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Justice Dept. charges Huawei with fraud, ratcheting up U.S.-China tensions

Acting attorney general Matthew G. Whitaker announced Jan. 28 charges against Chinese technology giant Huawei of lying, spying and attempts to obstruct justice. (Video: The Washington Post)

The Justice Department announced criminal charges Monday against Huawei Technologies, the world’s largest communications equipment manufacturer, and one of its top executives — a move likely to intensify trade tensions between the United States and China.

A 13-count indictment filed in New York City against Huawei, two affiliates and its chief financial officer, Meng Wanzhou, details allegations of bank and wire fraud. The company also is charged with violating U.S. sanctions on Iran and conspiring to obstruct justice related to the investigation.

Canadian officials arrested Meng on a U.S. warrant Dec. 1. She has since been released on bail, and her travel is confined to Vancouver and surrounding areas. Meng could face up to 30 years if found guilty on all counts.

On Monday evening, the Canadian Justice Department confirmed it had received a formal request for Meng’s extradition from the United States to stand trial. The request comes even as Beijing has pressured Canada to release Meng.

Top U.S. law enforcement officials, including acting attorney general Matthew G. Whitaker and FBI Director Christopher A. Wray, held a news conference in Washington to announce the charges.

“The criminal activity in this indictment goes back at least 10 years and goes all the way to the top of the company,” Whitaker said.

Wray said firms 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.”

Huawei attorney Reid Weingarten said he was confident “ justice will be done.”

“The U.S. government and China have an extremely complex, multifaceted relationship. Our client, Sabrina Meng, should not be a pawn or a hostage in this relationship,” he said. “Ms. Meng is an ethical and honorable businesswoman who has never spent a second of her life plotting to violate any U.S. law, including the Iranian sanctions.”

In a statement in Beijing, a Foreign Ministry spokesman decried the charges. “For some time, the U.S. has used its government power to discredit and crack down on specific Chinese companies in an attempt to stifle their legitimate operations,” Geng Shuang said. “We strongly urge the U.S. to stop the unreasonable suppression of Chinese companies, including Huawei, and treat Chinese companies objectively and fairly.”

The indictment threatened to further strain relations between Washington and Beijing as officials from both countries prepare for talks this week aimed at ending a months-long economic impasse that has contributed to huge swings in the stock market. Although President Trump had suggested he was willing to help secure Meng’s release if China met his demands for a trade deal, Justice and Commerce department officials insisted Meng’s criminal case was a separate matter.

Prosecutors said that Huawei — and Meng in particular — lied to banking authorities to avoid questions about whether the company evaded U.S. sanctions prohibiting firms from doing business with Iran. The indictment alleges that Huawei’s misrepresentations to the U.S. government and various banks about its business dealings in Iran date back to 2007.

According to the indictment, Meng in 2013 made a presentation to a bank executive in which she repeatedly lied about the relationship between Huawei and a company in Iran called Skycom, which prosecutors alleged functioned as a subsidiary. U.S. law prohibits banks operating in the United States from processing dollar transactions related to Iran through the United States.

The Justice Department also charged that when Huawei became aware of the U.S. investigation in 2017, the company’s American affiliate sought to obstruct that work by trying to move witnesses with knowledge of Huawei’s Iran-based business back to China, where FBI agents could not interview them.

The charges come as the two countries’ leaders seek to end their months-long trade dispute and with China’s lead trade negotiator, Liu He, scheduled to meet with U.S. officials in Washington in coming days.

Huawei is one of China’s “national champions,” promoted and protected by the ruling Communist Party. The arrest of Meng, the daughter of Huawei founder Ren Zhengfei, sparked outrage in China, which called for her immediate release and condemned the move as a U.S.-led effort to thwart the telecom giant and constrain China’s global ambitions.

Shortly after, in a move widely seen as retaliation for Meng’s arrest, Chinese authorities detained two Canadians, including a former diplomat, on security charges.

The charges grew from a long-running investigation by federal authorities into a rival Chinese telecom company, ZTE, which investigators found in 2012 was secretly diverting U.S.-made computer equipment to Iran through a front company. That probe uncovered evidence that Huawei also was diverting equipment to Iran through Skycom.

Skycom — on whose board of directors the indictment says Meng served from 2008 to 2009 — was one of the two affiliates charged. The other was Huawei Device USA.

According to the indictment and a Justice Department news release, at least two other defendants have been charged but not yet apprehended. Their identities remain under seal. The indictment also said that the FBI in 2007 interviewed Ren, the founder, and that he “falsely stated” that Huawei did not conduct activity in violation of U.S. export laws. It is not clear whether he has been charged.

In 2017, ZTE pleaded guilty to violating U.S. sanctions against Iran and North Korea, and paid $892 million in fines imposed by the Justice, Treasury and Commerce departments.

As part of the settlement, ZTE admitted it shipped U.S. telecommunications equipment to Iran in violation of the law that bars shipment of goods originating in the United States to Iran. Investigators also obtained documents that indicated ZTE modeled some of its sanctions-evading behavior after another company, code-named F7.

F7 was understood by government investigators to be a reference to Huawei, said two people familiar with the case.

Since Meng’s arrest, Canadian officials have stressed that her case is a legal matter, not a political one. But that message has not been consistent, complicating the standoff.

Shortly after Meng’s arrest, Trump suggested he might be willing to make a deal for her release if he could cut a trade agreement with China, raising concerns from observers about politicization of the judicial process.

Asked Monday if Trump’s suggestion remained a possibility, Whitaker said: “The U.S. Department of Justice does its investigations and charging decisions independent from the White House.”

Last week, Canada’s ambassador to China, John McCallum, shocked many by saying at a news conference that he thought Meng could make some “strong arguments” to avoid extradition, including what he termed Trump’s “political involvement.”

Prime Minister Justin Trudeau immediately distanced his government from the comment, and McCallum walked it back — only to tell a reporter the following day that it would be “great” for Canada if the United States dropped the case. Trudeau fired McCallum over the weekend.

Authorities also unsealed a separate 10-count indictment in Washington state, charging two affiliates — Huawei Device Co. and Huawei Device USA — with conspiring to steal trade secrets, wire fraud and obstruction of justice. That indictment alleges Huawei conspired to steal from T-Mobile USA the technical details of a phone-testing robot.

The robot, nicknamed “Tappy,” was of such great interest to Huawei that the company secretly took photos and measurements of the robot and, in one instance, stole its arm so that Huawei engineers could try to replicate it, according to prosecutors. Investigators said that after T-
Mobile learned of Huawei’s efforts and threatened to sue, Huawei produced a report falsely claiming the thefts were the work of rogue employees. In fact, U.S. officials said, the FBI had obtained emails showing that in July 2013, Huawei offered bonuses to employees based on the value of information they stole from other companies.

“Huawei clearly knew it was part of an organized effort to steal technology,” said Annette Hayes, first assistant U.S. attorney for the Western District of Washington. “This is part of Huawei’s M.O.”

Gerry Shih in Beijing and Emily Rauhala in New Haven, Conn., contributed to this report.