"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 Defence Security Service, an agency
of the Defence 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 travelled 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.
But the Defence Department subsequently acknowledged that it
could never substantiate the espionage alarm that it had put out
and launched the internal review that turned up the true nature
of the mysterious coin.
Meanwhile, in Canada, senior intelligence officials expressed
annoyance with the American spy-coin warnings as they tried to
learn more about the oddball claims.
"That story about Canadians planting coins in the pockets of
defence contractors will not go away," Luc Portelance, now
deputy director for the Canadian Security Intelligence Service,
wrote in a January e-mail to a subordinate. "Could someone tell
me more? Where do we stand and what's the story on this?"
Others in Canada's spy service also were searching for
answers. "We would be very interested in any more detail you may
have on the validity of the comment related to the use of
Canadian coins in this manner," another intelligence official
wrote in an e-mail. "If it is accurate, are they talking
industrial or state espionage? If the latter, who?" The identity
of the e-mail's recipient was censored.
Intelligence and technology experts were flabbergasted over
the warning when it was first publicized earlier this year. The
warning suggested that such transmitters could be used
surreptitiously to track the movements of people carrying the
coins.
"I thought the whole thing was preposterous, to think you
could tag an individual with a coin and think they wouldn't give
it away or spend it," said H. Keith Melton, a leading
intelligence historian.
But Mr. Melton said the Army contractors properly reported
their suspicions. "You want contractors or any government
personnel to report anything suspicious," he said. "You can't
have the potential target evaluating whether this was an
organized attack or a fluke."
The Defence Security Service disavowed its warning about spy
coins after an international furor, but until now it has never
disclosed the details behind the embarrassing episode. The U.S.
said it never substantiated the contractors' claims and
performed an internal review to determine how the false
information was included in a 29-page published report about
espionage concerns.
The Defence Security Service never examined the suspicious
coins, spokeswoman Cindy McGovern said. "We know where we made
the mistake," she said. "The information wasn't properly vetted.
While these coins aroused suspicion, there ultimately was
nothing there."
A numismatist consulted by the AP, Dennis Pike of Canadian
Coin & Currency near Toronto, quickly matched a grainy image and
physical descriptions of the suspect coins in the contractors'
confidential accounts to the 25-cent poppy piece.
"It's not uncommon at all," Mr. Pike said. He added that the
coin's protective coating glows peculiarly under ultraviolet
light. "That may have been a little bit suspicious," he said.
Some of the U.S. documents the AP obtained were classified
"Secret/Noforn," meaning they were never supposed to be viewed
by foreigners, even America's closest allies. The government
censored parts of the files, citing national security reasons,
before turning over copies under the U.S. Freedom of Information
Act.
Nothing in the documents — except the reference to
nanotechnology — explained how the contractors' accounts evolved
into a full-blown warning about spy coins with radio frequency
transmitters. Many passages were censored, including the names
of contractors and details about where they worked and their
projects.
But there were indications the accounts should have been
taken lightly. Next to one blacked-out sentence was this
warning: "This has not been confirmed as of yet."
The Canadian intelligence documents, which also were
censored, were turned over to the AP for $5 under that country's
Access to Information Act. Canada cited rules for protecting
against subversive or hostile activities to explain why it
censored the papers.