China hits back against US Huawei charges

China hits back against US Huawei charges

The US Department of Justice has issued several criminal charges against Huawei, claiming that the vendor has defrauded banks, violated trade sanctions, and stolen trade secrets.

The allegations were detailed by Acting Attorney General Matthew Whitaker in a press conference. Whitaker claimed that the misconduct went back “at least ten years…all the way to the top of the company”.

A grand jury in New York has issued 13 indictments against Huawei, its affiliate Skycom Tech, and the vendor’s CFO Meng Wanzhou. The companies face counts of bank and wire fraud, conspiracy to obstruct justice, money laundering, and violating US trade sanctions on Iran.

Huawei and its CFO stand accused of misleading international banks by implying that the company did not control Iranian firm Skycom Tech in order to secure approvals on transactions that in fact contravened US sanctions against Iran. US officials confirmed that Meng faced charges related to her own actions rather than being held to account for other Huawei executives, and noted that the US is looking to extradite her from Canada.

After being detained in Canada on 1st December last year, Meng has been charged with bank & wire fraud and conspiracy. Her arrest has soured relations between Canada and China, with two Canadian citizens being detained and allegedly abused since her arrest.

US attorney for the Eastern District of New York Richard Donoghue said that Huawei and its affiliates had displayed “serious fraudulent conduct” with both the knowledge and “personal involvement” of top level executives, claiming: “For over a decade, Huawei employed a strategy of lies and deceit to conduct and grow its business.”

Meanwhile a separate grand jury in Seattle has accused Huawei of a further ten counts, including IP theft, obstruction of justice and wire fraud. The FBI claims to have viewed emails from 2013 in which Huawei offered employees bonuses proportional to the value of information stolen from rival companies and repatriated via a dedicated encrypted email server.

Through this method, Huawei is accused of stealing information related to US carrier T-Mobile’s mobile device testing robot, including photos and measurements, in violation of non-disclosure agreements. It is even alleged that Huawei engineers stole a part of the robot’s arm in an attempt to replicate it in China, and that - upon being caught - the employees in question were unfairly painted as rogue operators and dismissed by Huawei.

Theft of trade secrets is typically punishable with a fine of three times the value of the stolen material, or $5 million if this is a greater amount. Wire fraud and obstruction of justice typically incur fines of up to $500,000.

China’s foreign ministry has hit back against the charges, claiming that as a result of “strong political motivation and political manipulation”, US authorities had “mobilised state power to blacken” the reputation of Huawei and other Chinese firms such as ZTE “in an attempt to strangle fair and just operations”.

Foreign Ministry representative Geng Shuang stated: “We strongly urge the United States stop the unreasonable suppression of Chinese companies including Huawei and treat Chinese companies fairly and justly. China will also continue to uphold the lawful and legitimate rights and interests of Chinese companies.”

Huawei itself has also refuted the claims, saying: “The company denies that it or its subsidiary or affiliate has committed any of the asserted violations of US law set forth in each of the indictments.” Additionally, it noted that a civil suit relating to the trade secret charges had already been settled, with a Seattle jury determining that there had been no damages or malicious conduct.

Filing charges against Huawei will further damage relations between the US and China ahead of trade talks scheduled to begin on 31st January. China has warned of retaliation if the US does not drop its extradition request for Meng, and called for her to be released. US Commerce Secretary Wilbur Ross has stated that the charges against Huawei are “wholly separate from our trade negotiations with China”.

Nonetheless, Huawei has long been viewed as a threat to US security, particularly against the backdrop of the 5G arms race. The administration has ordered domestic firms not to use Huawei components in building their 5G networks and has asked allies to follow suit.

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