By Dan Eggen and Ellen Nakashima Washington Post Staff Writers Tuesday, August 14, 2001; Page A02 The U.S. government's investigation of nuclear scientist Wen Ho Lee was a "slapdash" affair that ignored other potential suspects and was deeply flawed from the beginning, according to portions of a classified Justice Department report released yesterday. The scathing report by federal prosecutor Randy I. Bellows said the FBI spent "years investigating the wrong crime" -- a suspicion that Lee gave nuclear weapons secrets to China -- when the secrets could have leaked from dozens of federal facilities and defense contractors. Although the report cited "no evidence of racism," it said Energy Department officials were too quick to focus on Lee and his wife in an initial, administrative inquiry that became the basis for the FBI's criminal investigation. "Wen Ho and Sylvia Lee should never have been the sole suspects," the report said. "The AI [administrative inquiry] should have been a sieve resulting in the identification of a number of suspects. Instead, it ended up as a funnel from which only Wen Ho and Sylvia Lee emerged. . . . Once Wen Ho Lee was 'tagged' with the patina of suspicion, the AI was all but over. He would be 'it'." The long-awaited report by Bellows, an assistant U.S. attorney in Alexandria who also spearheaded the prosecution of FBI agent Robert P. Hanssen, has been classified since its completion more than a year ago. The Justice Department yesterday released two heavily censored chapters of the 800-page document at the behest of a federal magistrate who is presiding over a defamation lawsuit filed by Notra S. Trulock III, the former head of intelligence at the Energy Department. The report, ordered by former attorney general Janet Reno, is the government's official accounting of the missteps that led to the nine-month incarceration of Lee despite widespread doubts about the government's case. The former Los Alamos scientist's prosecution spawned congressional hearings, civil lawsuits and a strong rebuke from the judge in his case, who said the treatment of Lee "had embarrassed this entire nation." Lee, a U.S. citizen born in Taiwan, was charged in December 1999 with 59 felony counts of mishandling classified information and violating the Atomic Energy Act, which could have brought a life sentence. After the government's case largely fell apart, he pleaded guilty last September to a single felony charge of mishandling classified information and was sentenced to the time he had already served. He was not charged with espionage and denied giving information to China. Lee is pursuing a civil lawsuit against the FBI and the departments of Energy and Justice for violating his privacy by leaking his name as a suspect. Trulock, meanwhile, is suing Lee and two Energy Department officials for allegedly accusing him of racism in the investigation. Bellows portrayed the case against Lee as a scattershot and misguided spy hunt, built on faulty assumptions about Chinese espionage and focused on one suspect to the exclusion of many others. Although large sections of the 155 pages released yesterday had been blacked out, many of the review's key conclusions were left intact. Trulock and other investigators at the Energy Department decided early on that Los Alamos National Laboratory was the probable source of design secrets allegedly obtained by China about the W-88, America's most advanced nuclear warhead, and they soon focused on Lee as "the most logical suspect," the report said. It added that the Energy Department "converted the [initial probe] from a broad identification of potential suspects to a virtual indictment of Lee." When the investigation was turned over to the FBI, its agents ignored other leads, instead embracing Energy's "grandiose claim that Wen Ho Lee was 'the only individual identified during this inquiry who had the opportunity, motivation and LEGITIMATE access' " to leak the secrets, the report said. Lee ultimately acknowledged copying classified nuclear data onto portable computer tapes and removing them from Los Alamos. Despite an intensive debriefing by the FBI under the terms of his plea agreement, the tapes have never been found, and Lee has never publicly explained why he made them or what became of them. The Bellows report said that "at first blush, the claim of ethnic targeting" appears to have some merit, because investigators proposed in 1995 to "identify those U.S. citizens, of Chinese heritage, who worked directly or peripherally" with nuclear weapons designs. However, the report said, the proposal was never carried out and, in any event, it was "simply acknowledging the fact that the PRC [People's Republic of China] specifically targets ethnic Chinese for espionage purposes." In the end, the report said, Energy Department investigators weighed a variety of factors, including extensive foreign travel and prior security infractions, in assembling a list of 32 potential suspects at the Los Alamos and Lawrence Livermore national laboratories. A full investigation of Lee was "warranted," but he should not have become the only suspect, it said. A month after Bellows submitted his report to Reno in May 2000, two former Energy officials who were directly involved in the investigation said in sworn affidavits that Lee had been singled out largely because of his race. Trulock said yesterday he was heartened by the Bellows report's finding that racism did not drive the probe, but disputed the assertion that Lee was treated as the only suspect. "What went to the FBI was a list," Trulock said. "The list had on it at least six Caucasians and three Asian Americans" at Los Alamos. The Energy Department last night issued a brief statement emphasizing that the Lee investigation "was conducted under policies and procedures" that have been scrutinized and improved. "We will review the Bellows report to determine whether or not further policy changes are necessary," it said. The FBI also said in a statement that it had already made reforms based on the report. Mark Holscher, Lee's lead defense attorney in the criminal case, said he was pleased by the report's finding that Lee was improperly singled out. "From the beginning, we believed that Dr. Lee should not have been the sole focus of an espionage investigation," he said. © 2001 The Washington Post Company