JUDGE DEMANDS DOCUMENTS ON FBI COMPUTER SPY SYSTEM.

(Reuters) - A federal judge on Friday ordered prosecutors to show him documents next week describing how a classified FBI computer spying system works, saying their argument the system should be kept secret from defense attorneys was "gobbledygook."

The computer bugging question, which may have important implications for the public's right to computer privacy, has emerged as a key issue from the government's illegal gambling case against Nicodemo Scarfo, 36.

Scarfo, the son of jailed mobster Nicodemo "Little Nicky" Scarfo, is accused of running the loan-sharking and illegal gambling operations of the Gambino crime family.

During its 1999 investigation, the FBI obtained a search warrant to secretly install a "key logger device" on the computer the younger Scarfo used at his Belleville, New Jersey, business, Merchant Services of Essex County.

The device deciphered a password that let agents crack into an encryption program Scarfo was using and then monitor virtually every keystroke he made for the next two months.

The government is resisting the disclosure, claiming the system is classified and that revealing it would endanger national security. But when prosecutors presented an affidavit on Friday from a high-level Justice Department official exhorting the system's classified status, U.S. District Court Judge Nicholas Politan said it was gibberish.

PROSECUTION'S ARGUMENTS "GOBBLEDYGOOK"

"I don't know what it means. It's gobbledygook. More gobbledygook," Politan said, adding he was unconvinced that the system ought to be classified at all.

"It says the guides (that define classified material) are even secret. What do I do with that?" he said.

The affidavit by Neil Gallagher, assistant director of the FBI's National Security Division, also failed to prove national security was threatened, Politan said.

Assistant U.S. Attorney Ronald Wigler told reporters that next Friday he would privately give Politan classified and unclassified summaries of the system's operation and more affidavits detailing the national security aspects at stake.

Wigler insisted the government went by the book when it obtained a search warrant to install the key logger device, but he acknowledged that current statutes did not specifically address what type of warrant was needed for such a device.

"The problem is the technology has advanced quicker than the law," he said, adding current statutes do not state which law applies when authorities use something like the key logger device.

The judge, in the first ruling of its kind, will decide whether the secret use of the key logger device is protected under the Classified Information Procedures Act, which the government has invoked.

A Washington-based public interest group that has been monitoring the case said the act, normally used in foreign espionage cases, should not be employed for domestic cases.

"I don't think they should use a national security technique for domestic cases," David Sobel, general counsel for the Electronic Privacy Information Center, said after the hearing. "There ought to be a national security issue to the underlying case."