US authorities go after Huawei; accuse it of stealing trade secrets

The charges are the latest to accuse Chinese govt or Chinese companies of stealing intellectual property from US firms through a combination of cyberattacks, traditional espionage and other means

The Trump administration unveiled a sweeping set of criminal charges against China’s Huawei Technologies Co. in its latest salvo against the telecom giant, with authorities unsealing a pair of indictments just days before US-China trade talks are set to resume.

In the cases unsealed Monday, federal prosecutors accused Huawei of violating US sanctions on Iran and of stealing trade secrets from a US business partner, portraying the company as a serial violator of US laws and global business practices.

The actions included charges against Huawei’s chief financial officer, Meng Wanzhou, who is being held in Vancouver after Canadian authorities arrested the executive because of a US extradition request.

 

The charges are the latest to accuse the Chinese government or Chinese companies of stealing intellectual property from US firms through a combination of cyberattacks, traditional espionage and other means. US officials have warned that China’s corporate raiding of secrets, which some government estimates value into the hundreds of billions of dollars in damages annually, represents a pre-eminent national- and economic-security threat.

The indictments also come as US trade negotiators prepare to sit down with Chinese counterparts in Washington this week to seek a solution to a prolonged trade dispute that has the two sides exchanging tit-for-tat tariffs on goods flowing between the two economic superpowers.

In a statement, a Huawei spokesman said the company denies all of the alleged violations of US law outlined in the indictments. Moreover, the company sought to discuss Ms. Meng’s case with the Justice Department after her arrest, “but the request was rejected without explanation,” the spokesman said.

 

China’s Foreign Ministry urged the US “to stop the unreasonable suppression” of Huawei and renewed its appeal for Washington to end its extradition case against Ms. Meng. In a statement, ministry spokesman Geng Shuang accused the US of marshaling the power of the state to discredit particular Chinese companies and to try to throttle their business. Instead, he said, the US should treat Chinese companies “objectively and fairly.”

The charges, contained in separate indictments in Brooklyn, NY, and Washington state, were detailed by the top officials from the departments of Justice, Commerce and Homeland Security and other senior officials on the day the government reopened after a 35-day shutdown.

“Huawei relied on dishonest business practices that contradict the very economic principles that have allowed American companies and the United States to thrive,” said Federal Bureau of Investigation Director Christopher Wray. “There is no place…for this kind of criminal behavior in our country.”

 

US officials also reasserted their view that Huawei poses an unacceptable national-security risk due to the potential for the Chinese government to leverage its telecom-equipment gear for espionage capabilities. “As Americans, we should all be concerned about the potential for any company beholden to a foreign government—especially one that doesn’t share our values—to burrow into the American telecommunications market,” Mr. Wray said.

The US’s escalating, global campaign against Huawei has drawn in allies and enraged Beijing, which has detained a series of foreign citizens in recent weeks on suspicion of endangering China’s national security in what analysts view as retaliatory measures. Chinese officials have denied any links between these actions and the pressure on Huawei.

 

In one of the newly unsealed indictments, the US alleged Huawei, its finance chief and other employees worked over the years to deceive multiple global banks and the US government about its business in Iran. The superseding indictment, returned last week, charged Huawei and two affiliates with bank fraud, violations of US sanctions and conspiracy to obstruct justice related to the grand jury investigation.

After Huawei learned of the investigation in 2017, the company tried to move witnesses that knew about the Iran business to China, beyond the reach of US law enforcement, and tried to destroy related evidence, the indictment alleged.

The US also unsealed charges in a separate case accusing Huawei of stealing information from T-Mobile US Inc. about a phone-testing robot, “Tappy.” The contours of the 10-count indictment, returned on Jan. 16, were first reported by The Wall Street Journal and grew in part out of civil lawsuits against Huawei, including one in which a Seattle jury found Huawei liable for misappropriating robotic technology from T-Mobile’s Bellevue, Wash., lab.

 

Huawei offered bonuses to employees who were successful in stealing confidential information from other companies, US prosecutors alleged, adding that the alleged conspiracy against T-Mobile wasn’t limited to rogue employees but a companywide endeavor.

Despite being the world’s largest maker of telecommunications equipment and second-largest smartphone vendor behind Samsung Electronics Co. , Huawei has been effectively locked out of the US market since a 2012 congressional report raised concerns that its gear could be used to spy on Americans. US officials have also long voiced concerns that Huawei steals technology and improperly makes use of Chinese government subsidies to fuel its rise.

Huawei has denied the allegations, but the Trump administration in recent months has sharply accelerated its campaign to counter the telecommunications giant’s global expansion as countries rush to lock in contracts for next-generation 5G wireless technology. The 5G tech will make it easier to connect items like cars and appliances to the internet, but it will render networks more vulnerable to cyberattacks.

 

Governments including Australia, Britain, Canada, Germany and Japan have all recently said they were looking closely at their telecom-equipment supply chain in the wake of the Huawei developments. Australia and New Zealand have restricted Huawei’s involvement in new 5G projects with those countries’ carriers. On Friday, London-based Vodafone Group PLC, the world’s biggest mobile carrier outside China, said it was temporarily halting purchases of some components made by Huawei, citing uncertainty over whether governments in Europe would shun the firm because of national-security concerns.

Ms. Meng, who was arrested in Canada at the request of US authorities, is the daughter of company founderRen Zhengfei. The US accused Ms. Meng of misleading banks about the nature of Huawei’s business in Iran, leading to violations of US sanctions. Ms. Meng has denied the charges and is fighting extradition. Huawei says it follows the law in all countries where it operates.

After Ms. Meng’s arrest, Chinese authorities detained two Canadians, Michael Kovrig and Michael Spavor, on national-security grounds. They also issued a death sentence to a Canadian on drug-smuggling charges after a speedy retrial. Analysts viewed it as an attempt by Beijing to force Canada to release Ms. Meng. Chinese officials have said there is no connection. Similarly, Beijing last week said an Australian writer who went missing while traveling in the country had been detained on suspicions of threatening state security.

Separately, Polish authorities this month arrested Huawei executive Wang Weijing and charged him with conducting espionage on behalf of the Chinese government. Huawei wasn’t accused of wrongdoing in that case, and the company quickly terminated Mr. Wang’s employment.

Shortly after Poland publicized the charges, Mr. Ren, Huawei’s founder, made a rare appearance before international media at the company’s headquarters in the southern Chinese city of Shenzhen, seeking to directly confront the snowballing concerns. Mr. Ren said Huawei hasn’t—and would never—spy on behalf of the Chinese government.

The Wall Street Journal