Russian agents infiltrated US society, charges say

NEW YORK (AP) - They sometimes worked in pairs and pretended to be married so they could blend in as the couple next door while working as spies in a throwback to the Cold War, complete with fake identities, invisible ink, coded radio transmissions and encrypted data to avoid detection, authorities say.

Assistant U.S. Attorney Michael Farbiarz, speaking Monday in federal court in Manhattan, called the allegations against 10 people living in the Northeast "the tip of the iceberg" of a conspiracy of Russia's intelligence service, the SVR, to collect inside U.S. information, the biggest such bust in recent years.

Each of the 10 was charged with conspiracy to act as an agent of a foreign government without notifying the U.S. attorney general, which carries a maximum penalty of five years in prison upon conviction. Two criminal complaints outlining the charges were filed in U.S. District Court in New York.

Police in Cyprus said Tuesday that an 11th defendant, a Canadian citizen wanted by U.S. authorities on suspicion of espionage and money laundering, was arrested in the morning at Larnaca airport while trying to fly to Budapest, Hungary.

Russia angrily denounced the U.S. arrests as an unjustified throwback to the Cold War, and senior lawmakers said some in the U.S. government may be trying to undercut President Barack Obama's warming relations with Moscow.

"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."

Intelligence on Obama's foreign policy, particularly toward Russia, appears to have been a top priority for the Russian agents, prosecutors said.

The papers allege the defendants' spying has been going on for years.

One defendant was a reporter and editor for a prominent Spanish-language newspaper videotaped by the FBI contacting a Russian official in 2000 in Latin America, prosecutors said.

And in spring 2009, court documents say, conspirators Richard and Cynthia Murphy, who lived in New Jersey, were asked for information about Obama's impending trip to Russia that summer, the U.S. negotiating position on the START arms reduction treaty, Afghanistan and the approach Washington would take in dealing with Iran's suspect nuclear program. They also were asked to send background on U.S. officials traveling with Obama or involved in foreign policy, the documents say.

"Try to outline their views and most important Obama's goals (sic) which he expects to achieve during summit in July and how does his team plan to do it (arguments, provisions, means of persuasion to 'lure' (Russia) into cooperation in US interests," Moscow asked, according to the documents.

Moscow wanted reports that "should reflect approaches and ideas of" four sub-Cabinet U.S. foreign policy officials, they say.

One intercepted message said Cynthia Murphy "had several work-related personal meetings with" a man the court papers describe as a prominent New York-based financier active in politics.

In response, Moscow Center described the man as a very interesting target and urged the defendants to "try to build up little by little relations. ... Maybe he can provide" Murphy "with remarks re US foreign policy, 'roumors' about White house internal 'kitchen,' invite her to venues (to major political party HQ in NYC, for instance. ... In short, consider carefully all options in regard" to the financier.

The Murphys lived as husband and wife in suburban New Jersey, first Hoboken, then Montclair, with Richard Murphy carrying a fake birth certificate saying he was born in Philadelphia, authorities said.

One defendant in Massachusetts made contact in 2004 with an unidentified man who worked at a U.S. government research facility.

"He works on issues of strategic planning related to nuclear weapon development," the defendant's intelligence report said.

The defendant "had conversations with him about research programs on small yield high penetration nuclear warheads recently authorized by US Congress (nuclear 'bunker-buster' warheads)," according to the report.

One message back to Moscow from the defendants focused on turnover at the top level of the CIA and the 2008 U.S. presidential election, prosecutors said. The information was described as having been received in private conversation with, among others, a former legislative counsel for Congress. The court papers deleted the name of the counsel.

In the papers, FBI agents said the defendants communicated with Russian agents using mobile wireless transmissions between laptop computers, which has not previously been described in espionage cases brought in the U.S.: They established a short-range wireless network between laptop computers of the agents and sent encrypted messages between the computers while they were close to each other.

Aside from the Murphys, three other defendants also appeared in federal court in Manhattan - Vicky Pelaez and Juan Lazaro, who were arrested at their Yonkers, N.Y., residence, and Chapman, arrested in Manhattan on Sunday.

Behind the scenes, they were known as "illegals" - short for illegal Russian agents - and were believed to have fake back stories known as "legends."

Aside from fake identities, authorities say, they used Cold War spycraft - invisible ink, coded radio transmissions, encrypted data - to avoid detection. The court papers described a new high-tech spy-to-spy communications system used by the defendants: short-range wireless communications between laptop computers - a modern supplement for the old-style dead drop in a remote area, high-speed burst radio transmission or the hollowed-out nickels used by captured Soviet Col. Rudolf Abel in the 1950s to conceal and deliver microfilm.

The FBI said it intercepted a message from SVR's headquarters, Moscow Center, to two of the 10 defendants describing their main mission as "to search and develop ties in policymaking circles in US." Intercepted messages showed they were asked to learn about a wide range of topics, including nuclear weapons, U.S. arms control positions, Iran, White House rumors, CIA leadership turnover, the last presidential election, Congress and the political parties, prosecutors said.

"The FBI did an extraordinary job in this investigation," U.S. Attorney Preet Bharara said in a statement.

On Saturday, an undercover FBI agent in New York and another in Washington, both posing as Russian agents, met with two of the defendants, Anna Chapman at a New York restaurant and Mikhail Semenko on a Washington street corner blocks from the White House, prosecutors said. The FBI undercover agents gave each an espionage-related delivery to make. Court papers indicated Semenko made the delivery as instructed but apparently Chapman didn't.

The timing of the arrests was notable, given the efforts by Presidents Barack Obama and Dmitry Medvedev to reset U.S.-Russia relations. The two leaders met last week at the White House after Medvedev visited high-tech firms in California's Silicon Valley, and both attended the G-8 and G-20 meetings over the weekend in Canada.

Oleg Gordievsky, a former deputy head of the KGB in London who defected in 1985, said Medvedev would know the number of so-called illegal operatives in each country.

The 71-year-old ex-double agent told The Associated Press that, based on his experience and career in Russian intelligence, he estimates Moscow likely has about 40 to 50 couples operating under deep cover in the U.S.

The Murphys, Lazaro, Pelaez and Chapman were held without bail but didn't enter a plea. Another hearing was set for Thursday.

Pelaez is a Peruvian-born reporter and editor and worked for several years for El Diario/La Prensa, one of the country's best-known Spanish-language newspapers. She is best known for her opinion columns, which often criticize the U.S. government.

In January 2000, Pelaez was videotaped meeting with a Russian government official at a public park in the South American nation, where she received a bag from the official, according to one complaint.

Pelaez was born in Cusco, southeast of Lima, and Lazaro discussed plans to pass covert messages with invisible ink to Russian officials during another trip Pelaez took to South America, a complaint said.

The complaint alleges authorities overheard an unguarded Lazaro once saying in his home, "We moved to Siberia ... as soon as the war started."

Waldo Mariscal, Pelaez's son, said his mother was innocent. "This is a farce," he said.

Robert Krakow, an attorney for Lazaro, said after the court hearing that his client was innocent and that the information in the complaint "had no value".

An attorney for Chapman, Robert Baum, argued the allegations were exaggerated and his client deserved bail. Prosecutors countered that Chapman was a flight risk, calling her a highly trained "Russian agent" who is "a practiced deceiver."

Two other defendants, Michael Zottoli and Patricia Mills, were arrested at their Arlington, Va., residence. Also arrested at an Arlington residence was Semenko.

Zottoli, Mills and Semenko appeared before U.S. Magistrate Theresa Buchanan on Monday in Alexandria, Va. The hearing was closed because the case had not yet been unsealed in New York. The three did not have attorneys at the hearing, U.S. attorney spokesman Peter Carr said.

Two defendants known as Donald Howard Heathfield and Tracey Lee Ann Foley were arrested at their Cambridge, Mass., residence Sunday. They appeared briefly in Boston federal court Monday. A detention hearing was set for Thursday. Lawyers could not be found or did not return calls.

Spokesman Michalis Katsounotos said 54-year-old Christopher Robert Metsos was arrested early Tuesday based on an Interpol arrest warrant. Metsos appeared in a Larnaca court, which ordered Metsos released on $24,700 bail after surrendering his travel documents. The court also ordered Metsos to report to a Larnaca police station once a day.

Katsounotos says Metsos will remain on the island for one month until extradition proceedings begin.