U.S. prose­cu­tors

The Washington Post - - FRONT PAGE - BY JEANNE WHALEN [email protected]­post.com

charged Chi­nese firm Huawei with rack­e­teer­ing and con­spir­acy to steal trade se­crets.

U.S. fed­eral prose­cu­tors have charged Chi­nese tech gi­ant Huawei with rack­e­teer­ing and con­spir­acy to steal trade se­crets, in an es­ca­la­tion of a case that be­gan last year.

The new charges ac­cuse Huawei and its sub­sidiaries of a decades-long ef­fort to steal in­tel­lec­tual prop­erty from six U.S. tech com­pa­nies, in­clud­ing by of­fer­ing Huawei em­ploy­ees bonuses for ob­tain­ing con­fi­den­tial in­for­ma­tion, the U.S. at­tor­ney for the Eastern District of New York said Thurs­day.

Huawei and two of its U.S. sub­sidiaries vi­o­lated the Rack­e­teer In­flu­enced and Cor­rupt Or­ga­ni­za­tions Act, or RICO, through their ac­tions, prose­cu­tors said. The al­leged theft helped Huawei il­le­gally ob­tain tech­nol­ogy re­lat­ing to In­ter­net routers and an­ten­nas, giv­ing the com­pany an un­fair com­pet­i­tive ad­van­tage, prose­cu­tors said.

An in­dict­ment filed in fed­eral court in Brook­lyn also in­cludes new al­le­ga­tions about the ac­tiv­i­ties of Huawei and its sub­sidiaries in Iran and North Korea, coun­tries sub­ject to sanc­tions by the United States, the Euro­pean Union or the United Na­tions.

A Wash­ing­ton Post report last year de­tailed Huawei’s se­cret ef­forts to help the North Korean gov­ern­ment build and main­tain a wire­less telecom­mu­ni­ca­tions net­work. Huawei is one of the world’s largest man­u­fac­tur­ers of tele­com equip­ment and smart­phones.

Huawei de­nied the charges. “This new in­dict­ment is part of the Jus­tice De­part­ment’s at­tempt to ir­re­vo­ca­bly da­m­age Huawei’s rep­u­ta­tion and its business for rea­sons re­lated to com­pe­ti­tion rather than law en­force­ment,” the com­pany said in an emailed state­ment. “These new charges are with­out merit and are based largely on re­cy­cled civil dis­putes from the last 20 years that have been pre­vi­ously settled, lit­i­gated and in some cases, re­jected by fed­eral judges and ju­ries.”

The new in­dict­ment rep­re­sents an es­ca­la­tion of a case an­nounced in Jan­uary 2019, when fed­eral prose­cu­tors charged Huawei and its chief fi­nan­cial of­fi­cer, Meng Wanzhou, with bank and wire fraud. Huawei was also charged with vi­o­lat­ing U.S. sanc­tions on Iran and con­spir­ing to ob­struct jus­tice in con­nec­tion with the in­ves­ti­ga­tion. Huawei and Meng de­nied those charges.

Meng, the daugh­ter of Huawei’s founder, Ren Zhengfei, has been un­der house ar­rest in Canada since last year, fight­ing ex­tra­di­tion to the United States.

The new charges come as the Trump ad­min­is­tra­tion ap­pears to have stum­bled in its cam­paign to per­suade for­eign gov­ern­ments not to al­low Huawei to pro­vide equip­ment for 5G wire­less net­works. In ad­di­tion to at­tack­ing Huawei for its business prac­tices, the Trump ad­min­is­tra­tion ar­gues that the com­pany is ul­ti­mately con­trolled by China’s Com­mu­nist Party and that its equip­ment in­stalled over­sees could be used to fa­cil­i­tate es­pi­onage — charges Huawei de­nies.

The in­dict­ment ac­cuses Huawei of ly­ing about its in­volve­ment in North Korea to multi­na­tional banks that had sub­sidiaries in the United States. U.S. law pro­hibits banks with U.S. op­er­a­tions from han­dling dollar trans­ac­tions re­lated to coun­tries un­der sanc­tions.

As The Post re­ported, fed­eral prose­cu­tors said Huawei re­ferred to North Korea in in­ter­nal doc­u­ments with the code “A9,” reflecting the sen­si­tiv­ity of work­ing with a coun­try hit with sanc­tions.

Huawei also at­tempted to con­ceal its business deal­ings with North Korea by in­struct­ing one of its business part­ners not to in­clude a Huawei logo on the com­pany’s ship­ments to North Korea, ac­cord­ing to the in­dict­ment.

The orig­i­nal charges un­veiled last year al­leged that Huawei and Meng lied to bank­ing au­thor­i­ties to avoid ques­tions about whether the com­pany evaded U.S. sanc­tions pro­hibit­ing deal­ings with Iran. Prose­cu­tors al­leged Meng lied to a bank ex­ec­u­tive about the re­la­tion­ship be­tween Huawei and a com­pany in Iran called Sky­com, which prose­cu­tors said func­tioned as a Huawei sub­sidiary.

The new in­dict­ment says Huawei in­stalled equip­ment that helped Iran’s gov­ern­ment per­form do­mes­tic sur­veil­lance, in­clud­ing dur­ing anti-gov­ern­ment demon­stra­tions in 2009. It also says Sky­com, on be­half of Huawei, vi­o­lated U.S. law by em­ploy­ing at least one U.S. ci­ti­zen in Iran.

In re­la­tion to the al­leged in­tel­lec­tual-prop­erty theft, the in­dict­ment says Huawei set up a bonus pro­gram in 2013 that re­warded em­ploy­ees for steal­ing in­for­ma­tion from com­peti­tors, based on the value of the in­for­ma­tion ob­tained. Some em­ploy­ees were di­rected to send sen­si­tive in­for­ma­tion via en­crypted email, the in­dict­ment al­leges.

The charges al­lege that be­gin­ning in the early 2000s, Huawei and a sub­sidiary stole the op­er­at­ing source code for In­ter­net routers from a U.S. tech com­pany head­quar­tered in Cal­i­for­nia. The in­dict­ment says the U.S. com­pany sued Huawei for in­tel­lec­tu­al­prop­erty in­fringe­ment in a Texas court in 2003.

The U.S. com­pany is not named, but the de­tails match a 2003 Cisco law­suit against Huawei that the par­ties later settled. Cisco de­clined to comment Thurs­day.

The in­dict­ment also al­leges Huawei stole tech­nol­ogy re­lat­ing to cel­lu­lar an­ten­nas from an­other U.S. com­pany. It did so by pre­tend­ing to seek a business part­ner­ship with the com­pany and then steal­ing de­tails the U.S. com­pany pro­vided un­der a nondis­clo­sure agree­ment, prose­cu­tors say.

In a joint state­ment, the heads of the Se­nate In­tel­li­gence Com­mit­tee, Chair­man Richard Burr (R-N.C.) and Vice Chair­man Mark R. Warner (D-VA.), ap­plauded the new charges. Crit­i­cism of Huawei has been largely bipartisan in Congress, where many law­mak­ers agree with the White House view that Huawei is a se­cu­rity threat and an un­fair business com­peti­tor — al­le­ga­tions Huawei de­nies.

FRED DUFOUR/AGENCE FRANCE-PRESSE/GETTY IM­AGES

A Huawei logo at the Bei­jing In­ter­na­tional Con­sumer Elec­tron­ics Expo in Au­gust. An in­dict­ment filed Thurs­day in U.S. fed­eral court ac­cus­ing the Chi­nese tech gi­ant of rack­e­teer­ing and con­spir­acy also in­cludes new al­le­ga­tions about the ac­tiv­i­ties of Huawei and its sub­sidiaries in Iran and North Korea.

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