By Walter Pincus and Vernon Loeb
Washington Post Staff Writers
Friday, April 30, 1999; Page A1

Amid new allegations of questionable activity by an espionage suspect at Los Alamos National Laboratory, Congress erupted in complaints yesterday about FBI and Justice Department handling of security breaches and possible espionage by China at the nation's nuclear weapons laboratories.

After grilling FBI Director Louis J. Freeh for nearly three hours in a closed-door hearing, members of the Senate Select Committee on Intelligence from both parties appeared equally outraged at what they depicted as lax handling of past and present investigations into suspected leaks of classified data.

Their concern was aroused in particular by Freeh's testimony that the suspect, Wen Ho Lee, had been cited for suspicious actions going back almost 20 years, according to congressional and administration sources. This information hit particularly hard because it came on top of the disclosure Tuesday that Lee had moved secret nuclear weapons data from a highly classified computer network to an unclassified system vulnerable to access by outsiders.

Lee was fired last month because of security violations after reports emerged that he was under suspicion of passing nuclear secrets to China, and the latest revelations have added even more fuel to congressional suspicions his case was poorly handled.

"It's obvious to me that the FBI and perhaps Justice, both, treated this case as a routine, or ordinary, case – rather than what it was, an extraordinary case involving the highest levels of our national security – our nuclear labs," said committee Chairman Richard C. Shelby (R-Ala.). "It's hard to swallow."

"Somebody has not done the job," Shelby said, "Is it the FBI, is it the Justice Department, is it both? On both sides of the aisle that was raised."

"From the 1980s all the way through today, the right hand did not know what the left hand was doing," said Sen. Bob Kerrey (D-Neb.), vice chairman of the panel.

Sen. Arlen Specter (R-Pa.), former chairman of the intelligence panel who sat in on yesterday's session said, "The total picture is one of incredible bungling with enormous stakes."

Freeh's appearance included disclosure that Lee had a series of questionable activities documented in his security file going back to the early 1980s and continuing to 1994, according to the sources. "Any one of these should have led to lifting his security clearance years ago," one source said.

Failure of the FBI almost 20 years ago to follow up on an intercepted telephone call was one critical focus of the session, according to administration and congressional sources. The call in the early 1980s, made by Lee, then a new Los Alamos employee, was to an individual at the Lawrence Livermore Nuclear Laboratory who was then suspected of having given neutron bomb secrets to the Chinese, according to sources.

In it, Lee said, "‚'I can help you – I can tell you who ratted on you,'‚" one source said.

The Livermore scientist, whose name is still classified, was permitted to resign in 1981, sources said. That case has never been closed, according to FBI sources.

Nothing more was done concerning Lee, although a notation about the intercepted message was placed in his security file.

"Where were [government investigators] on the whole deal? This should have set off alarm bells ringing everywhere. If you intercept a phone call from one Chinese American at one laboratory to another Chinese American spy [suspect] at another laboratory, that should set off an alarm," said one person at the hearing.

"They knew Lee was doing something out of line and they still let him keep his security. They should have lifted it, and the net effect would have been termination," another said.

"Senators said maybe if we acted differently back then, we wouldn't be where we are today," said another source familiar with the session.

Freeh stunned senators at the hearing by disclosing that in 1994, a fellow Los Alamos employee reported to security officials that Lee was "embraced" by a Chinese delegation to the lab that included an officer of that country's intelligence service, according to sources. The employee further reported that Lee discussed with the Chinese nuclear weapons computer codes similar to the ones he is now said to have removed from classified files and put into his unclassified computer.

The problem was "things were observed by an employee who reported them, and no one was there to make hard decisions about them," one source said.

Mark C. Holscher, Lee's attorney in Los Angeles, denied any wrongdoing by his client. "We remain convinced that Dr. Lee never provided any information to any representative of the Chinese government," Holscher said.

Another issue raised during the Senate session was failure of the FBI to search Lee's computer when the bureau's investigation of him first began in 1996. Two months into the inquiry, one source said, agents running the case sought authority to search Lee's computer but were told that under the law they needed a search warrant.

Justice Department attorneys said the information involving Lee was not current enough to justify such a warrant, and the FBI did not challenge that decision or take it to the attorney general or the president.

After the hearing, without mentioning details that are still classified, Shelby told reporters a "central question" at the hearing was the time the FBI was "first put on the alert about a phone call from one lab to the other, where the other person was under investigation." Shelby then asked rhetorically: "Why didn't they do more? Why didn't they continue to put all their resources on that?"

Kerrey said that Freeh had "a very tough time," but that Congress "should be careful and not shoot the messenger." Responsibility for making the Justice Department, the FBI and the Energy Department, which runs the labs, work together to face the seriousness of the problem "was at the highest level. Only the president can make it work," he said.

Specter, who has been pressing for years for an independent counsel to look into allegations of Chinese campaign contributions to the 1996 Clinton reelection campaign, said he wants to know whether the money and the spying crossed somewhere.