Someone tracking cent of U.S. contractors?

WASHINGTON - Money talks, but can it also follow your movements?

In a government warning high on the creepiness scale, the Defense Department cautioned its American contractors over what it described as a new espionage threat: Canadian coins with tiny radio-frequency transmitters hidden inside.

The government said the mysterious coins were found planted on U.S. contractors with classified security clearances on at least three occasions between October 2005 and January 2006 as the contractors traveled through Canada.

Intelligence and technology experts said such transmitters, if they exist, could be used to surreptitiously track the movements of people carrying the spy coins.

The U.S. report does not suggest who might be tracking American defense contractors or why. It also does not describe how the Pentagon discovered the ruse, how the transmitters might function, or even which Canadian currency contained them.

Further details were secret, according to the U.S. Defense Security Service, which issued the warning to the Pentagon's classified contractors. The government insists the incidents happened, and the risk was genuine.

"What's in the report is true," said Martha Deutscher, a spokeswoman for the security service. "This is indeed a sanitized version, which leaves a lot of questions."

Top suspects, according to outside experts: China, Russia or even France - all said to actively run espionage operations inside Canada with enough sophistication to produce such technology.

The Canadian Security Intelligence Service said it knew nothing about the coins.

"This issue has just come to our attention," CSIS spokeswoman Barbara Campion said. "At this point, we don't know of any basis for these claims."

She said Canada's intelligence service worked closely with its U.S. counterparts and would seek more information if necessary.

Experts were astonished about the disclosure and the novel tracking technique, but they rejected suggestions Canada's government might be spying on American contractors. The intelligence services of the two countries are extraordinarily close and routinely share sensitive secrets.

"It would seem unthinkable," said David Harris, former chief of strategic planning for the Canadian Security Intelligence Service.

Harris said likely candidates included foreign spies who targeted Americans abroad or businesses engaged in corporate espionage. "There are certainly a lot of mysterious aspects to this," Harris said.

Experts said such tiny transmitters would almost certainly have limited range to communicate with sensors no more than a few feet away, such as ones hidden inside a doorway. The metal in the coins also could interfere with any signals emitted.