Iran is reported to have sentenced a former US marine to death for espionage and started enriching uranium at an underground site in an apparent show of defiance in the face of western sanctions.

The White House denied that Amir Mirzaei Hekmati, a 28-year-old Iranian-American born in Arizona, was a spy, and demanded his release. His family insisted that he had been visiting his grandparents when he was arrested last year.

Hekmati, a dual US-Iranian national who had served as a US marine translator, was shown on Iranian television in December seemingly confessing to being a CIA agent sent to gain the trust of the Iranian government by pretending to offer US state secrets. The death sentence against him was reported by the Iranian state news agency, Irna, and other semi-official media organisations in Tehran.

The White House said it was seeking to independently verify the reports, adding that it would strongly condemn such a verdict if confirmed.

"Allegations that Mr Hekmati either worked for, or was sent to Iran by the CIA are false," said a spokesman, Tommy Vietor. "The Iranian regime has a history of falsely accusing people of being spies, of eliciting forced confessions, and of holding innocent Americans for political reasons."

Hekmati was reported to have been arrested in August, but his family did not make it public then because they said they were advised by Iranian officials that it would worsen his situation. He has been given 20 days to appeal against his sentence, but his family say they have been unable to hire an independent Iranian lawyer to argue his case.

The White House has demanded Hekmati be given access to legal counsel and to be released "without delay". The US says that Swiss diplomats in Tehran, who represent US interests, have not been allowed to see him.

Iran does not recognise dual citizenship and so views Hekmati as an Iranian.

CNN reported that Hekmati had spent four years in the marines, including deployment in Iraq, and afterwards started a linguistics company. He helped to develop a portable translator for use by US troops, and worked for five months for BAE Systems, the British defence contractor.

The announcement on Monday of Hekmati's death sentence came as the International Atomic Energy Agency confirmed that Iran had started enriching uranium at the Fordow plant, a fortified site dug under a mountain near the city of Qom.

Gill Tudor, the IAEA spokeswoman, said that Iran was producing uranium "up to 20%" enriched, a source of concern for the west as it is much closer to weapons grade than the 3.5% enriched uranium used in nuclear power stations.

The British foreign secretary, William Hague, said he was "extremely disappointed" by the news. The foreign secretary added in a statement: "At a time when the international community is asking Iran to provide assurances of the peaceful nature of its programme, this is a provocative act which further undermines Iran's claims that its [nuclear] programme is entirely civilian in nature."

Iran only acknowledged the existence of the Fordow site in September 2009, after it had been identified by western intelligence agencies.

"Keyhan received reports yesterday that show Iran has begun uranium enrichment at the Fordow facility amid heightened foreign enemy threats," the newspaper said in a front-page report.

It was not immediately clear whether the centrifuges were being used to produce 3.5% or 20% enriched uranium. Iranian officials have said they intend to use Fordow to produce 20% uranium. The west suspects Iran is seeking the capacity to make nuclear weapons – a charge Tehran rejects.

The death sentence and the Fordow announcement appeared to signal Iranian defiance of western sanctions amid heightened tensions in the Gulf.

Congress has passed financial sanctions aimed at Iran's oil trade, due to come into effect in June, and EU foreign ministers are expected to agree an embargo on imports of Iranian oil at the end of the month, which are also likely to take effect after a few months' delay.