Chi­nese tele­com exec ac­cused of fraud

Huawei CFO al­legedly used sub­sidiary to vi­o­late U.S. trade sanc­tions

Winnipeg Free Press - - BUSINESS - LAURA KANE

ANCOUVER — A se­nior ex­ec­u­tive of Chi­nese tech gi­ant Huawei is fac­ing al­le­ga­tions of fraud by us­ing a sub­sidiary to vi­o­late U.S. trade sanc­tions against Iran in a case that shook world stock mar­kets this week.

A fed­eral prose­cu­tor told a bail hear­ing for Meng Wanzhou in Van­cou­ver on Fri­day that the chief fi­nan­cial of­fi­cer of Huawei Tech­nolo­gies is wanted in the United States to face crim­i­nal pro­ceed­ings, al­leg­ing Huawei used sub­sidiary Sky­com to do busi­ness with Iran.

John Gibb-Cars­ley said Meng is al­leged to have said Huawei and Sky­com were sep­a­rate com­pa­nies in a meet­ing with an un­named fi­nan­cial in­sti­tu­tion, mis­lead­ing an ex­ec­u­tive with that in­sti­tu­tion and putting it at risk.

“Sky­com was Huawei. This is the al­leged fraud,” said Gibb-Cars­ley, rep­re­sent­ing the at­tor­ney gen­eral of Canada. “Sky­com em­ploy­ees were Huawei em­ploy­ees.”

None of the al­le­ga­tions have been proven in court.

The com­pany has said it is not aware of any wrong­do­ing by Meng and her lawyer, David Martin, told the B.C. Supreme Court no charge or in­dict­ment has been filed against his client, just a war­rant.

He said one of the glar­ing de­fi­cien­cies in the al­le­ga­tions is that the sum­mary of the case doesn’t dif­fer­en­ti­ate be­tween time pe­ri­ods.

Martin said at the meet­ing Meng had with a bank that was re­ferred to in a story by Reuters, she ex­plained Huawei owned Sky­com for a pe­riod of time but it sold the com­pany in 2009. Martin told the court the Pow­erPoint pre­sen­ta­tion his client de­liv­ered to the bank is sup­posed to be ev­i­dence of fraud, but that claim is “pre­pos­ter­ous.”

Huawei sold Sky­com be­fore the sanc­tions be­came law in the United States un­der pres­i­dent Barack Obama in 2010, he said.

Martin also ar­gued that the out­line pro­vided by Canada does not sup­port the case.

“The al­le­ga­tions con­tained in this doc­u­ment do not sup­port a prima fa­cie case of fraud against Ms. Meng” or Huawei, he added.

The case was ad­journed un­til Mon­day by Jus­tice Wil­liam Ehrcke to al­low the de­fence more time to com­plete their sub­mis­sions.

Gibb-Cars­ley said the at­tor­ney gen­eral op­poses Meng’s re­lease on bail.

But Martin told the judge Meng is prom­i­nent and she would not vi­o­late a court or­der if she were re­leased.

“You can rely on her per­sonal dig­nity,” he said, adding that to breach a court or­der “would be to hu­mil­i­ate and em­bar­rass her fa­ther, who she loves.”

Huawei is the most pres­ti­gious tech com­pany in China and was founded by Meng’s fa­ther, Ren Zhengfei.

Martin said two prop­er­ties in Van­cou­ver worth a to­tal of $14 mil­lion could be put up for bail, and elec­tronic mon­i­tor­ing and sur­veil­lance-based se­cu­rity could be used, al­though he said nei­ther would be nec­es­sary.

Meng was ar­rested Dec. 1 while in tran­sit at Van­cou­ver’s air­port. The court heard she was en route from Hong Kong to Mex­ico.

Gibb-Cars­ley told the hear­ing that

VReuters re­ported in 2013 that Huawei was op­er­at­ing Sky­com, trig­ger­ing Huawei ex­ec­u­tives in­clud­ing Meng to al­legedly make a se­ries of mis­rep­re­sen­ta­tions.

He ar­gued the fi­nan­cial in­sti­tu­tions that did busi­ness with Huawei were the “vic­tims” of those mis­rep­re­sen­ta­tions. It’s al­leged they did not know they were in ef­fect do­ing busi­ness with Iran and could have faced se­vere fi­nan­cial con­se­quences, Gibb-Cars­ley said.

He said there is in­cen­tive for Meng to leave Canada, telling the court her fa­ther’s net worth is $3.2 bil­lion and she has no mean­ing­ful con­nec­tion to Canada, apart from spend­ing two to three weeks on va­ca­tion in Van­cou­ver ev­ery sum­mer.

In a state­ment ear­lier this week, Huawei said the com­pany com­plies with all laws and reg­u­la­tions in the coun­tries where it op­er­ates, in­clud­ing ap­pli­ca­ble ex­port control, sanc­tion laws and reg­u­la­tions of the United Nations, the United States and the Euro­pean Union.

Huawei is the big­gest global sup­plier of net­work gear used by phone and in­ter­net com­pa­nies, and has been the tar­get of deep­en­ing U.S. se­cu­rity con­cerns. The United States has pres­sured Euro­pean coun­tries and other al­lies to limit the use of its tech­nol­ogy.

The U.S. sees Huawei and smaller Chi­nese tech sup­pli­ers as pos­si­ble fronts for Chi­nese spy­ing and as com­mer­cial com­peti­tors. The Trump ad­min­is­tra­tion says they ben­e­fit from im­proper sub­si­dies and mar­ket bar­ri­ers.

Meng is a prom­i­nent mem­ber of Chi­nese so­ci­ety as deputy chair­woman of the Huawei board. The com­pany is a pri­vately held jug­ger­naut with pro­jected 2018 sales of more than

US$102 bil­lion that has al­ready over­taken Ap­ple in smart­phone sales.

On TV and so­cial me­dia, com­men­ta­tors likened her ar­rest to the hy­po­thet­i­cal de­ten­tion in China of a Mark Zucker­berg sib­ling or a cousin of Steve Jobs.

U.S. and Asian stock mar­kets tum­bled af­ter news of Meng’s ar­rest as it was seen to cause an­other flare-up in ten­sions be­tween Wash­ing­ton and Bei­jing.

Huawei has grown to more than

170,000 em­ploy­ees and does busi­nesses in more than 170 coun­tries since Ren founded the com­pany in 1987.

Meng’s bio on the com­pany web­site says she joined in 1993 and held var­i­ous po­si­tions across the com­pany, in­clud­ing di­rec­tor of in­ter­na­tional ac­count­ing and CFO of Huawei Hong Kong. She holds a mas­ter’s de­gree from Huazhong Univer­sity of Sci­ence and Tech­nol­ogy.

For a pe­riod of time, she was in charge of Huawei’s suc­cess­ful in­ter­na­tion­al­iza­tion ef­forts.

Meng’s fa­ther, now 74, comes from ru­ral roots, ac­cord­ing to the Huawei web­site. His par­ents were school teach­ers and he grew up in the re­mote moun­tain­ous town in Guizhou prov­ince.

Huawei says Ren was a stand­out in the Chi­nese mil­i­tary’s en­gi­neer­ing corps, re­tir­ing in 1983 when the unit dis­banded.

Meng, who also goes by the first name Sab­rina, is one of four deputy chairs listed on the Huawei web­site and one of three women to sit on the Huawei board.

JANE WOLSAK

In this court­room sketch, Meng Wanzhou (right), the chief fi­nan­cial of­fi­cer of Huawei Tech­nolo­gies, sits be­side a trans­la­tor dur­ing a bail hear­ing at B.C. Supreme Court in Van­cou­ver on Fri­day.

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