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Soviet Espionage: Three Arrested for Spying

by Bill Uttenweiler
The Aerospace Corporation
Vandenberg AFB, CA

What a difference a year makes!

On September 20, 1996, Theresa M. Squillacote and a Process Action Team (PAT) which she headed received the "Heroes of Reinvention – Hammer Award" at the Pentagon. Then Secretary of Defense William Perry presented it to her on behalf of Vice President Al Gore in recognition of excellence in the effort to reinvent government.

On October 4, 1997, Squillacote, her husband, and a college friend were arrested by the FBI and charged with espionage related to activities over two decades.

The 200-page affidavit filed in Federal District Court in Alexandria, VA, described the three as former student radicals and Communist Party sympathizers who met at the University of Wisconsin at Milwaukee during the 1970s.

Squillacote’s husband is 42 year old Kurt A. Stand, a labor union representative with an international organization. Authorities accused Stand of spying since 1972, when he was recruited by East Germany to line up spies in Washington, DC. The FBI alleged he was introduced to the East German intelligence officers through his father, who was already a spy for them.

Stand recruited Squillacote about the time the couple were married in 1980. He recruited James Clark, described as a paralegal researcher for a private investigator, in 1976. Clark had once worked for a defense contractor in Boulder, CO, and later for the US Army. He held a SECRET clearance from 1986 until at least 1992.

This was despite a past which should have raised warning flags. The FBI had a 1975 report describing his participation in the youth arm of the Communist Party. The military also had anti-draft statements he submitted to the Selective Service in the 1960s in which he pledged to "fight to defeat U.S. imperialism" and quoted Mao Tse-tung on revolution.

Squillacote in 1979 had organized a speaking appearance at the University of Wisconsin at Milwaukee for a man convicted of spying for North Vietnam, and she had been married to a communist sympathizer for over a decade when the Pentagon gave her a SECRET clearance in 1991. Asked how that clearance could have been approved, FBI official Thomas J. Pickard told reporters "I’m not going to try to explain it."

Prior to her Pentagon job, Squillacote had worked in government for the National Labor Relations Board, as a fellow for the House Armed Services Committee, and for the Defense Systems Management College. After receiving the AR Hammer Award, she left government to complete an advanced degree in acquisition law and had applied for a job in the White House’s Office of Management & Budget.

The spy ring was reportedly tripped up when German-speaking FBI agent Katharine Alleman found the names of Squillacote, Stand, and Clark in East German intelligence files obtained after the Berlin Wall was torn down. While many of those mentioned in the files had retired or left government service, Squillacote still was an active employee. During a covert search of her home in 1996 under a warrant issued by the Foreign Intelligence Surveillance Court, the FBI found evidence of continued intent to commit espionage.

They discovered a note from a South African Communist party official who was also a member of his nation’s government. Addressed to a "Lisa Martin," it thanked her for a letter praising a book he had written. On Squillacote’s computer they found "Martin’s" letter to the official. Reading between the lines, the FBI realized it was an offer to spy for the South Africans.

The FBI launched a "false flag" operation. They faked a letter from the South African asking if "Lisa Martin" might want to meet "one of our special components." If interested, she was to travel alone to New York for a meeting in a hotel bar. She allegedly did, boasting at that meeting, "Between myself and my husband, we go back in this work to 1918. And I’m kind proud of it."

Clark was also ensnared in a sting. In his case, an FBI agent posing as a Russian friend of his former East German handler contacted him. Clark bolted from the first rendezvous, nervous that it was a trap. He was coaxed back, and allegedly talked for hours about his experience as an East German spy.

Commenting on the security concerns raised by the case, current Defense Secretary William Cohen voiced concern that regular physical searches for classified documents at buildings like the Pentagon, where 23,000 people work, might be impractical and overly intrusive.

However, Cohen stated, the Pentagon will carefully assess the damage and review security procedures. "I am sure we will go back and take a look and see how long it had been going on, how it happened to occur, why it wasn’t detected, and why we had to wait for some revelations coming out of the East German files, and what measures, if any, might have been employed to detect it."

[Webmaster's Note: This article was originally written in November 1997 for the VSAC News and NCMS Channel Islands Newsletter.]