The cases against Leung and Smith were shocking to longtime FBI observers. Essentially, Agent Smith and his prized asset Leung admitted they would meet at her upscale home in a Los Angeles suburb. After they made love, J.J. would leave the bedroom and Katrina, unbeknownst to J.J. would copy secret or classified documents from his briefcase.
Leung's possession of secret documents and Smith's alleged complicity called into question virtually every piece of counterintelligence information on China gathered by the United States over two decades.
"Very grave damage could have been done," says Ed Appel, the former head of FBI Counterintelligence in San Francisco. "And it certainly could result in a compromise of U.S. government interests and intelligence interests with regard to China."
Neither Leung nor Smith were charged with espionage. Instead, the government said Leung had copied classified documents and that Smith provided access to those documents through gross negligence. Both pled not guilty.
The government alleged that Leung regularly traveled to China where she often met with high-ranking officials, and that she was a Chinese agent with the code name "Luo."
"Katrina Leung is a loyal American citizen," her attorneys said in a statement issued to the press. "For over 20 years she has worked at the direction and behest of the Federal Bureau of Investigation."
J.J. Smith's attorney, Brian Sun, questioned the motives of the government in charging his client. "We think the bureau is ... reacting and perhaps overreacting to external political pressures, to public relations nightmares, and [Smith and Leung] are being unduly and harshly sanctioned and punished for conduct which arguably could have been dealt with administratively or some other means short of criminal prosecution."
In the San Francisco FBI office, one of the bureau's top Chinese counterintelligence agents, William Cleveland, provided the first inkling that "Parlor Maid" may also have been giving the Chinese information without the FBI's knowledge.
In 1991, the FBI assigned Cleveland to travel to China. While there, he was followed by Chinese security agents and apparently confronted by a former espionage suspect under suspicious circumstances. When Cleveland returned to the United States, he was given a wiretap audio recording made before his trip to China on which a woman with the code name "Luo" talks to an agent code named "Mao" and gives the details of Cleveland's upcoming trip. The woman's voice was well known to Cleveland. It was one of the FBI's prized assets -- "Parlor Maid."
But Cleveland had a problem: for three years he and Katrina Leung also had been lovers. Cleveland would have to turn Leung in to headquarters but hope they never discovered his personal relationship.
Headquarters didn't discover Cleveland's or Smith's relationship with Leung -- and in what would later be criticized as a profound failure of management, they actually returned "Parlor Maid" to the field and allowed Smith to continue supervising her.
Subsequently it was revealed that even after learning that Leung was working with the Chinese, both Agent Smith and Agent Cleveland continued to share information about important Chinese counterintelligence investigations with Parlor Maid.
"Cleveland is deeply involved with Gwo-Bao Min, he's deeply involved in Wen Ho Lee. He is deeply involved in the Peter Lee Case," says Dan Stober, author of A Convenient Spy. "If Cleveland is talking to Katrina about these things, that she's telling the Chinese, the Chinese theoretically could be telling their sources at the labs, 'Look out, look out.'"
Former agent Cleveland has not been charged by the federal government and is said to be cooperating with the investigation.
"'From China With Love' details the human drama behind the profound troubles that have plagued the FBI for more than a decade," says FRONTLINE producer Michael Kirk. "This film illustrates the lack of management controls, the failure of safeguards, the 'old boy network' and the complexities of the relationship between sources and agents that is at the heart of what the FBI does."