Hizbullah Spy in U.S. Govt.?

A former FBI agent who pleaded guilty Tuesday to fraudulently obtaining U.S. citizenship and then improperly accessing sensitive computer information about Hizbullah was working until about a year ago as a CIA spy assigned to Middle East operations, NEWSWEEK has learned.

The stunning case of Nada Nadim Prouty, a 37-year-old Lebanese native who is related to a suspected Hizbullah money launderer, appears to raise a nightmarish question for U.S. intelligence agencies: could one of the world's most notorious terrorist groups have infiltrated the U.S. government?

"I'm beginning to think it's possible that Hizbullah put a mole in our government," said Richard Clarke, the former White House counterterrorism chief under presidents Clinton and, until 2002, Bush. "It's mind-blowing."

A U.S. official familiar with the case said Tuesday that the government's investigation has uncovered no evidence so far that Prouty, who was employed by the CIA until last week, had compromised any undercover operations or passed along sensitive intelligence information to Hizbullah operatives. After joining the CIA in June 2003, Prouty was an undercover officer for the agency's National Clandestine Service, the espionage division, working on Middle East–related cases. She was reassigned to a less sensitive position about a year ago, after she first came under suspicion, officials said.

Prosecutors have not charged Prouty with espionage. Nonetheless, the case remains an "ongoing investigation" and "that is obviously something we're looking at," a senior law enforcement official said. Her lawyer declined comment today. Under the terms of her plea agreement, she faces six to 12 months behind bars and could be stripped of her U.S. citizenship.

The case is clearly a major embarrassment for both the FBI and CIA and has already raised a host of questions. Chief among them: how did an illegal alien from Lebanon who was working as a waitress at a shish kabob restaurant in Detroit manage to slip through extensive security background checks, including polygraphs, to land highly sensitive positions with the nation's top law enforcement and intelligence agencies?

Indeed, the bizarre details of the Prouty investigation—which include connections to both Hizbullah and a multimillion-dollar bribery ring involving a former senior U.S. Homeland Security official—could ultimately be cast as a war-on-terror version of the notorious spy cases of Aldrich Ames and Robert Hanssen, Soviet spies who worked for the CIA and FBI respectively.

"It's hard to imagine a greater threat than the situation where a foreign national uses fraud to attain citizenship and then, based on that fraud, insinuates herself into a sensitive position in the U.S. government," said Stephen J. Murphy, the U.S. attorney in Detroit.

According to court papers filed Tuesday, Prouty pleaded guilty to three charges in federal court in Detroit: naturalization fraud, unlawfully accessing a federal computer system to obtain information about her relatives as well as Hizbullah, and conspiracy to defraud the United States.

Prouty, according to court documents, first entered the United States from Lebanon in 1989 on a one-year nonimmigrant student visa. After her visa expired she illegally remained in the country, residing in Taylor, Mich., with her sister and another individual. In order to stay in the country and evade immigration laws, she offered money to an unemployed U.S. citizen to marry her in the summer of 1990. But according to her indictment Prouty "never lived as husband and wife with her fraudulent 'husband' and the marriage was never consummated sexually."

By 1992, the court papers say, Prouty landed a job as a waitress and hostess at La Shish, a popular chain of Middle Eastern restaurants in the Detroit area owned by a Lebanese businessman, Talil Khalil Chahine, who later came under federal investigation for his suspected ties to Hizbullah.

At this point Prouty's case seemed like a garden-variety case of marriage and immigration fraud. But as laid out in the court papers, the story took a more ominous turn in April 1999, when Prouty, using the alias of "Nada Nadim Alley" and her fraudulently obtained U.S. citizenship, landed a job as an FBI special agent. Prouty got the job under a special FBI "language program" designed to recruit Arabic and other foreign-language speakers, a bureau official said today. Not only was she quickly granted a security clearance, she was then assigned to the bureau's Washington field office, where she worked on an extraterritorial squad investigating crimes against U.S. persons overseas. In that capacity Prouty in September 2000 improperly tapped into bureau computers to access information about herself, her sister, and Chahine. Three years later Prouty again tapped into bureau computers to obtain information about a case she was not assigned to: a national security investigation targeting Hizbullah being conducted by the Detroit field office.

Prouty, the court papers suggest, may have had a personal motive for seeking information about Chahine and Hizbullah. Her sister, Elfat El Aouar, had by then married Chahine, and in August 2002 both of them had attended a "fund-raising event in Lebanon." The keynote speakers at the event, according to the court papers, were Chahine and Sheikh Muhammad Hussein Fadlallah, the spiritual leader of Hizbullah, who has been designated by the U.S. Treasury Department as a "Specially Designated Global Terrorist."

Chahine was subsequently charged in two federal indictments. One of them last year accused him of skimming $20 million from his chain of restaurants in Detroit and routing some of that cash to unnamed persons in Lebanon. (Prouty's sister was also charged in that case. She has since pleaded guilty and was sentenced to 18 months in prison last May.) In the second indictment last month, Chahine—now believed to be a fugitive in Lebanon—was charged with conspiring with a former senior official of Homeland Security's office of Immigration and Customs Enforcement (ICE) in Detroit to extort funds from former employees of Chahine's La Shish restaurant chain. (Although he has since left the country, Chahine's lawyer has denied that Chahine had any involvement in terrorism.) The ICE official, Roy Bailey, was accused of misusing his position to accept "large sums of currency and other property in return for granting immigration benefits," according to a Justice Department press release last month. (Bailey has entered a plea of not guilty.)

Officials emphasized that there is still there is much they don't know about Prouty's activities—most important, whether she was actively providing U.S. government intelligence to Hizbullah. But the FBI acknowledged Tuesday that they didn't discover Prouty's connections to Hizbullah until December 2005—apparently as a result of the ICE bribery probe—more than two years after she left the bureau to go work for the CIA's Clandestine Service. Eventually the bureau alerted the agency and the CIA later reassigned her to a less sensitive position, a U.S. official said. But while both agencies are still doing damage-control assessments, the mere fact that Prouty got as far as she did has stunned the counterintelligence community. "This is not good," said one chagrined senior official, who, like all officials quoted anonymously in this story, declined to speak on the record owing to the sensitivity of the subject.

Paul Gimigliano, a CIA spokesman, said, "The CIA, among other federal agencies, cooperated with the investigation. Ms. Prouty was a midlevel employee who came to us in 2003 from the FBI, where she had been a special agent. The naturalization issue occurred well before she was hired by the Bureau. She formally resigned from the federal service as part of her plea agreement."