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Huawei lawyer says CFO Meng a 'hostage' after U.S. presses charges

[January 29, 2019] By Diane Bartz, Sarah N. Lynch and Sijia Jiang

WASHINGTON/HONG KONG (Reuters) - Huawei's CFO "should not be a hostage" in Sino-U.S. relations, her lawyer said on Tuesday, after the United States announced criminal charges against herself and the Chinese firm just days before crunch trade talks with Beijing.

The Justice Department charged Huawei Technologies Co Ltd and its chief financial officer with conspiring to violate U.S. sanctions on Iran by doing business through a subsidiary it tried to hide and that was reported on by Reuters in 2012 https://reut.rs/2sRL7Ve and 2013 https://reut.rs/2sUq8RT.

In a separate case, the Justice Department charged the telecommunications equipment maker with stealing robotic technology from T-Mobile US Inc. Huawei has said the companies settled their dispute in 2017.

CFO Meng Wanzhou, the daughter of Huawei's founder, was arrested in Vancouver on Dec. 1, a move which was followed by China arresting two Canadians on national security grounds. She is scheduled in court on Tuesday to discuss her bail terms, and is subject to a U.S. extradition request.

Her lawyer Reid Weingarten, partner at Steptoe & Johnson, pointed to "complex" Sino-U.S. relations.

"Our client, Sabrina Meng, should not be a pawn or a hostage in this relationship. Ms. Meng is an ethical and honorable businesswoman who has never spent a second of her life plotting to violate any U.S. law, including the Iranian sanctions."

Huawei said it had sought to discuss the charges with U.S. authorities "but the request was rejected without explanation".

It said it "denies that it or its subsidiary or affiliate have committed any of the asserted violations" and "is not aware of any wrongdoing by Ms. Meng."

China's foreign ministry urged the United States drop the arrest warrant and end "unreasonable suppression" of Chinese companies. Spokesman Geng Shuang also said China had issued stern representations to both Canada and the United States after the U.S. formally issued its extradition request for Meng.

Canada's Justice Minister has 30 days from receipt of the request to decide whether to grant authority to proceed. If granted, Meng's case would be sent to the British Columbia Supreme Court for a hearing, which could take weeks or months.

The development is likely to upset talks between Beijing and Washington this week as part of negotiations intended to walk back trade tensions between the globe's two largest economies.

U.S. President Donald Trump said in December he could intervene in Meng's case if it would serve national security interests or help close a trade deal with China.

U.S. Commerce Secretary Wilbur Ross said the charges are "wholly separate" from the trade negotiations.

MARKET RESTRICTION

Huawei makes equipment including base stations, switches and routers, as well as consumer products such as smartphones, and derives nearly half of its total revenue outside China.

Its global reach has come under attack from the United States, which is trying to prevent U.S. companies from buying Huawei equipment and is pressing allies to do the same. U.S. security experts are concerned the gear could be used by China's government for espionage - a concern Huawei calls unfounded.

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Meng Wanzhou, Huawei Technologies Co Ltd's chief financial officer (CFO), is seen in this undated handout photo obtained by Reuters December 6, 2018. Huawei/Handout via REUTERS

Australia and New Zealand followed the U.S. lead in restricting market access over the past year. On Tuesday, TPG Telecom Ltd canceled the Huawei-based mobile phone network it was building, in the first commercial casualty of Australia's move.

Huawei nevertheless said it is the world's leading provider of 5G technology, winning 30 contracts globally - more than any of its competitors - including 18 in Europe.

It is unclear how the U.S. charges would impact its business. Last year, Chinese peer ZTE Corp was prevented from buying essential components from U.S. firms after pleading guilty to similar charges, crippling its operations.

ZTE resumed normal business after paying up to $1.4 billion in fines and replacing its entire board, on top of a near $900 million penalty paid in 2017.

BANKING RELATIONS

U.S. Acting Attorney General Matthew Whitaker said the alleged criminal activity at Huawei "goes back at least 10 years and goes all the way to the top of the company." The charges against Meng and Huawei cite the Reuters stories that said Huawei's Skycom unit sought to sell goods to Iran.

The indictment noted that denials from Huawei in the stories were relied upon by financial institutions "in determining whether to continue their banking relationships with Huawei and its subsidiaries."

The indictment featured a meeting in August 2013 between Meng and an executive from an unidentified bank. Sources told Reuters the bank is HSBC Holdings PLC, which paid $1.92 billion in 2012 for violating U.S. anti-money-laundering and sanctions laws.

During the meeting, Meng misrepresented Huawei operations in Iran and ownership and control of Skycom, the indictment showed.

The Justice Department has confirmed that HSBC is not under investigation in this case, HSBC said in a statement last month.

Also according to the indictment, in July 2007, the FBI interviewed Huawei founder Ren Zhengfei and U.S. authorities said he falsely told them Huawei did not violate U.S. export laws.

The indictment concerning trade secret theft alleged that Huawei had a formal policy instituting a bonus program to reward employees who stole confidential information from competitors.

FBI Director Christopher Wray said the Huawei cases, filed in New York and Washington state, "expose Huawei's brazen and persistent actions to exploit American companies and financial institutions, and to threaten the free and fair global marketplace."

(Reporting by Diane Bartz, Sarah N. Lynch in WASHINGTON and Sijia Jiang in HONG KONG; Additional reporting by David Shepardson, Karen Freifeld, Chris Bing, Joseph Menn and Andy Sullivan, and Michael Martina and Ben Blanchard in BEIJING; Editing by Lisa Shumaker and Christopher Cushing)

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