King's College London

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.