SIS right to investigate China-born government analyst, watchdog says

Friday, 10 November 2023

Yuan Jason Zhao has denied an SIS allegation that he is an ‘insider threat’ risk, but the Inspector-General of Intelligence and Security now says it was right to investigate the Public Service Commission staffer.

A senior government analyst was rightly investigated by Security Intelligence Service spies about sharing information with Chinese government representatives, the spy agency’s watchdog says.

Yuan Jason Zhao, a senior analyst for the Public Service Commission, was accused of being an “insider threat” by the Security Intelligence Service (SIS) in October 2022. During an interview at Wellington Airport he was “delivered a warning” about sharing information with representatives of a foreign government - identified by Zhao as China.

Zhao denied the allegations when The Post broke the story, saying he was no “China James Bond”. Suspended from his Public Service Commission (PSC) job, he complained to the spy agencies’ watchdog, the Inspector-General of Intelligence and Security, about his treatment.

But, in a report published on Friday morning, Inspector-General Brendan Horsley said the investigation of Zhao, the briefing of his employer, search of his devices and questioning of him, was justified.

“The NZSIS had cause to investigate Mr Zhao, report on him to the PSC and seek information from the PSC about him to further its investigation,” he said.

Zhao declined to comment when reached by phone, on Friday. He said he would speak with his lawyer.

An SIS spokesperson said it welcomed the confirmation it had “reasonable grounds for investigating” Zhao.

“An insider threat, or insider, is any person who exploits, or intends to exploit, their legitimate access to an agency’s assets to harm the security of their agency or New Zealand, either wittingly or unwittingly,” the spokesperson said, in a written statement.

“NZSIS will continue to deliver against its mandated objectives in order to contribute to the protection of New Zealand’s national security.”

A Public Service Commission spokesperson reiterated an earlier response to questions about Zhao: “In accordance with standard security intelligence practice, we do not comment on individual security matters.”

SIS delivered a ‘warning’

Yuan Jason Zhao during an interview with The Post in March.

Zhao had complained about being investigated, about him and his family being “detained” by SIS agents for an voluntary interview, about the lengthy seizure of his cellphone, and he said he was concerned he was targeted for being a China-born New Zealander who socialised with Chinese people.

Zhao had confirmed to The Post in March that he had connected on WeChat with Chinese embassy staffers he met at social events, but said he only talked to them about general matters.

He said he did not believe he had been exploited by the Chinese government, nor had he mistakenly shared information.

Horsley’s report does not provide insight into the “highly classified” intelligence behind the SIS accusation. But the inspector-general said Zhao was delivered a warning about sharing official information with representatives of a foreign government, not “more general social interaction”.

“I found nothing to suggest Mr Zhao was investigated on the basis of irrelevant or unreasonable considerations, such as the mere fact he is a China-born Chinese New Zealander.”

Inspector-General of Intelligence and Security Brendon Horsley.

Similarly, the search and seizure of Zhao’s devices and the voluntary interview were deemed adequate. The SIS had a warrant for the search and seizure of “places and things owned or used by him”, and after some planning an officer approached Zhao and his family when they arrived back in Wellington from a holiday in Australia.

He was shown the warrant, and two devices used by Zhao were found within his family’s possessions. His phone was seized and, because the analysis of the device “was not straightforward”, it was returned to him more than three weeks later - a timeframe Horsley ultimately deemed reasonable.

Before his device was seized, Zhao was asked if he would voluntarily be interviewed by two different SIS officers, to which he agreed.

According to Horsley, Zhao was told more than once the interview was voluntary and he was not detained, and he signed information sheets explaining this in both English and Mandarin. The interview lasted an hour and a half.

His wife and three children decided to remain with Zhao as the interview was conducted, though they were twice given the option to wait in the airport arrivals area.

Zhao had complained to The Post about being approached by the SIS at an airport with his family. Horsley said, “alternatives such as approaching him at home or work would have had potential disadvantages for both the NZSIS and Mr Zhao”.

However, Horsley said the SIS needed to improve how it informed employers about investigations into employees, as this was “not as organised and careful as it should have been”.

A key briefing to the PSC “included an overstatement of confidence in a specific assessment”, Horsley said, without detailing this further.

The SIS also needed to be “careful” that it did not try to push a government agency down “a particular path”, particularly when an employment process was involved.

“It appeared at times the Service was considering how it might support the PSC’s employment investigation, towards its own end of threat mitigation.”

Zhao remains suspended from the PSC, facing an employment investigation.

What is an ‘insider threat’?

The SIS defines an “insider threat” as a person who uses their access to an organisation’s assets to “harm the security of their organisation or New Zealand”. An insider threat could do this “knowingly or unknowingly”, including through spying or the “unauthorised disclosure of information”.