Is that a poppy quarter in your pocket or are you just spying on me?
U.S. army contractors thought coins carried radio frequency transmitters
By TED BRIDIS The Associated Press

WASHINGTON — An odd-looking Canadian quarter with a bright red flower was the culprit behind a false espionage warning from the U.S. Defence Department about mysterious coins with radio frequency transmitters, The Associated Press has learned.

The harmless "poppy quarter" was so unfamiliar to suspicious U.S. army contractors travelling in Canada that they filed confidential espionage accounts about them.

The worried contractors described the coins as "filled with something man-made that looked like nanotechnology," according to once-classified U.S. government reports and e-mails obtained by the AP.

The silver-coloured 25-cent piece features the red image of a poppy, Canada’s flower of remembrance, inlaid over a maple leaf. The unorthodox quarter is identical to the coins pictured and described as suspicious in the contractors’ accounts.

The supposed nanotechnology on the coin actually was a protective coating the Royal Canadian Mint applied to prevent the poppy’s red colour from rubbing off. The mint produced nearly 30 million such quarters in 2004 commemorating Canada’s 117,000 war dead.

"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.

"We’ll have a good laugh over it," said John Regitko, who writes a newsletter for a leading coin-collecting organization, the Canadian Numismatic Association. "We never suspected there was such a thing (as spy coins) anyway."

Regitko predicted the quarter will become especially popular among collectors because of its infamy as the culprit behind the spy warning, despite the quarter’s wide availability.

"Everybody has some in their drawer at home," he said.

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.

The Defence Department subsequently acknowledged it could never substantiate the espionage warning but until now it has never disclosed the details behind the embarrassing episode.

In Canada, senior intelligence officials had 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 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. The United States 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.

Some of the U.S. documents the AP obtained were classified "Secret/Noforn," meaning they were never supposed to be viewed by foreigners, even the United States’ 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.