It began in mid-December 1981. A Navy civilian employee and an East German diplomat, Dieter Walsch, met at the East German Embassy in Washington to discuss a possible business arrangement.
On the surface it was simple: The employee would provide classified US documents and Mr. Walsch would pay for them. In fact, it was a little more complicated - the Navy employee was secretly working with the Federal Bureau Investigation and the Naval Investigative Service.
According to the State Department's diplomatic list, Walsch was an administrative attache at the East German embassy. According to a Federal Bureau of Investigation affidavit filed in federal court, Walsch was ''an officer in the GDR Ministry of State Security, East Germany's chief intelligence-gathering organization.''
The Navy employee worked at the Naval Electronic Systems Engineering Command in Charleston, S.C.
During the next four months, in early 1982, Walsch paid the Navy employee $3, 500 for various documents. Subsequently, the employee was instructed to deliver future documents to Mexico City.
It was on the employee's second trip to Mexico, in October 1982, that he first met Alfred Zehe.
Mr. Zehe, a physicist from Dresden, East Germany, was described by the FBI as an ''exchange scholar'' at the University of Puebla in Puebla, Mexico. But he was introduced to the Navy employee at the East German commercial office in Mexico City as a ''scientific-technical expert,'' according to court documents. The Navy employee was told Zehe would evaluate the worth of the secrets to be sold to the East Germans. (The classified documents had been prescreened by US officials.)
According to FBI records, Zehe told the Navy employee that the documents he had provided were useful. But he said that more complete information would be even more useful. He asked the employee to deliver entire technical manuals.
At one meeting on Feb. 26, Zehe is reported to have given the Navy employee a special camera with film cassettes capable of photographing up to 2,600 pages of documents on one cassette.
During the course of the year, Zehe is alleged to have paid the Navy employee to Mexico City and one trip July 28 to East Berlin.
The next meeting was scheduled for Dec. 17. But it would never be held.
Early last month, Zehe decided to travel to Boston, apparently to attend a conference of the American Vacuum Society. The FBI found out and registered six agents as conference participants to mingle among the 2,600 others at the conference and keep Zehe under continual surveillance. He arrived on Nov. 1.
According to the FBI, Zehe only ''briefly'' attended the conference. Rather, he is said to have traveled extensively in the Boston area. He was under 24-hour surveillance prior to his arrest Nov. 4.
James E. Lancaster, the FBI agent in charge of the Zehe investigation, wrote in the affidavit: ''It is my opinion that the purpose of Zehe's trip to Boston was intelligence-related.'' But the Boston office of the FBI has declined to comment further on Zehe's activities. Zehe maintains he is not a spy.
Boston's Route 128 area is second only to California's Silicon Valley as a national center for electronics and computer-related research. As such it is seen by the FBI and intelligence experts as a natural target for foreign espionage activity.