washingtonpost.com
U.S. downplays Russian spy case

By Jerry Markon and William Branigin
Washington Post Staff Writer
Tuesday, June 29, 2010; 5:46 PM

The White House said Tuesday that it does not expect the arrests of 11 accused members of a Russian espionage ring to affect relations between Washington and Moscow, shrugging off Russian denunciations of the busts as a throwback to the Cold War.

The FBI moved to arrest 10 suspects in the United States on Sunday in part because one of them was scheduled to leave the country, a Justice Department spokesman said. He did not specify which of the defendants was planning to leave.

The 11th suspect was arrested at Larnaca airport on the Mediterranean island of Cyprus as he was about to fly to Budapest, Hungary, Cypriot authorities said Tuesday. The man, identified in a U.S. complaint as Christopher Metsos, 54, was later released on bail but was told to remain on Cyprus for a month pending U.S. extradition proceedings. U.S. officials said Metsos acted as a money man for the ring and purported to be a Canadian citizen.

The arrests came after President Obama and Russian President Dmitry Medvedev met in Washington last week and attended weekend summit meetings in Canada.

Russia condemned the arrests and angrily denied Tuesday that the suspects had done anything to harm the United States.

"These actions are unfounded and pursue unseemly goals," the Russian Foreign Ministry said in a statement. "We don't understand the reasons which prompted the U.S. Department of Justice to make a public statement in the spirit of Cold War-era spy stories."

White House spokesman Robert Gibbs said Obama was "fully and appropriately" informed of the arrests, which he described as strictly a law enforcement matter. He insisted that the Justice Department had "acted appropriately" in picking up the suspects in raids along the East Coast.

Justice Department spokesman Dean Boyd told reporters that several law enforcement operational considerations were behind the timing of the arrests Sunday, but he declined to name them.

Phil Gordon, the assistant secretary of state for Europe, said the U.S. government complained about the spy ring to Russian authorities, both in Washington and Moscow. But he said the matter would not torpedo the Obama administration's "reset" of relations with Russia.

"We're moving towards a more trusting relationship. We're beyond the Cold War. I think our relations absolutely demonstrate that," he told reporters. But, he added, "I don't think anyone was hugely shocked to know that some vestiges of old attempts to use intelligence are still there."

The 10 U.S.-based suspects were arrested by the FBI on charges that they spent years in the United States as spies for Russia, taking on fake identities and trying to ferret out intelligence about U.S. policy and secrets by making connections to think tanks and government officials.

The arrests capped an almost surreal investigation that extended to the Clinton administration and involved video surveillance, hidden microphones and surreptitious FBI searches of homes along the East Coast. It climaxed Saturday with a fake "drop" in a park in Arlington County, when one of the suspects left $5,000 in an envelope inside a folded newspaper, which was recovered by the FBI.

Three of those arrested lived in Arlington, and court documents depict a trail of covert meetings between the suspects and undercover agents just blocks from the White House and in midtown Manhattan. At one point, agents videotaped an alleged conspirator brushing past his Russian handler and surreptitiously exchanging bags to be paid.

The operation, referred to by U.S. investigators as "the Illegals program," was aimed at placing spies in nongovernmental jobs, such as at think tanks, where they could glean information from policymakers and Washington-connected insiders without attracting attention.

Whether it succeeded was unclear Monday. Federal law enforcement officials portrayed their operation as a spectacular counterintelligence success that uncovered a group of spies capable of doing great damage to U.S. national security. "I can't remember a case where we've been able to arrest 10 intelligence officers from a foreign country in one fell swoop," one official said. "This network in the United States has now been completely compromised."

But other officials said the Russian network appears to have accomplished little, if any, of its espionage aims, even though some of the suspects had lived in this country for up to two decades.

"These are people trying to get inside the tent that you would expect to see more charges on if they had succeeded in doing so," said one U.S. official familiar with the investigation, who added, "It certainly is a wake-up call" for those on the alert for Russian spying.

The defendants

Eleven people face charges in federal court in Manhattan that include conspiring to act as unauthorized foreign agents and conspiracy to commit money laundering. They were not charged with espionage. Ten of the suspects were arrested Sunday in raids in Arlington, New York, New Jersey and Boston.

All of those arrested in the United States appeared in federal courts Monday and were ordered held without bond. All will be moved to Manhattan for trial.

Prosecutors said in court that additional search warrants are being executed nationwide.

Russian Foreign Minister Sergei Lavrov, traveling in Jerusalem, told reporters that U.S. officials "have not explained to us what it's all about."

The Foreign Ministry issued a statement saying it was "regrettable that all this is happening on the background of the 'reset' in Russian-American relations announced by the U.S. administration." The White House emphasized an improved relationship with Russia just last week, after Obama met with Mevedev at the White House in advance of the Group of 20 summit and took him for lunch at Obama's favorite Arlington burger joint.

The defendants, eight of whom are married couples, held jobs in fields such as finance and media. One, Vicky Pelaez, was a reporter for a Spanish-language newspaper in New York, officials said. Mikhail Semenko, who was arrested at his residence in Arlington, worked in New York in 2008 and last year for the Conference Board, which provides economic data, the organization said.

Semenko, who is fluent in Russian, English, Mandarin and Spanish, has worked at the Travel All Russia travel agency in Arlington for more than a year, said Slava Shirokov, a co-owner. He said Semenko was known as a smart, hard-working and polite employee who helped Chinese and Hispanic travelers plan trips.

"It's straight from a movie. I would never think of anything like this happening to Mikhail," he said. "It still seems quite surreal."

Attorneys for several of the defendants did not return calls seeking comment. The names of attorneys for other defendants could not be determined Monday.

Court files

Court documents contain hints, often byzantine, about the nature of the information that the suspects might have obtained. One defendant, whose alias was allegedly "Donald Howard Heathfield," made contact with a government official at a seminar and discussed "research programs on small yield, high penetration nuclear warheads," the documents said.

But it is unclear whether the information was passed to the headquarters of Russian foreign intelligence -- known as "Moscow Center" -- which officials said ran the operation, and there is no indication the data were secret or classified.

Two people arrested in New Jersey, known as "Richard Murphy" and "Cynthia Murphy," were instructed to obtain information about the U.S. position on a new strategic arms reduction treaty and Iran's nuclear program in advance of Obama's visit to Russia last year. Citing intercepted communications between the suspects and their Russian handlers, court documents say, "Moscow Center indicated that it needs intels . . . try to single out tidbits unknown publicly, but revealed in private by sources close to State department, government, major think tanks."

The documents make it clear that the Russians, who officials said began the "Illegals program" in the days of the Cold War, were prepared to wait.

Cynthia Murphy last year was assigned the account of a New York-based financier described as a fundraiser "for a major political party" who is "a personal friend" of a Cabinet member's.

"Try to build up little by little relations with him moving beyond just (work) framework," said an intercepted communication from "Moscow Center."

Staff writers Maria Glod, Greg Miller and Mary Beth Sheridan in Washington, Philip Pan in Moscow and staff researchers Meg Smith and Julie Tate in Washington contributed to this report.

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