tuesday, 29 january of 2019


U.S. to announce criminal charges related to China´s Huawei

The U.S. Justice Department is expected to announce criminal charges related to Chinese telecommunications firm Huawei Technologies Co Ltd on Monday.

The U.S. government has been expected to announce charges against Meng Wanzhou, Huawei’s chief financial officer, as part of an effort to extradite her from Canada.

The Chinas's answer

China has blasted the US government’s indictments against Huawei as “unfair and immoral” and urged Washington to stop its “unreasonable suppression” of the Chinese telecommunications company after it was charged with a series of offences.

In an escalation of hostilities between the world’s biggest economic powers, the US justice department charged Huawei and its chief financial officer, Meng Wanzhou, with conspiring to violate sanctions on Iran by doing business with Tehran through a subsidiary it tried to hide. Separately, it said Huawei stole robotic technology from the US carrier T-Mobile.

Wen Ku, a senior official at the ministry of industry and information technology, told reporters in Beijing on Tuesday the indictments were “unfair and immoral”.

China’s foreign ministry expressed “grave concern” over the latest development and complained that US authorities had “mobilised state power to blacken” some Chinese companies “in an attempt to strangle fair and just operations”, adding that the charges were the result of “strong political motivation and political manipulation”.

It added: “We strongly urge the United States stop the unreasonable suppression of Chinese companies including Huawei and treat Chinese companies fairly and justly.”

Huawei later said it was “disappointed” to learn of the charges and that its efforts to discuss them with US authorities were “rejected without explanation … The company denies that it or its subsidiary or affiliate have committed any of the asserted violations ... is not aware of any wrongdoing by Ms Meng, and believes the US courts will ultimately reach the same conclusion,” it added.

The news sparked a slide across Asian stock markets, amid fears the Huawei case could damage the prospects for a long-awaited trade deal between China and the US.

MSCI’s index of Asia-Pacific shares outside Japan got off to a shaky start with losses accelerating as other regional markets opened. Benchmark indices in Australia and New Zealand were down 0.7% each while South Korea’s Kospi was off 0.3%. Chinese shares opened in the red too, with the blue-chip index down 0.2%. Japan’s Nikkei 225 index fell 1%, while Hong Kong’s Hang Seng index was down 0.8%.

The charges against came just ahead of a two-day meeting between Chinese and US officials aimed at resolving the long-running trade war. Donald Trump will meet China’s top economy envoy, Liu He, during the talks, which start in Washington on Wednesday.

The US treasury secretary, Steven Mnuchin, said he expected “significant progress at these meetings”, despite the cloud Huawei has cast over the talks.

The justice department said Huawei had based its global expansion on “lies and deceit”. It accused the firm and its executives of stealing trade secrets, laundering money, obstructing justice and defrauding banks to elude US sanctions.

Matthew Whitaker, the acting attorney general, said criminal offending at Huawei went “all the way to the top of the company”. He announced that grand juries in Seattle and New York had issued indictments on 23 criminal charges.

Kirstjen Nielsen, the US homeland security secretary, said Huawei had operated a scheme that had been “detrimental to the security of the United States” by undermining sanctions against Iran.

The company, which is the world’s biggest manufacturer of telecommunications equipment, has consistently denied wrongdoing.

Huawei is accused by the US of stealing robot technology from T-Mobile for making smartphones. The FBI said it obtained emails showing that in 2013, the company offered bonuses to employees based on the value of information they stole from other companies and sent home via an encrypted email address.

Engineers from Huawei measured and took photographs of the robot, “Tappy”, and even stole a piece of it for replication in China, prosecutors said, and were falsely disowned as rogue employees by the company when they were caught.

The company and Meng are also accused of defrauding banks and lying to the US to get around economic sanctions on Iran. They claimed to have sold an Iranian subsidiary but had actually sold it to themselves, US prosecutors said.

Meng, 46, who is the daughter of the company’s founder, was arrested in Canada on 1 December following a request by the US, which will now seek to extradite her. She is accused of personally making a presentation to a “major banking partner” in which she “repeatedly lied” about the company’s relationship to the subsidiary, Skycom.

Meng is currently under house arrest and the US justice department has until 30 January to file a formal extradition request.

Another senior executive falsely told FBI agents that Huawei did not directly deal with Iranian companies, according to US authorities, and falsely said Huawei complied with all US export laws.

The charges said Huawei had also obstructed justice by concealing or destroying evidence about its Iranian subsidiary, and even moving potential witnesses who knew about the fraud back to China so they could not be reached by US investigators.

Prosecutors said that, as a corporate entity, Huawei could be punished by a fine of three times the value of the stolen trade secret, and up to $500,000 for wire fraud and obstruction of justice.

The charges are likely to raise tensions between China and the US amid a trade war between the world’s two biggest economies. They were unveiled shortly before trade talks between American and Chinese officials were due to resume.

Meanwhile, Meng’s arrest in Vancouver has provoked the detention and alleged abuse of two Canadian citizens in China, amid an ongoing diplomatic row between the two countries.

Huawei has long been considered a cybersecurity risk by US authorities. The Trump administration has pressured American technology companies to not use Huawei components, and have asked allied governments to do the same.

Whitaker said on Monday: “China must hold its citizens and Chinese companies accountable for complying with the law.”

The Lawyers

Huawei’s CFO “should not be a hostage” in Sino-U.S. relations, her lawyer said on Tuesday, after the United States announced criminal charges against herself and the Chinese firm just days before crunch trade talks with Beijing.

The Justice Department charged Huawei Technologies Co Ltd and its chief financial officer with conspiring to violate U.S. sanctions on Iran by doing business through a subsidiary it tried to hide and that was reported on by Reuters in 2012 reut.rs/2sRL7Ve and 2013 reut.rs/2sUq8RT.

In a separate case, the Justice Department charged the telecommunications equipment maker with stealing robotic technology from T-Mobile US Inc. Huawei has said the companies settled their dispute in 2017.

CFO Meng Wanzhou, the daughter of Huawei’s founder, was arrested in Vancouver on Dec. 1, a move which was followed by China arresting two Canadians on national security grounds. She is scheduled in court on Tuesday to discuss her bail terms, and is subject to a U.S. extradition request.

Her lawyer Reid Weingarten, partner at Steptoe & Johnson, pointed to “complex” Sino-U.S. relations.

Our client, Sabrina Meng, should not be a pawn or a hostage in this relationship. Ms. Meng is an ethical and honorable businesswoman who has never spent a second of her life plotting to violate any U.S. law, including the Iranian sanctions.”

Huawei said it had sought to discuss the charges with U.S. authorities “but the request was rejected without explanation”.

It said it “denies that it or its subsidiary or affiliate have committed any of the asserted violations” and “is not aware of any wrongdoing by Ms. Meng.”

China’s foreign ministry urged the United States drop the arrest warrant and end “unreasonable suppression” of Chinese companies. Spokesman Geng Shuang also said China had issued stern representations to both Canada and the United States after the U.S. formally issued its extradition request for Meng.

Canada’s Justice Minister has 30 days from receipt of the request to decide whether to grant authority to proceed. If granted, Meng’s case would be sent to the British Columbia Supreme Court for a hearing, which could take weeks or months.

The development is likely to upset talks between Beijing and Washington this week as part of negotiations intended to walk back trade tensions between the globe’s two largest economies.

U.S. President Donald Trump said in December he could intervene in Meng’s case if it would serve national security interests or help close a trade deal with China.

U.S. Commerce Secretary Wilbur Ross said the charges are “wholly separate” from the trade negotiations.

Huawei makes equipment including base stations, switches and routers, as well as consumer products such as smartphones, and derives nearly half of its total revenue outside China.

Its global reach has come under attack from the United States, which is trying to prevent U.S. companies from buying Huawei equipment and is pressing allies to do the same. U.S. security experts are concerned the gear could be used by China’s government for espionage - a concern Huawei calls unfounded.

Australia and New Zealand followed the U.S. lead in restricting market access over the past year. On Tuesday, TPG Telecom Ltd canceled the Huawei-based mobile phone network it was building, in the first commercial casualty of Australia’s move.

Huawei nevertheless said it is the world’s leading provider of 5G technology, winning 30 contracts globally - more than any of its competitors - including 18 in Europe.

It is unclear how the U.S. charges would impact its business. Last year, Chinese peer ZTE Corp was prevented from buying essential components from U.S. firms after pleading guilty to similar charges, crippling its operations.

ZTE resumed normal business after paying up to $1.4 billion in fines and replacing its entire board, on top of a near $900 million penalty paid in 2017.

U.S. Acting Attorney General Matthew Whitaker said the alleged criminal activity at Huawei “goes back at least 10 years and goes all the way to the top of the company.” The charges against Meng and Huawei cite the Reuters stories that said Huawei’s Skycom unit sought to sell goods to Iran.

The indictment noted that denials from Huawei in the stories were relied upon by financial institutions “in determining whether to continue their banking relationships with Huawei and its subsidiaries.”

The indictment featured a meeting in August 2013 between Meng and an executive from an unidentified bank. Sources told Reuters the bank is HSBC Holdings PLC, which paid $1.92 billion in 2012 for violating U.S. anti-money-laundering and sanctions laws.

During the meeting, Meng misrepresented Huawei operations in Iran and ownership and control of Skycom, the indictment showed.

The Justice Department has confirmed that HSBC is not under investigation in this case, HSBC said in a statement last month.

Also according to the indictment, in July 2007, the FBI interviewed Huawei founder Ren Zhengfei and U.S. authorities said he falsely told them Huawei did not violate U.S. export laws.

The indictment concerning trade secret theft alleged that Huawei had a formal policy instituting a bonus program to reward employees who stole confidential information from competitors.

FBI Director Christopher Wray said the Huawei cases, filed in New York and Washington state, “expose Huawei’s brazen and persistent actions to exploit American companies and financial institutions, and to threaten the free and fair global marketplace.”

(Published by Reuters and The Guardian)

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