A mystery solved: Why red coin raised red flag

WASHINGTON - An odd-looking Canadian quarter with a bright red flower was the culprit behind an espionage warning from the U.S. Defense Department about mysterious coins with radio-frequency transmitters, the Associated Press has learned.

The harmless "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 nanotechnology," according to once-classified U.S. government reports and e-mail 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 described as suspicious in the contractors' accounts.

The supposed nanotechnology 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.

"It did not appear to be electronic in nature," wrote one U.S. contractor, who discovered the coin in the cup holder of a rental car. "Under high-power microscope, it appeared to be complex consisting of several layers of clear, but different material."

The confidential accounts led to a sensational 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.

"We'll have a good laugh over it," said John Regitko, who writes a newsletter for a leading coin-collecting organization, the Canadian Numismatic Association. "We never suspected there was such a thing [as spy coins] anyway."

Regitko predicted the quarter would become especially popular among collectors because of its infamy as the culprit behind the spy warning, despite the quarter's wide availability. "Everybody has some in their drawer at home," he said.