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Huawei accused of racketeering, trade secret theft in US

Read time 4min 40sec

The US government is accusing Chinese telecommunications giant Huawei and its subsidiaries of a racketeering conspiracy as well as conspiracy to steal trade secrets.

This as the Trump administration ratchets up its campaign against Huawei, the world’s largest telecommunications equipment manufacturer.

US prosecutors announced the charges yesterday.

However, in a statement, Huawei fights back, saying: “This new indictment is part of the justice department’s attempt to irrevocably damage Huawei’s reputation and its business for reasons related to competition rather than law enforcement.

“These new charges are without merit and are based largely on recycled civil disputes from the last 20 years that have been previously settled, litigated and in some cases, rejected by federal judges and juries. The government will not prevail on its charges, which we will prove to be both unfounded and unfair.”

In a statement, the US Justice Department says the 16-count superseding indictment also adds a charge of conspiracy to steal trade secrets stemming from the China-based company’s alleged long-running practice of using fraud and deception to misappropriate sophisticated technology from US counterparts.

Extradition proceedings

The indicted defendants include Huawei and four official and unofficial subsidiaries – Huawei Device, Futurewei Technologies, Huawei Device USA, and Skycom – as well as Huawei’s chief financial officer Wanzhou Meng.

Meng was arrested in Canada in 2018, and is currently undergoing extradition proceedings that would move her to the US.

The new superseding indictment also contains the charges from the prior superseding indictment, which was unsealed in January 2019, says the US Department of Justice.

Huawei pleaded not guilty to the earlier indictment, which charged it with bank and wire fraud, violating sanctions against Iran, and obstructing justice.

The department adds that as revealed by the government’s independent investigation and review of court filings, the new charges in this case relate to the alleged decades-long efforts by Huawei, and several of its subsidiaries, both in the US and China, to misappropriate intellectual property, including from six US technology companies, in an effort to grow and operate Huawei’s business.

According to the department, the misappropriated intellectual property included trade secret information and copyrighted works, such as source code and user manuals for Internet routers, antenna technology and robot testing technology.

Huawei, Huawei USA and Futurewei agreed to reinvest the proceeds of this alleged racketeering activity in Huawei’s worldwide business, including in the US, it notes.

The justice department alleges the means and methods of the alleged misappropriation included entering into confidentiality agreements with the owners of the intellectual property and then violating the terms of the agreements by misappropriating the intellectual property for the defendants’ own commercial use.

IP misappropriation alleged

The other charge relates to recruiting employees of other companies and directing them to misappropriate their former employers’ intellectual property, and using proxies such as professors working at research institutions to obtain and provide the technology to the defendants.

“As part of the scheme, Huawei allegedly launched a policy instituting a bonus programme to reward employees who obtained confidential information from competitors. The policy made clear that employees who provided valuable information were to be financially rewarded.”

Huawei’s efforts to steal trade secrets and other sophisticated US technology were successful, says the department.

“Through the methods of deception described above, the defendants obtained non-public intellectual property relating to Internet router source code, cellular antenna technology and robotics. As a consequence of its campaign to steal this technology and intellectual property, Huawei was able to drastically cut its research and development costs and associated delays, giving the company a significant and unfair competitive advantage.”

The superseding indictment also includes new allegations about Huawei and its subsidiaries’ involvement in business and technology projects in countries subject to US, EU and/or UN sanctions, such as Iran and North Korea – as well as the company’s efforts to conceal the full scope of that involvement, the prosecutors say.

They add the defendants’ activities, which included arranging for shipment of Huawei goods and services to end-users in sanctioned countries, were typically conducted through local affiliates in the sanctioned countries.

“Huawei employees also allegedly lied about Huawei’s relationship to Skycom, falsely asserting it was not a subsidiary of Huawei. The company further claimed that Huawei had only limited operations in Iran and that Huawei did not violate US or other laws or regulations related to Iran.

“In fact, the indictment alleges Skycom was Huawei’s unofficial subsidiary that, among other services, assisted the government of Iran in performing domestic surveillance, including during the demonstrations in Tehran in 2009.”

As the trade war between the world's two biggest economic powers – US and China – intensified last year, the US put Huawei on an export blacklist, citing national security issues. The US also rallied its allies to cut the Chinese telecommunications equipment maker out of planned 5G networks.

The blacklist saw US tech companies, including Alphabet’s Google and British chip designer ARM, limit or cease their relationships with the Chinese company.

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