Huawei expands lobbying amid national security probe by Congress


Huawei Technologies’ business activities in the United States have drawn scrutiny over questions about whether the company has ties to China’s military, which Huawei has denied. (Daniel Acker/Bloomberg)
August 26, 2012

Huawei Technologies, China’s biggest maker of phone equipment, has quadrupled spending on lobbyists in Washington as a House panel investigates whether its expansion in the United States poses a security threat.

Huawei spent $820,000 on lobbying in the first six months of this year, up from $200,000 for the same period in 2011, according to U.S. Senate records.

The Washington increase coincides with a House Intelligence Committee inquiry into Chinese phone-equipment makers, including Huawei and ZTE. The panel, which announced the probe in November, is looking at whether the companies’ presence in the United States provides opportunities for Chinese espionage and imperils America’s telecommunications infrastructure.

“If cases of cyber espionage are identified or uncovered, that would stymie their business in the United States and have implications for trying to expand in other countries,’’ said Frank Cilluffo, director of George Washington University’s Homeland Security Policy Institute and a former special assistant to President George W. Bush for homeland security.

Huawei’s business activities in the United States have drawn scrutiny over questions about whether the company has ties to China’s military, which Huawei has denied. The company had about $1.3 billion in U.S. revenue last year, up from $760 million in 2010, said William Plummer, a U.S.-based spokesman for Huawei of Shenzhen, China.

Huawei is seeking to “clarify the facts about the company and undo misperceptions, and we’ve resourced ourselves accordingly,’’ Plummer said. “In terms of the investigation, we’ve been engaged in an open and cooperative dialogue and exchange of information for almost nine months, and look forward to further cooperating with the committee.’’

Washington hires

Huawei has hired six lobbying firms since November. The outside lobbyists include Doyce Boesch, a former Senate aide and veteran of two Republican presidential campaigns; and William Black, former chief of staff to the No. 2 House Democrat, Steny H. Hoyer of Maryland, according to the Center for Responsive Politics, a Washington-based research group.

In March, Huawei registered its first in-house employee lobbyists, including three former congressional aides. The company last month hired Donald Purdy as chief security officer for its U.S. operation. Purdy came from Computer Sciences Corp., a U.S. government technology contractor based in Falls Church.

Ren Zhengfei founded Huawei in 1987 after leaving the Chinese military, a background that has prompted congressional questions about continuing government ties.

House Intelligence Committee Chairman Mike Rogers (R-Mich.), and Rep. C.A. Dutch Ruppersberger of Maryland, the panel’s top Democrat, sent Huawei and ZTE letters on June 12, asking for details about their contacts with and funding from Chinese government entities and their U.S. business.

Staff representatives from the committee met with Huawei officials in Shenzhen on Feb. 23, and committee members met with Huawei officials on May 23 in Hong Kong, according to the letters.

“I remain concerned about the national security threat posed by the potential expansion of Huawei and ZTE into our telecommunications infrastructure,’’ Rogers said in a June 13 news release. “We must get to the bottom of these issues before the companies have further access to our market.’’

The House Intelligence Committee expects to issue a report on its investigation later this year, Susan Phalen, a spokeswoman for the panel, said in an e-mail. Rogers has no further comment at this time, she said.

Espionage fears

Huawei’s U.S. expansion efforts have been thwarted by national security objections from lawmakers and administration officials.

Huawei and Bain Capital Partners dropped a bid to buy computer-equipment maker 3Com Corp. in 2008 after the Committee on Foreign Investment in the United States — an interagency group led by the Treasury Department — opposed the transaction. Last year, Huawei unwound the purchase of patents from a computer-services company, 3Leaf Systems, after objections from the foreign investment panel.

The Commerce Department in October barred Huawei from participating in a nationwide emergency network, citing security concerns.

The House committee’s probe is part of increasing U.S. government scrutiny of economic espionage by China.

U.S. intelligence officials called China the world’s biggest perpetrator of economic espionage in a report in November that said the theft of sensitive data in cyberspace is accelerating. The most-targeted industries include infor­mation-technology, pharmaceuticals, military equipment and advanced materials, according to the report by the U.S. National Counterintelligence Executive.

Huawei established its U.S. headquarters in Plano, Tex., in 2001 and today has about 1,700 U.S. employees, including workers at a research-and-development center in Santa Clara, Calif., Plummer said.

ZTE, which is also based in Shenzhen, spent $80,000 on U.S. lobbying in the first six months of this year, down from $100,000 for the same period a year earlier, Senate records show. In October 2011, the company registered its first in-house lobbyist, Peter Ruffo, a former aide to Sen. Dianne Feinstein (D-Calif.).

Another lobbyist for ZTE, former congressman Jon Christensen, a Nebraska Republican, severed his ties with the firm July 13, according to Senate records.

ZTE has cooperated with the House Intelligence Committee and its equipment “has been certified by rigorous international standards,’’ Dai Shu, a ZTE spokesman, said in an e-mailed statement.

Huawei and ZTE have global ambitions and are trying to work through their issues in the United States, Willy Shih, professor of management practice at Harvard Business School who studies industrial competitiveness, said in an interview. “It’s problematic for either or both of them if they don’t have a free hand to compete in the U.S.,’’ Shih said. “To be a strong global player, they have to have a presence in the U.S.’’

— Bloomberg Government

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