Huawei exec faces fraud allegations
U.S. accuses Chinese official of misleading bank to circumvent sanctions against Iran
VANCOUVER— A five-year-old PowerPoint presentation is at the heart of allegations against the chief financial officer of the Chinese-owned tech giant Huawei in a case that has implications for international relations, trade and the future of Canada’s telecommunications infrastructure.
Meng Wanzhou was taken into custody last Saturday while passing through Vancouver’s airport. The arrest, carried out at the request of authorities in the United States, has infuriated the Chinese government and worsened preexisting tensions between the two global heavyweights.
On Friday, the first day of Meng’s bail hearing at the B.C. Supreme Court in Vancouver, Crown prosecutors revealed the nature of the claims for the first time. A warrant from the Eastern District of New York alleges Meng knew Huawei was operating a company called SkyCom to do business with Iran, which has been subject to U.S. sanctions since 1979.
The U.S. authorities allege Meng committed fraud by telling an HSBC executive her company was in compliance with U.S. sanctions against Iran limiting communication technology. The meeting took place in 2013, but the location was not revealed.
U.S. authorities argue that Meng broke the law when she told the banker that Huawei and SkyCom, another telecommunications company, were separate entities.
In court on Friday, the Crown presented affidavits detailing information from U.S. law enforcement officials who said former SkyCom employees told them the two companies were operating as one, including using Huawei employees to manage SkyCom in Iran.
“The allegation is SkyCom is Huawei,” said Crown prosecutor John Gibb-Carsley.
Meng’s lawyer David Martin countered, saying Huawei once owned shares in SkyCom and Meng sat on the company’s board, but the shares in the company were sold after 2009 and SkyCom became an independent contractor to Huawei.
Martin argued SkyCom’s business interests in Iran involved “benign, domestic telecommunications equipment.”
As Meng fights for her freedom, the case has sparked a furious response from officials in Beijing who accused Canada and the U.S. of violating Meng’s human rights.
The arrest comes at a time of already heated relations between the U.S. and China, as the two countries have battled over trade tariffs for months. Canadian officials say they had no choice but to make the arrest due to an extradition agreement with the U.S. Some experts say Canada could still suffer retaliation or the cooling of relations with Beijing, a country with which it is seeking more trade.
In Ottawa, Prime Minister Justin Trudeau said he met last weekend with Chinese President Xi Jinping and within the past few weeks with Premier Li Keqiang. He downplayed any risk to China-Canada relations posed by the arrest.
“With China we always talk about human rights and the rule of law, and we always look for ways to deepen our economic participation. That will continue,” Trudeau said. “We have a very good and productive relationship.”
Foreign Affairs Minister Chrystia Freeland also dismissed concerns that Meng’s extradition proceedings could be a setback or even pose a risk for Canadians in China, repeatedly stressing “this was a case where there was no political involvement.”
Like the prime minister, she said the decision to issue a provisional warrant at the request of U.S. authorities was handled “at the officials level.”
“Due process has been and will be followed in Canada,” Freeland said.
Nelson Cunningham, a former U.S. federal prosecutor and special adviser to the Clinton administration, anticipates Meng will remain behind bars pending the outcome of her extradition.
“In the systems I know, someone like this would be highly likely to be in custody while their matter is being adjudicated. They’re such a flight risk, and because we know that if she leaves Canada, she’ll go to China and she’ll be beyond the reach of process,” Cunningham said.
“I would be shocked if she were released on bail.” Cunningham suspected Meng’s arrest could be seen as a warning against those who defy U.S. sanctions, which cover Iran’s shipping, financial and energy sectors.
“Within the Trump administration, there are powerful cross-currents here,” he said. “Because they very much want to punish Iran by limiting trade with Iran, and by punishing companies that violate those sanctions.”
But the move could also have repercussions for Canadian-Chinese relations, he said.
“I could imagine the Chinese government could be putting a great deal of pressure on the Canadian government,” Cunningham said.
“There’s a big disagreement right now between the U.S. and its closest allies, I believe Canada being one of them, over how to interpret what sanctions ought to be enforced against Iran and what sanctions should not.”
Huawei is currently in partnership with leading Canadian universities across the country as well as companies such as Telus, with whom it is developing interconnected 5G networks in Canada. Matthew Dubé, New Democrat MP and critic for public safety and emergency preparedness, said earlier this week that the opposition has heard concerns from Canada’s allies. The United States, Australia and New Zealand have banned the company from participating in the construction of 5G networks because of security concerns, and Washington has been increasing pressure on Canada and Britain —the other two members of the “Five Eyes” intelligence alliance — to follow suit.
Last month, the Weekend Australian published an article citing secret intelligence reports showing Huawei officials were pressured at some point in the past two years to provide password and network details to infiltrate a foreign system.
At that time, the report prompted experts in Canada to reiterate concerns that working with Huawei is a grave “mistake.”
“We’ve heard assurances — but blind assurances — from the minister of public safety and the prime minister,” Dube said. “And I think that, ultimately, it’s incumbent on them to provide the proper assurances — whether that has to be done privately for reasons of national security — to parliamentarians and hopefully to the public as well.”
“This is critical infrastructure, and I think we need to, obviously, adjust ourselves accordingly.” Meng, who had permanent residency in Canada that expired in 2009, was arrested on her way to Mexico from Hong Kong. In court, the Crown argued that Meng has no meaningful connection to Vancouver and access to “vast” resources and connections, making even a million-dollar surety insuffi- cient to deter her from leaving the country.
The Crown alleged Meng has shown a pattern of avoiding the United States, suggesting she suspected an investigation was taking place. Meng could face up to 30 years for each charge, but the number of charges has not been revealed.
Meng’s lawyer argued she is not a flight risk because her family’s reputation would be damaged if she broke any conditions of a potential release, at the same time arguing that the allegations from the U.S. are not fully detailed.
“This PowerPoint is from 2013. Five years ago. If there was conspiracy ... to mislead financial institutions ... if Huawei and its employees were engaged in this activity, I ask rhetorically: Why has this company not been charged?” Martin said.
An affidavit prepared by Meng said she owns two homes in the upscale Vancouver neighbourhoods of Shaughnessy and Dunbar and spends several weeks a year in the city.
“Ms. Meng will remain here,” Martin assured the court.
Huawei executive Meng Wanzhou appeared in a B.C. court on Friday seeking bail, but the Crown argued she poses a flight risk.
A member of Meng Wanzhou’s legal team arrives at the B.C. Supreme Court in Vancouver Friday before her bail hearing.