Spy Hunt: Gray Deceiver

The following is an article from Uncle John’s Bathroom Reader

Cia-memorial-wallEveryone loves a spy thriller—especially when it’s real life. Here’s an amazing tale that a BRI operative recently uncovered.

THE MOLE

In February 1994, FBI agents arrested a 30-year veteran of the CIA named Aldrich Ames. The charge: spying for the Soviet Union. In the nine years that Ames was an active spy, he exposed more than 100 sensitive operations and revealed the name of every CIA intelligence source in the Soviet Union. At least 10 of them were executed; many others were sent to prison. Ames was paid more than $2.5 million for his efforts and was promised another $1.9 million, making him the highest-paid double agent in history, not to mention one of the most damaging.

Yet as pleased as the FBI and the CIA were to have caught and convicted Ames (he received a life sentence), disturbing signs soon began to emerge that there might be one, and possibly even more moles hiding elsewhere in various U. S. intelligence agencies. Some secrets known to have been compromised couldn’t be traced back to Ames—he simply didn’t know about them.

So both the CIA and the FBI set up new mole-hunting teams and set to work looking for spies. The FBI gave the investigation the code name GRAYSUIT; each time a new suspect was identified they were given a code name with “GRAY” as a prefix. The new mole hunt dredged up two more relatively minor spies: an FBI agent named Earl Edwin Pitts and a CIA agent named Harold J. Nicholson. Both men were arrested in 1996 and sentenced to more than 20 years in prison.

BIG SECRETS

Neither arrest answered the question of who was responsible for giving the two biggest intelligence secrets to the Russians:

  • The Tunnel. Someone told the Soviets about the secret eavesdropping tunnel that the FBI and the National Security Agency (NSA) had dug beneath the new Soviet embassy in Washington, D.C. The tunnel program cost more than $100 million but never produced a single piece of useful intelligence, because the Russians were told of its existence in 1994—five years before they moved in.
  • The Spy. In 1989 the FBI was hot on the trail of a senior U. S. diplomat named Felix Bloch, who was suspected of spying for the KGB. Someone tipped off his handler, a KGB spy named Reino Gikman. Gikman then tipped off Bloch, blowing the FBI’s investigation before they could collect enough information to indict him. To date Bloch has never been charged with espionage.

MYSTERY MAN

Both the spy tunnel and the Bloch investigation were FBI operations, but early on the FBI concluded that the mole was more likely to be a CIA official, so that’s where they focused their efforts.

For years tips had been coming in from U.S. sources in Russia, describing a spy who had a thing for “exotic dancers,” sometimes liked to be paid in diamonds, and was said to make “dead drops” (leave packages and pick up money) in Nottoway Park in Vienna, Virginia. None of the Russian sources knew the man’s identity—as far as anyone knew at the time, the man had never revealed his real name to his handlers or even told them which intelligence agency he worked for. Apparently he’d never met with his Russian handlers, either. No one even knew what he looked like.

THE MATRIX

One of the ways intelligence agencies hunt for spies is to make what is called a “matrix.” They compile a list of all the intelligence secrets that have been betrayed, and then make a list of the people who had access to those secrets. Then, using whatever other clues they have, they try to rule suspects in or out. The FBI mole hunters used just such a matrix to narrow a list of 100 suspects down to seven and then down to just one: a CIA agent named Brian Kelley. They gave him the nickname GRAY DECEIVER.

Kelley specialized in exposing Soviet “illegals,” spies who do not pose as diplomats and thus have no diplomatic immunity if they are caught. One illegal that Kelley had uncovered was Reino Gikman, the KGB agent who tipped off Felix Bloch. Kelley was a distinguished agent—he’d been awarded five medals for his work at the CIA, including one for the Felix Bloch case. But the FBI was now convinced that he’d been a spy all along. Uncovering Gikman and then warning him about Bloch was the perfect cover—who would ever suspect that a decorated CIA officer would blow his own case?

DIGGING DEEP

In late 1997 the FBI arranged for Kelley to be given a new assignment: to review the Felix Bloch files to see if any clues had been missed. The real purpose of the assignment was to isolate him and keep him at CIA headquarters, making it easier for FBI mole hunters to keep an eye on him until enough evidence was collected for him to be arrested.

In the meantime, the FBI placed Kelley on round-the-clock surveillance and secretly searched his home. They also tapped his phone lines, sifted through his garbage, searched his home computer, and planted listening devices all over the house. On one occasion they even tailed him all the way to Niagara Falls, only to lose him near the Canadian border. That suggested that Kelley was “dry cleaning”—taking evasive action to lose anyone who might be following him, so he could slip over the border into Canada, presumably to meet with his Russian handlers.

ONE TOUGH COOKIE

It was then that the mole hunters realized just how difficult it was going to be to catch Kelley red-handed. Sure, they knew about the dry cleaning incident at the border, and they also knew that Kelley shopped at a mall where SVR operatives had been seen in the past (the KGB was renamed the SVR after the collapse of the Soviet Union). But after all the bugging, searching, and garbage sifting, the only incriminating piece of physical evidence they were able to find was a single hand-drawn map of nearby Nottoway Park, with various times written at different locations on the map. To the mole hunters it could only be one thing: a map of various dead drops, complete with a schedule of different drop-off times. With the exception of the map, though, Kelley seemed to be an expert at erasing nearly every trace of his double life.

In fact, to the untrained eye, he didn’t seem like a spy at all.

TO TELL THE TRUTH

The map of dead drops (places where spies and their handlers exchange money and secret documents) that the FBI found in CIA agent Brian Kelley’s home was pretty incriminating, but it wasn’t enough to secure a conviction, so the Bureau decided to trick Kelley into taking a lie detector test. They arranged for him to be transferred to a “new assignment,” debriefing a nonexistent Soviet defector. To be approved for the new assignment, Kelley’s CIA superiors explained to him, he had to take a polygraph test.

The results of the test stunned even the seasoned FBI mole hunters—Kelley passed with flying colors. There wasn’t a flicker of a guilty response anywhere on the test. Of course, lie detector tests aren’t terribly accurate. The hunt continued.

KNOCK KNOCK

Next, they set up a “false flag” operation: an FBI agent masquerading as an SVR agent knocked on Kelley’s door and warned him that he was about to be arrested for spying and needed to leave the country. The agent then handed Kelley a written escape plan and told him to be at a nearby subway station the following evening. Then the man disappeared into the night…and the FBI waited to see what Kelley would do. If he made a run for the subway station, that would in effect be an acknowledgement that he was indeed a spy—people who aren’t spying for the SVR don’t need help fleeing the country.

The next morning Kelley went to work as usual and reported the incident to the CIA. He even gave an accurate description of the “SVR agent” to a sketch artist. Once again the FBI was astonished by Kelley’s skill under pressure. Somehow he must have detected that the SVR guy was a fake and was not taken in by the trick. He was so cool and collected that the investigators gave him a new nickname—the “Iceman.”

IN YOUR FACE

The FBI still lacked enough evidence to get a conviction and was running out of options. They made a last-ditch attempt at tricking Kelley into incriminating himself. On August 18, 1999, he was called into a meeting at CIA headquarters and confronted by two FBI agents who told him that they knew everything about his spying, even his SVR code name, KARAT. Kelley professed astonishment and denied everything, so the FBI agents pulled out Kelley’s handwritten map. “Explain this!” one of them said.

“Where did you get my jogging map?” Kelley asked.

The interview did not go as the FBI had hoped. Kelley didn’t crack—he even offered to answer questions without his lawyer present and to take another polygraph test. The agents turned him down.

After questioning him for more than seven hours, the agents gave up. Kelley was stripped of his CIA badge and security clearances, placed on paid administrative leave, and escorted out of CIA headquarters. But he wasn’t arrested or charged with spying—there still wasn’t enough evidence. He spent the next 18 months on leave while the FBI built a case against him. The mole hunters confronted his daughter, also a CIA employee, and told her that her father was a spy. She claimed to know nothing about her father’s spying. Neither did Kelley’s other children when they were confronted, nor did his colleagues and close friends when they were interviewed. No one had suspected a thing. Kelley was that good.

SHOPPING

By the spring of 2000 the FBI had compiled a 70-page report recommending that the Justice Department charge Kelley with espionage, which is punishable by death.

While the Justice Department considered the matter, the FBI expanded its search for evidence against Kelley to the former Soviet Union. They tracked down a retired KGB officer who they thought might have some knowledge of the case and lured him to the United States for a “business meeting.” Then, when the officer arrived in the United States, the FBI made its pitch—it was willing to pay him a fortune in cash if he would reveal the identity of the mole. The ex-KGB officer made a counteroffer: he had the mole’s entire case file in his possession and was willing to sell it outright to the FBI. He added that the file even contained a tape recording of a 1986 telephone conversation of the mole talking to his Russian handlers, so there was no question that the FBI would have the evidence it needed to win a conviction.

VOICE RECOGNITION

The FBI eventually agreed to buy the file for $7 million. It also agreed to help the KGB officer and his family to relocate to the United States under assumed names. The money changed hands, and in November 2000 the file slipped out of Russia and arrived at FBI headquarters. There was enough material in it to fill a small suitcase—hundreds of documents, dozens of computer disks, a cassette tape, and an envelope with the words “Don’t Open This” written on it.

The FBI was convinced it finally had the evidence it needed to convict Brian Kelley on spying charges and to put him to death. All the agents had to do was read the files, listen to the recorded conversation on the tape, and build their case. They put the cassette in a tape recorder, pushed PLAY, and waited to hear Kelley’s voice. Their long campaign to bring him to justice was at an end.

AN UNEXPECTED DEVELOPMENT

Or was it? It quickly became obvious that the voice the FBI heard talking to the KGB agent wasn’t Brian Kelley’s. Once again, the FBI agents were in awe of Kelley’s abilities as a spy. Even when talking to his KGB handlers, he had had the good sense to protect his identity by having an intermediary—a “cut out,” as they’re known—make his call for him.

One of the FBI agents, Michael Waguespack, recognized the voice, but couldn’t place it. Meanwhile another agent, Bob King, had started reading through some of the spy’s correspondence with his Russian handlers and had come across an unusual expression that sounded familiar: in two different places, the spy quoted World War II General George S. Patton telling his troops, “Let’s get this over with so we can kick the $#%@ out of the purple-pissing Japanese.” Bob King remembered his supervisor in the Russian analytical unit, an agent named Robert Hanssen, repeatedly using the same quote in conversation.

Huh?

“I think that’s Bob Hanssen,” he told the other agents. Waguespack knew Hanssen, too, and he went back to listen to the tape again. Sure enough—the voice was Robert Hanssen’s.

OFF THE HOOK

It took a minute for the mole hunters to realize it (and probably longer than that for them to admit it), but they had been on the trail of the wrong man, an employee of the wrong intelligence agency, for more than three years.

Brian Kelley wasn’t a master spy at all—he was an innocent man. The searches and electronic surveillance hadn’t found anything because there wasn’t anything to find.  He reported the “false flag” sting to his superiors because he had nothing to hide. His jogging map really was a jogging map. The “dry cleaning” at Niagara Falls? He was there on official CIA business and the mole hunters tailing him happened to lose him in traffic. Shopping at the same mall as the SVR? A coincidence—everybody shops somewhere.

With his time in the Air Force and the CIA, Kelley had served his country with honor and distinction for 38 years; yet all he had to show for it was a 70-page FBI report to the Department of Justice recommending that he be tried for espionage and executed.

BAD LUCK, GOOD LUCK

What are the odds that a retiring KGB officer would have taken Robert Hanssen’s file with him when he retired, and that the FBI would have been successful in tracking him down? Or that they would have been willing to cough up $7 million for the file? To this day, Kelley, his family, and his friends all wonder what would have become of him had the FBI been unable to get (or unwilling to pay for) Hanssen’s KGB file.

FINGERED

The FBI mole hunters had never suspected Robert Hanssen of spying before, but all residual doubt that he was their man disappeared when the KGB officer who sold them Hanssen’s file began to interpret the file’s contents.

What about that mysterious sealed envelope marked “Don’t Open This”? The FBI waited until the retired KGB officer arrived to open it. The officer explained that when the spy left documents and computer discs at a dead drop, he wrapped them in two plastic garbage bags to protect them from the elements. The envelope contained one of the spy’s garbage bags. The KGB officer explained that only he and the spy had touched the bag; if Hanssen was the spy (and wasn’t wearing gloves when he wrapped the package), it would likely contain his fingerprints.

The agents took the bag to the lab and succeeded in lifting two fingerprints from the bag. As they expected, the prints were Hanssen’s. Every piece of evidence in the KGB file pointed to him and him alone. He even had a thing for diamonds and strippers, just as Russian sources had been reporting for years.

GRAYDAY

The investigators put aside their investigation of GRAY DECEIVER, gave Hanssen the nickname GRAYDAY, and started investigating him. They arranged for Hanssen to be promoted to a new job at FBI headquarters, where he could be closely watched by hidden cameras. Then they tapped his office phone and searched his laptop computer. They couldn’t bug or search his house—his wife and two of his six kids still living at home were never gone long enough—but when a house across the street from Hanssen’s was put up for sale, the FBI bought it, moved in, and began watching Hanssen from there. Whenever Hanssen left home, undercover FBI agents secretly followed him.

This time, the mole hunters’ work paid off: after about three months of constant surveillance, on the afternoon of February 18, 2001, Hanssen was caught red-handed leaving a package of computer discs and classified documents in a dead drop in Foxstone Park near his home in Vienna, Virginia. A payment of $50,000 in cash was retrieved from another dead drop in a nature center in Arlington, Virginia.

The evidence against Hanssen was overwhelming, and he knew it. He confessed immediately and later agreed to a plea bargain in which he was spared the death penalty in exchange for cooperating fully with the FBI investigation into his crimes.

Hanssen admitted that he’d been spying off and on for more than 20 years. He started in 1979, quit in 1981 when his wife caught him (a devout Catholic, she made him go to confession but never turned him in), started again in 1985, quit when the Soviet Union collapsed in 1991, and started again in 1999. He continued spying until his arrest in 2001.

GRAYBOOB

The FBI had long assumed they were hunting a master spy, someone who knew how to cover his tracks and would be very hard to catch. They formed that impression over time as they failed to collect any incriminating evidence against Kelley (other than his jogging map), even though they were certain Kelley was the spy.

But as the investigation into Hanssen continued, the mole hunters realized just how wrong they’d been. Hanssen was smart enough not to tell the Russians his real name, but he was no master spy—in fact, he could have been caught years earlier if the people around him had been paying attention and doing their jobs. Over the years Hanssen left so many clues to his spying that he practically glowed in the dark.

He used FBI phone lines and answering machines to communicate with his KGB handlers in the 1980s.

When the KGB paid him cash, Hanssen sometimes counted the money at work, then deposited it in a savings account in his own name, in a bank less than a block from FBI headquarters in Washington, D.C.

At a time when he made less than $100,000 a year, Hanssen kept a gym bag filled with $100,000 in cash in his bedroom closet. One time he left $5,000 sitting on top of his dresser. His brother-in-law, Mark Wauck, also an FBI agent, saw the unexplained cash and reported it to his superiors, also noting that Hanssen had once talked of retiring to Poland, which was then still part of the Soviet bloc. An FBI agent retiring to a Communist country? The FBI never investigated the incident.

THE PERSONAL TOUCH

The FBI, and even the KGB, had assumed that Hanssen never met with any Russian agents, but they were wrong. Hanssen launched his spying career in 1979 by walking right into the offices of a Soviet trade organization that was known to be a GRU (the military version of the KGB) front and offering his services, even though he knew the office was likely to be under surveillance. When he made his first contact with the KGB in 1985, he did so by sending a letter through the U.S. mail to a known KGB officer who lived in Virginia. Both approaches were incredibly foolhardy, but Hanssen got away with it both times.

In 1993 Hanssen botched an attempt to resume spying for GRU when he walked up to a GRU officer in the parking lot of the man’s apartment building and tried to hand him a packet of classified documents. The officer, thinking it was an FBI sting, reported the incident to his superiors at the Russian Embassy, who lodged a formal protest with the U.S. State Department. The FBI launched an investigation—which Hanssen closely followed by hacking into FBI computers—but the investigation was unsuccessful.

In 1992 Hanssen hacked into a computer to gain access to Soviet counterintelligence documents. Then, fearing he might be caught, he reported his own hacking and claimed he was testing the computer’s security. His colleagues and superiors believed his story and were grateful to him for pointing out the weakness in the system. The incident was never investigated.

AT THE STATE DEPARTMENT

But perhaps the most inexplicable breach of security came in 1994, when Hanssen was transferred to an FBI post at the State Department’s Office of Foreign Missions. As the Justice Department later described it, Hanssen was “wholly unsupervised” by either the State Department or the FBI for the next six years. In that time he didn’t receive a single job performance review. Hanssen spent much of his time out of the office visiting friends and colleagues; when he did go to the office he spent his time surfing the Internet, reading classified documents, and watching movies on his laptop. Then he resumed spying for the Russians.

In 1997 Hanssen asked for a computer that would connect him to the FBI’s Automatic Case Support System (ACS) and got it, even though his job didn’t call for it. Soon after he got the computer, Hanssen was caught installing password breaker software that allowed him to hack into password-protected files. When confronted, Hanssen said he was trying to hook up a color printer. His story went unchallenged and the incident was never investigated.

Using the ACS systems, Hanssen downloaded hundreds, if not thousands, of classified documents and gave them to the Russians. At the same time, he repeatedly scanned the FBI’s files for his own name, address, and the locations of his various dead drops to check whether the FBI was onto him.

He also stumbled onto the FBI’s investigation of Brian Kelley. Assuming that Kelley, too, was a mole, he warned the Russians about the investigation. Then he did what he could to keep the FBI focused on Kelley, so that he could continue his own spying.

SUMMING IT UP

In the years that Hanssen spied for the Russians, he handed over thousands of America’s most important military and intelligence secrets. He revealed the identities of scores of secret Russian sources, at least three of whom were executed, and he caused hundreds of millions of dollars in damage to American intelligence programs. Hanssen also sold computer software to the Russians that allowed them to track CIA and FBI activities. Someone in Russia then sold it to Al-Qaeda, which may have used it to track the CIA’s search for Osama Bin Laden.

Hanssen was paid $600,000 for his efforts (and promised that another $800,000 was waiting for him in a Russian bank). He is the most damaging spy in FBI history and possibly in the history of the United States.

FAILING GRADE

After Hanssen’s arrest, the inspector general of the Justice Department launched an investigation into how the mole hunt had gone so wrong and how Hanssen had been able to spy for so long without attracting suspicion.

In August 2003, the inspector general issued a scathing report condemning the FBI mole hunters for focusing on the CIA without seriously considering the possibility that the mole might be in the FBI, especially since most of the biggest secrets known to have been compromised had come from the FBI. (The mole hunters’ explanation for how CIA agent Brian Kelley could have known so many FBI secrets: they thought he was seducing female FBI employees and selling their secrets to the Soviets.)

THE HONOR SYSTEM

The inspector general’s report also faulted the FBI for “decades of neglect” of its own internal security. Before Hanssen’s arrest, the Bureau operated on what was effectively the honor system: in his 25-year career, Hanssen never once had to submit to a financial background investigation, which might have turned up the KGB cash he was depositing in banks near FBI headquarters in his own name.

Hanssen had virtually unlimited access to the FBI’s most sensitive material—over the years he handed over thousands of original, numbered documents to the Soviets and no one had noticed they were missing. He also had unrestricted, unmonitored access to the ACS computer system, which gave him access to thousands more documents. The ACS software did have an audit feature that would have revealed Hanssen’s searches for classified information or for references to himself, but the audit feature was rarely, if ever, used. Hanssen knew it and felt secure enough to conduct thousands of unauthorized and incriminating searches over the years.

AFTERMATH

  • The FBI. No one involved in the Kelley/Hanssen mole hunt was disciplined or fired from the FBI, although several agents were promoted. The FBI says it has tightened security since the Hanssen arrest. The Bureau’s ACS computer system was scheduled to be replaced by a new $170 million software program called Virtual Case File in 2003. As of January 2005 only 10 percent of the system was in place, and the system was so flawed that the FBI was weighing whether to scrap the entire project and start over again.
  • Robert Hanssen. On July 6, 2001, Hanssen pleaded guilty to 15 counts of espionage, conspiracy to commit espionage, and conspiracy; he was sentenced to life in prison without the possibility of parole. He was supposed to cooperate with U.S. investigators, but he flunked a lie detector test when he was asked, “Have you told the truth?” So instead of being sent to a high-security prison, where he would have had some freedom of movement, he was assigned to a “supermax” prison in Florence, Colorado, where he is confined to his soundproof 7′ × 12′ cell for 23 hours a day.
  • Bonnie Hanssen. Because she cooperated with investigators and passed a lie detector test that showed she had no knowledge of her husband’s espionage after 1981, Bonnie Hanssen was allowed to collect the widow’s portion of her husband’s pension and to keep their three cars and family home.
  • Brian Kelley. After Hanssen’s arrest, Kelley was completely exonerated. He returned to the CIA and received an apology from the FBI. He did, however, lose his covert status when his identity was revealed by an investigative reporter writing a book about the Hanssen case. He continued working for the CIA until 2007, teaching spy catchers how to avoid making the same mistakes that were made when he was targeted by the mole hunters. After retiring from the CIA, he worked for Abraxas Corporation and The Institute of World Politics as a counterintelligence instructor.  He died of a heart attack in 2011 at the age of 68.

After Kelley’s identity was revealed in 2002, he went public with his concern that nothing had changed at the FBI and that the same mistakes could happen again. The mole hunters “were so overzealous, so myopic,” he told the Hartford Courant in 2002. “If these abuses happen to us, what chance does the average citizen have to protect their civil liberties?”

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  • Rob

    That is one disheartening article. Aldrich Aimes was equally catchable had anyone paid attention. Makes all those movies with infallible agents just all the more fictional.