Nuclear secrets: The ex-Westinghouse employee accused of helping a foreign power




Following the arrest of Allen Ho this spring, FBI agents appeared on the doorsteps of nuclear scientists across the United States.

In Murrysville, they met with Charles Beard, a retired Westinghouse Electric Co. software engineer who first connected with Mr. Ho in the 1980s when both men worked for that company. In 2011, Mr. Ho had approached Mr. Beard to consult for his Delaware-based firm Energy Technology International, according to documents in the case.

Mr. Beard had just retired and wasn’t sure it was worth it. He quoted an hourly rate so high it was intended to repel the advances, Mr. Beard told the FBI. But Mr. Ho agreed to the money, and so did Mr. Beard.

And thus he became part of a group of consultants — retired nuclear specialists, many from Cranberry-based Westinghouse — that Mr. Ho assembled on behalf of the China General Nuclear Power Corp. (CGN), one of several state-owned nuclear firms in one of the world’s largest commercial nuclear markets.

The consulting team was to “provide technology transfer in design, manufacturing, related training and technical support,” Mr. Ho wrote in an e-mail later obtained by the FBI. “They said budget is no issue.”

Since mid-April, Mr. Ho, 66, has been in jail in Tennessee awaiting a trial in which he faces a potential life sentence for violating a 60-year statute that has never before been tested in court. He spends 23 hours in a cell, in solitary confinement, according to his attorney.


Allen Ho with his mother,Yu-Ying Ho.

In its case, the government has said that Mr. Ho’s consulting services amount to nuclear espionage and that he was acting as a foreign agent when he recruited nuclear scientists to educate China’s nuclear engineers on aspects of commercial reactors. 

Mr. Ho, and one of his former consultants Ching Ning Guey whose plea deal last year helped the government build a case, are the first people to be charged under a statute of the Atomic Energy Act of 1954 that says people who help make special nuclear material outside of the U.S. have to ask the Secretary of Energy for permission.

They are the only two people that have been charged in this case.

The “special nuclear material” in question is plutonium — a byproduct of the nuclear reaction that takes place inside commercial power plants. By helping a Chinese company with its operations, Mr. Ho was involved in making plutonium, the government said.

Last month, despite a slew of character letters from friends, some of which pledged their homes as collateral, Mr. Ho was denied bail.

Even if he were stripped of his U.S. and Chinese passports, and outfitted with a tracking anklet that confined him to his home, Chinese operatives might shepherd him out of the country, prosecutors warned. They cited his expensive house in Delaware, an apartment in China and a child he fathered there nine years ago.

Commercial concerns

Mr. Ho’s attorney, Peter Zeidenberg of the Washington, D.C.-based Arent Fox LLP, has developed somewhat of a niche representing Chinese-born Americans accused of espionage.

In his response to this case, he has written that a list of Mr. Ho’s alleged offenses is simply a description of ordinary business activities — what a consultant does when he is hired by a foreign company to help with its operations.

Other participants in the case have raised similar objections. “This is commercial, why is this a problem?" Carl Olson, a Monroeville-based consultant asked FBI agents when they interviewed him on April 14, a few hours after Mr. Ho was arrested in Georgia.

Before Mr. Olson left Westinghouse, he had been part of a team involved in transferring the technology behind the AP1000 nuclear reactor to the State Nuclear Power Technology Corp., another state-owned nuclear firm in China and the first to purchase four AP1000 units being built on China’s east coast.


The Westinghouse AP1000 I+C Control Room.

The deal was a coup for Westinghouse — large enough for the U.S. company to agree to transfer a significant portion of its intellectual property to the Chinese as a condition of the sale.

Westinghouse declined to comment for this story.

When Mr. Olson started consulting for Mr. Ho, he tried to mimic the presentations he gave while at Westinghouse but from memory, he told the FBI.

In 2012, Mr. Olson advised officials from CGN about the contents of an AP1000 procedure manual that the Chinese company kept in digital form in a locked room that required a signature to access. Mr. Olson told the FBI he didn’t know how the company had acquired the manual, but he assumed it was above board since the documents were up to date and the company was considering buying the reactors.

Calling all Westinghouse engineers

Szuhsiung “Allen” Ho was born in Taiwan in 1950. He came to the U.S. in 1973, went to college in California, married his wife Anne the following year, and, in 1981, began work at Westinghouse in Pittsburgh. In 1983, he became a U.S. citizen.

Mr. Ho spent seven years at Westinghouse, a stint that provided many of the connections he would later tap to help China General Nuclear.

In December 2008, Mr. Ho e-mailed Yu Chung Lee, a Westinghouse nuclear fuel expert, to say he was looking for people with experience in fuel design, manufacturing and testing for an upcoming project in Shenzhen, where CGN is based.

“Retired or active Westinghouse people are all acceptable,” he wrote, according to court records. “Please help but do not openly announce this news. I don't want to alert Westinghouse.”

In the hours after his arrest, a federal agent told Mr. Ho that he would be contacting Westinghouse shortly to tell the company how Mr. Ho was using its retired engineers to help a Chinese company design its own nuclear reactor to sell to the world.

“Westinghouse has big plans to sell [its] know-how to China, and I don’t think they’re going to be very pleased with the fact that, basically, you’re underbidding them,” he told Mr. Ho, according to a transcript released this week.

 

 

When federal agents interviewed Mr. Lee at his home in Columbia, S.C., on April 14, he and his wife had just woken up. They studied the search warrant that allowed federal agents to inspect their home and their computers. They said Mr. Ho told them he had the proper authorization from the U.S. government.

Mr. Lee, a mechanical engineer, spent nearly four decades at Westinghouse specializing in nuclear fuel design. He said he was “instrumental” in transferring AP1000 technology to China before he retired in 2011.

Mr. Lee said he advised CGN on how to test nuclear fuel assembly hardware. Whatever he gave the Chinese firm was public information he found on Google, Mr. Lee told the FBI. The Chinese government blocked access to the U.S. online search engine, he said, so CGN needed him to perform the searches.

Still, Mr. Lee knew that China was a sensitive subject with the U.S., so he asked Mr. Ho if the firm had gotten permission to share nuclear information. Mr. Ho said he had applied for it and said he used a lawyer that charged $800 per hour, Mr. Lee said.

Mr. Ho had, in fact, applied for the special authorization required by the Atomic Energy Act.

In 2013, he sent two letters to the U.S. Department of Energy describing his activities in China. One said he and his consultants were engaged in IT support work, such as converting code from one language to another and updating it with more recent fission and heat transfer models.

In less than two months, the energy agency replied to Mr. Ho that these activities don’t need special permission.

The other letter had a more detailed list that more closely matched what Mr. Ho’s consultants told the FBI about their given tasks. That one was never approved.

The Department of Energy would send Mr. Ho questions and he would send back additional information. Then the agency would ask for more.

Meanwhile, ETI kept sending consultants to China and the U.S. Department of Justice launched an investigation into its activities.

Special permission

The government’s argument on the dangers of Mr. Ho’s actions follow two paths. On the one hand, the FBI has alleged Mr. Ho was selling commercial secrets, violating intellectual property protections and helping Chinese companies get ahead by bypassing the expense and time of research and development.

On the other hand, the government and the FBI agents that conducted the interviews with Mr. Ho’s consultants have sprinkled in questions about possible security concerns, given that the plutonium produced at commercial nuclear power plants can be used for military purposes.

 

 

“Our idea of how China works, is that at the end of the day, whatever’s good for commercial is also good for military,” the federal agent told Mr. Ho after his arrest. 

That dynamic is the focus of the Atomic Energy Act, a law passed in 1954 that guides how the U.S. balances the promotion of nuclear trade in the electric sector with the goal of keeping nuclear proliferation at bay.

There are 50 countries for which a special authorization is not required. For all others — including China — activities ranging from document transfers and e-mails to the “transfer of knowledge and expertise” in the area of nuclear reactors call for special permission from the Secretary of Energy.

George Rudy, who consulted for Mr. Ho, told an FBI agent on April 15 that Mr. Ho didn’t seem to understand the logic behind the authorization rules. “He felt that the requirements were the NSA and DOE trying to impede his progress,” Mr. Rudy told the FBI.

A 2014 Government Accountability Office report looking at how the Department of Energy handles the special authorization statute found that U.S. nuclear firms and the Nuclear Energy Institute commonly felt the requirements and the long approval times put U.S. firms and the interest of commercial nuclear development at a disadvantage to suppliers in other countries.

It’s OK for Westinghouse

When FBI agents showed up at the Manitou Springs, Colo., home of Charles Rombough on April 14, they left with six desktop computers and a laptop.

But the feds already had many of the e-mails Mr. Rombough had sent to Mr. Ho and to nuclear engineers at CGN. They featured prominently in Mr. Ho’s indictment, where Mr. Rombough was referred to as “U.S. Person 6.”

Mr. Rombough told the FBI agents how he traveled to China in 2011 after an earthquake and tsunami devastated the Fukushima Daiichi nuclear plant in Japan to help CGN assess its likelihood of keeping nuclear plants safe in such an event. On another occasion, he explained what tests needed to be done after a reactor starts up. 

“All these different things that are supposedly nefarious are just nuclear engineering,” he said in an interview earlier this month, reflecting on the experience.

China’s nuclear ambitions are second to none. It is gobbling up Western nuclear technology and expertise, and developing its own in service of an aggressive plan to build dozens of reactors in the next decade.

“This whole thing doesn’t make any sense, because Westinghouse sold AP1000 reactors to China along with all of their proprietary information,” Mr. Rombough said this month. “If doing nuclear reactors in China is so off limits, why did they allow Westinghouse to do that?”

David Seel, another retired Westinghouse engineer, told FBI agents in April that his concerns “were mitigated by the assumption (Westinghouse’s) presence in China and AP1000-related business dealings illustrated consulting such as his was not prohibited.”


A containment building being constructed at Sanmen, the site of Westinghouse's first AP1000 reactor which has run into delays but is now expected to be online by the end of next year. (Courtesy of Sanmen Nuclear Power Co.)

Mr. Seel grew more uncomfortable in 2014, he told the FBI, when Mr. Ho said he could no longer pay him directly as it would leave a paper trail and asked Mr. Seel to assemble a list of relatives who could receive payment on his behalf. 

Other consultants had their own turning points.

Ronald Kesterson, a South Carolina-based metallurgy expert who retired from Westinghouse and began consulting for Mr. Ho in 2010, told the FBI that when he declined to give proprietary information in answer to a question posed by a Chinese scientist in 2011, he was laughed at and never invited to return. 

Mr. Beard, the retired Westinghouse engineer who spoke to the FBI from his home in Murrysville, said he grew uneasy when he started seeing news stories in 2014 accusing the Chinese government of hacking American companies, including Westinghouse.

He stopped working for Mr. Ho’s consulting firm that year.

Focusing on industrial espionage

In May 2014, the U.S. indicted five Chinese military operatives who allegedly stole documents and e-mails from American firms. 

The Chinese individual accused of hacking Westinghouse was found to be stealing information about the AP1000 reactor and intercepting e-mails between executives discussing their strategy for negotiating the technology transfer for those plants with the Chinese company that bought them, according to the U.S. government’s case.

Two and a half years later, that case remains where it started. There is no extradition treaty with China and the accused are members of the Chinese military. 


United States attorney David Hickton at a news conference in January 2015. (Elizabeth Miles/Post-Gazette)

Still, David Hickton, the U.S. attorney for the Western District of Pennsylvania who brought the charges, said this month that the 2014 indictment has already caused a huge shift in how the U.S. attacks industrial espionage.

And, he added, “It changed the entire course of the behavior of a national adversary of this country.”

The case has elevated the subject of economic spying to such a level, he said, that last year President Barack Obama and Chinese President Xi Jinping publicly agreed not to conduct or condone such cyberespionage.

“The campaign of industrial espionage in China is a vast campaign,” Mr. Hickton said. “The U.S. is still the cradle of innovation and creativity. Invention occurs here and we protect it.”


President Barack Obama meets with Chinese President Xi Jinping in Le Bourget, France, in November 2015. (Evan Vucci/Associated Press)

FBI agents that investigated the case against Mr. Ho imagined a similarly large reach for their effort, according to the transcript. “It’s a big statement for the U.S. government to charge a Chinese state-owned company,” one of them told Mr. Ho after he was arrested. “And they don’t take that very lightly.”

The agent suggested Mr. Ho could help himself by providing information to the U.S. government about the inner workings of CGN and other Chinese companies. 

“I want you to realize there might be things that you know that are valuable to the United States,” he told Mr. Ho. “Because China is — it’s like a black hole, you know? We have very limited understanding of what goes on there.”

In this atmosphere of heightened concern and Cold War echoes, dozens of Chinese-born American citizens have been charged with acting as economic spies in service of helping China’s industry get ahead.

Mr. Zeidenberg, Mr. Ho’s attorney, last year defended the chairman of Temple University’s physics department accused of sending blueprints for a proprietary technology to Chinese scientists. The government dropped the case when it was discovered that federal agents misunderstood what the document contained.

Mr. Zeidenberg also represented a Chinese-born American woman who worked for the National Weather Service and who was accused of stealing a password to access and transmit information about the nation’s dams to a Chinese official. Those charges were also dropped.

While he declined to speak about Mr. Ho’s case in detail, Mr. Zeidenburg said it “falls into a long and depressing line of cases where the Department of Justice has arrested a Chinese-American first and asked questions later.”

In court filings, he has argued that the government — unable to find an espionage statute that sticks — has tried to “shoehorn” Mr. Ho’s legitimate commercial work into a statute that has never been tested in court.

Mr. Ho’s trial is scheduled to begin in January.

Anya Litvak: alitvak@post-gazette.com or 412-263-1455.

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