WASHINGTON -- The Justice Department is investigating whether FBI agents involved in espionage and terrorism cases may have moonlighted by forming private companies and using informants and subjects of inquiries to benefit their personal business.
The allegations, according to court documents, include charges that the private companies of agents and intelligence figures were involved in business deals in China and the Middle East about the same time the FBI was investigating Chinese efforts to acquire sensitive technology.
The FBI says it is cooperating.
"Any time there is a request by an inspector general, the FBI fully cooperates," said a statement released by the FBI.
The investigation is focusing on the same Arizona FBI office that produced the now-famous warning that went unheeded before the terrorist attacks of Sept. 11, 2001, that Arab pilots were suspiciously training at US flight schools. The FBI's Phoenix office was a hotbed of investigations into terrorists and espionage during the 1990s.
The Justice Department inspector general's office, which investigates allegations of wrongdoing by federal law enforcers, has interviewed several times a Phoenix businessman named Harry Ellen, who worked undercover for US intelligence and the FBI for three decades in the Middle East, Mexico, and China.
"I was interviewed about events concerning various companies and corporations with whom I came in contact and/or had financial dealings with while I was assisting the FBI," Ellen said in an interview. "One or more of the companies were operated by FBI agents."
FBI agents generally are prohibited from moonlighting in second jobs without special permission, and they are subjected to regular background checks for irregularities. One question the inspector general is examining is whether private companies originally were fronts used by the FBI in undercover investigations and then were taken over by agents as they neared retirement, officials said.
While working on sensitive Chinese and Palestinian cases, Ellen had a falling-out with the FBI in 1999 after he had an affair with a Chinese woman named Joanna Xie. The bureau had asked Ellen to monitor the woman as a possible Chinese intelligence agent.
Ellen alleges that FBI agents intentionally divulged his identity, jeopardizing his life. The FBI denies blowing his cover and says he was severed for violating rules for paid assets.
"We decided to break off this relationship," said an FBI statement. The FBI has been aware of Ellen's allegations for several years, but has concluded there is no wrongdoing, officials said.
The FBI's counterespionage program was rocked earlier this year by criminal charges filed against one key agent in California, who is accused of becoming romantically involved with a woman he was supposed to be watching and allowing her to gain access to sensitive classified information.
The new investigation focuses in part on allegations from Ellen and Xie in a closed immigration case, which were further researched by a freelance reporter who has become a witness in the case.
Xie testified that in 1995 a prominent Chinese-American professor who introduced her to FBI agents visited her in Shanghai with some US businessmen and tried to enlist her help on a project to sell black-box satellite technology to a Chinese military aerospace company.
An agent introduced by the professor contacted Xie in 1996 from his Phoenix company, "requesting that I assist his company with Amway," Xie testified. She said the agent's contact set up an Amway bank account for her for sales. She did not explain further the reference to Amway, a sales distributorship company.
By 1997, Xie alleged, the professor introduced her to some business partners, including another FBI agent who was described as an investor in a Chinese trading company in Chicago. That agent, she alleged, also had business interests in a Phoenix trading company, sought her help on business, and introduced her to Chinese business executives.
"So you had learned that some FBI agents were business partners?" her lawyer asked.
"Yes," Xie testified.
Xie said she has turned over to investigators the personal business cards that agents gave her, listing at least three of their private companies.
Ellen testified that while working with the FBI on a sensitive Middle East terrorism investigation, he was asked by the bureau to get close to Xie to monitor her activities.
Ellen said around that time, one agent cited by Xie provided him free T-shirts to be used for his Muslim foundation, which was cooperating with the FBI.