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FBI Files Say China Firm Pushed US Experts for Nuclear Secrets

FBI Files Say China Firm Pushed US Experts for Nuclear Secrets

A model of nuclear reactor is displayed at the stand of CGN (China General Nuclear Power Group) during the 16th China Hi-Tech Fair in Shenzhen city, south China's Guangdong province, 16 November 2014. (Imaginechina via AP Images)

Thursday, 25 August 2016 07:41 AM

A state-owned Chinese power company under indictment in the U.S. pressed American nuclear consultants for years to hand over secret technologies and documents they weren't supposed to disclose — and in some cases it got them, several of the consultants have told the FBI.

Summaries of the consultants' interviews with agents from the Federal Bureau of Investigation were filed this month in a federal court where the company, China General Nuclear Power Corp., has been charged with conspiring to steal nuclear technology.

The FBI documents surfaced shortly after the same company became a focus of concerns across the Atlantic: The U.K. last month delayed approval of the country's biggest nuclear power station in a generation as questions swirled about whether China General Nuclear's investment in the plant poses a security risk.

The filings provide a window into the tactics of CGN, China's biggest nuclear power operator. One of the consultants said CGN employees asked for off-limits operational manuals to nuclear equipment and software, according to the interview summaries. Another said he was asked to provide proprietary temperature settings for material used to contain nuclear fuel. After he refused, he wasn't offered more consulting jobs, he told the FBI.

Employees of CGN "frequently asked for documents which were proprietary or limited to restricted access," according to a summary of one interview. In several instances, the company got what it wanted, according to the FBI documents.

In a statement, CGN said it "attaches high importance" to the U.S. case. "The company always sticks to the principle of following laws and regulations," it said in the Chinese-language statement translated by Bloomberg. "The company will continue to stick to such a principle moving forward."

China Warning

While the U.S. court case doesn't address the U.K. plant, the FBI interviews could add to concerns expressed by British officials like Nick Timothy, a close adviser to the new prime minister, Theresa May. Timothy warned last year that China's involvement in nuclear projects there might allow it to "shut down Britain's energy production at will."

The prime minister hasn't said why she put the brakes on the 18 billion pound ($24 billion) Hinkley Point plant in southwest England, a project one-third owned by CGN and led by Electricite de France SA. In addition to the security concerns, the project has faced criticism over its price tag and the above-market electricity rates that U.K. taxpayers would have to pay. Electricite de France declined to comment.

China has made it a priority to advance its domestic nuclear-power capability, and companies in the industry have sought to obtain technology from corporate partners and foreign governments as part of that effort, said Mark Hibbs, a senior associate at the Carnegie Endowment for International Peace.

"What you hear again and again from foreign company executives working in China is that the Chinese are absolutely determined to have as much technology transferred from foreign entities as they can," Hibbs said.

Some supporters of the project reject Timothy's alarm. Tim Yeo, a former U.K. environment minister, said he doesn't believe CGN poses serious security concerns. "I'd be disappointed if we pulled out because of concerns about China, unless there was a very strong case that is made public about cyber-espionage," said Yeo, who's chairman of New Nuclear Watch Europe, an industry-funded lobbying group.

U.S. Indictments

In the U.S., CGN was indicted along with Szuhsiung "Allen" Ho, an American nuclear engineer born in Taiwan who recruited the U.S. consultants for CGN. Ho and the company are accused in a federal court in Knoxville, Tennessee, of conspiring to help Beijing obtain restricted U.S. nuclear technology over two decades. Ho, 66, is also accused of acting as an unregistered agent of the Chinese government.

He faces life in a U.S. prison in what prosecutors call an "extremely significant national security case."

Ho has pleaded not guilty. His lawyers say that he was merely helping China's civil nuclear power industry and that he had no intent to break the law or steal U.S. secrets.

The case is unfolding as U.S. officials say they see Beijing's hand in cyber-espionage, indicting five Chinese military officials in absentia in 2014 for allegedly stealing trade secrets from U.S. companies — including Westinghouse Electric Co., a unit of Japan's Toshiba Corp. that designs nuclear power plants.

Westinghouse, which didn't respond to requests for comment, is the former employer of Ho and many of the experts he brought to China to consult for CGN.

Ho, a U.S. citizen, earned a doctorate in nuclear engineering from the University of Illinois and started his own company in 1996. He advised clients in the U.S. and Asia, helping them to run their nuclear power plants, according to court filings by his lawyer, Peter Zeidenberg.

Starting in 2004, he began recruiting for CGN in Shenzhen, where he kept an office, searching the U.S. for experts to teach the company's engineers, according to the April indictment.

FBI Interviews

Zeidenberg filed the FBI interview summaries in support of a bail application for Ho, who's been held since his arrest in April. Such internal FBI investigative documents are rarely made public. It's not clear whether the FBI talked to engineers besides those whose interview summaries were filed in court by Zeidenberg.

The experts often turned down CGN's requests for protected information, according to the FBI summaries.

But one of the documents recounted an FBI conversation with Ching Ning Guey, who pleaded guilty to conspiring to help Beijing obtain restricted nuclear technology — the same charge faced by CGN and Ho. Guey is cooperating with U.S. investigators in the Ho case, according to court records.

The Guey summary said that in addition to inviting retired Westinghouse engineers to visit China, Ho recruited members of the Chinese American Nuclear Technology Association to provide consulting to CGN.

Restricted Reports

In March 2004, Ho asked Guey to lecture at China's Daya Bay nuclear power plant. While there, Guey admitted in his plea agreement, he gave the Chinese government three restricted reports from the Electric Power Research Institute about technology for light and heavy water reactors. (Among the titles: "A Method to Predict Cavitation and the Extent of Damage in Power Plant Piping.")

Guey told FBI agents he also gave Daya Bay workers a copy of the manual to restricted software known as Saphire, which was developed for the U.S. Nuclear Regulatory Commission to help assess risk and reliability in reactors.

An ex-Westinghouse metallurgist, Ronald Kesterson, told agents he visited the Daya Bay plant in 2011, according to the summary of his FBI interview. A CGN engineer asked him to provide specific temperature settings related to zirconium, which is used in nuclear fuel containment vessels.

When he said he couldn't because it was proprietary, "the engineer laughed at Kesterson's response," according to the FBI summary. "Kesterson was never invited to return to Daya Bay" and did no more consulting for CGN, it said. Kesterson isn't accused of wrongdoing. Efforts to reach him were unsuccessful.

Bail Denied

Ho has been held without bail, after prosecutors said he had the means and motive to flee to China, which has no extradition treaty with the U.S. Ho's wife of 42 years lives in Wilmington, Delaware, but prosecutors say he has a second family in China that is his "real family." They also said Ho has spent an average of 290 days a year outside the U.S. over the past decade.

Ho's lawyer acknowledged in court filings he "spends significant time in China" and fathered a child there in 2007. But he said his permanent residence was in Wilmington and he had no intention of fleeing.

Prosecutors said that when they arrested Ho, he had a "random code generator" so that he could remotely gain access to accounts at the Bank of China.

"If the government of China really wants him out of the United States, they're going to find a way to get him out of the United States," Assistant U.S. Attorney Charles Atchley Jr. said at a bail hearing on June 14 — a characterization that Ho's lawyer called "pure speculation."

"There is not one shred of evidence that the government of China has any interest in protecting or assisting Dr. Ho in any way, shape or form," Zeidenberg said.

U.S. District Judge Thomas Varlan is expected to rule soon on whether Ho deserves a $3 million bail package.

© Copyright 2019 Bloomberg News. All rights reserved.

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A state-owned Chinese power company under indictment in the U.S. pressed American nuclear consultants for years to hand over secret technologies and documents they weren't supposed to disclose - and in some cases it got them, several of the consultants have told the...
FBI, China, Firm, US, Experts, Nuclear, Secrets
Thursday, 25 August 2016 07:41 AM
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