Katrina M. Leung, the Chinese American civic leader accused of being a double agent for China who obtained classified documents through her romance with an FBI agent, also is suspected of having a long history as a tax cheat, court documents show.
The 29-page government affidavit that details the espionage case against Leung also alleges that for more than a decade she has failed to report sizable amounts of her income to the Internal Revenue Service and has contrived elaborate tax schemes to defraud the government.
Leung, 49, was arrested Wednesday at her home in the wealthy community of San Marino, which lies just east of Los Angeles. Federal investigators say that since the early 1980s she has been a secret informant -- code-named "Parlor Maid'' -- who provided intelligence about the Chinese government and collected $1.7 million from the FBI for her work.
But for much of that time, investigators allege, she also was secretly copying and passing to the Chinese documents that her longtime FBI contact and alleged lover, FBI counterintelligence agent James J. Smith, brought to her home.
Leung has been charged with illegally obtaining classified documents with the purpose of aiding a foreign power. She is being held without bond. Leung has not been charged with any tax-related crimes, but prosecutors have said additional charges may be filed. Federal investigators allege that Leung did not report the payments and expense reimbursements that the FBI gave her over nearly two decades on her taxes, even though she was advised twice by Smith to do so. The affidavit also charges that Leung was paid more than $1 million by a technology company based in Hong Kong, money that she did not report on tax forms.
Leung also had been claiming mortgage- interest deductions on her taxes for a residence that was not mortgaged, according to the affidavit. It details an alleged scheme in which Leung pretended to refinance a home that she owned by paying a foreign company that she and her husband controlled.
In the affidavit, an FBI agent asserted that Leung admitted to the alleged tax scheme when she was questioned by agents investigating whether she was spying.
"Leung further stated she used such accounts to create the appearance of a separate creditor to which she made mortgage payments, when in fact she was paying herself," the affidavit states.
Investigators said that Leung told them she had purchased her San Marino home about 12 years ago for $1.4 million and had fully paid for it before she began claiming phony mortgage-interest deductions on her taxes.
Attorneys for Leung have declined to comment on any of the charges. They released a statement after her arrest that described her as a loyal American citizen who has made "heroic contributions" to the country.
Leung, a self-described business consultant and venture capitalist, is well known in political and diplomatic circles around Los Angeles. She is a longtime campaign fundraiser for Republican candidates in California, belongs to many Chinese American civic groups and has frequently organized local receptions for visiting Chinese dignitaries.
She is in federal custody awaiting a bond hearing next week. Prosecutors said they intend to ask that she be denied bail because she is a serious flight risk, and that she be incarcerated until the case against her is resolved.