Living the American dream. But all the time spying for Russia

On Wednesdays, Anna Chapman would sit in a coffee shop in Times Square or another public space in Manhattan and transmit information to a Russian official

The endgame came last Saturday, on a sweltering early summer afternoon in downtown Washington. The year was 2010, but the Cold War might never have ended. The FBI undercover agent, purporting to be a Russian government official, and a suburban travel agency employee named Mikhail Semenko met on a street corner six blocks east of the White House, and exchanged pre-arranged code phrases. "Could we have met in Beijing in 2004? Yes, we might have, but I believe it was in Harbin."

With the formalities out of the way, the pair got down to serious business, discussing problems with communications equipment, before the undercover agent gave Semenko a newspaper folded around an envelope containing $5,000. The package was to be dropped off at an agreed spot in a park in suburban Arlington the following day.

Semenko carried out his instructions. Within hours he was arrested along with nine other people across north-eastern US, all of them accused of belonging to a network of Russian deep-cover secret agents, spying on the United States. Whatever else, the operation had not been rushed; some of the alleged agents had been living here since the early 1990s, when the Soviet Union was still warm in its grave. The FBI, court papers show, had been on the case since at least 2004.

Most of the suspects had acquired American identities, American families, American jobs and American children. They were unimpeachably suburban, imbued with the bedrock suburban virtues of faith, family and proper living – and owning your own home.

Take Richard and Cynthia Murphy, referred to in the court filing as 'the New Jersey Conspirators'. They lived with their two young daughters in the little town of Montclair, a dozen miles west of New York City, in a smartly painted house with a trim and tended garden, resplendent with hydrangeas.

The house seems to have had a bit of history, however, with their masters in Moscow. The Murphys wanted to buy it themselves, "a natural progression of our prolonged stay here", they explained to the SVR, the Russian intelligence service intercepted by the FBI. It was a convenient way of solving their particular housing problem and, they added, a nice way to "'do as the Romans do' in a society that values home ownership".

But the SVR apparently balked. Maybe the house would cost too much, maybe it considered the Murphys were going a bit too native. In the end a compromise was reached: the house would technically be owned by "C" – Moscow Centre – but the Murphys would live in it.

Such were the vicissitudes of being one of the 'Illegals,' as the FBI termed the network. The name was a nod to one of the great traditions of the espionage business, of deep-cover agents who built their entire lives in their target countries, operating without diplomatic cover.

Illegals have left a lasting mark on the history of spying. There was Rudolf Abel, who ran a major Soviet spy ring in the US until his arrest in 1957, even as he pretended to be an artist. There were Peter and Helen Kroger, seemingly innocuous antiquarian bookdealers who lived in quintessentially suburban Ruislip near London – until they were unmasked in 1961 as ringleaders of the Portland Spy Ring that stole important British naval secrets.

Over the years the tradecraft of spying has changed. Back then, microfilm and dead drops were the order of the day. Dead drops and "brush-passes" feature in this 21st-century tale of illegals, as well as tried and trusty '"micro-bursts" of encrypted data, now called "radiograms", that can be picked up by a receiver set to the proper frequency.

But the newly uncovered network also employed state-of-the-art communications between laptop computers set to special networks, as well as "steganography", where secret data is hidden in a seemingly normal computer screen image.

Even so, the early indications are that this bunch of illegals will not occupy a very exalted place when the definitive history of the second oldest profession is written. Apart from the aforementioned Murphys, the couples include Donald Heathfield and Tracey Foley of Cambridge, Massachusetts, as well as Vicky Pelaez, a writer for the Spanish language paper El Diario, who lived with her husband, Juan Lazaro, a few miles up the Hudson River from New York City. Then there were Michael Zottoli and Patricia Mills, residents of a high-rise block of flats in Arlington, Virginia, just across the river from Washington DC.

Semenko, however, to be in a slightly different category, as does Anna Chapman, the 10th individual arrested. A 28-year-old divorcee who bears a passing resemblance to a Russian tennis starlet, she was described by the New York Post yesterday as "a flame-haired, 007-worthy beauty who flitted from high-profile parties to top-secret meetings around Manhattan".

According to court papers, Ms Chapman had 10 Wednesday encounters with a Russian official, where she would sit in various New York public spaces – ranging from a Tribeca bookshop to a coffee shop in Times Square – and transmit information over private wireless networks. Her lawyer insists she is perfectly harmless – but prosecutors claim she is a "highly trained" Russian agent and "a practised deceiver" who had to be denied bail.

Most importantly, both she and Semenko seem to have retained their original Russian identities. Not so the eight others, the true "illegals" whose real names may never be known. Anyone who has seen The Day of the Jackal will know how easy it could have been for the SVR to take the birth certificate of a dead American or Canadian to build new, entirely false personas for its agents. Richard and Cynthia Murphy, Michael Zottoli and Patricia Mills, who are you really?

From the court papers, Semenko and Chapman would appear to be links between the eight and the Russians. If the group has a single co-ordinator it would appear to be the 11th alleged conspirator, Christopher Metsos, who travels on a Canadian passport and was reportedly arrested yesterday in Cyprus. The court papers depict him as the paymaster, under surveillance by the FBI since 2004, if not before.

Quite possibly, the group, as prosecutor Michael Farbiarz maintains, is just "the tip of the iceberg." Indeed, if the former KGB officer Oleg Gordievsky, who was exfiltrated to Britain in 1985, is to be believed, the SVR may be running 40 or 50 couples as deep-cover agents in the US. If so, the question must be asked: are they getting good value for this long-term investment? The evidence suggests not.

Ensconced in suburban New Jersey, the Murphys, for instance, were asked for information about President Obama's trip to Russia in the summer of 2009, and for details of Washington's stance on the new nuclear arms reduction treaty that was signed a few months ago. From their base in Cambridge, the Heathfield/Foley duo is said to have established contact with an American nuclear weapons specialist.

But no classified information ever changed hands: the 11 are not even charged with espionage, merely with failing to register as agents of a foreign government, an offence that carries a maximum jail term of five years. Rudolf Abel or Helen and Peter Kroger – this motley band is not.

Indeed the entire concept of illegals may now be somewhat passé. As any intelligence officer will admit, the vast bulk of his raw material is already in the public domain as "open source material". In the internet age, that proportion has surely increased.

But nothing matches the appeal of what is not in the public domain; as messages intercepted by the FBI indicate, the SVR was after "tidbits unknown publicly but revealed in private by sources close to the state department government and major think-tanks." Nor is the failing exclusively Russian. It was the Bush administration's obsession with secret intelligence, no matter how dodgy the source, that led to a disastrous war in the name of non-existent WMD.