Canadian 'spy coin' mystery is solved

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12:44 p.m.

An odd-looking Canadian coin with a bright red flower was the culprit behind a U.S. Defense Department false espionage warning earlier this year about mysterious coin-like objects with radio frequency transmitters, the Associated Press has learned.

The harmless "poppy coin" was so unfamiliar to suspicious U.S. Army contractors traveling in Canada that they filed confidential espionage accounts about them.

The worried contractors described the coins as "anomalous" and "filled with something man-made that looked like nano-technology," according to once-classified U.S. government reports and e-mails obtained by AP.

The silver-colored 25-cent piece features the red image of a poppy -- Canada's flower of remembrance -- inlaid over a maple leaf. The unorthodox quarter is identical to the coins pictured and described as suspicious in the contractors' accounts.

The supposed nano-technology actually was a conventional protective coating the Royal Canadian Mint applied to prevent the poppy's red color from rubbing off. The mint produced nearly 30 million such quarters in 2004 commemorating Canada's 117,000 war dead.

"It did not appear to be electronic (analog) in nature or have a power source," wrote one U.S. contractor, who discovered the coin in the cup holder of a rental car. "Under high power microscope, it appeared to be complex consisting of several layers of clear, but different material, with a wire like mesh suspended on top."

The confidential accounts led to a sensational warning from the Defense Security Service, an agency of the Defense Department, that mysterious coins with radio frequency transmitters were found planted on U.S. contractors with classified security clearances on at least three separate occasions between October 2005 and January 2006 as the contractors traveled through Canada.

One contractor believed someone had placed two of the quarters in an outer coat pocket after the contractor had emptied the pocket hours earlier.

"Coat pockets were empty that morning and I was keeping all of my coins in a plastic bag in my inner coat pocket," the contractor wrote.