Gusev had been on the radar screen since first arriving in the U.S. last spring, as a diplomat assigned to the Russian embassy. Within months he was spotted around the State Department by a top secret group of FBI agents who work in disguise and do nothing but covert surveillance. Agents knew that Gusev, 54, was not a diplomat, but a spy, an experienced technician with the Russian spy service.
Gusev went to the spot regularly. He never went inside. Sometimes, he would park his car, feed the meter, and then soon after move to another parking space further down the street. He always showed up with a leather bag.
"I think the bag has some significance," says Neil Gallagher, the head of National Security. "I'm confident there was more than likely a piece of equipment in the bag."
The FBI used its own high-tech equipment to see if any signals were being sent. Agents did find signals, which led straight to the Gusev. Gusev's Foggy Bottom strolls were apparently a search for the best spot to operate a remote-controlled listening and recording system, some of it hidden in that bag, some in his car.
But FBI agents had a problem: although they heard the signal, they had no idea where the bug itself was planted. They knew that the signal was coming from the State Department, but could not pinpoint it.
Room by room, they swept the building - mostly at night so as not to arouse suspicions. When they found the bug, they were shocked. It was on the seventh floor of the State Department - down the hall from "Mahogany Row" where Secretary of State Madeline Albright and her top aides have offices. The Russians had a listening device on the very floor where America's foreign policy is crafted.
"I think this is a huge deal," says Paul Redmond, the former head of counter-intelligence at the CIA. "You have the apparent appalling fact that a hostile intelligence service, however they did it, put an audio device on the seventh floor, the top floor, of, in effect, our foreign ministry."
As a professional, Gallagher is impressed with the Russian work. "Someone had to go in and take a survey, go back and have a particular device designed, and then somehow get back into State Department with the device and introduce it," he says.
"This was a very sophisticated device, technically sophisticated that was very professionally placed within the State Department."
To find the bug, the FBI used sophisticated counterintelligence technology, which sniffed out a tiny microphone and transmitter hidden inside some wooden molding in a conference room. Investigators didn't immediately remove it for fear o blowing the Russian operation. Instead, they waited for Gusev to return to his usual post.
They discovered that Gusev's normal parking spot gave him an excellent sight line to the bugged conference room.
According to Oleg Kalugin, a former general in the KGB, the bug installation was straight out of Russian spy manuals.
"It's the design, the camouflage are all manufactured in Moscow," Kalugin says. "From my own experience, we would simply send a description of a specific place. We would give the details, the size, the measurements, and everything and the color by the way, it's important to have the right tint. If it's a mahogany, it should be mahogany. If it's oak, it's oak. But then in Moscow they would simply reproduce a piece of the specified measurements of the specified color and then you would have to put it underneath where ever you picked out the right place."
Agents do not yet know how the bug was actually planted. They do not think Gusev planted it. While being watched, he never entered the State Department. Kalugin thinks somebody else planted the bug.
Redmond says that the State Department must tighten security. "The State Department clearly lives in the 19th century," he says. "They still want to believe that gentlemen don't read other gentlemen's mail."
Others also say that the State Department has loose security. The State Department's own Inspector General found that highly classified documents were mishandled, visitors often went unescorted, and some rooms were not swept for bugs. Top secret files - including some from the Secretary of State's own offices - mysteriously disappeared.
Two years ago security officials required all foreign visitors to have an escort inside the building. But the higher-ups thought the new rules were a nuisance, and did away with them.
That may have been a costly mistake. FBI and State Department sources now say they are virtually certain that Gusev's assistant - another Russian spy posing as a diplomat - may have gotten into the building, and from that point would have been allowed to walk about unescorted.
Investigators are still trying piece together what information was lost. But officials are downplaying the breach, saying the bugged conference room belonged to the department's oceanography branch and was used mostly for low-level meetings.
Redmond, though, thinks the room may have been used for sensitive meetings.
Gallagher and his security team are in the process of identifying every meeting that occurred in the room, and are trying to crosscheck that information with time when Gusev was listening in.
On a chilly morning last December, investigators finally took out the bug. When Gusev returned to his post, the FBI detained him, and he was ordered out of the country. Meanwhile technicians carefully removed the conference room molding.
"From a professional standpoint I would describe it as a major feat, a coup indeed,"Kalugin says. "From a political standpoint I think it's a blunder. After all the United States today is a partner of Russia right? We are no longer at war and yet what do we want to know in the State Department? As far as I'm concerned, I do not need that. I would not be surprised if they would concentrate on stealing technological secrets or something which would help Russia's economy."
Redmond agrees. "If I were in Moscow, what I'd want to know is what's Microsoft going to do," he says. "What's Sun going to do?"
Ironically, the discovery of the Gusev bug may give the United States a temporary edge in the contest. FBI technicians will now spend months analyzing the bug, learning as much as possible about Russian spy technology. Gallagher says the U.S. may try to create a device that can turn off the Russian bugs.
Says Gallagher: "We've probably got their attention."