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U.S. Charges Huawei With Stealing Trade Secrets and Attempting to Evade Sanctions on Iran

By NexChange
Financial Services

The United States Justice Department and acting Attorney General Matthew G. Whitaker unveiled a 13-count indictment against the Chinese telecom giant Huawei and its chief financial officer, Meng Wanzhou, charging the company  with bank fraud , wire fraud and attempting to evade sanctions on Iran and more.

In one indictment, which was returned by a grand jury on Jan. 16, alleges that Huawei attempted to steal trade secrets from T-Mobile USA and then obstructed justice when T-Mobile threatened to sue T-Mobile in U.S. District Court in Seattle, Washington. The attempt to steal trade secrets occurred between 2012 to 2014, according U.S. officials, “and includes an internal Huawei announcement that the company was offering bonuses to employees who succeeded in stealing confidential information from other companies.”

According to the indictment,Huawei tried to steal information on a T-Mobile phone-testing robot known as “Tappy,” carried out by Huawei engineers who secretly took photos of “Tappy,” took measurements and even attempted to steal a piece of the robot in order to replicate it. This was all in violation of confidentiality and non-disclosure agreements with T-Mobile.

When T-Mobile discovered the attempted theft and threatened to sue, “Huawei produced a report falsely claiming that the theft was the work of rogue actors within the company and not a concerted effort by Huawei corporate entities in the United States and China.” However, the Justice Department obtained emails during its investigation showing “the conspiracy to steal secrets from T-Mobile was a company-wide effort involving many engineers and employees within the two charged companies.”

“This indictment shines a bright light on Huawei’s flagrant abuse of the law – especially its efforts to steal valuable intellectual property from T-Mobile to gain unfair advantage in the global marketplace,” First Assistant U.S. Attorney Annette L. Hayes of the Western District of Washington, said in a statement. “We look forward to presenting the evidence of Huawei’s crimes in a court of law, and proving our case beyond a reasonable doubt. Fair competition and respect for the rule of law is essential to the functioning of our international economic system.”

The most serious new charges that Huawei could be facing, however, is that since 2007 Huawei employees have lied about the company’s relationship with an Iranian-based company called Skycom, falsely claiming that it was not a subsidiary of Huawei. In fact, the indictment charges that Huawei defrauded four big banks into clearing transactions with Iran, which violates sanctions against the country.

Per the Justice Department’s press release:

Most significantly, after news publications in late 2012 and 2013 disclosed that Huawei operated Skycom as an unofficial affiliate in Iran and that Meng had served on the board of directors of Skycom, Huawei employees, and in particular Meng, continued to lie to Huawei’s banking partners about Huawei’s relationship with Skycom. They falsely claimed that Huawei had sold its interest in Skycom to an unrelated third party in 2007 and that Skycom was merely Huawei’s local business partner in Iran. In reality, Skycom was Huawei’s longstanding Iranian affiliate, and Huawei orchestrated the 2007 sale to appear as an arm’s length transaction between two unrelated parties, when in fact Huawei actually controlled the company that purchased Skycom.

“In 2017, when Huawei became aware of the government’s investigation, Huawei and its subsidiary Huawei USA allegedly tried to obstruct the investigation by making efforts to move witnesses with knowledge about Huawei’s Iran-based business to the PRC, and beyond the jurisdiction of the U.S. government, and by concealing and destroying evidence of Huawei’s Iran-based business that was located in the United States,” the Feds said in a statement.

Whitaker said the U.S. will seek to have Meng extradited from Canada, where she was detained last year. However, the Chinese Foreign Ministry released a statement on Tuesday calling on the United States and Canada to release Meng.

“For a long time, the U.S. has used state power to smear and attack certain Chinese companies in an attempt to stifle legitimate business operations,” the statement said. “Behind that, there is strong political motivation and manipulation. We strongly urge the U.S. to stop unreasonable suppression of Chinese companies, including Huawei, and treat Chinese enterprises fairly and objectively.”

It remains to be seen if these latest charges impact the ongoing trade war between the U.S. and China.

Photo: Getty iStock

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