A senior Chinese tech executive faces fraud charges in the United States related to business dealings with Iran, a Canadian prosecutor said Friday, offering the first details of a case that has pummeled financial markets and raised questions about a current trade truce between Beijing and Washington.
Before a packed courtroom in Vancouver, prosecutor John Gibb-Carsley argued that Meng Wanzhou committed fraud in 2013 by telling financial institutions that China’s Huawei had no connection to a Hong Kong-based company, Skycom, which was reportedly selling U.S. goods to Iran in violation of U.S. sanctions. Meng’s lawyer denied the charge.
News this week of her arrest roiled markets already shaken by months of conflict between the world’s two largest economies. The fear is that the arrest of a top Chinese executive could impact a trade war truce struck last week by President Trump and Chinese President Xi Jinping.
Meng was arrested at Vancouver’s airport as she traveled from Hong Kong to Mexico on Dec. 1, the same day Trump met Xi on the sidelines of the Group of 20 summit in Argentina.
But the warrant was issued long before that. The allegations were detailed in an Aug. 22 arrest warrant granted in the Eastern District of New York. A Canadian justice then issued a warrant when authorities became aware of Meng’s travel plans, the court heard.
Friday’s hearing suggested that U.S. authorities will allege that Meng played a direct role in a fraud by telling banks that there was no link between Huawei and Skycom.
These banks then cleared financial transactions for Huawei, said Gibb-Carsley, inadvertently doing business with Skycom and becoming “victim institutions” of fraud.
“Skycom was Huawei,” he said.
Meng’s lawyers denied the allegation of fraud, telling the court that Huawei had already divested of Skycom and left its board.
Gibb-Carsley argued that Meng, the daughter of the company’s billionaire founder, Ren Zhengfei, is a flight risk because of her wealth and the fact that she could face three decades in prison.
Meng’s lawyer, David Martin, said she would not risk embarrassing her father or her country by fleeing before her extradition hearing. He also said Meng has family and two homes in Vancouver and that she would put up property as collateral and surrender her Chinese and Hong Kong passports.
The hearing closed without a decision on bail. The court will reconvene Monday.
The U.S. and Canadian sides have thus far said little about the case.
The Chinese government has called for Meng’s immediate release.
“To detain someone without giving clear reason is an obvious violation of human rights,” said Geng Shuang, a spokesman for China’s Foreign Ministry.
The case has called fresh attention to a long-standing conflict over Chinese telecom companies’ operations in the United States and around the world.
Huawei, the world’s second-largest maker of smartphones, is one of the pillars of the new high-tech economy championed by Xi.
But the company’s expansion is strongly opposed by some U.S. officials, who have argued, without detailing their evidence, that Huawei is a threat to national security.
In 2012, the House Intelligence Committee issued a report on Huawei and a smaller firm, ZTE, that warned that the companies “provide a wealth of opportunities for Chinese intelligence agencies” to spy on U.S. companies or agencies that use their equipment.
A previous case against ZTE, which is accused of violating U.S. export sanctions on Iran, brought it to the brink of bankruptcy last year. ZTE was initially blacklisted in the United States, but after Trump’s intervention that was downgraded to an $890 million fine.
Although the United States has not detailed its evidence, the cases appear similar.
For China, the sight of Meng watching the proceedings from a glass defendant’s box, interpreter at her side, will feel personal.
To some, Huawei is a symbol of China’s great economic transformation and the country’s reemergence on the world stage.
The company was founded in 1987 and has grown to become the biggest maker of telecommunications equipment in the world, as well as a leading maker of cellphones.
The founder, Ren, is a prominent business figure in China, and his family is seen as corporate royalty.
The same week news broke of Meng’s arrest, her half sister, Annabel Yao, a 21-year-old Harvard student, was the subject of a fashion spread in Hong Kong’s South China Morning Post that featured photographs of her recent appearance in a debutante ball in Paris.
The Communist Party-controlled media is already casting the case as a cynical U.S. bid to seek trade war leverage.
The United States is “resorting to despicable hooliganism,” the Global Times, a newspaper known for its strident nationalism, wrote in an editorial published Thursday.
“Anybody can see that the United States is maliciously picking holes in Huawei, trying to give it a hard time using the American legal system,” the paper said.
As an uncharacteristically quiet White House mulls its response, Canada is left in a tough position, caught between two superpowers.
Canadian Prime Minister Justin Trudeau said Thursday that his country had no political involvement in Meng’s arrest.
“The appropriate authorities took the decisions in this case,” he said. “We were advised by them with a few days’ notice that this was in the works, but of course there was not engagement or involvement in the political level in this decision.”
Anna Fifield in Beijing contributed to this report.