`Deep-Cover' Russian Spies Worked in U.S., FBI Says

Federal agents arrested 10 alleged members of a “long-term, deep-cover” Russian spy ring whose ultimate goal was to infiltrate U.S. policy-making circles, according to the Justice Department.

The arrests in the New York area, Boston and Arlington, Virginia, broke up a group that began operating in the 1990s, according to two criminal complaints unsealed yesterday in Manhattan federal court.

The alleged ring included Russian agents posing as American and Canadian citizens, some of them living in the U.S. for more than 20 years, with the goal of becoming “Americanized” and passing intelligence back to the Russian Federation, according to court papers.

“The fact that there are 10 or 11 people here illegally as part of a highly organized effort” and may explain why federal authorities made the arrests now, said William C. Banks, Director of the Institute for National Security and Counterterrorism at Syracuse University in New York. “It may be to send a statement that we’re on to this.”

The conspiracy involved at least three unnamed Russian government officials, including one associated with the Russian Mission to the United Nations, according to the complaints.

Federal prosecutors charged 11 individuals, including the 10 arrested June 27, with conspiring to act as illegal agents of the Russian Federation within the U.S., according to a Justice Department statement yesterday. Nine of the defendants are charged with conspiracy to commit money laundering.

Photographer: Jin Lee/Bloomberg

U.S. Magistrate Judge Ronald Ellis ordered the five defendants to be held without bail. Close

U.S. Magistrate Judge Ronald Ellis ordered the five defendants to be held without bail.

Close
Open
Photographer: Jin Lee/Bloomberg

U.S. Magistrate Judge Ronald Ellis ordered the five defendants to be held without bail.

Canadian Arrested

Cyprus police said today they arrested a Canadian, Christopher Metsos, who is alleged to be the remaining member of the alleged ring. Officials in Cyprus are awaiting an extradition request from the U.S., according to a police spokesman.

It isn’t clear what, if any, secrets the ring is claimed to have passed back to Russian officials. In one case, an alleged agent in Boston discussed so-called nuclear “bunker buster” weapons in 2004 with a government official working on strategic planning related to atomic weapons development, the U.S. said. Such bombs are intended to destroy hardened or below-ground targets by penetrating below the surface before exploding.

According to the government, the alleged agents arrested in Boston had a conversation with a former Congressional aide in 2006 about “turnover at the head of the CIA and the 2008 U.S. presidential election.”

20-Year Sentence

The defendants face as long as 20 years in prison on the money laundering conspiracy charges. The charges of conspiracy to act as an agent of a foreign government without notifying the U.S. attorney general carries a prison sentence of as long as five years. None of the defendants were charged with espionage, which can result in a life sentence upon conviction.

According to Banks, the fact that the alleged agents weren’t charged with espionage or conspiracy to commit espionage may show they didn’t obtain classified information. It may also make the cases easier for the government to prosecute, he said. Prosecutors in spy cases often are forced to drop cases to avoid making classified material public, he said.

“The prosecutors are in a fairly enviable position,” said Banks. “There may be some sensitivity as to the types of electronic surveillance used, but a lot of it was old-school cloak-and-dagger stuff.”

Obama and Medvedev

The arrests were announced four days after U.S. President Barack Obama met with Russian President Dmitry Medvedev at the White House. Obama said June 24 he wanted to move relations between the two countries beyond arms control and security and develop better economic ties.

Russia’s Foreign Ministry said today the U.S. claims are reminiscent of the Cold War and “regrettable” at a time when relations are improving.

“Such actions are completely unfounded and serve unseemly goals,” the ministry said on its website.

Five of the defendants, Richard Murphy, Cynthia Murphy, Juan Lazaro, Vicky Pelaez and Anna Chapman, 28, appeared before a federal magistrate in Manhattan yesterday. All but Chapman are scheduled to appear in federal court again July 1.

Defendants Michael Zottoli, Patricia Mills and Mikhail Semenko appeared in federal court in Alexandria, Virginia, yesterday, according to court records.

Donald Howard Heathfield and Tracey Lee Ann Foley appeared in federal court in Boston yesterday, according to court records. All of the defendants were ordered to be detained.

Court Appointed Lawyers

U.S. Magistrate Judge Ronald Ellis in Manhattan assigned court-appointed lawyers for the five defendants who appeared before him after they said they were unable to pay for a lawyer.

Robert Baum, an attorney for Chapman, asked Ellis to dismiss the conspiracy charge against his client, saying prosecutors had failed to establish their case. Baum argued that when an agent with the Federal Bureau of Investigation, posing undercover as a Russian official, gave Chapman a fake passport, she had turned it over to New York police.

“That is just a reaction of an innocent person,” Baum said.

Assistant Manhattan U.S. Attorney Michael Farbiarz alleged that some defendants made incriminating statements after their arrests.

“This is just the tip of the iceberg,” Farbiarz told Ellis. The prosecutor said that Chapman, after meeting with the undercover FBI agent, bought a mobile phone she used to make calls to Russia. He called her “a sophisticated agent of Russia.”

Russian Official

He said the government has determined Chapman also communicated with a Russian government official using a laptop computer that transmitted data using a secret wireless connection.

Chapman is a Russian national who operates an online real estate business that she estimated was worth $2 million, Baum said after court. He said his client has been in the U.S. since 2009. He declined to comment on the charges.

U.S. officials collected evidence on the alleged spies through wiretaps, e-mail monitoring, hidden microphones, video cameras and secret searches of some of the defendants’ homes, according to the criminal complaints.

One of the alleged New Jersey conspirators, Cynthia Murphy, had several work-related meetings with a “prominent New York- based financier” whose name is omitted from the complaint. Superiors in Moscow instructed Murphy to work on the relationship and try to obtain foreign policy rumors and invitations to political events, the government said.

‘Develop Ties’

The alleged spies were instructed to remain in place for years to deliver useful intelligence to agents of the Russian Federation, according to the charges. Cynthia Murphy, and her husband and co-defendant Richard Murphy, received a coded message in 2009 from the Moscow headquarters of the Russian Federation foreign intelligence service, instructing them on their duties, the U.S. said.

“You were sent to USA for long-term service trip,” read the message, decoded by the Federal Bureau of Investigation, according to the government. “Your education, bank accounts, car, house, etc. -- all these serve one goal: fulfill your main mission, i.e. to search and develop ties in policymaking circles in U.S. and send intels (intelligence reports) to C(enter).”

Richard Murphy, 39, has resided in Montclair, New Jersey, since 2008, after living in Hoboken, Jersey City and Queens, New York, according to a computer database.

Traveled to Rome

Farbiarz told Ellis that Murphy had traveled in 2009 to Rome where he met with a Russian official and then traveled, using a fake passport, to Moscow.

“There is also direct evidence of secret global travel,” Farbiarz said.

By using illegal documents, the alleged Russian agents assumed false identities before getting university degrees, took jobs and joined professional associations, according to the complaint. Agents also lived together, posing as married couples and having children to deepen their cover, or “legend,” the FBI said.

“We all feel pretty duped,” said Corine Jones, 53, a neighbor of the Murphys in Montclair. “Who would have thought there would be a Russian spy amongst us? It’s just a nice, quiet, middle-class street.”

The Murphys, who moved to Montclair in 2008, have two daughters who walked with their father to the school bus stop each morning, said neighbor Jeanette Lauture, 45.

“We would say ‘good morning’ every morning but he was very private,” Lauture said. “My kids would try to talk to him and he would pretend he didn’t even hear it and walk away.”

Girls ‘Shell Shocked’

After the Murphys were arrested, FBI and police cars lined the street for hours while agents searched the tan house with brown shutters. A green Honda Civic sat in the driveway.

Their girls “got in a van with their pillows looking pretty shell shocked,” Jones said.

Before coming to the U.S., the agents were trained in spy craft, learning foreign languages, the use of encrypted messages and the avoidance of detection of their work, according to the FBI. One method that agents learned was a “brush-pass” or “flash meeting” in which they secretly passed items or payments to another while walking past them in public, according to the FBI.

Prosecutors said federal agents determined the defendants used a process called “steganography,” or messages that are secretly encrypted within electronic images. Federal agents found such encrypted messages on a computer disk recovered from a 2005 search of the New Jersey residence, prosecutors said.

‘Radiograms’

The defendants also made use of “radiograms” in which they used coded bursts of data sent by a radio transmitter that can be picked up by a radio receiver set to a proper frequency. As the messages are transmitted, radiograms sound like the transmission of Morse code, the U.S. said in court papers.

As early as 2001, the FBI was aware that the Russian agents were using false identities, according to the complaints. A 2001 search of defendant Foley’s bank safe deposit box showed that the negatives of photos taken of her in her twenties came from a Soviet film company.

Ellen Shaffren, who lives in Yonkers, New York, across the street from two of the alleged spies, Lazaro and Pelaez, said her block has been “teeming” with FBI agents.

“I was totally shocked,” Shaffren said yesterday in a phone interview. “I would never have suspected anything.”

Shaffren said Pelaez wrote columns for El Diario, a Spanish newspaper in New York. An Internet search turned up numerous references to Pelaez at the newspaper. A message left at the newspaper wasn’t immediately returned.

The cases are U.S. v. Metsos; U.S. v. Chapman, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Bob Van Voris in New York federal court at rvanvoris@bloomberg.net and; Patricia Hurtado in New York federal court at pathurtado@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.