FBI busts ring of alleged Russian agents

MOSCOW, Russia — From afar, it looks like the spy scandal of the decade — 11 alleged Russian agents busted by the FBI on suspicion of infiltrating American society to feed policy secrets back to their spymasters in Moscow.

The U.S. Justice Department announced the arrest of 10 men and women in New York, New Jersey, Cambridge, Mass., and the Washington, D.C,. area late on Monday. Their alleged boss, known as Christopher Metsos, was arrested the same day in Cyprus and freed on bail. All have been charged with conspiring to act as spies, and nine with conspiracy to commit money laundering.

Yet a closer look at the FBI’s investigation shows a sloppy Russian operation that appears to have gathered little in terms of solid information. The FBI tracked the receipt for a mobile phone bought by Anna Chapman, an alleged conspirator caught in New York, the day before her arrest on Sunday. The address she gave Verizon was: “99 Fake Street.”

The FBI had been investigating at least two of the defendants — Peruvian citizen Vicky Pelaez and Peruvian-born Juan Lazaro — as far back as 2000. The FBI file includes a transcript of a conversation between the two at their Yonkers home, with Lazaro distressed that Moscow was unhappy with his work “because I didn’t provide any source.” Pelaez quickly answers: “Put down any politician from here!”

Material worthy of a John le Carre novel it is not.

So the question becomes: why expose the spy ring now?

The announcement came just three days after Russian President Dmitry Medvedev wrapped up what by all accounts was a highly successful visit to the U.S. The trip, to Silicon Valley and D.C., prompted long suspicious observers to announce that the Obama administration’s hope of a “reset” in relations was finally coming into its own.

The visit was light on substance, but high on symbolism. Medvedev ate burgers with President Barack Obama and traded “Terminator” quotes with California Gov. Arnold Schwarzenegger. He visited Twitter headquarters and opened an account. He smiled his way through a joint press conference at the White House.

Russians responded in kind. A poll released Monday by VTsIOM, a Russian pollster, showed that the percentage of Russians that held a positive attitude towards the U.S. had grown from 46 percent to 59 percent in the last year.

The spy scandal now threatens to derail that.

Moscow reacted angrily to the charges, with the Foreign Ministry issuing a statement that condemned the move as being "in the spirit of the 'spy mania' of the Cold War era."

“In our view, such actions are completely unfounded and serve unseemly goals,” it said. “It is deeply unfortunate that all this is happening against the background of the reset in Russian-American relations announced by the U.S. administration itself."

Foreign Minister Sergei Lavrov took it one step further, telling reporters during a visit to Israel that “the choice of timing was particularly graceful.”

In Moscow, Nikolai Kovalyov, a former head of the Federal Security Service, a successor organization of the disbanded KGB, said “someone is trying to put a virus into the reset program,” Interfax reported.

The rumor mill is running wild. Some analysts blame U.S. hardliners who are weary of the Obama administration’s overtures to Russia, a country rife with corruption and human rights abuses and clouded in the mistrust of the Cold War era.

The Justice Department issued two separate criminal complaints against the group.

The first targets Anna Chapman and Mikhail Semenko of Arlington, Va., both reportedly in their late 20s, with investigation materials cited for 2010 only. The charges say that the two conspired to “commit an offense against the United States” from “in or about the 1990s,” when they would have been teenagers. The undercover FBI operation to catch them in the act — with an FBI agent posing as a Russian intelligence official — was carried out on Saturday, one day after Medvedev left the U.S. for the G8 meeting in Canada.

Chapman and Semenko, like the other nine defendants, are accused of being “illegals” — spies operating under false identities who have failed to register as agents with the U.S. attorney general. They were tasked with finding recruits in think tanks and policy circles, with the aim of sending information back to Russia’s Foreign Intelligence Service, known by its Russian acronym, the SVR.

All 10 are due to be tried in Manhattan. It is unclear what will happen with Metsos, the alleged ringleader.

The second count includes four married couples — Pelaez and Lazaro; Richard and Cynthia Murphy of New Jersey; Michael Zottoli and Patricia Mills, formerly of Seattle and arrested in Montclair, N.J.; Donald Howard Heathfield and Tracey Lee Ann Foley of Cambridge — and Metsos. In a grizzly detail, FBI investigators traced Heathfield’s birth certificate back to a dead Canadian baby.

The Justice Department complaints make for thrilling reading at times — with details of cash payoffs buried in fields, clandestine meetings in Washington parks and notes passed with invisible ink. Just as often, they are unintentionally funny, with several pages devoted to Chapman’s complaints about her laptop.

"The old Soviet system was more militarized and far more disciplined. It does not exist anymore," Oleg Kalugin, a longtime Soviet spy in the 1960s and 1970s who now lives in the U.S., said by telephone from Washington, D.C. “All these questions [in the Justice Department documents] of how much to pay, housing — all of it devoid of ideology and devoid of professionalism – that’s what made me a little amused.”

Kalugin said he was surprised at the number of arrests, and the fact that all stood accused of operating in the U.S. since the 1990s, when Russia was mired in post-Soviet chaos. "I thought at some point, Russian intelligence was really paralyzed. It reveals that the old assets apparently kept a low profile and once Russia stood from its knees, resumed activities. That's the intelligence business — once you're in you're never out."

It remains unclear what sort of information the 11 alleged spies were able to gather, and whether any of it was classified. The FBI intercepted and decoded a message from Moscow that spelled out their mission: “to search and develop ties in policymaking circles and send intels [intelligence reports].” The single detail that jumps out in 55 pages of Justice Department documents is the fact that Heathfield met with a U.S. government employee working in nuclear weapons research.

It was also unclear who — if anyone — they managed to recruit.

On Tuesday, Chapman's Facebook profile (since removed from the social networking site) was steadily losing about one friend per hour (one of the first was Nouriel Roubini). The quote under her glam shot appeared eerily telling: "If you can imagine it, you can achieve it; if you can dream it, you can become it."

One Russian contact posted a link to a story about her arrest. Pretty soon, 53 comments flooded the page. Nearly all of them echoed this sentiment: "Great, now the Americans won't give us visas."