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US Engineer Sentenced in Nuclear Espionage Case for Supporting China’s Nuclear Energy Program

Overview

On 30 August, a US nuclear engineer, Szuhsiung Ho, was sentenced to serve 24 months in prison and one year of supervised release for his part in illegally exporting US nuclear technology to China. The complex case highlights the need for an integrated and comprehensive approach to nuclear trade compliance.

Background

The case involved the illegal sharing of sensitive U.S nuclear technology and trade secrets with China. Szuhsieng Ho, a Taiwan-born naturalized US citizen and nuclear engineer working as an operative for the Chinese government was sentenced today to a two year prison term by a U.S District Court. He will also face a supervised one year probation period and a fine of $20,000. Ho had previously pleaded guilty under an agreement reached in January to engaging or participating in the unauthorized development or production of special nuclear material outside of the United States and originally faced a prison term of up to ten years and a fine of $250,000. Under the agreement, the US agreed to dismiss remaining counts against Ho from his original indictment in April 2016.

Ho operated a nuclear energy consulting business that engaged in the provision of technical consultancy to China General Nuclear Power Company (CGNPC), one of China’s nationalized nuclear entities. Ho assembled a network of experts from a number of different companies in order to help CGNPC indigenize knowledge related to the operation of nuclear reactors.

Ho’s illegal activity began as owner and president of Energy Technology International (ETI), a nuclear consulting firm. He acted, through ETI, as a senior advisor to the China General Nuclear Power Company (CGNPC), which is the largest Chinese state-owned enterprise specialized in the development and manufacture of nuclear reactors. CGNPC’s Board of Directors is comprised on Chinese Communist Party members and is controlled by the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC), a special Chinese government agency.

Under the direction of CGNPC, Ho recruited and sent US-based experts to Chinese nuclear facilities where they shared technical information and assistance related to the production of special nuclear material for CGNPC, including for CGNPC’s small modular reactor, advanced fuel assembly, and fixed in-core detector systems, as well as the verification and validation of nuclear reactor-related computer codes.

Under the US Atomic Energy Act (AEA) 42 U.S.C § 2011, the technology Ho arranged to export to China is controlled as sensitive and therefore requires special authorization from the US Secretary of Energy. The National Nuclear Security Administration of the US Department of Energy implements the AEA under 10 C.F.R Part 810, “Assistance to Foreign Atomic Energy Activities.” The US regulates civil nuclear cooperation and circumventing the authorization process can result in damage to US national security by compromising US nuclear technology and expertise. According to the plea agreement, Ho was aware that his activities required such authorization after meeting with US Department of Energy officials to discuss the work to be undertaken and received confirmation that the export was not covered by 10 C.F.R. § 810.3. This was not the only relevant statue, however, and Ho ultimately plead guilty to violations of 10 C.F.R. § 810.8.

The individuals involved in the Ho case provided numerous reports containing sensitive information and trade secrets to CGNPC. From the period of 1997 to 2016, Ho, CGNPC and ETI engaged in this activity with the alleged intent of securing China with a technological advantage for the production of nuclear material. However, according to the terms of the plea deal, Ho’s defense team negotiated for a guilty plea discounting Ho’s motivation to injure the US or secure an advantage to China, arguing that Ho became involved in the plot only to make money and cheapen the cost of Chinese nuclear energy by speeding up the production process.

One of the individuals Ho engaged was Ching Ning Guey, a nuclear engineer with the Tennessee Valley Authority (TVA). Guey provided CGNPC with reports and technical assistance related to the operation of nuclear reactors. The Tennessee Valley appear to have informed Ho’s associate, Guey, about the authorization requirements associated with the information that he would later transfer. Guey later admitted to the TVA Office of the Inspector General, to supplying sensitive information regarding the production of special nuclear material. TVA contacted the FBI and Ching cooperated in the investigation under a plea deal in 2015 where he pleaded guilty to participating in the development of special nuclear material outside of the United States in violation of 42 U.S.C. Guey is set to be sentenced September, 2017.

Lessons and Preventing a Recurrence

The case highlights a number of important points.

First, the US government is intent on enforcing controls on nuclear transfer including with countries like China that has a relatively mature nuclear sector. In this case, the US government relied upon a previously unused part of the Atomic Energy Act (10 C.F.R. § 810.8) as opposed to the more usual 10 C.F.R. § 810.3.

Second, there is a need for firms of all sizes to take a systematic and holistic approach to trade controls. Just because the transfer was not covered by 810.3 does not mean the transfer is not subject to controls. The parts could equally be covered under the EAR.

Third, intellectual property from the Tennessee Valley Authority and others was transferred to China without authorisation. It is possible that better training could have protected TVAs intellectual property and its staff.

Fourth, in this case, employees of TVA and other companies appear to have exploited their positions and ignored warnings, highlighting the need for checks and balances in addition to training.

North Korea’s Proliferation & Illicit Procurement Apparatus within China

North Korea’s development of weapons of mass destruction, missile delivery systems and conventional military equipment continues despite ever increasing international sanctions. It is known that North Korea relies upon trade in and through China to bypass sanctions. A key knowledge gap relates to what apparatus North Korea maintains in China, especially the border region, to facilitate this. An initial study by King’s College London identified a number of findings:

  • The presence of extensive procurement networks in the Chinese border regions are significant to both North Korea’s economy and support to its military-related programmes, including WMD.
  • It is assessed that North Korea employs a covert system in its attempts to prevent the activities between North Korea-based entities and suppliers being identified.
  • The majority of those entities identified in the China border regions were located in Dandong, although significant numbers were also identified in Dalian and Shenyang. The research to date also found potential presence of North Korean-associated companies in other locations within the Chinese border provinces.
  • Within the cities of Dandong, Dalian and Shenyang many of the entities were found to be collocated suggesting centres for North Korean-related trade, and close proximity to logistic centres.
  • The nationality of the majority of people identified and associated with the entities in this report are assessed to fall into three basic categories;
    • Chinese (citizens) business people who trade with North Korean.
    • Ethnic Koreans of which there are over 2 million who are Chinese citizens living in the border provinces of Jilin, Liaoning and Heilongjiang.
    • North Korean persons living and/or working in the border regions within China.
  • From open source information this study has identified a large number of networks/groups that North Korea could potentially use in support of proliferation-related procurement. However, this is considered to be only part of the potential number of entities that exist.
  • Most of the entities/companies included in international sanctions lists are based in North Korea. So far, of the entities and people identified in this study only two appear in any sanctions list, these being;
    • Korea Ryonha Machinery Joint Venture Corporation (UNSCR 1718)
    • Dandong Hongxiang Industrial Development Company Ltd. (US)
  • A number of companies and individuals identified have been included in UNSCR 1718 PoE reports with the assertion that they have aided North Korean proliferation activity, but have not been included in any sanctions list.

Although this initial study has not identified any new policy recommendations, it has shown that the extent of the problem is potentially far greater than many have previously considered. To have effective sanctions against North Korean proliferation activity cooperation with, and support to, Chinese authorities should be considered.

North Korean Scientists – Chemical and Biological Weapons Programmes

Many consider the North Korean ideology of Juche (self-reliance) to include science and technology as one of its three priority pillars alongside ideology and the military. Given its prominence, in the late 1990’s the DPRK formulated a plan for science and technology development that included investment and scientific exchanges with foreign countries. North Korea continues to be one of the most closed nations, and acquiring information relating to scientists and their work is no exception.  Some technological fields, such as nuclear and military arms technology are considered to be relatively well advanced, but very little is understood regarding any current chemical and biological weapons programmes.

The study by King’s College London aimed to identify where possible scientists that have been recognised through awards and honours for their work in support of North Korea’s ideology and objectives. Specifically those that may be involved in or have conducted research work in support of the DPRK’s suspected chemical and/or biological weapons programmes. Analysis was also conducted in an attempt to identify persons that worked at entities and/or locations suspected of being involved in chemical and/or biological weapons programmes. The findings included;

  • The Order of Kim Il-sung is the highest order of North Korea, along with the Order of Kim Jong-il. Recipients can be individuals or organizations, who have contributed “outstanding services to the Republic of the Korean nation and communism”.
  • The People’s Scientist is an award by the People’s Prize Awarding Commission that works directly under the Cabinet of North Korea.
  • The names of some of the recipients are available but in many cases details of their role, profession and parent organisation are not reported.
  • The overwhelming trend is not to name scientists associated to nuclear or missile-related programmes who have received awards.
  • According to a study by ScienceCentral, analysis of publications from North Korea indexed in the Web of Science Core Collection found 318 articles from North Korea mostly in collaboration with other countries. The study also identified that most research results by North Korean researchers have been published in journals in North Korea.
  • Analysis of data acquired by KCL of over 29,000 papers published in North Korea identified a total of 33 of potential interest. 24 were identified against a list of key terms and a further 9 were identified as topics of potential interest.
  • In most cases there was no additional information about the authors of these papers, or their parent organisations.
  • Entity/location analysis of data extracted from open source websites has identified approximately 1200 people linked to entities or locations that are of possible concern. Of those identified, some are award recipients.
  • Due to its dual use applications chemical and biological research, development and production those involved are possibly more likely to have some public recognition.