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U.S. Department of Justice Formally Charges Huawei CFO With Bank, Wire Fraud

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WASHINGTON  D.C. – The United States Justice Department on Monday charged China’s Huawei Technologies Co Ltd, its chief financial officer Meng Wanzhou and two affiliates with bank and wire fraud to violate sanctions against Iran in a case that has added to tensions with Beijing.

In a 13-count indictment, the Justice Department said Meng Wanzhou misled a global bank and U.S. authorities about its relationship with the subsidiaries, Skycom Tech and Huawei Device USA Inc, in order to conduct business in Iran.

In a separate case, the Justice Department also accused Huawei of stealing trade secrets, wire fraud and obstructing justice for allegedly stealing robotic technology from carrier T-Mobile US Inc to test smartphones’ durability.

T-Mobile had accused Huawei of stealing the technology, called “Tappy,” which mimicked human fingers and was used to test smartphones. Huawei has said that the two companies settled their disputes in 2017.

The charges add to pressure on Huawei, the world’s biggest telecommunications equipment maker, from the U.S. government, which is trying to prevent American companies from buying Huawei routers and switches and pressing allies to do the same.

Alleged Fraud involving Meng Wanzhou

The U.S. Eastern District office alleges Meng, the company and a Hong Kong-based subsidiary called Skycom Technologies committed wire fraud, obstructed justice, conspired to launder money and violated the International Emergency Economic Powers Act (IEEPA) by doing business with sanctioned Iran.

Huawei and Meng allegedly committed fraud by lying to banks, misrepresenting their relationship with Skycom and whether they were improperly transferring U.S. technology assets and money between Iran and the company. It is illegal for banks to knowingly allow financial transfers that involve countries sanctioned under IEEPA.

“Had the [banks] known about Huawei’s repeated violations of the [Iran sanctions] they would have reevaluated their banking relationshipos with Huawei, including the provision of U.S.-dollar and Euro clearing service to Huawei,” the indictment reads.

The document also gives clues as to why Meng herself was arrested in Canada, and how the U.S. will position its request for her extradition from Vancouver. The allegations say Meng traveled through New York’s JFK airport in early 2014, “several months” after meeting with an executive from one of the banks.

She allegedly had on one of her electronic devices a text message of “suggested talking points,” according to the Justice Department, which read in part: “The core of the suggested talking points regarding Iran/Skycom: Huawei’s operation in Iran comports with the laws, regulations and sanctions as required by the United Nations, the United States and the European Union.”

That financial institution later decided to sever its relationship with Huawei over its possible Iranian relationships through Skycom. The company also then went on to misrepresent the reasons for that bank ending the relationship, according to the indictment.

Meng Wanzhou, also known as Sabrina Meng and Cathy Meng, is a Chinese business executive. She is deputy chairwoman of the board and chief financial officer of China’s largest private company, the telecom giant Huawei founded by her father Ren Zhengfei.

What’s the Context?

Huawei is one of the largest telecommunications equipment and services providers in the world, recently passing Apple to become the second-biggest smartphone maker after Samsung.

But the US and other western nations have been concerned that the Chinese government could use Huawei’s technology to expand its spying ability, although the firm insists there is no government control.

The arrest of Ms Meng, the daughter of Huawei’s founder, infuriated China.

She was arrested on 1 December in Canada’s western city of Vancouver at the request of the US.

She was later granted a C$10m (£5.7m; $7.6m) bail by a local court. But she is under surveillance 24 hours a day and must wear an electronic ankle tag.

The US charges come the day after Canada fired its ambassador to China, days after he publicly said the US extradition request for Ms Meng was flawed.

By Reuters, CNBC, BBC