Canadian coin created false espionage scare in U.S. Army officials thought harmless Canadian quarter concealed a tiny radio transmitter

This unusual Canadian 25-cent piece features the red image of a poppy, Canada's flower of remembrance, inlaid over a maple leaf. The coin was the culprit behind a U.S. Defense Department false espionage warning earlier this year about mysterious coin-like objects with radio frequency transmitters. less This unusual Canadian 25-cent piece features the red image of a poppy, Canada's flower of remembrance, inlaid over a maple leaf. The coin was the culprit behind a U.S. Defense Department false espionage warning ... more Photo: AP Photo: AP Image 1 of / 1 Caption Close Canadian coin created false espionage scare in U.S. 1 / 1 Back to Gallery

WASHINGTON — An odd-looking Canadian quarter with a bright red flower was the culprit behind a false espionage warning from the Defense Department about mysterious coins hiding radio transmitters.

The "poppy quarter" was so unfamiliar to suspicious U.S. Army contractors traveling 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 nano-technology," according to once-classified U.S. government reports and e-mails obtained by the AP.

The silver-colored 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 nano-technology on the coin actually was a protective coating the Royal Canadian Mint applied to prevent the poppy's red color from rubbing off. The mint produced nearly 30 million such quarters in 2004 commemorating Canada's 117,000 war dead.

One U.S. contractor, who discovered the coin in the cup holder of a rental car, said, "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."

One contractor thought someone had placed two of the quarters in an outer coat pocket after the contractor had emptied the pocket hours earlier.

Warning unsubstantiated

The confidential accounts led to a warning from the Defense Security Service , an agency of the Defense 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 traveled through Canada.

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

In Canada, senior intelligence officials had expressed annoyance with the U.S. spy-coin warnings.

"That story about Canadians planting coins in the pockets of defense contractors will not go away," Luc Portelance, now deputy director for the Canadian Security Intelligence Service, wrote.

The Defense Security Service disavowed its warning about spy coins after an international furor. The U.S. 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.