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ESPIONAGE The Satellite Secrets Are in the E-Mail

Brian Regan was no 007. When the FBI arrested him at Washington's Dulles International Airport last week as he was about to board a flight to Frankfurt, Germany, they allegedly found a slip of paper with names and addresses of foreign spymasters in his shoe. But the retired Air Force sergeant--now charged with conspiracy to commit espionage--will likely rate a footnote in history because of the central role computers and the Internet played in his case. "This is really 21st-century espionage," says an FBI official.

The United States was first alerted to Regan last August when the 38-year-old, who'd just retired from the military after 20 years with $53,000 in consumer debt, allegedly advertised secrets for sale in a letter. Regan, a trained cryptanalyst, had been working for the previous four years at the National Reconnaissance Office, the supersecret agency that runs spy satellites. "He had access to everything," said one source. The FBI alleges Regan mailed a letter to "Country A"--identified by NEWSWEEK sources as Libya--offering his services, and a few pages of classified material as a come-on.

Regan's letter was intercepted, with the help of a foreign source, along with two other encrypted messages. It took U.S. code breakers three months to break the ciphers, revealing instructions to the Libyans to e-mail a certain Web address. The FBI learned that the address belonged to a Steven Jacobs of Alexandria, Va., and by April had identified Regan as Jacobs. When FBI experts then combed through the hard drive of his old computer at the NRO, they say they found proof that he had downloaded the materials sent to Libya.

In the guise of Libyan intelligence, sources tell NEWSWEEK, the FBI e-mailed "Jacobs," inducing him to fly to Munich, Germany, last June to meet a U.S. agent posing as a Libyan spy. On his return, the FBI arranged for Regan, who was working for TRW, a big defense contractor, to get posted back to NRO and have his access to secrets restored. Regan was recorded surfing Intelnet, a top-secret intelligence Web, downloading secrets.

When Regan was arrested he thought he was on his way to meet with Libyan intelligence. But he allegedly had other potential clients in mind, too: sources tell NEWSWEEK that the addresses he was carrying included contacts for Iraqi intelligence, and for "some former [Soviet] bloc countries." ECSTASY Please Pass the Glow Sticks Score one for the ravers in their latest standoff with Uncle Sam. Earlier this year the United States indicted three men who put on raves at the State Palace Theater in New Orleans. It was the first time federal crack-house laws were used to try to shut down raves and the ecstasy usage they breed. In the end, both sides struck a plea agreement that, in part, required the State Palace to ban glow sticks, pacifiers and other items common at raves--"drug paraphernalia" in the government's view. But last week the American Civil Liberties Union sued U.S. Attorney General John Ashcroft over that provision, arguing that partyers have a constitutional right to express themselves with legal items. A federal judge in New Orleans agreed and--for now--blocked the government from enforcing the provision. While the Feds weigh an appeal, revelers are digging out their glow sticks for the next rave.

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Say What? Bush's baffling spin: It's 'incredibly positive news' that the money's gone! …