Huawei faces criminal charges in US, denies violations

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Huawei CFO Meng Wanzhou faces bank fraud and wire fraud charges in the US.
Huawei CFO Meng Wanzhou faces bank fraud and wire fraud charges in the US.

Huawei is "disappointed to learn of the charges brought against the company". This is according to a statement from the Chinese tech giant after it learned the US had filed criminal charges against the company and CFO Meng Wanzhou just days before trade talks were set to kick off between Washington and Beijing.

"The company denies it or its subsidiary or affiliate have committed any of the asserted violations of US law set forth in each of the indictments, is not aware of any wrongdoing by Ms Meng, and believes the US courts will ultimately reach the same conclusion," Huawei said.

Meng, who is the daughter of Huawei founder and CEO Ren Zhengfei, was arrested in December 2018 in Canada for allegedly violating sanctions on Iran. The US government is seeking Meng's extradition to the United States.

In December, Reuters reported that the CFO arrest was part of a US investigation into an alleged scheme to use the global banking system to evade US sanctions against Iran. Since at least 2016, the US has been looking into whether Huawei shipped US-origin products to Iran and other countries in violation of US export and sanctions laws, Reuters reported in April.

The United States Department of Justice issued a statement on Monday saying a 13-count indictment was unsealed in federal court in Brooklyn, New York, charging four defendants, including Huawei Technologies, Meng and two Huawei affiliates: Huawei Device USA and Huawei's Iranian subsidiary Skycom.

"The defendants Huawei and Skycom are charged with bank fraud and conspiracy to commit bank fraud, wire fraud and conspiracy to commit wire fraud, violations of the International Emergency Economic Powers Act (IEEPA) and conspiracy to violate IEEPA, and conspiracy to commit money laundering. Huawei and Huawei USA are charged with conspiracy to obstruct justice related to the grand jury investigation in the Eastern District of New York. Meng is charged with bank fraud, wire fraud, and conspiracies to commit bank and wire fraud," the statement said.

"After Ms Meng's arrest, the company sought an opportunity to discuss the Eastern District of New York investigation with the Justice Department, but the request was rejected without explanation," Huawei added.

Dual threat

FBI director Christopher Wray, however, said the charges "lay bare Huawei's alleged blatant disregard for the laws of our country and standard global business practices".

"Companies like Huawei pose a dual threat to both our economic and national security, and the magnitude of these charges make clear just how seriously the FBI takes this threat. Today should serve as a warning that we will not tolerate businesses that violate our laws, obstruct justice, or jeopardise national and economic well-being," Wray added.

Secretary Kirstjen Nielsen, of the US Department of Homeland Security, said Huawei and its CFO "broke US law and have engaged in a fraudulent financial scheme that is detrimental to the security of the United States".

"They wilfully conducted millions of dollars in transactions that were in direct violation of the Iranian Transactions and Sanctions Regulations, and such behaviour will not be tolerated. The Department of Homeland Security is focused on preventing nefarious actors from accessing or manipulating our financial system, and we will ensure legitimate economic activity is not exploited by our adversaries," Nielsen added.

"For years, Chinese firms have broken our export laws and undermined sanctions, often using US financial systems to facilitate their illegal activities," said secretary Wilbur Ross of the US Department of Commerce. "This will end. The Trump administration continues to be tougher on those who violate our export control laws than any administration in history."

Separate charges were also filed in Washington State accusing Huawei of stealing trade secrets from T-Mobile and offering bonuses to employees who succeeded in getting technology from rivals.

However, Huawei said the Washington allegations of trade secret indictment "were already the subject of a civil suit that was settled by the parties after a Seattle jury found neither damages nor wilful and malicious conduct on the trade secret claim".

The charges are yet another blow to the world's biggest telecommunications equipment maker, as the US continues to try to stop American companies from buying Huawei equipment and is pressuring its allies to follow suit. American security experts have raised concerns that Huawei's networking gear could be used for spying and espionage, which Huawei has denied.

Japan has excluded Huawei from public procurement, and Australia and New Zealand have effectively blocked Huawei from involvement in the rollout of their 5G network infrastructure. The UK, Canada and Germany are also assessing whether to exclude Huawei from forthcoming infrastructure rollouts, along with some other European countries like Poland.

Iran allegations

The US Department of Justice said the charges in this case "relate to a long-running scheme by Huawei, its CFO, and other employees to deceive numerous global financial institutions and the US government regarding Huawei's business activities in Iran".

The indictment alleges that beginning in 2007, Huawei employees lied about its relationship to Skycom, falsely asserting it was not an affiliate 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.

"Most significantly, after news publications in late 2012 and 2013 disclosed that Huawei operated Skycom as an unofficial affiliate in Iran and that Meng had served on the board of directors of Skycom, Huawei employees, and in particular Meng, continued to lie to Huawei's banking partners about Huawei's relationship with Skycom," the US Department of Justice said.

The department alleges Huawei falsely claimed it had sold its interest in Skycom to an unrelated third party in 2007 but in reality, Huawei orchestrated the 2007 sale to appear as an arm's length transaction between two unrelated parties, when in fact Huawei actually controlled the company that purchased Skycom.

"For over a decade, Huawei employed a strategy of lies and deceit to conduct and grow its business. This office will continue to hold accountable companies and their executives, whether here or abroad, that commit fraud against US financial institutions and their international counterparts and violate US laws designed to maintain our national security," stated Richard Donoghue, US attorney for the Eastern District of New York.

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