I guess the previous claim that the Chinese themselves were responsible for "spying on themselves" was an attempt to deflect the blame. Beware what you believe from our gov't, still. They are the best at PR sometimes.
For those of you that haven't registered (it is free), the article is below...
Spy Suspect May Have Told Chinese of Bugs, U.S. Says
By JAMES RISEN and ERIC LICHTBLAU
ASHINGTON, April 14 — Counterintelligence officials fear that an F.B.I. informer in Los Angeles tipped off the Chinese government to a covert United States effort to plant listening devices aboard China's version of Air Force One, several government officials said today.
The National Security Agency, the supersecret eavesdropping agency, working with the Federal Bureau of Investigation and other intelligence organizations, led an operation to plant bugs in a Boeing 767 used by the president of China while it was in the United States for refitting, officials said. The listening devices were quickly discovered, and the Chinese government disclosed the incident early last year.
United States officials have never previously acknowledged the bugging operation, and the Bush administration still publicly declines to comment.
Intelligence officials say they are trying to determine whether the Chinese found out about the operation as a result of an F.B.I. security breach that was disclosed last week with the arrest of Katrina Leung, who officials described as a Chinese double agent, and James J. Smith, a former F.B.I. agent in Los Angeles who was her contact at the bureau. The two had a long-term sexual relationship, court documents said.
Officials familiar with the investigation said that if the bugging operation was compromised as a result of the F.B.I. case, it would be one of the most damaging losses associated with it.
National Security Agency officials are said to be furious that F.B.I. officials involved in planning the bugging operation did not tell them of their suspicions that the bureau had been penetrated by China.
Mr. Smith, who was the top expert on Chinese counterintelligence in the F.B.I.'s Los Angeles field office from 1996 until his retirement in November 2000, has been questioned about the bugging operation by the F.B.I., people close to the case said today. When the agents first interrogated Mr. Smith several months ago about his relationship with Ms. Leung, the Chinese plane was one of several issues they were keenly interested in pursuing.
"That was obviously a hot button issue," said an official who demanded anonymity.
The F.B.I. theorized that Mr. Smith's "pillow talk" with Ms. Leung might have included rumors about the intelligence community's efforts to bug the plane. Mr. Smith adamantly denied having discussed the case with Ms. Leung, and his lawyer, Brian Sun, said today that there was "absolutely not" a connection. "My client flat-out did not talk about the plane with her," he said.
The case widened late last week when another former F.B.I. agent, who has not been charged in the case, resigned his post as chief of security at Lawrence Livermore National Laboratory after it was revealed that he had an extended sexual relationship with Ms. Leung. Although he was not named in court documents, several officials identified William Cleveland as the former San Francisco agent. In addition, the F.B.I. has opened an investigation involving an active F.B.I. agent in Los Angeles in connection with Chinese intelligence operations, officials said.
In January 2002, Chinese officials said that they had discovered that China's presidential aircraft had been bugged after it was refurbished in the United States. The Chinese said that they had found 27 listening devices on board, including some in the bathroom and in the headboard of the Chinese president's bed. China bought the airplane in June 2000 for $120 million, and it was sent to San Antonio International Airport for refitting by several contractors. It was delivered to the Chinese government in August 2001.
The Chinese said that they had discovered the listening devices in October 2001, soon after accepting delivery on the plane.
Law enforcement officials today played down the possibility of a connection between the F.B.I. case and the airplane operation, and said that senior F.B.I. officials were not certain that a link would be found.
Yet officials said they were still in the beginning phases of their investigation of the F.B.I. case, and so it will take more time to determine the full extent of any damage to national security. The F.B.I. and the Justice Department are conducting separate investigations into the case, as investigators examine what secrets Ms. Leung may have given up and what management problems at the F.B.I. may have allowed the problem to go undetected .
"We have to look at everything," a senior law enforcement official said today. "No conclusions have been reached. We'll have to go through a whole assessment of what she knew."
Still, F.B.I. officials are skeptical of what Mr. Smith has told them. Prosecutors noted in court filings last week that Mr. Smith denied having an affair with Ms. Leung, only to be contradicted by tapes that recorded the pair in a hotel.
Mr. Smith was Ms. Leung's F.B.I. handler for nearly 20 years, and the two had an affair for almost as long, court documents said. Ms. Leung was a highly paid F.B.I. informer, but prosecutors now say that she took classified documents from Mr. Smith, photocopied them, and passed them to handlers in Beijing.
Mr. Smith was also active in investigating accusations that the Chinese tried to buy influence in the 1996 Clinton-Gore campaign. Law enforcement officials said Ms. Leung was a key informer in the campaign finance investigations, and they are concerned that she could have compromised the politically charged case by telling the Chinese where the investigation was heading.
Lawyers for Ms. Leung said in a court filing late today in Los Angeles that the government's case was "skimpy." While the lawyers acknowledged that Ms. Leung, a prominent political fund-raiser, did give information to the People's Republic of China, they said it always was at the behest of the F.B.I.
"The F.B.I. controlled everything she did," Janet Levine, a lawyer for Ms. Leung, said in the filing. "The F.B.I. fed information to her and encouraged her to give it to the P.R.C. in order to obtain the trust of the P.R.C. and obtain information in return. For over 20 years, she was used and controlled by the F.B.I."
Defense lawyers argued that Ms. Leung, now being held without bail, should be freed on a bond of $250,000. They argued further that it was unfair for the courts to have granted Mr. Smith bail last week while declaring Ms. Leung a flight risk and ordering her held pending trial. A bail hearing is set for Tuesday in Los Angeles.