- The Washington Times - Thursday, June 22, 2000

The State Department said yesterday that China failed to notify the U.S. government, as required by law, that its state-run news service purchased a seven-story apartment building that overlooks the Pentagon for use as its Washington bureau.

State Department sources say some officials want to block the sale, which was concluded June 15, on national security grounds.

Xinhua is linked to China's extensive intelligence-gathering network. The sources said U.S. intelligence failed to detect the sale beforehand.

The State Department made the statement after The Washington Times disclosed Xinhua's purchase and its intelligence links.

Jiang Liu, Xinhua's Washington bureau chief, told Agence France-Presse that the first story in The Times was "nonsense."

"It's a smear," he said. "This morning all our staff members read the story. They're laughing at it. It's just ridiculous."

At the State Department, however, nobody was laughing.

"The Embassy of the People's Republic of China is required under the Foreign Missions Act to obtain prior authorization from the State Department for any purchase or sales of real property of the Xinhua News Agency," the State Department said. "The embassy was notified of this in 1985.

"The department has no record of it providing notification of its plans to purchase the Virginia property or of the department granting authorization. The department is in contact with the Chinese government regarding this issue to assure that all appropriate interests are addressed."

Officials said the department has begun discussions with Beijing about why the Beijing government did not comply with the 1985 Foreign Missions Act. Under the law, the State Department treats the state-run Xinhua News Agency as it does the Chinese Embassy. As such, officials said, the embassy in Washington was required to notify the United States of the pending purchase.

"It's a clear requirement they provide notification and they obtain prior authority for purchase or sale," said a State Department official, who asked not to be named. "We have no record of them providing this."

The official said he did not know whether Secretary of State Madeleine K. Albright would raise the issue during her current trip to Beijing.

At the Pentagon, spokeswoman Susan Hansen said, "The Defense Department is not in a position to monitor real-estate transactions. We don't have any independent information of the location of this news agency and what they plan to do there."

The Pentagon issued a statement that its building is "protected by a variety of security systems."

The State Department's concern was raised after The Times reported yesterday that Xinhua had purchased the 32-unit Pentagon Ridge Apartments last week as living and working headquarters for its employees. Tenants were told they must move out.

Zhang Yuanyuan, a spokesman at the Chinese Embassy in Washington, contended yesterday that Xinhua did not need State Department approval to buy the apartment building.

"We don't need the permission," he said. "[Xinhua is] a company. As long as they go through the legally required procedures. The law does not require them to go through a different procedure. We have been following the laws and regulations of the U.S. in Virginia all along. If something is wrong, the lawyers should know that."

The Xinhua News Agency referred press inquiries to its attorney, who could not be reached yesterday.

Mr. Zhang took particular issue with the dispatch in yesterday's editions of The Times, which quoted China and intelligence experts as saying Beijing uses Xinhua to collect intelligence.

"I found it rather disturbing," he said. "There were many characterizations in your article that are very, very wrong… . The Xinhua News Agency is a very responsible news agency. It's one of the five largest agencies in the world. I think the United Nations has been using the wire service of Xinhua for many, many years."

According to Clinton administration officials, neither the FBI nor other U.S. law-enforcement and intelligence agencies knew in advance that Xinhua had purchased the Pentagon Ridge building. In two past cases, the FBI and U.S. National Security Agency, which conducts electronic eavesdropping, notified the State Department about Chinese real-estate purchases in advance of the sales. In one instance, a sale was blocked on national security grounds.

"The intelligence community would have said no to this sale," said one official.

From the building overlooking the Pentagon, a telescope allows a peek into windows on the southern side of the Pentagon, the officials said. The apartment building's sixth and seventh floors have a clear line of sight toward the Pentagon.

With electronic snooping equipment, technicians in the building could collect computer emanations low-power signals that are broadcast from computer screens from the building, the officials said.

Under certain favorable weather conditions, microphones could pick up conversations in Pentagon offices within sight of the building by sensing the slight vibrations on windows caused by conversations. The building could provide a vantage point from which electronic spies could pick up transmissions from microphones placed covertly inside the Pentagon.

Not long ago a Russian intelligence officer was caught picking up electronic transmissions from a microphone planted in a seventh-floor conference room.

Xinhua, pronounced "shin-wa," translates to New China News Agency. The agency takes part in formulating Chinese foreign policy in meetings of the Communist Party Politburo's Foreign Affairs Leading Group. Said one U.S. official yesterday: "Xinhua is not an Associated Press of China."

The Pentagon yesterday issued a statement on security measures.

"Since the erection of the Pentagon more than 50 years ago, defense officials have realized the building could be a target for intelligence activities," the statement said. "For that reason, the Pentagon is protected by a variety of security systems. In addition, policies and procedures are in place that govern the manner in which the perimeter is protected. Various technical measures thwart attempts to monitor sensitive activities in the building.

"To protect their usefulness, we cannot detail these security measures other than to point out we fully utilize secure telephones and secure inner offices. Suffice it to say, we constantly monitor our 'fence lines' for any activity which poses a threat to [Defense Department] personnel, information and operations especially with rapid technological advances today."

Kenneth deGraffenreid, former National Security Council intelligence director, said the Reagan administration and Congress created the State Department's Office of Foreign Missions to deal with this kind of security issue. The office was "a key element of our systematic approach to protecting the nation's vital secrets from foreign espionage."

Nevertheless, he said, the fact that the office was not informed about Chinese plans to purchase the building by U.S. intelligence "is another example of the administration's inattention and denigration of the building blocks of a good security system."

• Ben Barber contributed to this report.

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