U.S. charges Huawei

U.S. charges Huawei, affiliates with theft and lying about Iran sanctions

By MATTHEW CHOI

The Justice Department on Monday announced criminal charges against Huawei and its affiliates, accusing the Chinese telecommunications firm in two indictments of violating intellectual property law and lying about its compliance with U.S. sanctions against Iran.

Huawei was charged with violating confidentiality agreements with T-Mobile by photographing, measuring and stealing part of a T-Mobile-developed robot, as well as lying to banks about the firm’s ties with Iranian affiliate Skycom to appear to comply with U.S. sanctions, acting Attorney General Matt Whitaker said at a Justice Department news conference that was also attended by FBI Director Christopher Wray and other officials.

The actions name Huawei’s CFO, Meng Wanzhou, who was arrested Dec. 1 in Vancouver, also on charges of lying about violating U.S. sanctions against Iran, leading to fierce backlash from Beijing and adding strains among Chinese, Canadian and U.S. officials as the three countries renegotiate their trade relationships.

Whitaker reiterated the Justice Department’s desire to have Meng, who has been characterized as a Chinese equivalent to Facebook CFO Sheryl Sandberg, extradited to the United States. She had been free on bail in Canada for several weeks, awaiting extradition procedures by the United States. Whitaker said Monday that the department planned to file the extradition paperwork by the end of the month.

The action also comes just two days before the Trump administration will host Chinese Vice Premier Liu He for two days of talks aimed at defusing a bilateral trade war. Trump plans to raise duties on $200 billion worth of Chinese goods to 25 percent, from 10 percent currently, on March 2 if the two sides do not reach a deal. He has already imposed a 25 percent duty on another $50 billion of Chinese goods, and Beijing has retaliated by hitting $110 billion of American exports.

POLITICO reported in August that the White House was working on two executive orders and a presidential memorandum that would restrict U.S. industry from using Chinese products in the U.S. telecommunications infrastructure. While not naming Huawei and ZTE directly, the orders would effectively bar the companies from selling to wireless firms that make up the backbone of U.S. networks.

Additionally, President Donald Trump last year signed a defense bill that bars the U.S. government, including the Pentagon, from procuring equipment or services from Chinese telecoms, though it allowed those companies to do business with the U.S. private sector. Sen. Marco Rubio was among lawmakers who wanted to reinstate a full U.S. ban on ZTE that the Trump administration imposed but later lifted. Members of both parties see the Chinese telecoms as vehicles for cyberespionage and intellectual property theft.

On Tuesday, U.S. intelligence chiefs are expected address the growing cybersecurity threat posed by China at the annual Senate Intelligence Committee hearing on worldwide threats. Over the past few months, Washington lawmakers have sounded the alarm posed by Huawei and ZTE, especially as the U.S. moves toward rolling out 5G networks. At a December hearing on Chinese espionage activities, Senate Judiciary Chairman Chuck Grassley said hysteria about Russian hacking overshadowed a “greater, more existential threat” from China.

Both sides have endeavored to keep the Huawei episode separate from the trade negotiations. But the arrest of the prominent Chinese businesswoman has added to the tense atmosphere.

Altogether, the Justice Department announced 23 new charges on Monday against Huawei and its affiliates: 10 in the case alleging theft of T-Mobile's trade secrets and 13 in the case involving the company's Iranian affiliate Skycom.

Trump has previously hinted he would be willing to use Meng as a bargaining chip, possibly intervening in the Justice Department case against Meng in exchange for “the largest trade deal ever made” with China, Reuters reported in December.

But other senior members of the Trump administration have distanced Meng’s case from trade negotiations.

“This is a criminal justice matter. It is totally separate from anything I work on or anything that trade policy people in the administration work on,” U.S. Trade Representative Robert Lighthizer told CBS in early December.

Commerce Secretary Wilbur Ross also sought to distance the enforcement action from the talks this week.

“To be clear, these indictments are law enforcement actions and are wholly separate from our trade negotiations with China,” Ross said during Monday’s news conference.

Although little-known in the United States, Huawei is a huge force internationally. It is the world's largest telecommunication equipment company and one of the world's largest cellphone manufacturers.

Aside from casting a shadow over already-tense trade talks, Meng’s arrest has led to what appears to be diplomatic retaliation and political conflict among the three countries. A number of Canadians were arrested in China shortly after Meng was detained, and one Canadian national was retried on drug smuggling charges from 2014 and sentenced to the death penalty. China denies that the arrests and retrial are politically motivated.

Canada maintained that Meng’s extradition would be apolitical, and the country routinely follows through with extraditions to the U.S.

But the Canadian ambassador to China at the time, John McCallum, said last week that Meng had a strong argument against extradition to the United States, suggesting that her case was more politically motivated than usual.

“One [reason she has a case against extradition is], political involvement by comments from Donald Trump in her case,” McCallum said. “Two, there’s an extraterritorial aspect to her case, and three, there’s the issue of Iran sanctions which are involved in her case, and Canada does not sign on to these Iran sanctions.”

The divergence from Ottawa’s message of collaboration with the U.S. did not go over well: Prime Minister Justin Trudeau of Canada said on Saturday that he had fired the ambassador.