US Investigators Accuse Huawei of Fraud, Trying to Steal Secrets

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china-huawei2-012919.jpg Huawei's 5G wireless tech exhibition hall is shown at the Beijing PT Expo, Sept. 26, 2018.

Authorities in the United States on Tuesday indicted China's flagship telecoms giant Huawei on charges of fraud, attempted theft of trade secrets, and obstruction of justice, as investigators formally placed an extradition request for the company's chief financial officer Meng Wanzhou.

Prosecutors in Brooklyn, New York charged Huawei, two of its affiliates, and Meng with charges related to bank fraud and money laundering, the Department of Justice said in a news release.

They were also accused of violating the International Emergency Economic Powers Act (IEEPA) governing sanctions with Iran. Huawei was also charged with conspiracy to obstruct justice related to a grand jury investigation of its activities in the Eastern District of New York.

"Huawei and its Chief Financial Officer broke U.S. law and have engaged in a fraudulent financial scheme that is detrimental to the security of the United States," Secretary Kirstjen Nielsen of the U.S. Department of Homeland Security said in a statement.

"They willfully conducted millions of dollars in transactions that were in direct violation of the Iranian Transactions and Sanctions Regulations, and such behavior will not be tolerated," Nielsen said.

Wilbur Ross of the U.S. Department of Commerce said the administration of President Donald Trump was "tougher" on those who violate export controls than any previous administration, while FBI Director Christopher Wray said Huawei was accused of showing "blatant disregard" for U.S. law and international business practices.

"Companies like Huawei pose a dual threat to both our economic and national security," Wray said. "We will not tolerate businesses that violate our laws, obstruct justice, or jeopardize national and economic well-being."

Acting U.S. Attorney General Matthew G. Whitaker called on China to "hold its citizens and Chinese companies accountable for complying with the law."

The DOJ said Huawei had hidden behind a linked company, Skycom, to mask its operations in Iran and accused Meng of repeatedly lying to Huawei’s banking partners about the relationship with Skycom, which they described as a "partner."

"Huawei orchestrated the 2007 sale [of Skycom] to appear as an arm’s length transaction between two unrelated parties, when in fact Huawei actually controlled the company that purchased Skycom," it said, summarizing the indictment.

Trade secrets stolen

Meanwhile, a separate indictment unsealed in Washington state after being returned by a grand jury on Jan. 16 accused Huawei of trying to steal trade secrets from T-Mobile USA.

It cited an internal offer of bonuses to Huawei employees who succeeded in stealing confidential information from other companies, the Department of Justice said in a statement on its website.

"Today we are announcing that we are bringing criminal charges against telecommunications giant Huawei and its associates for nearly two dozen alleged crimes," Acting Attorney General Matthew G. Whitaker said.

"The charges unsealed today clearly allege that Huawei intentionally conspired to steal the intellectual property of an American company in an attempt to undermine the free and fair global marketplace," FBI Director Christopher Wray said.

"Huawei continually disregarded the laws of the United States in the hopes of gaining an unfair economic advantage," Wray said. "The FBI will not tolerate corrupt businesses that violate the laws that allow American companies and the United States to thrive."

Some of the allegations revolve around a robot named "Tappy" developed by T-Mobile to test its new phones.

Huawei engineers violated confidentiality and non-disclosure agreements with T-Mobile by secretly taking photos of “Tappy,” taking measurements of parts of the robot, and in one instance, stealing a piece of the robot so that the Huawei engineers in China could try to replicate it, according to the indictment.

Huawei then produced a report falsely claiming that the theft was the work of rogue actors within the company, giving rise to the "obstruction of justice" charge, it said.

It said email evidence showed that  a "conspiracy to steal secrets from T-Mobile [that] was a company-wide effort."

'Dissatisfied, opposed'

In Beijing, foreign ministry spokesman Geng Shuang said the Chinese government was "deeply dissatisfied and resolutely opposed" to the accusations.

"The U.S. is using its national power to discredit and suppress specific Chinese companies in an attempt to stifle their legitimate operations," Geng told a regular news briefing on Tuesday.

He said the moves were the result of "political motivation and maneuvering."

"We strongly urge the U.S. to stop the unreasonable suppression of Chinese companies including Huawei, and to treat Chinese enterprises fairly and objectively."

He repeated Beijing's call for Meng's immediate release.

June Teufel Dreyer, political science professor at the University of Miami, said the Huawei indictments were unlikely to be the last of their kind aimed at Chinese technology companies.

"It's not just the U.S.: other countries including the U.K., Germany, and Australia are very concerned about the security threat from Huawei and other Chinese companies," Dreyer told RFA.

"Western countries are now making rules and decisions that will limit the use of Huawei and ZTE products," she said in comments translated from an interview with RFA's Mandarin Service.

Canadians held

At least 13 Canadians were detained in China after Chinese officials vowed to retaliate for the arrest of Meng, who is wanted for questioning by investigators in the U.S. over alleged bank fraud linked to the breach of sanctions against Iran.

While at least eight have since been released, a court in the northeastern city of Dalian on Dec. 29 handed down the death penalty to Canadian national Robert Schellenberg, who was originally sentenced to 15 years in prison for drug smuggling last November.

Former Canadian diplomat Michael Kovrig and consultant Michael Spavor remain in detention on suspicion of "endangering national security."

The indictments come after national security researchers at George Mason University published a report warning that Huawei should be regarded as a potential security threat as governments around the world begin tendering for next-generation 5G mobile network infrastructure, given a 2017 Chinese law requiring Chinese companies and citizens to comply with spying requests from the government.

Huawei has repeatedly insisted that it is a private company with no ties to the state.

Reported by Wen Yuqing for RFA's Cantonese Service, and by Xi Wang for the Mandarin Service. Translated and edited by Luisetta Mudie.


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