAN. These documents do not accurately reflect the

state of affairs at the time, actually. What Mr. Shapiro had authority to do was to use a section 794 prosecution in leverage for plea

negotiations. Had the plea broken down, we would then have regrouped, hashed it out, and perhaps considered a section 794 prosecution for the 1985 compromise.

Senator SPECTER. So these documents are flat-out wrong?

Mr. LIEBMAN. Not flat-out wrong. I would say they’re slightly

wrong.

Senator SPECTER. But they are wrong that there was no authorization to proceed under section 794?

Mr. LIEBMAN. On that point, they are wrong. And I would note

they’re written by people who were not involved in the discussions

between our office and the U.S. Attorney’s office.

Senator SPECTER. Well, that is the big question. Since you

brought it up, who were the people involved in the discussions?

Tracing from Mr. Shapiro to you to whom? Something we have

tried to find out very hard, but your unavailability and the unavailability of documents until the last minute and the representation

by many people in the Department of Justice and the Department

of Defense and the Navy that there were no documents has made

it very, very difficult for this subcommittee to find anything out.

But now——

Mr. LIEBMAN. Well——

Senator SPECTER. Let me finish. But now when you say these

people didn’t know better, what these documents say is wrong, a

subject we will get into in great detail, who was privy to the discussions? Who did you talk to in the Department of Defense?

Mr. LIEBMAN. Mr. Shapiro, Mr. Drooyan, myself, and Mr. Dion

I think were the central figures in discussing the plea negotiations

that were going on——

Senator SPECTER. Do you recall my question?

Mr. LIEBMAN. Yes. I think I just answered it, sir.

Senator SPECTER. Whom did you talk to in the Department of

Defense?

Mr. LIEBMAN. As to the plea discussions? Absolutely no one.

Senator SPECTER. And whom did you talk to in the Department

of Defense about anything?

Mr. LIEBMAN. Whom did I talk to, sir?

Senator SPECTER. That is my question.

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Mr. LIEBMAN. I met with Department of Defense officials on October 28, 1997, at a meeting. Since—I believe it was people like

who testified before this subcommittee last month.

Senator SPECTER. You believe it was people like who testified before the subcommittee last month? Do you have any records as to

whom you talked to in the Department of Defense?

Mr. LIEBMAN. I have some documents I got in November 1997

that were faxed to me indicating the various public record information that was available on the 1997 compromise, and I believe the

documents came from Donna Kulla in the Department of Defense,

and I think she was also at the meeting in late October.

Senator SPECTER. Could you produce those documents for this

subcommittee?

Mr. LIEBMAN. I think you have those, Senator.

Senator SPECTER. Why do you think we have those?

Mr. LIEBMAN. If you’re talking about the public record documents—— Senator SPECTER. I don’t know what I am talking about. This is

something you mentioned. I don’t know what you are talking about.

That is what I am trying to find out.

Mr. LIEBMAN. There was a thick stack—— Senator SPECTER. If I say I don’t know what I am talking about,

I am asking you to produce documents which I have no knowledge

of which you have referred to. So don’t ask me where the documents are.

Mr. LIEBMAN. I don’t think I did that, sir. These documents were

public documents relating to the 1997 compromise.

Senator SPECTER. What do you mean by public documents?

Mr. LIEBMAN. These are various articles and research pieces

about—from scientists on the issue of radar ocean imaging and directed at the ocean surface.

Senator SPECTER. Mr. Liebman, I am trying to find out whom

you talked to in the Department of Defense, and my question to

you, when you make a generalized reference like people who testified before, and you mentioned Ms. Donna Kulla, I am asking you:

Are there any records which specify whom you talked to in the Department of Defense?

Mr. SWARTZ. Mr. Chairman, perhaps I could help clarify this.

The documents that Mr. Liebman is referring to are the documents

that were faxed to him. This subcommittee has them, and they

refer to one of the people he spoke to at the Department of Defense

on this matter.

Senator SPECTER. They were faxed to the subcommittee when?

Mr. SWARTZ. No, no. I am sorry. They were provided to the subcommittee. They were faxed to Mr. Liebman.

Senator SPECTER. When were they provided to the subcommittee?

Mr. SWARTZ. I believe—for some time. I would have to check,

but——

Senator SPECTER. Are you talking about—Mr. McArthur gives

me a thick pack that were handed to him this morning. Are these

the ones you are talking about?

Mr. SWARTZ. No, Mr. Chairman. These are the documents that

I believe you have seen before for some period of time.

135

Senator SPECTER. Now, wait a minute. Don’t tell me about the

documents that I have seen, please. These are the documents that

you have seen before, Mr. Chairman?

Mr. SWARTZ. I believe so—— Senator SPECTER. Please do not tell me what I have seen.

Mr. SWARTZ. I am sorry. These are documents provided to the

subcommittee some period of time ago that we have referred to— that have been referred to throughout these hearings. These are

the Web pages from the Lawrence Livermore Lab that refer to the

ocean imaging. Those are the documents that Mr. Liebman is referring to.

Senator SPECTER. Well, we will not pursue this further, but we

will handle it with staff after the session is over. Mr. McArthur,

who has done a phenomenal job going through 800 pages yesterday

that were presented, hands me this thicket of papers about an inch

thick with a notation, ‘‘These were handed to me this morning.’’ Now, I will say for the record I haven’t seen the notes, but we

do want to see what records there are. But for the moment, in the

interest of time, we will proceed to ask Mr. Liebman whom he

talked to at the Department of Defense.

Mr. LIEBMAN. I believe, in addition to Donna Kulla, I think Earl

Dewispelaere was there. He also testified before this subcommittee

last month, and I think in his statement he mentions that he was

at the meeting as well.

I know—I cannot recall the other people from the Department of

Defense who were there. I know Gil Cordova from the FBI was also

there.

Senator SPECTER. Did you make a record notation of that meeting which would include the identification of the people who were

at the meeting?

Mr. LIEBMAN. No, I did not, sir.

Senator SPECTER. Why not?

Mr. LIEBMAN. It didn’t strike me as a crucial piece of information

at the time.

It was also the preliminary meeting. Had the case had gone forward, that would have led to many, many more additional and

much more important meetings where I would have kept better

track of who I was talking to and when.

Senator SPECTER. Well, since you didn’t have any other meetings

and since you were looking to the Navy and the Department of Defense for an evaluation as to this matter, why do you classify it or

say it is a meeting which wasn’t of sufficient importance to maintain some sort of a written record as to what happened?

Mr. LIEBMAN. It is not my habit and it is not our office’s habit

to maintain detailed written records of all the meetings we have

with the Department of Defense and the Intelligence Agency,

and——

Senator SPECTER. Well, I am not talking about detailed records.

I am just talking about a record which would give you the date, the

people who were present, and a generalized statement as to what

they said.

Mr. LIEBMAN. Well, the purpose of the meeting, Senator, was

merely to get a general idea of what kind of public information

might be out there that would affect the viability of a section 794

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prosecution of the 1997 compromise as well as to find out what we

could say generally about the program if we were to go to trial. It

was a very preliminary meeting, in my estimation, and had we gotten over those initial hurdles, there would have been many more

meetings of much more significance.

Senator SPECTER. But that was the only meeting you ever had

with representatives of the Department of Defense.

Mr. LIEBMAN. It was the only meeting, but I do recall speaking

to Donna Kulla after the meeting and getting some additional documents.

Senator SPECTER. But that was the only meeting?

Mr. LIEBMAN. Correct, sir.

Senator SPECTER. And did you inquire at that time as to what

damage was done in the view of the Department of Defense by

these disclosures?

Mr. LIEBMAN. No, I did not, and let me explain. That is not

something we typically do. We don’t ask the Department of Defense

to do damage assessments before we answer a plea or consider an

indictment.

Senator SPECTER. Well, it seems to me that it is pretty important

to know what the Department of Defense thinks about the matter

and how badly they have been damaged.

Mr. LIEBMAN. But not—— Senator SPECTER. Let me finish.

Mr. LIEBMAN. I thought you were finished. I’m sorry.

Senator SPECTER. Very briefly, so that you have some assessment

as to what the damage is to national security, an issue which you

have raised, before you preclude a prosecution by a plea bargain.

Mr. LIEBMAN. A formal damage assessment, which is something

we never ask for prior to a plea or prior to an indictment, is something that takes at least, in my experience, over a year. It is an

all intelligence community assessment of the damage caused in a

case. It usually results in a very thick, highly classified report that

we cannot disclose to defense counsel or the defendant, and that is

why we do not ask the agencies to do a damage assessment.

We will, however, if the case is moving forward and we see that

there is some viability to it, meet with the owners of the information to have them articulate to us why the information is classified,

why it relates to the national defense.

Senator SPECTER. But it is possible, Mr. Liebman, to get a damage assessment in much less than a year, isn’t it?

Mr. LIEBMAN. Not in my experience. Not the kind of formalized

damage assessments that have been done in other espionage cases.

Senator SPECTER. So you have gotten formalized damage assessments in other espionage cases?

Mr. LIEBMAN. I am aware they have been done. They’ve all been

done after the conviction, which is the standard practice because at

that point there is usually more information that has come out.

Senator SPECTER. Well, we will take a look at your standard

practices, Mr. Liebman, but when we have the discussion with Mr.

Keeney, we will get into this later, there, I think, is agreement

among the upper echelons at the Justice Department that there

need to be some fundamental changes in what you do, that there

has to be a better understanding by the agency, like the DepartVerDate 26-SEP-2001 06:22 Oct 03, 2001 Jkt 073205 PO 00000 Frm 00142 Fmt 6601 Sfmt 6602 E:\HR\OC\A205.XXX pfrm04 PsN: A205
137

ment of Defense, about the Confidential Information Protection Act

and a more formalized understanding if these cases are to be plea

bargained and not to be decided without some real inquiry and pursuit as to what the Department of Defense thinks. But we will get

into that in due course. And we will take a look at the length of

time it takes and what information a prosecutor ought to have before he enters a plea bargain to know what the case is all about.

But we have heard your view, and we will proceed with our assessment of that.

Just a couple more questions, Mr. Liebman, before yielding to my

colleagues.

Mr. Shapiro testified about his determination—he characterized

it his ‘‘aggressiveness’’—to move under 794, thinking that he could

get a conviction under 794. That attitude by Mr. Shapiro was conveyed to you, wasn’t it?

Mr. LIEBMAN. Yes, it was.

Senator SPECTER. But you disagreed with it?

Mr. LIEBMAN. Yes, I did.

Senator SPECTER. Mr. Liebman, when you talk about the issue

of classification, you did know that beyond the information which

was in the confession that the FBI was aware of other information

that Dr. Lee had revealed that was not declassified. For example,

a June 1998 FBI report cites three other instances in which Dr.

Lee revealed classified information. And another FBI document indicates that in the early 1980’s Dr. Lee gave the Chinese classified

information that greatly assisted their nuclear weapons program.

You were aware of that, weren’t you?

Mr. LIEBMAN. Senator, I am reluctant to go into that in open session. I was aware—— Senator SPECTER. I am not asking you to go into anything. I am

asking you to respond to a very carefully calibrated question which

does not disclose any classified information.

Mr. SWARTZ. Mr. Chairman, I do believe that this is something,

to allow Mr. Liebman to respond to fully, we would have to be in

closed session.

Senator SPECTER. Then we will proceed into closed session.

Mr. SWARTZ. Thank you.

Senator SPECTER. We will honor that request because we are not

going to take any chances, although I think that question calls for

a simple ‘‘yes’’ or ‘‘no’’ answer, but we will have a closed session.

Mr. Liebman, you make a big point about the materials being declassified at some later point, but isn’t it true that when you have

a multibillion-dollar program like this and the scientists from the

People’s Republic of China have access to the information for a period of time, from 1985 to 1990, 1991, 1992, 1993, 1994, that there

is substantial value in having at that time—although the Government later declassifies it, it is not really up to Dr. Lee to make a

disclosure or to claim an excuse that it was later declassified. At

the time it is disclosed, there is a serious espionage breach, isn’t

there?

Mr. LIEBMAN. It certainly is—I am not going to dispute that

there might have been a substantial benefit to the Chinese to get

this information in 1985. Nor do I think Dr. Lee, or Peter Lee—

I don’t think he is deserving of that title anymore—is entitled to

138

use it as an excuse. However, I do think the declassification and

the reasons for the declassification are quite relevant to whether

the information was national defense information at the time he

disclosed it.

Senator SPECTER. Well, why is that? The time of disclosure is a

critical time. We agree on that, and it was classified at that time.

And the damage assessment which was made—the impact statement which was made on February 17 of 1998, the declaration of

technical damage to the United States national security assessment in support of U.S. v. Dr. Peter Lee from Dr. Cook which is

in February of 1998, well short of the year you talk about, or the

impact statement of February 17, 1998, signed by Messrs. Staffin,

Trulock and Mahaley, specified the damage to U.S. national security at the time they were disclosed.

Mr. LIEBMAN. But there are other documents, Senator, talking

about the reasons for the declassification and the debate that

began in 1989 specifically about the fact that the rest of the world

was catching up. If the Department of Energy was discussing the

fact that the rest of the world was catching up in 1989, I think a

reasonably competent defense attorney will be able to scour the

public record in this country and other countries to point out that

some of the same information the Department of Energy was relying upon to declassify the information in 1990, to begin talking

about it in 1989, was available also in 1985.

Now, I am not saying that reasonable people can’t disagree about

the viability of a section 794 case on the 1985 compromise. I fully

understand that, and that is why I recommended to Mr. Dion that

we use the section 794 potential charge for the 1985 compromise

as leverage in plea negotiations. And had those plea negotiations

broken down, there would have been further meetings that might

have led to an assessment to actually go forward with that 1985

compromise.

Senator SPECTER. Well, just two more questions before yielding.

All of that means that you didn’t have an insurance policy for a

conviction, but trial prosecutors don’t necessarily have insurance

policies for a conviction. You had Mr. Shapiro, who was an experienced trial attorney, and I am not doubting your credentials, Mr.

Liebman, and I am pleased to hear about your good work and I

have only the highest respect for you as an attorney. I don’t know

what the relevance of all of that is to our proceeding, but I am

pleased to have it put the record, as Mr. Keeney wanted to put it

in the record. But I think it would be relevant to contrast you and

Mr. Shapiro to put on the record your experience as a trial attorney.

Mr. LIEBMAN. In conducting trials, Senator? Well, I would first

like to also point out that my position on the section 794 charge

was matched by experienced prosecutors in the U.S. Attorney’s office, as well as my own superiors.

Senator SPECTER. Could you focus on my question first and

then——

Mr. LIEBMAN. Yes, I will.

Senator SPECTER [continuing]. Make any amplification you think

helps your case?

139

Mr. LIEBMAN. I had significant trial experience, as I define the

term, in 1991 when I was a special assistant U.S. Attorney, numerous bench trials and two jury trials over a six-month period. I also

was on the trial team for the only section 794 prosecution in the

last 12 years.

Senator SPECTER. How many espionage cases have you tried?

Mr. LIEBMAN. Have I tried, Senator?

Senator SPECTER. Yes.

Mr. LIEBMAN. There has only been one espionage trial, as I define the term, under section 794 since I came to the Department

of Justice and I was——

Senator SPECTER. Would you answer my question and then amplify?

Mr. LIEBMAN. And I was on that trial team.

Senator SPECTER. You were on the trial team. How many lawyers

were there?

Mr. LIEBMAN. I believe there were two assistant U.S. Attorneys

and myself.

Senator SPECTER. Mr. Liebman, when you testify about what was

on the Web site, you are aware of the fact that Dr. Lee’s confession

went far beyond what was on the Web site, and that on information provided to you by Dr. Twogood—and I believe you have this

document marked in the upper righthand corner P12–34.

Mr. SWARTZ. Mr. Chairman, can you give us a reference to that?

We have a numbered set of documents here. I don’t know if you

have got the same provided by your subcommittee.

Senator SPECTER. Number 3, quote, ‘‘processing techniques’’—

this is referring to what Dr. Lee confessed turning over to the PRC

scientists—‘‘processing techniques, which, when applied to classified or unclassified data, yield a significant enhancement in signature detectability which might apply to the submarine case (secret/

Crimson Stage),’’ which was Dr. Twogood’s classification that above

and beyond what was in the public domain, that the material disclosed by Dr. Lee were secret. You are aware of that?

Mr. LIEBMAN. I am aware of that. It went above and beyond the

Web site. It did not go above and beyond the mosaic document that

is only classified at the confidential level. And as I said before,

there are numerous——

Senator SPECTER. Did not go beyond what?

Mr. LIEBMAN. It did not go above and beyond this document right

here, which is classified confidential only under a mosaic theory.

There are so many unclassified paragraphs in that document, I

could recite them out loud and this committee would not be committing a security violation, and I would not be going beyond what

Peter Lee confessed.

Senator SPECTER. Can you identify the document you are referring to in the double-wrapped envelope?

Mr. LIEBMAN. Yes, I can.

Senator SPECTER. Why do you have it in a double-wrapped envelope if you are going to take it out now?

Mr. LIEBMAN. Pardon me, sir?

Senator SPECTER. Why do you have it in a double-wrapped envelope if you are going to take it out now?

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Mr. LIEBMAN. I wasn’t sure you wanted me to take it out, and

it is a classified document. It has a cover sheet.

Senator SPECTER. I just asked you to identify it. I didn’t ask you

to take it out.

Mr. LIEBMAN. I can’t recall the title of the document offhand,

Senator. It is written on the document.

Senator SPECTER. Well, let’s move into that, and we can give my

colleagues a chance to question, but the point is that knowing all

that Dr. Lee had said publicly and what was in the public domain,

what he had written and what was on the Web site, Dr. Twogood

said that his confession disclosed secret information. Didn’t Dr.

Twogood come to that conclusion?

Mr. LIEBMAN. I know that Mr. Shapiro had his own doubts about

Dr. Twogood’s opinions and their evolution, but also I think Dr.

Twogood’s opinions have to be measured against the opinions of the

Navy—— Senator SPECTER. Do you remember my question?

Mr. LIEBMAN. Yes, I do.

Senator SPECTER. What was my question? My question was, isn’t

it true Dr. Twogood classified this as secret?

Mr. LIEBMAN. I don’t think he has original classification authority. He may have opined that it was secret. And whether not it is

secret or confidential, the fact is every single paragraph that this

document—that Peter Lee confessed to disclosing is marked unclassified.

Senator SPECTER. Mr. Liebman, we will take your statement that

he opined that it was secret. I think that is all anybody can do.

Even those people across the street in the Supreme Court of the

United States who hand down life-and-death decisions put the classification under opinions—— Mr. SWARTZ. Mr. Chairman—— Senator SPECTER. Wait just a minute.

Mr. SWARTZ. Thank you.

Senator SPECTER. Just an observation, Mr. Liebman. What this

subcommittee is trying to do is find out the facts, but so frequently

when I ask you a question, you give me a thesis on why what you

did was correct, such as asking you about Dr. Twogood’s classification, his evaluation, his judgment, his opinion, his statement that

it was secret. You tell me why it is not worth anything.

But all I am trying to find out is whether you knew that he

opined that it was secret.

Mr. LIEBMAN. Yes, I did, Senator.

Senator SPECTER. You did?

Mr. LIEBMAN. I did know that.

Senator SPECTER. OK, thank you.

Senator Sessions?

Senator SESSIONS. I think Senator Grassley——

Senator GRASSLEY. He said I could go first.

Senator SPECTER. That is fine.

Senator GRASSLEY. It is my understanding that Peter Lee multiple times confessed to disclosing classified information. I want to

know—and remember I am a non-lawyer, but why wasn’t that confession in and of itself enough to convict him of a 794 or a 793,

based on the 1997 disclosures?

141

Mr. LIEBMAN. Senator, both section 793 and 794 require that the

Government prove there was a compromise of national defense information. It is not enough that the information or the document

at issue merely be classified. And even though the Department of

Defense may, in good faith and full propriety, classify a document

or classify certain information, if, in fact, the information is not significant, if, in fact, there is substantially the same information

available to the public, then it is not national defense information,

and therefore not a violation of those provisions.

Senator GRASSLEY. The Department of Defense officials have

stated that Peter Lee documents provided by your office for determination of classification was an unclassified FBI affidavit of Agent

Cordova. They have repeatedly stated in hearings and briefings in

this subcommittee that they were not supplied with the videotape

confession of Peter Lee. FBI Agent Sayner testified that the Department of Defense was supplied with the Cordova affidavit, as

well as the videotaped confessions.

Since you were a liaison between Justice and the DOD on this

Peter Lee case, what exactly did you supply to the Department of

Defense in order for them to make their classification? And I would

like to have the names of those individuals at the Department of

Defense that you supplied the information to.

Mr. LIEBMAN. The purpose of my initial meeting with the DOD

in late October 1997 was not to get a formal classification determination. So I did not supply any information to DOD for that purpose. The people I did give some information to while we were at

that meeting, I believe, include Captain Dewispelaere and Donna

Kulla, because I think now they were at that meeting.

And the information I provided was a draft affidavit from the

FBI which summarized, in my estimation, the important points of

the confession of October 1997, and also made note of the fact that

the confession had been taped. So if the Department of Defense or

the Navy had desired a tape, they knew one existed and they could

have asked for one.

Senator GRASSLEY. Then you did not transmit the videotaped

confession to the Department of Defense?

Mr. LIEBMAN. No, sir.

Senator GRASSLEY. My staff advised me, why not?

Mr. LIEBMAN. Because at that point, at the initial meeting, the

purpose was not to get a final classification determination or even

a preliminary classification determination on the information. It

was only to find out one of two things: what publicly available information might be out there that could potentially compromise a

section 794 prosecution on the 1997 compromise, and what could

we say about the program generally, as I have here today, in an

open trial setting.

Senator GRASSLEY. Mr. Shapiro testified last week in a closed

hearing that his prosecution of Peter Lee was greatly impacted by

the October 1997 meeting that he had with the FBI and the Department of Justice officials here in Washington. He says you were

at that meeting. Was your interpretation at that meeting the same

as Mr. Shapiro’s, and did you think that meeting had an impact

on the prosecution of Peter Lee?

Mr. LIEBMAN. Excuse me, Senator.

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[Witness conferring with Mr. Swartz.]

Mr. LIEBMAN. I would say I was in the meeting, so that is correct, sir. And I think it did have an impact, and I would be happy

to go into that specifically in closed session.

Senator GRASSLEY. The chairman will follow up on that in a

closed meeting because I won’t be able to be present.

Mr. Shapiro stated last week that a Department of Defense

memo written by Mr. Schuster was, quote, ‘‘a body blow to the

prosecution.’’ What follow-up action did you take, if any, with the

Department of Defense regarding what is known as the Schuster

amendment? In other words, did you seek clarification from the Department of Defense or the Navy?

Mr. LIEBMAN. No, I did not seek any further clarification, sir. My

opinion had pretty much been fully decided even prior to getting

the Schuster memorandum. And once I got the Schuster memorandum—and I would agree with previous testimony that it was a

body blow. Mr. Shapiro said a knock-out punch, I think. And therefore based on what I knew about the case already, and this memorandum, I quickly was satisfied there was no section 794 case on

the 1997 compromise, particularly where the Schuster memorandum has the concurrence of the Vice-Chief of Naval Operations.

Senator GRASSLEY. Thank you, Mr. Chairman.

Senator Specter. Thank you, Senator Grassley.

Senator Sessions.

Senator SESSIONS. Thank you, Mr. Chairman.

On Mr. Shapiro’s views and yours, the chairman asked you about

trials. As I understand it, you were on the trial team of one 794

trial, is that correct?

Mr. LIEBMAN. That is correct, sir, but as I——

Senator SESSIONS. Have you ever tried another case before a

jury?

Mr. LIEBMAN. Yes, I have.

Senator SESSIONS. How many?

Mr. LIEBMAN. Two other cases.

Senator SESSIONS. What kind of cases?

Mr. LIEBMAN. Immigration and drug cases.

Senator SESSIONS. Mr. Shapiro had 8 years as a trial attorney

and tried a lot of complex cases, had he not?

Mr. LIEBMAN. Yes, he did, obviously, sir.

Senator SESSIONS. And he was aware of the Schuster memo?

Mr. LIEBMAN. Yes, sir.

Senator SESSIONS. And he was prepared to proceed with 794?

Mr. LIEBMAN. Yes, he was, but apparently he didn’t have the——

Senator SESSIONS. I just asked you, he was prepared to proceed,

was he not?

Mr. LIEBMAN. Yes, he was, sir.

Senator SESSIONS. Now, you have examined witnesses.

We don’t have a lot of time; we have to just ask a few questions.

So he was prepared to proceed. Who made the decision that he

could not proceed with 794?

Mr. LIEBMAN. It was Mr. Drooyan, the first assistant U.S. attorney at the U.S. Attorney’s Office, Mr. Shapiro’s supervisor. It was

Mr.——

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Senator SESSIONS. Wait a minute. Let me ask you this: the authority to approve a 794 is not with his supervisor in that office,

is it? The authority is in the Department of Justice, isn’t it, in

Washington?

Mr. LIEBMAN. I believe it is at the Assistant Attorney General

level.

Senator SESSIONS. In Washington, DC?

Mr. LIEBMAN. Yes, sir.

Senator SESSIONS. Who in Washington, DC, made the decision to

not allow him to go forward with 794?

Mr. LIEBMAN. I believe Mr. Keeney testified that he approved the

plea agreement which had in it that there would not be a section

794 prosecution.

Senator SESSIONS. Mr. Keeney didn’t know a lot about the case

and said he wouldn’t have had the same decision had he known

more about it. Were you the person that was in charge of collecting

the data for some officials to make final decisions on?

Mr. LIEBMAN. I wouldn’t say I was in charge of that, sir.

Senator SESSIONS. Who was?

Mr. LIEBMAN. I think it was a combination of the U.S. Attorney’s

Office and our office, the Internal Security Section.

Senator SESSIONS. Well, Mr. Chairman, I think one thing is absolutely clear. In this whole process, everybody is passing the buck.

Mr. Keeney is passing the buck, Mr. Dion is passing the buck, Mr.

Liebman is passing the buck, and now they want to blame the U.S.

Attorney’s Office. But the fact is, and I will repeat again—and I

know how this works because I had them tell me no on cases where

the Department of Justice has final authority.

The Department of Justice had final authority, not the U.S. Attorney’s Office, did they not?

Mr. SWARTZ. Senator Sessions, may I clarify on this issue, if I

may for a moment?

This is a case, as you know, that went up through the U.S. Attorney’s Office, not just Mr. Shapiro but also through the first assistant and the U.S. attorney to the Internal Security Section. No one

is passing the buck in that regard, Senator. The decision was made

at Main Justice, but was concurred——

Senator SESSIONS. All right. That is why I am asking.

Mr. SWARTZ. But it was concurred in—— Senator SESSIONS. The U.S. attorney’s opinion is worthless when

it comes to the authority to make the decision, responsibility to

make the decision.

Mr. SWARTZ. The U.S. attorney can concur in or disagree with

section opinion, and here the U.S. attorney agreed with—and so

did the first assistant—that decision. The person who did not

agree, of course, as you know, was Mr. Shapiro.

Senator SESSIONS. And you disagreed with Mr. Shapiro?

Mr. LIEBMAN. Yes, I do, Senator.

Senator SESSIONS. And Mr. Dion disagreed with Mr. Shapiro?

Mr. LIEBMAN. I have talked to him about it. Yes, I believe he

does, sir.

Senator SESSIONS. Now, the Schuster memo laid out there as a

detriment to the case for sometime. Did anybody ever seek to get

another analysis of it? I saw Senator Specter examine Mr.

144

Schuster, and I will tell you what I concluded from that examination. Mr. Schuster’s memo was wrong, and he was in error, and he

acted too hastily. And he had never seen the confession on tape,

and he didn’t know hardly anything about the case. And I know at

first glance—and I have tried a lot of cases and supervised lawyers

trying cases, and I have seen them panic over bad memos in the

file. But you have to go beyond that. This is a matter of great importance to me.

Did you ever attempt to get any other analysis from the Department of Defense contrary or different from Mr. Schuster’s?

Mr. LIEBMAN. I didn’t, sir, but I know that the Department of

Defense—or the Navy, that is—did re-analyze this issue for the

Cox committee last year.

Senator SESSIONS. Well, but when you were making a decision of

whether or not to prosecute, you allowed this half-baked memo to

lie out there and be an excuse not to proceed with the case, it

seems to me, without ever proceeding. Isn’t it true, Mr. Liebman,

that a case like this would have had the potential to embarrass the

Department of Defense?

Mr. LIEBMAN. I’m not so sure about that, but——

Senator SESSIONS. Well, you are not sure about it. Okay.

Mr. LIEBMAN. That’s correct, sir.

Senator SESSIONS. All right. But you went through here and described for us some things I thought were pretty stunning that you

found that were on public record that I got the impression you

were dubious about whether it should have ever been made a part

of the public record. Would you express an opinion about that?

Mr. LIEBMAN. What part of the public record should I not

have——

Senator SESSIONS. You were saying some of these matters had

subsequently been made public on the Web site and other things

and that the Department of Defense had released some of these

matters and that the Department of Defense actually wanted other

countries to know some of these things.

Is that accurate? It sounded like to me——

Mr. LIEBMAN. No, sir——

Senator SESSIONS [continuing]. The Department of Defense——

Mr. LIEBMAN. No, sir, that’s not accurate.

Senator SESSIONS [continuing]. Being critical of the Department

of Defense.

Mr. LIEBMAN. No, sir. What I was referring to was the 1985 compromise in terms of what I was told that the Department of Energy

had factored into the declassification of that information, not the

Department of Defense with respect to the 1997 compromise.

Senator SESSIONS. All right. Well, with regard to the—I find it

very difficult to understand how you could suggest that this was

not a Department of—this was not a national security information.

Mr. LIEBMAN. Which information precisely?

Senator SESSIONS. I mean, it clearly went to serious national defense issues. It wasn’t a matter about something you could debate,

say it is computers, it had commercial and military applications.

This was purely a defense-type security question, was it not, had

no civilian uses?

145

Mr. LIEBMAN. You’re talking about the 1997 information now,

Senator?

Senator SESSIONS. Well, 1985, too.

Mr. LIEBMAN. Well, in the 1985, I think I testified that it was

a little bit of a closer case, which is why I recommended it be used

as leverage—— Senator SESSIONS. Well, I think 1985 was closer because your

basis there for saying it was originally when he released it, it was

classified secret, was it not?

Mr. LIEBMAN. It was classified secret, but I’m not sure it would

have been ultimately found to be national defense information at

the time he compromised it.

Senator SESSIONS. Well, what was it about?

Mr. LIEBMAN. National defense information, sir, is a term of art

under the espionage statute. It’s the subject of numerous—several

court opinions. While it may relate to the national defense in the

colloquial sense, I think there was significant doubt, and there was

a significant doubt in my mind, whether it related to national defense for the purposes of the espionage statute.

Senator SESSIONS. Well, what was the subject of the 1985 disclosures?

Mr. LIEBMAN. The 1985 disclosure, the subject was the

hohlraum, inertial confinement fusion, and the use of—— Senator SESSIONS. Nuclear weapons.

Mr. LIEBMAN. Nuclear weapons research, that’s—— Senator SESSIONS. Testing, yes, and if that is not national security, I don’t know what is. And I don’t believe there is any law anywhere that would say that kind of information is not.

Mr. LIEBMAN. Senator, I think there is, actually, and I would

refer to the Supreme Court’s opinion in Gorin, the opinion of Judge

Learned Hand in Hein, and I would like to say I argued this precise issue before the Fourth Circuit last month, so I’m pretty well

up to speed on it.

Senator SESSIONS. Well, Messrs. Staffin, Trulock, and Mahaley

said, ‘‘In summary, Dr. Lee has confessed to compromising classified nuclear weapon design information. This information was

properly classified at the time of compromise, and U.S. intelligence

analysis indicates that this information, in conjunction with other

information, was of material assistance to the People’s Republic of

China in advancing their nuclear weapons program. Compromise of

this information reasonably could be expected to cause serious

damage to United States national security.’’

So I don’t believe there is any case law that would get around

that.

Mr. LIEBMAN. I’d respectfully disagree, Senator.

Senator SESSIONS. And Mr. Shapiro testified, I think correctly,

that whereas it had subsequently been declassified perhaps, maybe

not all of it, but say it was, then it was still classified at the time.

And you could—— his phrase was, after the D Day invasion, you

could reveal the plans of the D Day invasion, but not before. Timing is a critical factor, is it not?

Mr. LIEBMAN. It is, Senator. However, the D Day invasion analogy, which, by the way, was my analogy when I discussed the general issue of national defense with Mr. Shapiro, is not apt in this

146

case. Certainly on June 7, 1944, the timing and place of the D Day

invasion is no longer an issue. However, in this case, there was

gradual and—gradual release or gradual catching up of the rest of

the world in this area of research, which is why the Department

of Defense ultimately decided to begin declassifying it in 1990. It

was a gradual scientific process. It is not——

Senator SESSIONS. It wasn’t declassified in 1985.

Mr. LIEBMAN. Correct, but it’s got to be national defense information.

Senator SESSIONS. And if you reveal—the element of the offense

is you reveal classified documents relating to—all right. Counsel is

over here shaking his head. State it for me, counsel. What are the

elements of the offense?

Mr. Swartz. National defense information, Senator.

Senator SESSIONS. All right. So the elements of the offense of 794

was met when he revealed that information, and he confessed and

admitted that it was classified, had he not?

Mr. LIEBMAN. I’m not sure the elements of the offense were met

because of my subsequent study of DOE documents for the reason

of the declassification. It was a questionable case. I recommended

we use the 794 prosecution as leverage in plea negotiations, and

had the plea agreement broken down, had negotiations broken

down, we would have revisited the issue.

Senator SESSIONS. Did you convey that to Mr. Shapiro?

Mr. LIEBMAN. I conveyed it to Mr. Dion, who I believe conveyed

it to Mr. Shapiro.

Senator SESSIONS. So you don’t know whether Mr. Dion conveyed

it or not to Mr. Shapiro?

Mr. LIEBMAN. I guess you can talk to him about that, Senator.

Senator SESSIONS. But you didn’t convey it to Mr. Shapiro?

Mr. LIEBMAN. Precisely the fact that he had leverage to use section 794?

Senator SESSIONS. No. Whether or not he could charge it if the

plea negotiations broke down. The implication of your testimony to

what you told Mr. Shapiro was that he couldn’t do it if the negotiations broke down. Ethically, you felt he could bluff with it, basically

is what you said in your written statement.

Mr. LIEBMAN. That’s not what I said, Senator. What I said was

that if plea negotiations broke down, we would have regrouped and

reconsidered the issue. He was never told that had plea negotiations broken down in advance—he wasn’t told in advance that he

could then charge with 794.

Senator SESSIONS. Well, all I want to do is get the truth on this

matter, and I think we are going around in circles here on it. But

I think in your statement you don’t say that you ever told him he

could go forward. In fact, you suggest just the opposite.

Well, let me just say this: In my view, the elements of the charge

were met on the 1985 disclosure; that you were basing your analysis primarily on what he admitted that he disclosed. Is that not

correct?

Mr. LIEBMAN. That’s correct, and it’s because we couldn’t prove

anything else, Senator.

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Senator SESSIONS. I know that, but we are rational human

beings. We can expect he may have disclosed more than that. Don’t

you agree?

Mr. LIEBMAN. As to what else he might have disclosed or did, in

fact, disclose, I’m happy to address that in closed session.

Senator SESSIONS. Well, this is the way I would analyze the case,

and I think this is the way Mr. Shapiro analyzed it, and he was

one that would be the lead trial attorney, would he not?

Mr. LIEBMAN. I’m not sure if he would have been the lead or Mr.

Drooyan would also have been the lead.

Senator SESSIONS. He would have had to carry—he was prepared

to carry the burden, put his neck on the line and litigate the case,

and he believed he had sufficient evidence to proceed. That is what

he testified in his testimony.

Mr. LIEBMAN. He also testified that his own supervisor disagreed.

Senator SESSIONS. I understand that, which is an interesting

question. But I think what we are doing here is looking back over

it, and looking back over it, I think Mr. Shapiro was correct. You

had national security information. You had meetings in a private

hotel room. You had the defendant—you had it classified secret at

the time it was revealed, and you had the defendant himself admitting on tape that he had revealed classified information.

Now, I believe you can get to a jury with that, and I believe that

case should have been charged as 794, and if the legal technicalities gave you trouble, I believe that you could have been able to

negotiate a much better plea agreement. But, frankly, I believe the

case could have gone forward, and perhaps the Department of Defense and Navy would have been embarrassed at the way they had

been releasing information. Perhaps Lawrence Livermore Lab and

these people who think they have a right under free speech to say

what they want to would have had to have come forward and explained some of the declassifications that occurred, which I think

is unjustified, and I don’t think a jury would have had a hard time

with this case, Mr. Chairman. I think a jury would have sized this

up in a heartbeat and figured that—and I believe you would have

had a conviction on 794 and it would have been upheld on appeal.

I thank you.

Senator SPECTER. Thank you, Senator Sessions.

Mr. Liebman, from the tenor of your testimony, I conclude you

disagree with Senator Sessions that the jury would have convicted

in a heartbeat, but do you disagree with former U.S. Attorney Sessions that there was a jury question on 794?

Mr. LIEBMAN. As to the 1985 compromise, I think it was a very

close call. Perhaps it was a jury question. And I think reasonable

prosecutors can disagree on whether we should have gone forward

with the 794 prosecution.

Senator SESSIONS. And the decision in the Department of Justice

denied the jury the right to make that call.

Senator SPECTER. That is the 1985 matter?

Mr. LIEBMAN. Yes.

Senator SPECTER. But how about the 1997 matter? Jury question?

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Mr. LIEBMAN. Respectfully, Senator, I don’t think so. I think it’s

not even a close call. I think it would have been a Rule 29 before

it went to the jury.

Senator SPECTER. You referred in response to Senator Sessions’ question as to other DOD documents which undercut the 1997 incident. Are those matters you would want to discuss in closed session?

Mr. LIEBMAN. No. Those are publicly available documents, Senator.

Senator SPECTER. Fine. Well, what documents are you referring

to?

Mr. LIEBMAN. That’s the big thick stack I think Mr. McArthur

was showing to you earlier of articles, and, frankly, Senator—— Senator SPECTER. This is the stack that you opened?

Mr. LIEBMAN. I’m not sure, Senator.

Senator SPECTER. It says, ‘‘These were handed to me this morning.’’ McArthur is a speed reader, but not that speedy. May the

record show I thumbed the papers.

Mr. LIEBMAN. Senator, actually, those documents weren’t all as

troubling as the Twogood testimony in open session of the Armed

Services Committee and the Web site. They were just additional— they’re additional documents about—public documents about radar

ocean imaging that’s out there in the public literature.

Senator SPECTER. All right. The subcommittee will consider your

testimony on that.

As to the issue about Dr. Lee’s disclosures going well beyond the

article and what was on the Web site, there are two documents:

one, November 17, 1997, and another dated November 21, 1997,

the second of which we got just—we don’t have that yet. Mr.

McArthur says we saw it last night for the first time, but we will

go into that in a closed session.

I had handed to Senator Sessions a couple of documents when he

was questioning you, Mr. Liebman, and one of them is an impact

statement signed by Staffin, Trulock, and Mahaley that I referred

to, February 17, 1998, which concluded—or I will read the paragraph. It is short. ‘‘In summary, Dr. Lee has confessed to compromising classified nuclear weapon design information. The information was properly classified at the time of compromise, and U.S. intelligence analysis indicates that this information, in conjunction

with other information, was of material assistance to the People’s

Republic of China in advancing their nuclear weapons program.

Compromise of this information reasonably could be expected to

cause serious damage to U.S. national security.’’ With the emphasis

on ‘‘Compromise of this information reasonably could be expected

to cause serious damage to U.S. national security.’’

Do you disagree with their conclusion about damage to U.S. national security, Mr. Liebman?

Mr. LIEBMAN. I don’t disagree, Senator, but there are other DOE

documents that put that kind of statement—other DOE documents

that would have been relevant at a trial that would have made this

a much closer issue.

Senator SPECTER. So it would be a jury question?

Mr. LIEBMAN. For the 19—this impact statement is as to the

1985 compromise, and as I said before, I think it was a close quesVerDate 26-SEP-2001 06:22 Oct 03, 2001 Jkt 073205 PO 00000 Frm 00154 Fmt 6601 Sfmt 6602 E:\HR\OC\A205.XXX pfrm04 PsN: A205
149

tion, a close call, and reasonable minds could differ on the propriety of going forward with the section 794.

Senator SPECTER. OK, but it was a jury question as to what

Staffin, Trulock, and Mahaley concluded was national security information.

Mr. LIEBMAN. Senator, just because it’s a jury question doesn’t

mean we should bring a section 794 prosecution.

Senator SPECTER. There you go again. I just asked you if it was

a jury question. It doesn’t mean that because it is a jury question

you are going to bring it. I just asked you if it was a jury question.

Mr. LIEBMAN. Under the case law——

Senator SPECTER. Why so defensive, Mr. Liebman?

Mr. SWARTZ. Mr. Chairman, he wasn’t being defensive. He’s already answered that he believed it was a jury question before. He

was just amplifying on that.

Senator SPECTER. No, he had answered it overall, but not as to

the national security question, Mr. Swartz. It was a jury question

as to the national security matters, Mr. Liebman?

Mr. LIEBMAN. As a matter of law, it’s always a jury question

whether information relates to the national defense.

Senator SPECTER. Oh, now, Mr. Liebman, it isn’t always a matter

of law it is a jury question. Judges take a lot of issues away from

the jury and do not make them jury questions as a matter of law.

Isn’t that correct?

Mr. LIEBMAN. Not with respect to the espionage statute, and I

would refer you to United States v. Gorin, a Supreme Court opinion.

Senator SPECTER. Senator Sessions’ staff would like to have this

question asked, which I will read. Wouldn’t the fact that discussions began in 1989 about declassification because the rest of the

world was catching up be aggravating evidence rather than mitigating because Lee helped them catch up?

Mr. LIEBMAN. There was no—Senator, there was no information

that DOE documents that the rest of the world was catching up because of the compromise by Peter Lee. In fact, the intelligence community had no knowledge of the 1985 compromise prior to Peter

Lee’s confession in October 1997.

Senator SPECTER. Mr. Liebman, in taking a look at 793 and 794,

without reading the whole sections, 793 contains the clause ‘‘relating to the national defense or information relating to the national

defense,’’ which is virtually identical, at least in one portion, to 794,

‘‘information relating to the national defense.’’

So when you say that there was a requirement in 794 that

couldn’t be met as to national defense, but you could proceed under

793, aren’t the requirements as to that element of proof the same

in the two sections?

Mr. LIEBMAN. Yes, Senator, but he pled guilty to 793. He would

not have pled guilty to 794. We would have had a trial on that

issue.

Senator SPECTER. But the point that you made, at least as I understood it, was that you didn’t have an evidentiary base to meet

all of the requirements of 794, which is why you didn’t charge it,

because you couldn’t prove that it related to national defense;

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whereas, you did proceed as to 793. You think you couldn’t have

proved it as a 793 either if he hadn’t entered a guilty plea?

Mr. LIEBMAN. No. I think we could have proved it, but I do think

a trial would have been extremely difficult and might not have resulted in a conviction had there been a trial issue on—— Senator SPECTER. As to 793 either.

Mr. LIEBMAN. Had we gone to trial, Senator, we would not have

gone to trial under 793.

Senator SPECTER. Would you have not authorized a trial, a prosecution under 793?

Mr. LIEBMAN. We did authorize a prosecution under 793, Senator.

Senator SPECTER. Would you not have authorized going forward

to trial if there hadn’t been a plea bargain?

Mr. LIEBMAN. There could not—we could not have gone forward,

Senator, because the statute of limitations had run on section 793.

Senator SPECTER. But you could have gone forward under 794

because there was no statute of limitations.

Mr. LIEBMAN. That’s correct, Senator, had we thought the elements could have been proven beyond a reasonable doubt.

Senator SPECTER. Are you aware, Mr. Liebman, that when the

Navy finally got around to looking at the tapes of Dr. Lee’s confession that Schuster, Wayne W. Wilson, and Donna Kulla wrote an

unequivocal, albeit brief, conclusion, quote, the statements saying

that it was at the confidential level?

Mr. LIEBMAN. Are you referring to the March 2000 document,

Senator?

Senator SPECTER. Yes.

Mr. LIEBMAN. Could I just have a brief—could I look at that? I

think it have it here.

Senator SPECTER. Sure.

[Pause.]

Mr. LIEBMAN. Yes, I am aware of that letter, Senator.

Senator SPECTER. Mr. Liebman, I congratulate you on your decision to be in public service in the Department of Justice. I think

it is a very high calling, and there is no doubt that an attorney of

your ability could earn a great deal more somewhere else. And

when we are conducting these hearings, there is no suggestion of

any sort of any challenge to your competency. Of course, there is

no challenge to your integrity or your ability or your good faith. We

want to find out what happened here.

I think there are certain areas of disagreement, and our oversight function is to take a look at what you have done and to see

if we can recommend improvements. When we finished up with the

Foreign Intelligence Surveillance Act matters under Wen Ho Lee,

we introduced legislation which has been sponsored by almost everybody, thinking that we have added a little bit to improving your

procedures, and we may be in a position to do that again here. We

are going to get into some of that with Mr. Keeney.

And we don’t like to interrupt any of your work because you are

doing important work, regardless of what you are doing, but I understand you are doing extremely important work at the present

time. But we have our responsibilities on oversight, something that

the Congress does precious little of. And we have gotten into a fair

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amount of controversy on line attorneys, and I was a line attorney

once.

Somebody asked me once if the best job I had was Senator, and

I said, no, being district attorney was better than Senator. And

they said, was disrict attorney the best job you ever had? And I

said, no, being assistant district attorney was better than being district attorney.

So I have some appreciation of what it is like to be a line attorney. And I know the Department regulations frown on line attorneys, and I have already put into the record all the line attorneys

who have testified. One testified before the Governmental Affairs

Committee last June. I am on that committee as well.

And if you would care to make a comment, you appeared here

under subpoena, which is the rules of the Department of Justice.

And when we sought to talk to you in advance of your appearance

here, you declined, and you had every right to decline. We thought

it might be easier if we had an informal discussion to let you know

what we were looking for, but we respect your declination.

My own thinking is that it is a healthy thing, not an unhealthy

thing, from time to time to have men like you in your position testify beyond what Mr. Keeney testifies to or Mr. Dion testifies to,

because you are an important link. And your testimony about why

you did what you did and your limited contact with the Department of Defense, this is the first time I knew about that. And we

can only get that from you.

Somebody said that the subcommittee had made an arrangement

that if line attorneys appeared that we wouldn’t call them in the

public session. We never made any such arrangement. I wouldn’t

make any deal like that, or really any other deal.

And there is no way for somebody in my position to make a judgment about what ought to be public until I know what it is. And

if it is classified, sure, it is going to be in closed session.

To repeat, I respect what you said about the classified information. But if you would care to give an opinion, I would be interested

in your views, and this violates the cardinal principle about never

asking a question that you don’t know the answer to. But do you

think this is generally in the public interest for the Senate to find

out why you did what you did, say specifically with respect to not

conferring further with DOD officials?

Mr. LIEBMAN. Senator, I actually leave it to my superiors to—

who are more up to speed on the reasons for—behind the line attorney policy. I’d rather not comment on that.

Senator SPECTER. Fine.

Mr. LIEBMAN. But I would like to point out that the decision not

to meet with you in advance was made by my superiors.

Senator SPECTER. Oh, I know that. No, I am not—as I said, I respect it and I am in no way being critical. We are going to have

to decide the line attorney issue on other matters, and I respect

your statement that the policies in your view ought to be articulated by somebody else.

We made arrangements to go into the Intelligence Committee

room adjacent when we finish Mr. Dion’s testimony. So if you will

stand back, we will do that. It is a small room for having a hearing,

but we can accommodate ten people, and we are going to draw lots

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to see who gets to go into the closed session. Maybe I will be lucky

and draw the short lot and won’t be able to get to go in.

[The prepared statement of Mr. Liebman follows:]

PREPARED STATEMENT OF MICHAEL LIEBMAN

Mr. Chairman and distinguished members of the subcommittee, good morning/

afternoon. I’d like to make a few opening remarks, after which I look forward to

answering your questions.

As Mr. Keeney noted, since joining ISS in 1991, I have worked on some of the

major espionage cases of the 1990s—the Lalas case; the Ames case; the Lipka case;

the Squillacote case. All of these cases resulted in prison sentences ranging from

14 years to life.

All of these were prosecutions under 18 U.S.C. § 794. Of these, I am most proud

of the Lipka case, where I helped build an historical case where the investigation

did not even begin until roughly 25 years after the crime. I also take pride in the

1998 Squillacote/Stand case, where I was part of the trial team for a two-week jury

trial against a well-financed defense, which resulted in guilty verdicts on all counts

and sentences of 22 years and 18 years. In connection with that trail, I was awarded

last year the Attorney General’s Award for Excellence in Furthering the Interests

of U.S. National Security. Finally, I am, of course, proud of the Ames case, for which

John Dion and I received an award from the U.S. Attorney for the Eastern District

of Virginia.

At the time of Peter Lee’s admissions in October 1997, I fully expected that they

would lead to another case in my string of § 794 cases. But almost from the outset

I encountered significant obstacles.

Within about two or three days after Lee made his admissions in early October

1997, I flew out to Los Angeles and met with prosecutors from the USAO and FBI

special agents from the LA Division to discuss the case. Our office had first been

briefed on the case in August 1997, when it was still just a false-statements case

because Lee had merely admitted to telling lies. In my trip in October, I spent several hours meeting with then-AUSA Jonathan Shapiro, and FBI special agents Gil

Cordova and Serena Alston, at the LA Division FBI office, where we also listened

closely to the tapes of the October interviews. To the best of my recollection, it was

then that I first learned that the information Lee had compromised in 1985, while

classified ‘‘Secret’’ then, was no longer classified in 1997, and that the information

Lee compromised in 1997, was, for the most part, only classified under a mosaic theory and only at the ‘‘Confidential’’ level. By mosaic theory, I mean that the items

of information considered separately are unclassified, but when grouped together

they become classified.

I also recall that, with respect to the 1997 compromise, the FBI in Los Angeles

showed me a copy of a 1995 document authored by Lee that was marked ‘‘Confidential.’’ It concerned research into detecting the wakes of surface ships, conducted

under DOD auspices, through the use of radar directed at the ocean surface. Although the overall document was classified ‘‘Confidential,’’ every single portion of

the document was separately marked ‘‘Unclassified,’’ with one exception. The exception was the single paragraph on the first page that explained that considered as

a whole the document was ‘‘sensitive.’’

Later, after I returned to Washington, I obtained tapes of Lee’s October confession

and determined that as to the 1997 compromise, the 1995 ‘‘Confidential’’ document

essentially contained all the significant information Lee had confessed to giving the

Chinese in May 1997, with one important exception. The 1995 document was all

about using radar to detect surface ship wakes; it said nothing about using radar

to detecting submarines or anything below the surface. I knew that Lee had admitted to the FBI that he told the Chinese in May 1997 that the radar technique discussed in the 1995 document could be used to detect submarines, although he minimized the disclosure by telling the FBI that the Chinese already knew this.

In my estimation, both then and now, the sole weakness in the case was the questionable significance of the information Lee compromised, both in 1985 and 1997.

As to Lee’s 1985 disclosure, I knew, for instance, that the Department had never

prosecuted a case under 794 where the compromised information, as in the case of

Lee’s 1985 disclosure, had been declassified prior to the crime being discovered. Let

me emphasize this: the information Lee admitted disclosing in 1985 had been declassified. While some aspects of the government’s research in this area might remain classified, as shown by updated classification guides, what Lee confessed to

disclosing regarding ICF research in 1985 was fully declassified by 1993. And on

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this issue, I would refer the subcommittee to the FBI’s October 15, 1997 interview

of Dr. Roy R. Johnson, of Lawrence Livermore National Laboratory.

Furthermore, what I later determined was that the information was actually declassified over the 1990–93 time period, not just in 1993. DOE documents that I believe this subcommittee has shown that ICF research, including details disclosed by

Lee to the PRC, began being declassified on March 21, 1990, for reasons that included the fact that the rest of the world was catching up. Another reason for the

declassification, I was told, was that DOE considered it to be in the U.S. national

interest to educate countries on how to simulate nuclear weapon explosions in a laboratory setting, in order to discourage them from actually detonating nuclear devices. Moreover, I was advised, and again this is documented, that the debate over

declassification had begun at least as early as January 1989, only four years after

Lee’s disclosures.

Why is any of this relevant? Why does it matter that the information was declassified after the crime? Because section 794 does not penalize disclosures of classified

information. It does not even use that term. What it penalizes is the disclosure, or

attempted disclosure, of items, documents and information related to the national

defense. And what the caselaw, including Supreme Court caselaw says is that this

is a jury issue, not to be decided by a classifier merely testifying that certain information is or was classified at the time of the offense. The government needs to be

able to describe how a disclosure of classified information might benefit an enemy

of the United States. And publicly available information that tends to suggest that

the classified information is not all that significant may well be found by a court

to be relevant and admissible in an espionage prosecution.

The DOE documents indicated to me that there would be a significant issue at

any trial whether the ICF disclosures Lee made in 1985 related to the national defense at the time he made them. Most alarming to me was the notion that Lee could

claim that he made the disclosures to encourage China not to conduct nuclear weapons tests in the field, and he would likely be supported by internal government documents or even testimony of former USG or Livermore officials that that was actually one of the reasons the U.S. government declassified the information beginning

in 1990. In other words, Lee would have been able to argue his actions were in the

national interest.

I soon discovered that there were similar obstacles to bringing a § 794 prosecution

based on the 1997 disclosure. To analyze this, it is helpful to begin with the 1995

‘‘Confidential’’ document, every last substantive part of which, when considered

independently, is unclassified. Recall that this document discusses a radar technique in which the wakes of surface ships can be detected by bouncing radar signals

of the ocean surface. I have a copy of it right here today.

The best way to explain the problem with basing a prosecution on this document

is as follows. Under the classification guidance on this document, I could remove

any single paragraph, perhaps even a single line—just cut it out—and then take the

remainder of the document over to that press table, and I would not even be committing a security violation, because the document is only classified when considered

as a whole.

I recognized that problem with the 1997 compromise as soon as I got to Los Angeles. But there was one crucial piece of Lee’s admissions that I thought, at the time,

could make the case viable, even viable under section 794. Lee had confessed to telling the Chinese scientists that the technique described in the document could also

be used to detect submarines. As I’ve said, that goes beyond the document. Surely,

I thought, it must be a well-kept secret that the U.S. government is investigating

the detection of submerged submarines by utilizing radar aimed at the ocean surface.

When I returned to Washington, as I said, I began analyzing the confession in

some detail. Approximately two weeks after returning, on October 23, 1997, I attended a meeting at the Main DOJ building with the FBI and other Criminal Division attorneys, along with Mr. Shapiro and his supervisor, then-FAUSA Richard

Drooyan. The problems with the information, which I’ve just described, were discussed, along with other issues in the case. Immediately after that meeting, I attended a briefing by the FBI on the case, along with Mr. Shapiro and I believe Mr.

Drooyan. I will not go into that briefing here in open session.

A few days after that meeting, I attended a meeting with DOD officials to discuss

the 1997 information. I’ve recently been reminded, by the testimony of DOD and

Navy officials to this subcommittee last month, that the meeting occurred on October 28, 1997. The main purpose of that meeting, from my perspective, was to inquire of DOD as to what publicly available information could potentially undermine

an espionage prosecution for the 1997 compromise. Another issue for me was what

154

could the government say about the program generally, in a public forum, if the case

were to go to trial.

About a week after the meeting, I received a stack of public articles from DOD

related to radar ocean imaging generally. One thing they also sent me was extremely surprising. Among the articles was a print-out from a Lawrence Livermore

National Laboratory web site, last updated in March 1995, well in advance of Lee’s 1997 trip to China. I have a copy of the print-out here. I quickly confirmed, after

receiving it, that the web site was a public one and available to anyone in the world

with a computer and a modem. I offer it into the record now and I’d like to read

some portions of it out loud.

The title of the page is ‘‘radar ocean imaging.’’ The first line of text states: ‘‘This

project focuses on the detection by radars of surface manifestations of moving, submerged submarines.’’ Later, it says that as a result of ‘‘achievements’’ in the project, ‘‘[t]here is now no controversy within the community that radars offer any potential

for this problem,’’ that is, to detect submarines. It concludes: ‘‘[t]his program has

made impressive advances in understanding and exploiting radar remote sensing of

the ocean for important national defense needs.’’ In addition, a few days after obtaining the website printout, DOD gave me a copy

of the prepared remarks of Dr. Richard E. Twogood of the Lawrence Livermore National Laboratory, presented in open session to a subcommittee of the House Armed

Services Committee in April 1994. I have a copy of those remarks and I offer it into

the record now, and I’d like to quote from the most significant portions: ‘‘The Joint

US/UK Radar program has made important progress in the development of methods

to detect submarine signatures with remote sensing radars, especially over the last

two years.’’ It also states: ‘‘We have developed new signal processing and detection

techniques that, to our knowledge, have never been successfully applied to this problem. We have applied these new methods in both classified and unclassified settings.

Results have been achieved that I believe are not only impressive, but also offer

great promise for future improvement.’’ So there it was. There was no secret at all that the USG was working on a program to detect enemy submarines with radar aimed at the ocean surface. There was

not even any secret that we had achieved a potential breakthrough. The website and

Dr. Twogood’s testimony, coupled with the fact that the underlying 1995 document

was only classified under a mosaic theory, convinced me that there was no section

794 case on the 1997 compromise.

I arrived at that conclusion even before I received the Shuster memorandum of

November 14, 1997. The memo only served to reaffirm my position. Particularly significant were the Navy’s determination that it could not support the ‘‘Confidential’’ classification of the 1995 document and that, in any event, Peter Lee’s disclosures

did not cause significant damage. I would note that the Shuster memorandum had

the concurrence of the vice chief of naval operations, the second highest ranking

Navy official.

Now, just because a compromise of classified information cannot be prosecuted

under section 794 does not mean that there are no other statutes with serious criminal penalties that might apply. There are other provisions of the espionage code,

specifically 18 USC 793 and 798. In addition, there is the Internal Security Act, specifically 50 USC 783. Each of these carries a ten-year penalty. The problem was that

none of them applied. Section 793 was out because it too used the term national

defense information, just like section 794. Section 798 was out because it applies

only to communications intelligence and cryptographic information. And the Internal Security Act was out because it applied only to defendants who were USG employees or employees of USG-owned corporations. That was the biggest disappointment, and I remember discussing that with Mr. Shapiro over the phone following

my trip out to Los Angeles. The statute does not apply to employees of government

contractors, such as TRW.

Shortly thereafter, I do not recall precisely when, I recommended to Mr. Dion that

we offer Lee a plea under 18 USC 793 or section 224(b) of the Atomic Energy Act

of 1954 (42 USC 2274(b)) for the 1985 compromise. Both statutes carry a maximum

penalty of ten years, and would require Lee to waive the statute of limitations. The

USAO elected to offer Lee the plea under 18 USC 793.

At some point in early December 1997, it became apparent that Lee was balking

at a plea with a potential ten-year exposure for the 1985 incident. I then recommended to Mr. Dion that, although the section 794 case for that incident had

problems, it was sufficiently robust that we could still ethically use it as leverage.

This was communicated to the USAO by Mr. Dion, I believe, in a phone call to Mr.

Drooyan. Shortly thereafter, the plea agreement was entered. Lee did in fact waive

the statute and plead guilty to a violation of 18 USC 793, along with a violation

of 18 USC 1001 for lying about the circumstances of his 1997 travel to China.

155

It goes without saying, I hope, that I was extremely disappointed that Peter Lee

was not sentenced to prison. It is the only espionage prosecution that I have worked

on that did not result in a jail sentence. But let me add that I am proud of my work

on the case, and proud that Jonathan Shapiro and I ensured that Peter Lee would

not remain free to continue to make sensitive disclosures to foreign governments.

That concludes my remarks.

Senator SPECTER. OK; Mr. Dion. Will you step forward? Mr.

Dion, would you raise your right hand, please? Do you solemnly

swear that the testimony you are about to give before this subcommittee of the Committee of the Judiciary of the U.S. Senate will

be the truth, the whole truth, and nothing but the truth, so help

you God?

Mr. DION. I do.

Senator SPECTER. Now, Mr. Dion, is Mr. Swartz an interloper or

do you want him sitting there?

Mr. DION. Mr. Chairman, Mr. Swartz is my supervisor.

Senator SPECTER. Well, that still doesn’t answer my question.

Mr. DION. I would like to have him with your leave, sir.

Senator SPECTER. OK; may the record show that Mr. Swartz continues to accompany the witness, Mr. John Dion.

Mr. SWARTZ. Thank you, Mr. Chairman.

Senator SPECTER. Mr. Dion, I know you have an opening statement, and we would be pleased to hear from you, and you may proceed now in any way you see fit.

STATEMENT OF JOHN DION, ACTING CHIEF, INTERNAL SECURITY SECTION, CRIMINAL DIVISION, U.S. DEPARTMENT OF

JUSTICE, WASHINGTON, DC; ACCOMPANIED BY BRUCE C.

SWARTZ, DEPUTY ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC

Mr. DION. Thank you, Mr. Chairman.

Mr. Chairman and members of the subcommittee, I am the Acting Chief of the Internal Security Section. I held that position in

the fall 1997 as the Peter Lee case was being considered for prosecution. As Mr. Keeney noted, I have devoted most of my career to

prosecuting espionage cases. In all, I have been involved in the

prosecution of more than 70 defendants charged with espionage or

related offenses.

Let me discuss briefly the background of my involvement in the

Peter Lee case. In August 1997, I was advised by an FBI agent

from headquarters that Lee had recently been interviewed by

agents of the Los Angeles FBI office and was believed to have made

false statements. I asked that steps be taken to get the United

States Attorney’s office briefed on the case, and I assigned Mr.

Liebman, the line attorney in the section with the most experience

in espionage cases, to monitor developments in the investigation.

When we learned of Lee’s admissions in his interviews with the

FBI in October, I asked Mr. Liebman to travel to Los Angeles to

work directly with Mr. Shapiro and the agents. Over the ensuing

weeks, I had numerous conversations with Mr. Shapiro, and I was

kept apprised by Mr. Liebman of the inquiries being made on classification issues and the searches of open source materials. I should

note that these inquiries are made in every espionage case considered for prosecution. In turn, I regularly briefed my supervisor,

156

Deputy Assistant Attorney General Mark Richard on all significant

developments.

On October 23, 1997, I attended a meeting at the Department,

chaired by Mr. Richard, to discuss the case with Mr. Shapiro and

his supervisor, Mr. Drooyan, and agents from Los Angeles and FBI

headquarters. The facts and issues as we understood them at the

time were discussed at length.

In late November or early December, I received approval from

Mr. Richard to authorize Mr. Shapiro to engage in plea negotiations with counsel for Lee in the following terms. Mr. Shapiro was

authorized to seek a plea of guilty by Lee to a violation of 18 U.S.C.

§ 793(d) for his 1985 disclosures and to a violation of the false

statement statute, 18 U.S.C. § 1001. As such a plea would require

Lee to waive the 10-year statute of limitations, Mr. Shapiro was

authorized to advise counsel that no final decision had been made

as to the prospect of charging Lee with a violation of section 794.

I conveyed these terms to Mr. Shapiro by telephone.

Senator SPECTER. You say no final decision had been made—— Mr. DION. That’s correct.

Senator SPECTER [continuing]. As to whether he would be

charged with 794?

Mr. DION. That’s correct, sir.

In closing, I would note that we fully anticipated that Lee would

receive a sentence of incarceration for his plea. I believe that Mr.

Shapiro vigorously represented the Government in the papers filed

with the court and in his allocution. We were, of course, extremely

disappointed in the sentence imposed. But I am proud that we put

a stop to Mr. Lee’s disclosures, and I am very proud of the work

done on the case by Mr. Liebman and Mr. Shapiro.

That concludes my statement, sir.

Senator SPECTER. Thank you, Mr. Dion.

Mr. Dion, when you say no decision had been made—and I interrupted you at that point—as to what would happen if the plea bargain broke down, Mr. Shapiro testified very emphatically that he

wanted to proceed with 794 but was told that all he could do was

do the best he could under the authorized plea bargain, so that is

why he proceeded as he did, asking only for a short period of incarceration and not taking action when Dr. Lee lied on his polygraph

and did not give further answers. But are you suggesting, if that

plea bargain had broken down, that you might have reconsidered

and authorized a 794 prosecution?

Mr. DION. We definitely would have reconsidered our course of

action, sir.

Senator SPECTER. Well, did you tell Mr. Shapiro that?

Mr. DION. I don’t recall specifically if we discussed that or not.

We did discuss that no final decision had been made on the 794

and that he should proceed with plea negotiations on that basis.

Senator SPECTER. But, Mr. Dion, that is a very important point.

If Mr. Shapiro knew that if the plea broke down he would have a

shot at 794, he testified that he was very unhappy with what Main

Justice had done, that he wanted to go on 794, that he didn’t have

an insurance policy or a guarantee, as none of us trial attorneys

ever does, but he wanted to proceed under 794, and he really felt

hamstrung. I don’t know that he used the word ‘‘hamstrung,’’ but

157

felt that he had to take what he could get and that he couldn’t ask

for a longer sentence of jail, he couldn’t complain about lies which

Dr. Lee told, at least as disclosed by the polygraph. So he had no

inkling, according to his testimony, as I understood his testimony,

that there was a possibility that he could go under 794. I think he

would have liked to have chucked the plea bargain and gone on

794.

But you say you never really told him or you don’t recall telling

him that he could have gone under 794 if the plea bargain broke

down.

Mr. DION. Well, I definitely did not tell him that he had approval

to go forward on a 794 if plea negotiations terminated. I would also

say, though, that we never had a conversation at the time where

he told me that he or his office—and he did testify that he was reporting regularly, in fact, many times a day to Mr. Drooyan, that

they felt that their position in plea negotiations was hamstrung if

they did not have that final authority. If that had been the position

of the office that they could not have engaged in vigorous negotiations without that final authority, then I think we would have had

to reconsider our position.

Senator SPECTER. Well, do you agree with Mr. Keeney that if you

had known he was going to ask for a ‘‘short period of incarceration’’

that you wouldn’t have approved the plea bargain?

Mr. DION. That Mr. Keeney would not have approved the plea

bargain?

Senator SPECTER. Well, Mr. Keeney said he wouldn’t have approved the plea bargain if he had—Mr. Keeney is in the room at

the time hearing me say this—that he wouldn’t have approved the

plea bargain if he had known that there was going to be a request

of a trial prosecutor for only a ‘‘short period of incarceration.’’ My

question to you is: Would you have approved the plea bargain had

you known of that recommendation as to sentencing?

Mr. DION. I knew that recommendation was in the plea offer as

the offer proceeded and neared the end, that that was the concession that Mr. Shapiro had made, and it was one that——

Senator SPECTER. It was a concession, you say? I didn’t hear

what you said.

Mr. DION. It was a concession in the sense that it—that he did

not ask for a long period of incarceration, which was the other formulation that his office used in pre-guidelines pleas. But it was a

thing negotiated by Mr. Shapiro when we left it to him to negotiate

the plea.

Senator SPECTER. So you did——

Mr. DION. It was approved by his superiors as well.

Senator SPECTER. So you did approve the plea bargain knowing

that it was a short period of incarceration?

Mr. DION. I did.

Senator SPECTER. Now, Mr. Keeney says that after the fact he

doesn’t disagree with the conclusion, but at the time he would not

have approved the plea bargain. But you did. All right. If that is

your testimony, that is your testimony.

Were you aware that Mr. Shapiro felt he was unable to go back

at Dr. Lee for the lies he told because he had no alternative but

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to take the authorized plea bargain or he would have nothing else

to fall back on?

Mr. DION. My understanding is that during the closed session

that I attended, Mr. Shapiro discussed the difficulties in seeking a

breach of the agreement because of the reasons of classified information.

Senator SPECTER. Would you repeat that, please?

Mr. DION. During the closed session last week, Mr. Shapiro discussed the difficulties in seeking a breach of the agreement because

of the reservations that the agents had in the polygraph failures

as to Mr. Lee’s cooperation, that there were classified information

issues at stake with respect to going forward and seeking a breach

of the plea.

Senator SPECTER. Well, there is no doubt, in my mind, at least—

and I think the specifics of the testimony will bear it out—that Mr.

Shapiro wanted to go forward with 794 and accepted all of these

concessions because he had no greater authority. But the long and

short of it is—and this is repetitious, but I think worth repeating—

that you never told Mr. SHAPIRO that if the plea bargain broke

down, you would reconsider a prosecution under 794.

Mr. DION. I don’t know that we ever had that conversation, Senator.

Senator SPECTER. OK; there are these——

Mr. DION. May I amplify a previous answer, though?

Senator SPECTER. You may say anything you choose, Mr. Dion.

Mr. DION. Thank you, sir. I appreciate that.

I would note that in Mr. Shapiro’s testimony last week, in response to a question to you, he said that he thought that he was—

you asked him about asking for the short period of incarceration,

and he stated in response that that was the best he was going to

do in front of Judge Hatter.

Senator SPECTER. Well, that was one of the factors, but only one

of the factors, as other of his testimony will show.

These two statements, Mr. Dion, one quotes you directly from the

memo from Michael Doris, dated November 25, 1997, ‘‘According to

JJ’’—J.J. Smith—‘‘ISS/Dion said that if RT’’—referring to Lee—

‘‘doesn’t accept the plea proffer, then he gets charged with 18

U.S.C. 794, the heftier charge.’’

Is that statement incorrect?

Mr. SWARTZ. Mr. Chairman, could we get that document?

Senator SPECTER. Yes.

Mr. SWARTZ. Thank you.

Mr. DION. I have had an opportunity to read that passage, sir.

It is not correct.

Senator SPECTER. It is not correct?

Mr. DION. I’m sorry. Reading that—I think I’ve been confused by

reading the first sentence and then the sentence that’s marked

down at the bottom here. The sentence that you read me, as I understand it, sir, was, ‘‘According to JJ, ISS/Dion said that if RT

doesn’t accept the plea proffer, then he gets charged with 18 U.S.C.

794, the heftier charge.’’ That decision had not been made.

Senator SPECTER. And the accompanying memorandum from the

Department of Defense, undated—and it is hard to understand how

159

these documents float around undated, but I know you have the

document before you, or let me inquire if you do.

Mr. DION. You’re referring to the second full paragraph on the

page, sir?

Senator SPECTER. Yes. ‘‘Should Lee decline the offer, the U.S. Attorney will seek an indictment against him for violation of section

794.’’

Mr. DION. Yes, sir. Again, that authority had not been given to

Mr. Shapiro or his office.

Senator SPECTER. Shapiro was never told that if Dr. Lee turned

down the plea bargain, he could proceed under 794.

OK; we will make the interpretation of all this conflicting testimony as best we can sort through it.

Mr. DION, were you aware that Dr. Lee had given the PRC scientists a great deal more information than was encompassed in his

confession on the 1985 disclosures?

Mr. DION. I am not sure I understand your question, sir.

Senator SPECTER. Well, we went into this with Mr. Liebman, and

we can go the long route, but I cited certain documents which represented that Dr. Lee had given the PRC scientists a great deal

more information about the hohlraum nuclear power than was contained in his confession. Were you aware of that?

Mr. DION. I think that’s a matter that would require us to go into

closed session. I think that Mr. Liebman is familiar with that.

Senator SPECTER. Go into closed session and Mr. Liebman is familiar with that, but you are not?

Mr. DION. No. Mr. Liebman is more directly familiar with that

information than I am, and I recall him requesting that we go into

closed session to discuss it.

Senator SPECTER. Do you disagree with this assessment made by

Staffin, Trulock and Mahaley that compromise of the information

relating to the nuclear energy ‘‘compromise to this information’’ reasonably could be expected to cause serious damage to U.S. national security?

Mr. DION. We are looking for the document, sir.

I have no reason to dispute that passage, sir.

Senator SPECTER. Do you disagree with the statement made by

Dr. Cook, again, which was read to Mr. Liebman, the second full

paragraph? ‘‘Information contained in the classified DOD document

that Peter Hoong-Yee Lee admits to having transferred to the PRC,

represents the scheme for interpreting temperature measurements

made with X-ray detectors’’—are you with me on this?

Mr. DION. I am reading with you, sir.

Senator SPECTER. [continuing]. ‘‘on radiation emerging from a

plasma in a hollow cavity’’—references to the paper document,

Lee—‘‘formal participation and broad classified inertial confinement fusion, ICF, diagnostic development programs. These programs had specific classified objectives including the measurement

of material properties necessary for benchmarking classified computer code simulations, calibration of underground nuclear test at

infusion laboratories and adaptation of ICF diagnostic techniques

for use in UGT. Some technologies with which Peter Hoong-Yee

Lee was associated are now unclassified because of academic developments in ICF research. Others remain classified in nuclear weapVerDate 26-SEP-2001 06:22 Oct 03, 2001 Jkt 073205 PO 00000 Frm 00165 Fmt 6601 Sfmt 6602 E:\HR\OC\A205.XXX pfrm04 PsN: A205
160

on science with emphasis on ‘others remain classified in nuclear

weapon science.’ ’’ Do you disagree with that, Mr. Dion?

Mr. DION. I have no basis to dispute the statement that he was

associated with both classified and unclassified information.

Senator SPECTER. Mr. Dion, Senator Thurmond’s staff has asked

that a question be propounded as to whether you knew about the

lies that Dr. Lee had told at least as disclosed by the polygraph

and whether you had considered trying to abrogate the plea bargain on that basis. For a variety of reasons, Mr. Shapiro decided

not to, but did you join in that decision not to seek to abrogate the

plea agreement in the light of those lies?

Mr. DION. I was familiar that Dr. Lee had shown deceptive—deception on the polygraph. I did not have any discussion that I can

recall with Mr. Shapiro or anyone else where the issue was directly

raised should we seek to breach the plea agreement.

I think the reason for that was—as you know was disclosed in

Mr. Shapiro’s closed-session testimony.

Senator SPECTER. Mr. Dion, as with Mr. Liebman, I congratulate

you. Thank you for being in public service. You, like virtually everyone in the Department of Justice, could do a lot better financially. Public service is a very high calling, and to repeat what I

said to Mr. Liebman, he had asked me to testify where no way

challenging your competency, obviously not challenging your integrity or your dedication. And I know the policy of the Department

of Justice is not to object to talking to somebody in your position.

How do you define and distinguish your role from the so-called

line attorneys?

Mr. DION. I am the first-level supervisor for line attorneys in our

section.

Senator SPECTER. You are a first-level supervisor?

Mr. DION. Yes. We have a very small section, Senator. We only

have 10 employees.

Senator SPECTER. So, if you are a supervisor, that takes you out

of the category of line attorney?

Mr. DION. Sir, I am not so familiar with the line attorney policy

that I would be able to answer.

Senator SPECTER. Neither am I. That is what I am trying to find

out, but I am learning more. It is a tough learning curve.

Would you care to comment on the utility of your appearing here

today to answer questions on Senate oversight? Do you think it is

a good idea?

Mr. DION. I don’t care to comment, sir.

Senator SPECTER. Okay. Thank you very much, Mr. Dion.

[The prepared statement of Mr. Dion follows:]

PREPARED STATEMENT OF JOHN DION

Mr. Chairman and members of the Subcommittee, I am the Acting Chief of the

Internal Security Section. I held that position in the fall of 1997 as the Peter Lee

case was being considered for prosecution. As Mr. Keeney noted, I have devoted

most of my career to prosecuting espionage cases. In all I have been involved in the

prosecution of more than 70 defendants charged with espionage or other Internal

Security offenses.

Let me discuss briefly the background of my involvement in the Peter Lee case.

In August 1997, I was advised by an FBI agent from headquarters that Lee had

recently been interviewed by agents of the Los Angeles FBI office and was believed

to have made false statements. I asked that steps be taken to get the United States

161

Attorney’s Office briefed on the case and I assigned Mr. Liebman, the line attorney

in the Section with the most experience in espionage cases, to monitor developments

in the investigation.

When we learned of Lee’s admissions in his interviews with the FBI in October,

I asked Mr. Liebman to travel to Los Angeles to work directly with Mr. Shapiro and

the agents. Over the ensuing weeks, I had numerous conversations with Mr. Shapiro and I was kept apprised by Mr. Liebman of the inquiries being made on classification issues and the searches of open source materials. I should note that these

inquiries are made in every espionage case considered for prosecution. In turn, I

regularly briefed my supervisor, Deputy Assistant Attorney General Mark Richard

on all significant developments.

On October 23, 1997, I attended a meeting at the Department, chaired by Mr.

Richard to discuss the case with Mr. Shapiro and his supervisor, Mr. Drooyan, and

agents from Los Angeles and FBI headquarters. The facts and the issues as we understood them at the time were discussed at length.

In late November or early December I received approval from Mr. Richard to authorize Mr. Shapiro to engage in plea negotiations with counsel for Lee in the following terms. Mr. Shapiro was authorized to seek a plea of guilty by Lee to a violation of 18 U.S.C. § 793(d) for his 1985 disclosure and to a violation of the false statement statute, 18 U.S.C. § 1001. As such a plea would require Lee to waive the tenyear statute of limitations, Mr. Shapiro was authorized to advise counsel that no

final decision had been made as to the prospect of charging Lee with a violation of

794. I conveyed these terms to Mr. Shapiro by telephone.

In closing, I would note that we fully anticipated that Lee would receive a sentence of incarceration for his plea. I believe that Mr. Shapiro vigorously represented

the government in the papers filed with the court and in his allocation. We were,

of course, extremely disappointed in the sentence imposed. But I am proud that we

put a stop to Mr. Lee’s disclosures. And I am very proud of the work done in this

case by Michael Liebman and Jonathan Shapiro.

Senator SPECTER. Mr. Keeney, you are being recalled, briefly.

Mr. Keeney, you don’t want Mr. Swartz at the table with you, do

you?

Mr. KEENEY. No, thanks.

Senator SPECTER. Do you care to call any other attorney?

Mr. KEENEY. No. No, thank you, Senator. I appreciate the courtesy, though.

Senator SPECTER. Mr. Keeney, before I got to the meeting last

Thursday, you had had an extended discussion with Mr. Dobie

McArthur who has done such an outstanding job in reviewing

reams of documents here, and you had a discussion with him at

some length. And then you and I had a very brief discussion about

what may be learned from this process, and I would like to put on

the record what we were talking about.

Do you think it would be a good idea to get a written classification review by the agency involved whose secrets were taken before

decisions were made with regard to a plea? And I refer to the kind

of documents that Dr. Cook prepared here, the document which

Staffin, Trulock and Mahaley prepared, and at least a reflected

judgment by the Navy on whether it was confidential which we finally got from Schuster and others. Do you think that that would

be a desirable procedure for handling future espionage cases?

Mr. KEENEY. I think it would be a desirable procedure to clarify

under the extent that we can get a written statement with respect

to the agency’s position on the classification and impact on national

security of disclosure of that information.

Senator SPECTER. So that the Department of Justice would at

least know what the security classification was? That is important?

Mr. KEENEY. It is important, and, Senator, just if I may, my understanding is that we do this—we do this review, and we do have

162

the contact with the agencies. We may not have formalized it as

much as would be desirable.

Senator SPECTER. Do you think it would be desirable to formalize

it, to have that done in writing by the agency so there is no doubt

as to what they view the classification of the compromised material

and the impact on national security?

Mr. KEENEY. I would—yes. I would prefer to have their assessment in writing.

Senator SPECTER. And another item which was discussed last

Thursday was to formalize the procedures for ensuring that the

agency understands the Classified Information Protection Act

which allows court cases to go forward even where they involve

classified information so that there is an assessment by the Justice

Department and the agency as to what the disclosures would be.

Do you think that is desirable?

Mr. KEENEY. That is desirable in—you know, we do get into that

at some point in our evaluation process, but it is something that

should be done, and we do it. But maybe it should be clarified as

to what stage we do it and tell them what we are going to have

to put into evidence in order to maximize the likelihood of conviction and determine from them what that information or evidence

has to be protected under CIPA.

Senator SPECTER. Do you think that that ought to be formalized

in writing, too, so there is no misunderstanding as to what the Department of Justice can protect and what has to be disclosed, so

the Department of the Navy, as in this case, would understand

what their risks were on public disclosures?

Mr. KEENEY. I don’t know that we have to do that in writing,

Senator, but we ought to lay it out to them in the discussions with

them when we—when they know what evidence we are going to

have to utilize.

Senator SPECTER. If you do not do it in writing, then do your line

attorneys have to make notes as to whom they talked to and what

they said so that there is some check as to what was done?

Mr. KEENEY. Well, I think there should be some record of what

the agreement was with respect to the utilization of CIPA, the necessity to utilize CIPA.

Senator SPECTER. Wouldn’t the simplest way be to do it in writing so that there is a statement by the Department of Justice as

to what can be protected and a statement by the Department of

Defense as to what they can live with?

Mr. KEENEY. Senator, I agree that it would be desirable to have

it in writing. What I am hedging a little bit and maybe being a little hesitant about is requirements as to what has to be in writing,

how much detail has to be in writing.

What we need is a meeting of minds so that the agency, intelligence agency, knows what exposure they have if we go ahead, and

that should be communicated.

Senator SPECTER. And a meeting of the minds so each knows

what the other is saying and there is some way that you can have

some congressional oversight instead of guessing as to what was

said at these meetings years ago where no notes are maintained.

Mr. KEENEY. Well, it is desirable to have records, but as I think

you are getting from the sense from these hearings that there is

163

a reluctance with respect to certain matters to take notes, and I

think you will agree with respect to some of the matters that have

come out in this hearing that it would be inappropriate to take

notes.

So I do not want to put us in a vise here, Senator.

Senator SPECTER. Well, I think that the documents have to be

carefully constructed, but even if they move over into the classified

section, if they are available only to the Department of Justice and

the Department of Defense, you representatives of those two agencies see secret and classified documents all the time and then the

Senate can see them or the House can see them under appropriate

procedures. It does not have to be in the public domain, but

wouldn’t it be desirable to have it in writing so there is no misunderstanding about the positions of either agency?

Mr. KEENEY. It is desirable to have the things in writing so there

is no misunderstanding, Senator. I agree with that, and we are certainly happy to look at our procedures and see if they can be clarified and made more useful to everybody.

Senator SPECTER. Where should the ultimate decision be, Mr.

Keeney, if the Department of Defense says we do not want to go

forward and the Department of Justice says we can protect this information, and if there is a trial ruling—cases are frequently withdrawn when a trial judge will rule that more information has to

be presented. So the Government always has the option of withdrawing the prosecution if there would be disclosure of something

which would be deemed more serious for the Government than the

loss of the prosecution.

Mr. KEENEY. Yes, that is true.

Senator SPECTER. So who ought to have the judgment as to—or

let me lead you just a little. Should it be the Department of Justice

judgment as to whether you go forward after considering what the

Department of Defense has to say?

Mr. KEENEY. If there is a disagreement between the Department

of Justice and the—another agency, Department of Defense in this

case, the matter should be raised at the Cabinet level for a decision.

Senator SPECTER. Raised at the Cabinet level?

Mr. KEENEY. Yes, sir.

Senator SPECTER. And decided by the National Security Council?

Mr. KEENEY. National Security Council or the President, if it is

appropriate.

Senator SPECTER. With all of the confusion as to the plea bargain

in this case, wouldn’t it be a good idea that on matters of espionage, you don’t have so very many of these that——

Mr. KEENEY. Senator, could I just make a comment——

Senator SPECTER. Sure.

Mr. KEENEY [continuing]. With respect to—you have been asking

questions, and Senator Sessions was, with respect to how many of

these cases have been tried.

You know, a very significant number of these are the subject of

pleas, and have been in the last 10 years. I just wanted to make

that point. I do not think that was clear.

Senator SPECTER. Well——

Mr. KEENEY. And these people have been involved deeply——

164

Senator SPECTER [continuing]. You mentioned Senator Sessions.

Do you see how fast he reappeared?

Mr. KEENEY. Yes, he has come back. Welcome back, Senator.

Senator SESSIONS. I have to keep an eye on him.

Senator SPECTER. May the record show that Senator Sessions

had other pressing business and absented himself briefly, and here

he is again. Mr. Keeney—these men have a long relationship, when

Mr. Keeney was Mr. Sessions’ boss.

I just want to close up, and then I will turn to Senator Sessions—see if you agree that on espionage cases, you do not have

all that many and they are decided a lot of times by pleas.

Shouldn’t there be a writing as to whether a man like Mr. Shapiro

knows that if the plea bargain falls through on 793, the Department will reconsider 794 instead of having misambiguity and confusion?

Mr. KEENEY. Well, if I understand what you are saying, there

should be some communication to the United States Attorney or

Assistant indicating the extent of his authority in this matter, and

in this case, that would include you are not at this point authorized

to go on 794. You are authorized to not take it off the table insofar

as plea discussions are concerned. If the plea breaks down and you

want to go 794, you are going to have to come back and we are

going to have to look at the whole matter.

Senator SPECTER. Right. Shouldn’t that be in writing so that Mr.

Shapiro knows what is in Mr. Dion’s mind?

Mr. KEENEY. It will be desirable to have it in writing, Senator,

but I would like to look at this as to whether or not we want to

insist upon it being in writing in every situation.

Senator SPECTER. Well, I am not saying in every situation, but

in every situation—— Mr. KEENEY. It is desirable.

Senator SPECTER [continuing]. Where you have espionage and

the potential for the death penalty?

Mr. KEENEY. I think we ought to be very clear where we are considering the utilization of the death penalty provision, yes.

Senator SPECTER. I had 500 homicide cases a year when I was

District Attorney, but if the death penalty was required, that was

a judgment which I thought the District Attorney ought to make,

nobody else.

We are in the process of taking a look at some remedial legislation, and we will submit it to you, but if you say it is desirable to

have it in writing, I think it ought to be mandatory, but we will

take it from there.

Senator Sessions, you have the last word—— Senator SESSIONS. Well——

Senator SPECTER [continuing]. Before the closed session.

Senator SESSIONS. All right. Mr. Keeney, when I ask about trial

experience, I was not referring to espionage cases. All espionage

cases—is just a complex trial.

Mr. KEENEY. Right.

Senator SESSIONS. I think if you are in a big espionage case, I

hope you do not limit the attorneys who are going to prosecute it

to those who have had experience in espionage trials because there

are not enough of them to get any experience. What you need is

165

an experienced litigator, someone who is ready to go to court, and

you had that in Mr. Shapiro, a Harvard graduate, Rhodes Scholar,

8 years on the firing line, tried every kind of cases. They could do

that. He was ready to go forward, and people reading the paper

who had not that kind of litigating experience made the decision.

And I believe it was not a good decision.

I also am troubled to see the Department of Justice attempt to

pass the buck a bit.

Mr. KEENEY. Senator, I don’t think we are passing the buck. I

have told you from my standpoint that if I had seen the original— at the initiation of those proceedings, I would have said do not

agree to that, go back to the table again, don’t agree to that short

period of—— Senator SESSIONS. Who was to blame for you not having the

right information?

Mr. KEENEY. Well—— Senator SESSIONS. Who is responsible for it?

Mr. KEENEY. It got lost, but the ultimate thing is, Senator, what

I was saying—— Senator SESSIONS. It was not Mr. Shapiro’s fault because he was

trying to push for 794 and go forward with it.

Mr. KEENEY. Right. And there was a disagreement both within

his office and back with the Internal Security Section with respect

to that.

Senator SESSIONS. I want to talk about this responsibility. I

think the chairman—— Mr. KEENEY. Senator, could I—all right. Go ahead. I’m sorry.

Senator SESSIONS. In certain cases, the Department of Justice

takes unto itself the litigating authority and responsibility for decision-making cases. They are involved in—Hobbs Act cases have to

be approved or extortion cases have to be approved in the Department of Justice. RICO has to be approved in the Department of

Justice.

Mr. KEENEY. RICO does, yes.

Senator SESSIONS. I have been told no by the Department of Justice on cases I wanted to go forward with. It was my neck on the

line, but I accept that ultimate authority. With espionage, ultimate

authority and responsibility lies within the Department.

Now, did the Attorney General of the United States know about

this case?

Mr. KEENEY. I do not know. I didn’t discuss it with her. Mark

Richard may well have mentioned it to her, but I did not.

Senator SESSIONS. Now, who is Mark Richard?

Mr. KEENEY. Mark Richard is the—he was the Deputy Assistant

Attorney General who supervised, as Mr. Swartz does now, the Internal Security Section.

Senator SESSIONS. All right. And you supervise——

Senator SPECTER. On that point, will you get back to us? It is my

understanding that Attorney General Reno did not know about the

case.

Mr. KEENEY. To my knowledge, she did not, Senator. Let me put

it——

Senator SPECTER. We had a session with Senator Hatch, and I

asked her about it. She declined to answer the question, which is

166

not unusual, but would you get back to us? Because if she did know

about it, we will want to hear from her on the facts, and if she did

not, we would like to have that of the record.

Mr. KEENEY. She didn’t hear about it from me. She may have

been—what we have—we have frequent meetings with the Attorney General, and she is brought up to date with respect to important cases. Mark may have done that. I did not.

Senator SPECTER. We would like to know what the facts are.

Mr. KEENEY. OK.

Senator SPECTER. Senator?

Senator SESSIONS. I don’t want to take too much of your time.

Do I have a few minutes?

Senator SPECTER. Sure.

Senator SESSIONS. OK; to pursue that, what about Mr. Holder?

WAS he your supervisor?

Mr. KEENEY. Yes, sir.

Senator SESSIONS. Did he know about this? Was he briefed on

the case?

Mr. KEENEY. He wasn’t briefed by me, Senator.

Senator SESSIONS. And to your knowledge, he was not briefed on

the case?

Mr. KEENEY. There are certain things that are—the Assistant

Attorney General from the Criminal Division can make the decision and does not have to go upstairs with it and certain other

things, if they think the Deputy or the Attorney General should be

apprised of it, we do that.

Senator SESSIONS. Well, I am just trying to—— Mr. KEENEY. But there were no—— Senator SESSIONS. So you were the highest official to have—to

your knowledge that had a formal briefing on the matter?

Mr. KEENEY. Yes.

Senator SESSIONS. And how long was that?

Mr. KEENEY. It was very brief, Senator, at the—— Senator SESSIONS. But then you do not deny that the responsibility for this case was yours?

Mr. KEENEY. Yes.

Senator SESSIONS. The final decision was yours?

Mr. KEENEY. Yes, it was.

Senator SESSIONS. And you don’t deny that from a legal point of

view that the U.S. attorney and the assistant attorney did not have

the authority to decide whether to go forward with 794 or not?

Mr. KEENEY. That’s right.

Senator SESSIONS. And you do not deny that the Department of

Justice declined to allow Mr. Shapiro, the trial attorney, to charge

794?

Mr. KEENEY. That’s right.

Senator SESSIONS. And if 794 had been charged, don’t you think

that would have enhanced the ability of Mr. Shapiro to negotiate

a good plea agreement?

Mr. KEENEY. It might, yes.

Senator SESSIONS. It probably have, would it not?

Mr. KEENEY. It would put additional pressure on the defendant.

It would make him probably more receptive, yes. I have to agree

with that.

167

Senator SESSIONS. And I think you would agree that in one

sense, he had one hand tied behind him when he went into the negotiations when he was not able to charge 794?

Mr. KEENEY. No. Senator, I don’t—I don’t agree with that. Now,

he was entitled and authorized to discuss with defense counsel a

plea or a charge, and 794 was not taken off the table, but he was

told that if this breaks down and you want to bring 794, you are

going to have to come back to Washington and we are going to

have to discuss it. So it was not taken off the table.

Senator SESSIONS. Let’s get that straight now.

Mr. KEENEY. As far as his negotiations were concerned, the defendant was not told that 794 was not on the table.

Senator SPECTER. Mr. Keeney, he was not told that. Nobody has

testified to that, that Mr. Shapiro was told—you can ask the question.

Senator SESSIONS. Well, I was going to ask. Isn’t it a fact that

Mr. Shapiro has not stated and as—stated that he did not—he was

not told he could ultimately charge 794? He was told he could not

charge 794?

Mr. KEENEY. He was told he could not charge 794, but he was

told that if the negotiations broke down and he still wanted to

charge 794, he would have to come back to Washington.

Senator SPECTER. Well, who told him that, Mr. Keeney? Nobody

has testified to that.

Mr. KEENEY. Well, I had understood Mr. Dion had testified to

that, Senator.

Senator SPECTER. No, he did not testify to that. Mr. Dion is still

here.

Mr. KEENEY. Well, I am mistaken, then.

Senator SPECTER. He said he does not—he did not recollect having any conversation with Mr. Shapiro that if the plea bargain

broke down that Mr. Shapiro could come back and they would reconsider a—— Mr. KEENEY. He is the one that told them, Senator. You will

have to take his testimony. I am just getting information into the

record.

Senator SPECTER. Well, we will take his testimony or anybody

else who was present and was a party to a conversation.

Mr. KEENEY. I was not. So—— Senator SPECTER. OK; well, may the record show that Mr. Dion

is still in the room.

Senator SESSIONS. The matter strikes me—did you have any indication from the Defense Department that they did not want to

proceed with this case because of a potential embarrassment to

them?

Mr. KEENEY. Well, we had what has been discussed here. We had

the reservations that have been indicated, yes.

Senator SESSIONS. Those are security type?

Mr. KEENEY. Yes.

Senator SESSIONS. Well, what about the way they had handled

security information in general, the laxity of their rules, the fact

that there was matter on the Internet that were apparently still

classified and issues like that? Is that a reason for them not to

want this case to go forward?

168

Mr. KEENEY. It might be a reason in their mind, but I saw no

indication of objections on that ground, Senator. Somebody else

may have.

Senator SESSIONS. As an experienced person within the Department of Justice, am I wrong to say you are the most experienced

member of the Department of Justice?

Mr. KEENEY. I am one of the more experienced.

Senator SESSIONS. As an experienced member there, isn’t it true

the Department of Justice is the one that has to stand tall for justice because when agencies are involved, oftentimes they have parochial agency interests that tend to undermine the pursuit of justice?

Mr. KEENEY. I think it is our responsibility to go forward if we

think the prosecution is appropriate.

Senator SESSIONS. And the Department of Justice has to say no,

I know you would like to plead this case out, but this is a not sufficient sentence, or this case has got to be charged, or sometimes it

cannot be charged even if you want to charge it.

So, when you are dealing with an agency, it is not often—I mean,

it is not unusual that you have to go back to them if they are dragging their feet on a case.

Mr. KEENEY. Yes.

Senator SESSIONS. Do you think the Department of Justice was

aggressive enough in assisting that authoritative persons objectively analyze this data and provide information that would have

confirmed or perhaps discounted the Schuster memo?

Mr. KEENEY. I think it was sufficient. We looked at, Senator— and we had—we had information indicating that the position of the

agency with respect to classification was not crystal-clear, and—— Senator SESSIONS. And it never got clarified?

Mr. KEENEY. It got clarified by a plea.

Senator SESSIONS. But the plea was weakened because of the

ambiguity of the Navy and their lack of interest in seeing the case

go forward, it seems to me.

Mr. KEENEY. Well, I don’t know about the lack of interest in seeing it go forward, but—— Senator SESSIONS. Wouldn’t you say that basically was true

here?

Mr. KEENEY. Well—— Senator SESSIONS. Wouldn’t you say the Navy wanted this case

to go away?

Mr. KEENEY. Well, that’s—I’m sorry. Yes, they did indicate at

one point that they were not enthusiastic about it, right.

Senator SESSIONS. You know, Mr. Chairman, it is easy to go back

and blame these lawyers and everybody for what happened. I

would say that a couple of things that are a problem to me—one

is that the people making these decisions that the most experienced and the highest level were not engaged and that even the

people above Mr. Keeney—it should have been probably in this

case—were not even aware of it.

With regard to the others, I believe there is a lack of trial experience in the highest levels of the Department of Justice, individuals

who have the highest integrity or legal skill, but are not familiar

with the dynamics of a courtroom. And in a big case like this, you

169

really needed to call this case, in my view, with a litigator who understands the dynamics of a courtroom. It strikes me that Mr.

Peter Lee would have a hard time convincing a jury that his acts

were not espionage and they should have been charged with it, and

if that had happened, you would have either tried the case and

probably got a conviction or convict him on the lesser offenses and

got a bigger sentence than you got now or the plea bargain would

have been healthier, and that this Department of Justice allowed

the Department of Defense, who had a lack of interest in proceeding with this case, for what I would consider fundamentally to

be they didn’t want to be embarrassed. And they were not required

and forced to come forward with sufficient information to strengthen your case that I believe was there as you have brought out in

this hearing.

Mr. KEENEY. Senator, may I just make a comment? Several

times you have mentioned the fact of lack of the experienced litigators in the—in the Internal Security Section. We don’t claim that

these people are extensive, active litigators. We claim that they are

good lawyers and they are experts in their field.

With U.S. attorneys, you will notice Shapiro was the lead attorney, Shapiro or his first assistant. That is the arrangement that

the Internal Security has in the espionage cases. We provide the

expertise. United States Attorneys who are our litigators provide

the expert litigators who are the chief litigators in the case. I

thought that was worth making the point because we do not claim

to have, particularly in the Internal Security Section, very—people

spend a lot of time in cases.

Now, Michael Liebman has been our expert on a number of these

cases, but he has not been the lead prosecutor. We have an experienced litigator from the United States Attorney’s Office.

Senator SESSIONS. You need that before you tell an experienced

litigator no. Somebody who tells him no ought to also have a good

level of trial experience.

Mr. KEENEY. Right, and——

Senator SESSIONS. I know the chairman has got to go forward.

Senator SPECTER. We have got to go into the closed session. We

are going to have to conclude that by 12:30 p.m.

I would ask you to provide to us for the record whether Attorney

General Reno personally participated in the decisions in this case.

Mr. KEENEY. Well, I will give you the answer to that. She did

not personally participate in the decision.

Was she aware of it? I will have to get that.

Senator SPECTER. Well, give us the specifics as to what her actions were or wherever—whatever specifics, and also as to the Deputy Attorney General, and those are the only others in the chain

of command, right?

Mr. KEENEY. Yes, sir.

Senator SPECTER. I asked you this question when we met informally, and I know it is an up-in-the-air question, but let’s put it

in the record. Could Dr. Lee still be prosecuted for the 1997 incidents?

Mr. KEENEY. I don’t think so, sir. We get into all sorts of problems——

170

Senator SPECTER. Well, that is a different answer than you gave

me when we talked about it informally.

Mr. KEENEY. Theoretically, I am not sure. Practically, I am sure

that he could not be—we could not mount a successful prosecution.

Senator SPECTER. Well, let us ask you to give us a formal opinion

on that, Mr. Keeney.

Mr. KEENEY. OK.

Senator SPECTER. We are going to go into Room 219 which is

right down the hall for the closed session, and all the staffers who

want to come, let’s see how many we can squeeze into the room.

We will try to accommodate everybody.

[Whereupon, at 12:09 p.m., the committee was adjourned, to reconvene in closed session.]

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