By Vernon Loeb and David A. Vise

Saturday, December 11, 1999; Page A01

Nuclear physicist Wen Ho Lee, a central figure in the government's Chinese espionage investigation at Los Alamos National Laboratory, was arrested yesterday in New Mexico and charged with 59 counts of mishandling classified information and violating secrecy provisions of the Atomic Energy Act. Some of the counts carry a maximum sentence of life in prison.

FBI agents arrested Lee at his modest ranch-style home outside Los Alamos and took him to Albuquerque, where he was arraigned before a U.S. magistrate and ordered held without bail until a detention hearing on Monday.

His arrest came after a federal grand jury issued a far-reaching indictment that charged Lee with downloading vast quantities of highly sensitive information related to the design, construction and testing of nuclear weapons from a classified computing network at Los Alamos to his unsecure office computer and to 10 portable tapes, seven of which are missing.

In the indictment, Lee is charged with counts that carry life sentences for violating the Atomic Energy Act and a provision in the espionage statutes that carries a 10-year prison term for gross negligence in the handling of classified defense information. However, the indictment does not allege that Lee deliberately passed secret information to China or any other foreign government.

"The case is being prosecuted because Wen Ho Lee has denied the United States its exclusive dominion and control over some of this nation's most sensitive nuclear secrets," John J. Kelly, the U.S. attorney in Albuquerque, told a news conference.

"Although he has not been charged with communicating classified information to a foreign power, the mishandling of classified information alleged in the indictment has resulted in serious damage to important national interests," Kelly said.

Mark Holscher, Lee's attorney at the Los Angeles firm of O'Melveny & Myers, denounced the indictment as "a horrible injustice" and said in a statement that the government is "blatantly overreaching and wholly unjustified" in seeking to have Lee held without bail, since Lee has already surrendered his passport.

"He has been under 24-hour, seven-day a week surveillance since March 1999, even though the government has fully acknowledged that it has no evidence that he engaged in any espionage activities," Holscher said.

"We look forward to proving Doctor Lee's innocence and his being exonerated of all charges that are being brought against him," the lawyer added.

In a separate letter faxed to Kelly four hours prior to the indictment, Holscher said Lee is ready to take a polygraph examination to establish his innocence and will immediately provide prosecutors with "credible and verifiable" information showing that "at no time did he mishandle those tapes in question and to confirm that he did not provide those tapes to any third party."

Lee's indictment, approved by Attorney General Janet Reno, comes after months of political furor over suspected Chinese espionage at the nation's nuclear weapons laboratories.

Amid the politically charged atmosphere in Washington, the FBI committed massive resources to its probe of Lee's activities at Los Alamos.

The FBI said Lee's indictment was based on work by more than 60 agents and computer specialists who conducted more than 1,000 interviews and searched more than a million computer files. An additional 200 FBI agents have been involved in watching Lee 24 hours a day since April, U.S. officials said.

Lee, 59, a Taiwan-born U.S. citizen, was fired in March for mishandling classified information and failing to report contacts with Chinese scientists after working for almost 20 years in the top secret X Division at Los Alamos, which designed America's most advanced nuclear warhead, the W-88.

At the time, authorities identified Lee as the prime suspect in a three-year probe into China's apparent theft of nuclear secrets, including information about the design of the W-88.

After his dismissal, Lee gave investigators permission to search his office. They discovered that he had downloaded computer data from Los Alamos's classified network to his unclassified desktop computer.

According to the 44-page indictment and interviews with U.S. officials, Lee allegedly abused a computer security system at Los Alamos that permits scientists with high-level clearances to work with classified and unclassified data simultaneously.

Rather than returning the classified computer data to its secure environment, Lee transferred 380 computer files into an "open" area in the computer system and changed its coding so that it no longer carried a classified designation.

He then allegedly copied the data on nine separate high-volume computer tapes. In the process, Lee allegedly used an associate's computer to download some data that his computer was blocked from copying.

Within a few hours after Lee was advised on Feb. 10 that he had failed a polygraph exam, he deleted the classified files he had put into the open system, an apparent effort to conceal the illicit activities, according to the indictment and federal officials.

The misappropriated information allegedly covered the physical and radioactive properties of nuclear weapons, the precise shapes and sizes of nuclear weapons and, most significantly, computer codes used to simulate nuclear explosions. "These are the tools by which you test nuclear weapons," one official said.

There is uncertainty over the seven missing tapes. Investigators said they hope that Lee, now facing the possibility of life in prison, may become a cooperating witness and explain what happened to the tapes.

Reno's decision to indict Lee, following a briefing on the case last week at the White House for senior officials, ended months of speculation about whether he could or should be charged with felony counts for downloading computer data.

The speculation was fueled by the Justice Department's decision in April not to prosecute former CIA director John M. Deutch after CIA technicians discovered classified materials stored on Deutch's unsecure laptop computer at his home.

Legal scholars said Lee's indictment may be the first time a government employee has been charged with "gross negligence" in handling classified information without evidence that the information fell into the hands of a third party.

The charges against Lee also appear to be the first criminal prosecution under a section of the Atomic Energy Act that prohibits removing, concealing or tampering with classified nuclear weapons data. Under this section, the individual must act "with intent to injure the United States or with intent to secure an advantage to any foreign nation."

Lee's indictment was applauded on Capitol Hill, where lawmakers have faulted the nation's weapons labs for alarmingly lax security and counterintelligence procedures. Senate Judiciary Committee Chairman Orrin G. Hatch (R-Utah) described the arrest as "an overdue step in a long story in which the attorney general paid too little attention to serious and credible espionage allegations."

Chinese American groups, meanwhile, expressed concern that spy mania might poison the atmosphere for immigrant scientists. C.Y. Wong, a Chinese American physicist at Oak Ridge National Laboratory in Tennessee, who is chairman of the Overseas Chinese Physics Association, said the indictment is "flawed" because some investigators have alleged that Lee was singled out as a suspect on the basis of his ethnicity.

"We hope the indictment will not bring up anti-Chinese American sentiment," Wong said. "It is something we're afraid of, that the trial will be emotional and drag on for a year."

Staff writer Walter Pincus contributed to this report.

What Lee Allegedly Took

A 59-count federal indictment alleges that Wen Ho Lee downloaded and removed the following classified information from Los Alamos National Laboratory:

• Data on the physical and radioactive properties of materials used to make nuclear weapons.
• The exact shapes and sizes used in the design and simulated testing of nuclear weapons.
• The computer instructions to simulate the detonation of a nuclear weapon.
• Computer "source codes" used to determine whether designs for nuclear weapons would work and to compare bomb test results with predictions.
• Libraries of data collected from actual tests of nuclear weapons.
• Data on nuclear bomb test problems, yield calculations and other nuclear weapons design and detonation information.
• Computer programs needed to run the design and testing files.

SOURCE: Justice Department