New evidence has emerged that Huawei deliberately obscured the relationship between its Chief Financial Officer Meng Wanzhou and the Iran-based Skycom Tech.
Extensive business records obtained by Reuters – including contractual agreements, correspondence and memos – demonstrate that Huawei “effectively controlled” Skycom despite maintaining that the Hong Kong-registered firm was a local partner in Iran and a separate business.
The documents may be used as evidence against Meng as the US seeks to extradite her from Canada following her arrest in December 2018 on fraud charges. US authorities allege that Huawei and Meng defrauded a major bank in order to deliver US-manufactured products to Iran via Skycom and then repatriate money from the country.
The US claims that Skycom was an “unofficial subsidiary” of Huawei rather than a local partner. Although the business was shuttered in 2017, it remains a defendant in the case. Huawei is a former shareholder in Skycom but sold its stake in the unit over ten years ago.
Reuters notes that the documents “appear to undermine Huawei’s claims that Skycom was just a business partner” by providing “a behind-the-scenes look at some of what transpired at the two companies inside Iran seven years ago and how intertwined the companies were.” The agency notes that Huawei internal company records from 2010 confirm that the vendor was “directly involved in sending prohibited U.S. computer equipment to Iran”.
Huawei and Meng have both denied the criminal charges – which include bank fraud and wire fraud, among others – and have argued that they cannot be considered crimes under Canadian law. However, this defence was dismissed last week by a Canadian Supreme Court judge, allowing the case to proceed.
The Chinese Foreign Ministry claimed that the US case represented an unfair politicisation of a trade dispute, stating: “We urge the United States to immediately stop its unreasonable suppression of Chinese firms including Huawei.”
In January 2013, Reuters first reported on connections between the firms – including Meng sitting on Skycom’s board of directors from 2008 until 2009. In December 2012, the news agency reported that Skycom had approached Iran’s leading mobile operator MCCI (Mobile Communication Co of Iran) in 2010 with an offer to sell embargoed Hewlett-Packard ICT equipment worth $1.4 million.
According to the documents obtained by Reuters, Huawei began attempting to hide its relationship to Skycom following the 2012 report. At the time, the Chinese firm described the company as a “major local partner”, with their relationship “a normal business partnership.”
However, a document from Huawei’s Iranian office dated 28th March 2013 suggests that Huawei was in control of Skycom. Translated from Chinese, the document reads: “In consideration of trade compliances, A2 [Huawei’s internal code for Iran] representative office is trying to separate Skycom and Huawei.”
The same document confirmed that an “urgent decision” had been made to appoint Hu Mei as Skycom’s general manager in Iran – effective from 10th March 2013 - to “avoid the risks of media hype.” Hu had previously been a director at Skycom and was listed in a directory of Huawei employees.
However, this appointment created an issue that was addressed swiftly, since Hu was based at Huawei’s Shenzhen headquarters but the role necessitated presence in Iran. Recognising the need for “a Chinese employee based in Iran”, Hu was quickly replaced by Song Kai, the deputy representative of Huawei’s Iran office.
On 2nd November 2013, Song sent a letter to the vice president of MCCI – one of Skycom’s major clients - informing them that the firm had “decided to annul and terminate its business activities and dissolve the branch company in Iran”, suggesting that Huawei was directly involved in shuttering Skycom.
The day after Song sent this letter, Skycom transferred eight contracts worth around US$50 million to a newly founded Huawei unit known as Huawei Technologies Service (Iranian) Co Ltd, with all money owed to Skycom transferrable to this unit once the contracts were complete. The three-way agreement was also signed by MCCI, with all parties agreeing to confidentiality.