Chi­nese tele­com ex­ec­u­tive in trade case seeks bail

The Sun News - - Business - BY JIM MORRIS, ROB GIL­LIES AND PAUL WISEMAN

A top Chi­nese telecom­mu­ni­ca­tions ex­ec­u­tive fac­ing pos­si­ble ex­tra­di­tion to the United States ap­peared in court Fri­day as she sought bail in a case that has rat­tled mar­kets and raised doubts about the U.S. be­ing able to reach a truce in its trade war with China.

A prose­cu­tor for the Cana­dian gov­ern­ment urged the court not to grant bail, say­ing the charges against Meng Wanzhou, the chief fi­nan­cial of­fi­cer for Chi­nese tele­com gi­ant Huawei, in­volve U.S. al­le­ga­tions that Huawei used a shell com­pany to ac­cess the Iran mar­ket in deal­ings that con­tra­vene U.S. sanc­tions.

Prose­cu­tor John Gibb-Cars­ley said Meng, who has vast fi­nan­cial re­sources as the daugh­ter of Huawei’s founder, has in­cen­tive to flee Canada be­cause she faces fraud charges in the U.S. that could bring up to 30 years in prison.

The prose­cu­tor said Meng as­sured U.S. banks that Huawei and the shell com­pany al­leged to have done busi­ness with Iran, called Sky­com, were sep­a­rate com­pa­nies, but in fact Sky­com and Huawei were one and the same.

“Ms. Meng per­son­ally rep­re­sented to those banks that Sky­com and Huawei were sep­a­rate, when in fact they were not sep­a­rate,” Gibb-Cars­ley said. “Sky­com was Huawei.”

Meng has con­tended Huawei sold Sky­com in 2009.

Gibb-Cars­ley said the war­rant for Meng’s ar­rest was is­sued in New York on Aug. 22. He said Meng was aware of the U.S. in­ves­ti­ga­tion and had avoided the U.S. since March 2017, even though her teenage son goes to school in Bos­ton.

Meng was ar­rested in Van­cou­ver on Satur­day en route to Mex­ico from Hong Kong.

Meng’s lawyer, David Martin, dis­puted the prose­cu­tor’s call to deny bail, say­ing: “The fact a per­son has worked hard and has ex­tra­or­di­nary re­sources can­not be a fac­tor that would ex­clude them from bail.”

He said Meng’s own per­sonal in­tegrity would not al­low her to go against a court or­der, and that she would not em­bar­rass her fa­ther, com­pany founder Ren Zhengfei, by breach­ing such an or­der. He said Meng would agree to wear an an­kle mon­i­tor.

Meng’s ar­rest came as a jar­ring sur­prise af­ter Pres­i­dents Don­ald Trump and Xi Jin­ping agreed to a trade truce last week­end in Buenos Aires, Ar­gentina.

The case is the lat­est de­vel­op­ment in a sur­pris­ing le­gal wran­gle that raises doubts about whether a U.S.-China trade cease-fire can hold.

Fears of re­newed U.S.China trade hos­til­i­ties have rat­tled global fi­nan­cial mar­kets. They tum­bled Thurs­day. Stocks re­gained their equi­lib­rium Fri­day in Europe and Asia af­ter con­cil­ia­tory words from Bei­jing but fell again on Wall Street.

Trump him­self sought to in­ject a note of op­ti­mism into the pro­ceed­ings, go­ing on Twit­ter be­fore dawn Fri­day to say: “China talks are go­ing very well!”

Huawei has been a sub­ject of U.S. na­tional se­cu­rity con­cerns for years and Meng’s case echoes well be­yond tar­iffs or mar­ket ac­cess. Wash­ing­ton and Bei­jing are locked in a clash be­tween the world’s two largest economies for eco­nomic and po­lit­i­cal dom­i­nance for decades to come.

“It’s a much broader is­sue than just a trade dis­pute,” said Amanda DeBusk, chair of in­ter­na­tional trade prac­tice at Dechert LLP. “It pulls in: Who is go­ing to be the world leader es­sen­tially. … It’s a Cold War sit­u­a­tion.”

Meng was de­tained on the same day that Trump and Xi met at the Group of 20 sum­mit in Ar­gentina and agreed to a cease-fire in their trade war.

White House eco­nomic ad­viser Larry Kud­low said Fri­day on Fox Busi­ness Net­work’s “Var­ney & Co” that Huawei had vi­o­lated U.S sanc­tions on Iran. “They had been warned, and fi­nally we had to pros­e­cute that,” he said.

He dis­missed spec­u­la­tion that Meng’s ar­rest was a de­lib­er­ate ploy to gain lever­age over China in trade talks and said that Trump did not know the ar­rest was com­ing.

Huawei is the world’s big­gest sup­plier of net­work gear used by phone and in­ter­net com­pa­nies and long has been seen as a front for spy­ing by the Chi­nese mil­i­tary or se­cu­rity ser­vices.

“What’s get­ting lost in the ini­tial frenzy here is that Huawei has been in the crosshairs of U.S. reg­u­la­tors for some time,” said Gre­gory Jaeger, spe­cial coun­sel at the Stroock law firm and a for­mer Jus­tice Depart­ment trial at­tor­ney. “This is the cul­mi­na­tion of what is likely to be a fairly lengthy in­ves­ti­ga­tion.”

In a sign Meng’s case might not de­rail the Trump-Xi truce, Bei­jing protested Meng’s ar­rest but said talks with the Trump ad­min­is­tra­tion would go ahead. Chi­nese Com­merce Min­istry spokesman Gao Feng said China is con­fi­dent it can reach a deal dur­ing the 90 days that Trump agreed to

‘‘ IT’S A MUCH BROADER IS­SUE THAN JUST A TRADE DIS­PUTE. IT PULLS IN: WHO IS GO­ING TO BE THE WORLD LEADER ES­SEN­TIALLY. … IT’S A COLD WAR SIT­U­A­TION. Amanda DeBusk, chair of in­ter­na­tional trade prac­tice at Dechert LLP

sus­pend a sched­uled in­crease in U.S. im­port taxes on $200 bil­lion worth of Chi­nese prod­ucts.

Still, at­tor­ney DeBusk said, “I would cer­tainly ex­pect the Chi­nese to do some­thing in re­tal­i­a­tion” for Meng’s ar­rest, per­haps by tar­get­ing U.S. com­pa­nies do­ing busi­ness in China. “Let’s see who doesn’t get a per­mit or which U.S. ex­ec­u­tive gets ar­rested,” she said.

The world’s two largest economies are locked in a dis­pute over charges by Wash­ing­ton, echoed by U.S. in­dus­try groups and an­a­lysts, that China has de­ployed preda­tory tac­tics in its drive to over­take Amer­ica’s dom­i­nance in tech­nol­ogy and global eco­nomic lead­er­ship. These al­legedly in­clude forc­ing Amer­i­can and other for­eign com­pa­nies to hand over trade se­crets in ex­change for ac­cess to the Chi­nese mar­ket and en­gag­ing in cy­ber theft.

Wash­ing­ton also re­gards Bei­jing’s am­bi­tious long-term de­vel­op­ment plan, “Made in China 2025,” as a scheme to dom­i­nate such fields as ro­bot­ics and elec­tric ve­hi­cles by un­fairly sub­si­diz­ing Chi­nese com­pa­nies and dis­crim­i­nat­ing against for­eign com­peti­tors.

Priscilla Mo­ri­uchi, a for­mer East Asia spe­cial­ist at Na­tional Se­cu­rity Agency and now with the cy­ber­se­cu­rity firm Recorded Fu­ture, said both Huawei and its big­gest Chi­nese ri­val, ZTE Corp., are wed­ded to China’s mil­i­tary and po­lit­i­cal lead­er­ship.

“The threat from these com­pa­nies lies in their ac­cess to crit­i­cal in­ter­net back­bone in­fra­struc­ture,” she said.

The Trump ad­min­is­tra­tion has tight­ened reg­u­la­tions on high-tech ex­ports to China and made it harder for Chi­nese firms to in­vest in U.S. com­pa­nies or to buy Amer­i­can tech­nol­ogy in cut­ting-edge ar­eas like ro­bot­ics, ar­ti­fi­cial in­tel­li­gence and vir­tual re­al­ity.

This year, the United States nearly drove ZTE out of busi­ness for sell­ing equip­ment to North Korea and Iran in vi­o­la­tion of U.S. sanc­tions. But Trump is­sued a re­prieve, per­haps partly be­cause U.S. tech com­pa­nies, ma­jor sup­pli­ers to ZTE, would also have been scorched. ZTE agreed to pay a $1 bil­lion fine, change its board and man­age­ment and let Amer­i­can reg­u­la­tors mon­i­tor its op­er­a­tions.

The U.S. and Chi­nese tech in­dus­tries de­pend on each other so much for com­po­nents that “it is very hard to de­cou­ple the two with­out pun­ish­ing U.S. com­pa­nies, with­out shoot­ing our­selves in the foot,” said Adam Se­gal, cy­berspace an­a­lyst at the Coun­cil on For­eign Re­la­tions.

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