Huawei indictments: sanctions busting, industrial espionage and a stolen robot

Indictments packed with emails and transactions allegedly showing how technology giant carried out criminal conspiracies

The twin criminal indictments against Huawei unveiled by US authorities on Monday are packed with emails and financial transactions allegedly showing how the Chinese technology giant carried out criminal conspiracies.

But the finer points of the 23 charges are less important than the overall shot they deliver across China’s bows. The US considers Huawei to be an arm of the Chinese state – and their devices to be potential spying equipment for Beijing.

Charges that Huawei illegally violated US sanctions on Iran hold the most symbolic significance. They allowed Kirstjen Nielsen, the homeland security secretary, to stress the company’s activities had been “detrimental to the security of the United States”.

But many US officials and analysts also see the prosecutions as proxies for America’s response to other Chinese threats – against US cybersecurity and economic pre-eminence.

As the race to dominate the world’s next-generation 5G networks intensifies, the Trump administration is seeking to stop Huawei equipment making its way into the communications infrastructure – and to give its American competitors a leg-up.

Earlier this month, Huawei’s reclusive founder, Ren Zhengfei, broke years of silence to say the company has never engaged in espionage on behalf of Beijing.

Eastern district of New York (Brooklyn)

The 13 charges against Huawei in Brooklyn allege an elaborate fraud to get around US sanctions on Iran. The US says that in 2007, Huawei pretended to sell its Iran subsidiary, Skycom, but actually just transferred it to another branch of Huawei.

Conspiracy to violate the International Emergency Economic Powers Act (IEEPA) two counts
IEEPA violations
two counts
Money-laundering conspiracy
Huawei is accused of running a scheme to violate American sanctions on Iran in two separate ways.

Prosecutors say the company broke US sanctions by using American banks for operations in Iran without the special permission this would require.

It also provided telecommunications services to Iran, the indictment says. In January 2013, Reuters reported Skycom sold embargoed Hewlett-Packard equipment to Iran’s biggest phone company.

Prosecutors say that by moving funds in and out of the US to carry out this sanctions-busting conspiracy, Huawei was also money laundering.

Conspiracy to defraud the US
It is a crime to use deception to intentionally impede the operations of a US government agency.

Prosecutors allege that in addition to lying to their bankers in the US, senior Huawei executives lied to FBI investigators and Congress about the company’s activities relating to Iran.

This, the indictment says, amounted to a conspiracy to obstruct the operations of the US treasury’s office of foreign assets control, which oversees economic sanctions against Iran.

Conspiracy to commit bank fraud two counts
Bank fraud x
Huawei and its chief financial officer, Meng Wanzhou, are accused of devising a scheme to defraud two banks in the US – and carrying it out.

Prosecutors said the firm promised not to use the banks to process transactions related to Iran, which would violate US sanctions. In fact, the indictment says, it ran more than $100m of Iranian-related transactions through one bank in 2010-14.

Even after media reports said Huawei still owned Skycom, prosecutors say, Meng delivered a bogus PowerPoint presentation to one bank, claiming Skycom was merely a trading partner. After this bank ended their relationship in 2017, Huawei allegedly moved to another bank in the US by making similar false claims on Iran.

Conspiracy to commit wire fraud
Wire fraud
Prosecutors allege Huawei and Meng used wire communications – telephone calls, emails and other electronic messages – as part of their fraud conspiracy. This is a crime in itself, as is conspiring to do it.

Conspiracy to obstruct justice
The US says that after discovering it was under criminal investigation in 2017, Huawei began destroying evidence, and moving witnesses with knowledge of the Iran scheme back to China.

Western district of Washington (Seattle)

The charges filed in Seattle focus on Huawei’s alleged theft of robotic technology from T-Mobile, whose US headquarters is in the region. The indictment says Huawei aggressively tried to steal secrets, even setting up a bonus system rewarding employees who emailed them home to China.

Theft of trade secrets conspiracy
Attempted theft of trade secrets
Huawei began supplying phones to T-Mobile in 2010 and agreed not to disclose confidential information that it learned, according to prosecutors. But from 2012, Huawei engineers allegedly began stealing information on Tappy, T-Mobile’s robot for testing touchscreens.

Prosecutors say Huawei needed a robot like Tappy because the phones it supplied to T-Mobile “generally were not of high quality” and kept breaking. T-Mobile declined to sell or license the Tappy system to Huawei, partly because Huawei also supplied competitors such as AT&T.

So Huawei dispatched an engineer from China, identified as FW, to Seattle. He allegedly accessed a T-Mobile laboratory, took measurements and photographs of Tappy, and sent them back to China. Another Huawei engineer, AX, later tried to steal one of Tappy’s robotic arms but was caught, the indictment says. He claimed he “found it in his bag”.

Wire fraud seven counts
The indictment quotes extensively from emails between Huawei staff in the US and China. Chinese bosses repeatedly pressured those in the US to steal data on Tappy, prosecutors say. By devising the conspiracy over email, the company allegedly repeatedly committed wire fraud.

Obstruction of justice
After being caught stealing trade secrets, Huawei allegedly misled T-Mobile by carrying out a sham internal investigation and producing a 23-page report containing false information on what happened. The report falsely claimed that FW and AX were rogue employees acting without permission.

The company is accused of obstructing justice by using this report to defend itself against a civil lawsuit that T-Mobile brought against it over the trade secrets theft.


Jon Swaine in New York

The GuardianTramp

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