Spy case could have done 'grave injury' to Canada's ties with allies

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The case of a naval intelligence officer accused of leaking classified military documents to a foreign adversary has done significant damage to Ottawa's treasured intelligence-sharing relationships with key allies, sources say.

The fallout has been an extraordinarily sensitive topic for the federal government since January, when a Canadian Forces sailor was arrested for espionage and reports surfaced that some Russian diplomats were asked to go back to Moscow.

No officials in Ottawa have been cleared to speak publicly about the damage, but some government sources say the strain on relations with allies cannot be fully gauged until damage assessments determine exactly what has been lost. Problem is, no one seems to know the extent – the leaks of military information are alleged to date back years, while the accused is understood to have been put under surveillance for only a matter of months.

Some sources characterize the damage – particularly to relations with the United States – as grave, while others say they hope bad feelings will blow over. Defence Minister Peter MacKay has said key allies retain "full confidence in Canada."

In mid-January, Canadian Forces Sub-Lieutenant Jeffrey Delisle was arrested and charged with spying. The 40-year-old worked at HMCS Trinity in Halifax, a naval intelligence hub. There, military surveillance gleaned by NATO and English-speaking allies are collated into a real-time picture of global security for Canadian policy makers.

The espionage case is a nightmare for federal security agencies, which benefit disproportionately from sharing state secrets with big players such as the United States and the United Kingdom despite the fact that Canada gives relatively little in return. Various federal officials have openly attested over the years that being a "net importer" of intelligence breeds fears that allies could cut off the information flow should Canada ever be seen as an untrustworthy junior partner.

The first person criminally charged with violating Canada's Security of Information Act, SLt. Delisle is accused of multiple counts of leaking secrets to a "foreign entity" starting in July, 2007.

No evidence has been disclosed publicly. Prosecutors are even keeping portions of the criminal dossier under wraps from SLt. Delisle and his lawyer. "There is quite a bit of stuff that is blacked out. That will present some challenges down the road," attorney Mike Taylor said in an interview on Tuesday, adding that, for now, he is focused on his client's March 28 bail hearing.

There is no suggestion that the accused was part of a larger spy network. In fact, some government sources say they believe SLt. Delisle took the initiative to sell state secrets to foreigners and that only modest amounts of cash were involved.

Government insiders and allies are now asking how the accused got security clearance from government screeners despite some obvious red flags. The father of four had declared bankruptcy in 1998, and went through a painful separation from his wife a decade later. Both life-altering events are laid out in public court documents.

SLt. Delisle had been cleared to handle top-secret information – which, by definition, causes "exceptionally grave injury" to the national interest if compromised.

The federal agency that assesses the suitability of civil servants to handle secret and top-secret information now screens three times as many people as it used to: The Canadian Security Intelligence Service screened 40,000 employees in 2005-2006 and more than 120,000 in 2009-2010. (This number does not include 200,000 additional people who were looked at that year to work at the Vancouver Olympics.)

Canadian history has no obvious parallels to the Delisle case. Most allegations of spying involve foreign nationals, and trials are rare in all countries, given how they highlight security vulnerabilities and cause profound embarrassment.

In such cases, expulsions, and not prosecutions, are the norm. When U.S. authorities rounded up a 10-member spy ring two years ago, the accused were quietly deported to Russia in exchange for the release of prisoners overseas. No such exchange or deportation is possible in the case at hand – SLt. Delisle is a Canadian citizen who was apprehended in his hometown of Halifax.

In Canada, different federal departments screen to different standards. For example, federal spy services routinely polygraph their employees to gauge their reliability, but the Canadian Forces is averse to subjecting soldiers to the lie-detection machines.

Rarely do documented examples of frayed intelligence relationships among English-speaking countries surface, but some examples are known. In 2004, U.S. president George Bush was briefed by his advisers that prime minister Paul Martin was about to beseech him to allow Canada into an intelligence channel that was created for English-speaking countries – the United States, the United Kingdom and Australia – fighting together in the Iraq invasion even though Canada had refused to join the military action.

"The [Canadian]government has expressed concern at multiple levels that their exclusion from a traditional 'four-eyes' construct is 'punishment' for Canada's s non-participation in Iraq," reads the leaked State Department briefing note released last year via WikiLeaks. "And they fear that the Iraq-related channel may evolve into a more permanent 'three-eyes' only structure. …"