(1) 
This controversy about the W-88 warhead raised policy issues about whether U.S. securitywas further threatened by the PRC's suspected use of U.S. nuclear weapon secrets in its developmentof smaller nuclear warheads and new ICBMs, as well as whether the Administration's response tothe security problem was effective or mishandled and whether it fairly used or abused itsinvestigative and prosecuting authority. In a publicly known fifth case, on April 9, 2003, in Los Angeles,authorities arrested a retired FBI agent who directed the FBI's counter-China efforts in Los Angelesuntil 2000, James J. Smith, and his informant and mistress, a Chinese-American businesswomannamed Katrina M. Leung, for involvement in allegedly mishandling national defense information-- some classified -- related to China. He was notcharged with espionage. (21) 

	Damage Assessments on the W88

Concerning the serious case of China's suspected acquisition of the W88 data that becamepublic in early 1999, there were concerns about China's modernization of its nuclear-armed ballisticmissile force and implications for U.S. national security. (23) 

		President on U.S. Superiority

On April 7, 1999, President Clinton presented a public assessment that in the U.S.-Chinastrategic balance, U.S. nuclear forces still maintained decisive superiority over China's relativelylimited strategic nuclear forces. In part, because of our engagement, China has, at best, onlymarginally increased its deployed nuclear threat in the last 15 years. (29) 
According to the unclassified key findings released by the DCI, the Intelligence Community'sdamage assessment, with concurrence by the independent panel, confirmed that "China obtained byespionage classified U.S. nuclear weapons information that probably accelerated its program todevelop future nuclear weapons." nuclear reentry vehicles, including the Trident II" that delivers the W88 warhead as well as "avariety of U.S. weapon design concepts and weaponization features, including those of the neutronbomb." Cox Committee's Report

Findings. (44) On March 25, 1999, Senator Shelby, the committee's chair,announced that it voted unanimously to begin an investigation into whether China obtained U.S.nuclear weapon secrets and how the Administration dealt with counter-intelligence at the labs. Section 3146 of the FY2000 National Defense Authorization Act ( P.L. (54) 
National Nuclear Security Administration(NNSA). 2032 to establisha Nuclear Security Administration in the Department of Energy. The ClintonAdministration acknowledged that improvements to security measures were required at the nuclearweapon labs and said that it took a number of corrective actions in response to indications in 1995that China may have obtained secrets about the W88 in the 1980s. Critics arguedthat the Clinton Administration was slow to respond to concerns about China and the labs and thatDOE officials resisted reforms for years. (145) 
Indictment of Wen Ho Lee. (147) 
By December 1999, the FBI completed the specific investigation that focused on Lee'stransfers of computer files, which were discovered just before he was fired in March 1999, afterwhich, FBI agents later searched his home in April 1999. Then, on September 10,2000, the prosecution and defense revealed that they had negotiated a plea agreement, under whichLee would plead guilty to one felony count of unlawful retention of national defense information,help the government to verify that he destroyed the seven tapes (as he maintained), and thegovernment would drop the other 58 counts and free Lee (with sentencing to the nine months healready served in jail).
This CRS Report discusses China's suspected acquisition of U.S. nuclear weapon secrets,including that on the W88, the newest U.S. nuclear warhead. This serious controversy becamepublic in early 1999 and raised policy issues about whether U.S. security was further threatened byChina's suspected use of U.S. nuclear weapon secrets in its development of nuclear forces, as wellas whether the Administration's response to the security problems was effective or mishandled andwhether it fairly used or abused its investigative and prosecuting authority. The ClintonAdministration acknowledged that improved security was needed at the weapons labs but said thatit took actions in response to indications in 1995 that China may have obtained U.S. nuclear weaponsecrets. Critics in Congress and elsewhere argued that the Administration was slow to respond tosecurity concerns, mishandled the too narrow investigation, downplayed information potentiallyunfavorable to China and the labs, and failed to notify Congress fully.
On April 7, 1999, President Clinton gave his assurance that partly "because of ourengagement, China has, at best, only marginally increased its deployed nuclear threat in the last 15years" and that the strategic balance with China "remains overwhelmingly in our favor." On April21, 1999, Director of Central Intelligence (DCI) George Tenet, reported the IntelligenceCommunity's damage assessment. It confirmed that "China obtained by espionage classified U.S.nuclear weapons information that probably accelerated its program to develop future nuclearweapons." It also revealed that China obtained information on "several" U.S. nuclear reentryvehicles, including the Trident II submarine-launched missile that delivers the W88 nuclear warheadas well as "a variety of" design concepts and weaponization features, including those of the neutronbomb.
On May 25, 1999, the House's Cox Committee reported that China stole classifiedinformation on the W88 and six other U.S. nuclear warheads. On June 15, 1999, the President'sForeign Intelligence Advisory Board (PFIAB) called the Department of Energy a "dysfunctionalbureaucracy" and urged the creation of a semi-autonomous or independent agency to oversee nuclearweapons. In September 1999, Congress passed the FY2000 National Defense Authorization Act tocreate a National Nuclear Security Administration (NNSA) within DOE on March 1, 2000.
As one result of the W-88 case, the FBI investigated a Taiwan-born U.S. scientist at the LosAlamos lab, Wen Ho Lee. He was never charged with espionage. In December 1999, the JusticeDepartment indicted Lee on 59 felony counts for mishandling nuclear weapons information (notclassified at the time). Lee was jailed without bail until a plea agreement on September 13, 2000,when he pleaded guilty to one count of mishandling national defense information (for making copiesof his computer files). The judge apologized to Lee. Meanwhile, in April 1999, the FBI expandedits counterintelligence investigation beyond the focus on Los Alamos, and in 2000, the probe shiftedto missile secrets and to the Defense Department. In April 2003, an ex-FBI agent, James Smith, andhis informant, Katrina Leung, were arrested for allegedly mishandling national defense informationrelated to China.