Following the arrest of Huawei’s CFO in Canada last month, new documents released by Reuters indicate that the Chinese vendor has closer ties than previously thought with two companies under investigation by the US Department of Justice.
On 1st December last year, Huawei CFO Meng Wanzhou - who is also the daughter of the vendor’s founder Ren Zhengfei – was arrested in Vancouver, where she was detained until 11th December before being released on C$10 million (£5.9 million) bail by a Canadian court. She remains in the city while the US attempts to extradite her.
US authorities claim that the Huawei CFO obfuscated Huawei’s connection to the two firms under investigation - Iranian equipment seller Skycom Tech and Mauritius-registered shell company Canicula Holdings – to convince a number of financial institutions to clear transactions linked to Skycom Tech. If proven true, the allegations could mean that Huawei had violated trade sanctions that the US had in place against Iran.
Huawei has strongly denied a connection to either company, maintaining that both are independent and that its relationship with Skycom Tech was “a normal business partnership.” The company has stated that it has complied with all laws and regulations, and that it required Skycom to follow suit.
However, the corporate filings and additional documents released by Reuters appear to show that a senior Huawei executive was appointed as the Iran manager for Skycom Tech. The documents also confirm that least three individuals with Chinese names held the signing rights for the Iranian bank accounts of both Huawei and Skycom.
Reuters also provided a statement from a Middle Eastern lawyer indicating that Canicula had conducted business in Syria on behalf of Huawei. In a 2014 letter to Middle Eastern business website Aliqtisadi.com, attorney Osama Karawani requested a correction to a story about the dissolution of a Huawei company in Syria which incorrectly inferred that Huawei itself had been liquidated.
Karawani wrote: “Huawei was never dissolved…[it] has been and is still operating in Syria through several companies which are Huawei Technologies Ltd and Canicula Holdings Ltd.”
Reuters’ findings appear to support the US assertion that Huawei held control of Skycom and used it to sell telecoms equipment in Iran as well as repatriate money from the country through the international banking system. This would mean that several financial institutions would have inadvertently approved transactions that contravened US sanctions against conducting business with Iran.
The US case against Meng leans heavily on reports by Reuters, including the revelation that Meng sat on Skycom’s board of directors between February 2008 and April 2009. Investigators allege that Meng and Huawei “repeatedly lied” over the fact that “Skycom was entirely controlled by Huawei.”
If the US is successful in extraditing Meng, she could face a number of charges of conspiracy to defraud these financial institutions. While the exact charges have not been disclosed, each carries a maximum sentence of 30 years. Upon Meng’s arrest, Huawei stated that it has not been provided with detailed information about the charges that she faces, and that the company is “not aware of any wrongdoing by Ms. Meng.”
Meng’s arrest has exacerbated the deterioration of US-China relations, which have been fraught for months due to growing tensions over trade. The Chinese government has requested that Canada release Meng, and in an apparent reaction to the arrest has taken at least 13 Canadians into custody. Two have been charged with spying.
While Huawei’s equipment has long been banned in the US due to security concerns, the arrest of Meng appears to have prompted other developed markets to reassess their use of the company’s network equipment. Australia and New Zealand have both banned operators from building next-generation networks using Huawei products, and UK authorities are similarly scrutinising the vendor.