Huawei exec faces fraud al­le­ga­tions

U.S. ac­cuses Chi­nese of­fi­cial of mis­lead­ing bank to cir­cum­vent sanc­tions against Iran

Toronto Star - - FRONT PAGE - MICHAEL MUI, PER­RIN GRAUER, JOANNA CHIU AND JEREMY NUT­TALL STARMETRO VAN­COU­VER

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.

JANE WOLSAK THE CANA­DIAN PRESS

Huawei ex­ec­u­tive Meng Wanzhou ap­peared in a B.C. court on Fri­day seek­ing bail, but the Crown ar­gued she poses a flight risk.

JESSE WIN­TER STARMETRO VAN­COU­VER

A mem­ber of Meng Wanzhou’s le­gal team ar­rives at the B.C. Supreme Court in Van­cou­ver Fri­day be­fore her bail hear­ing.

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