Huawei Indicted, China Claims Foul

There’s no doubt Huawei is in crisis management mode, as the company continues to get pummeled by the United States and others. In January, we have seen two of Huawei’s subsidiaries charged with industrial espionage against U.S.-based T-Mobile and three entities and the company’s CFO indicted for bank fraud, money laundering and Iranian sanction-busting.

To steal a line from “Gone with the Wind,” Huawei frankly doesn’t give a damn. The company views rules are for others to follow, while it advances its agenda of global telecommunications dominance and those of the People’s Republic of China.

Huawei Sanction-Busting

Earlier this month we asked the question, “Huawei: Sanction-Busting and Espionage Threat?” We noted that Huawei was in the geopolitical hot seat. We detailed how the arrest of its CFO in Vancouver, Canada, for circumventing the Iranian sanctions was well-documented. What we didn’t see coming was the indictment levied upon Huawei and its CFO. Detailed within the 13-count indictment we found the nuts and bolts of the company’s bank fraud, money laundering and Iranian sanction-busting. No doubt the sealed document was the genesis of the arrest warrant levied to Canada law enforcement to detain and arrest Huawei’s CFO.

Huawei Espionage

The Chinese company found itself dead center in the industrial espionage discussion when a grand jury returned an indictment on Huawei for theft of trade secrets from T-Mobile. According to the indictment, from June 2012 through September 2014, Huawei stole the technology behind the “Tappy” proprietary robotic phone testing system.

The indictment follows the conclusion of a civil suit between Huawei and T-Mobile, in which T-Mobile was awarded $4.8 million. T-Mobile had sought $502 million when it filed suit in 2014. Though the jury found that Huawei had indeed misappropriated T-Mobile’s trade secrets —Tappy—it awarded a small fraction of T-Mobile’s request for damages, as it saw Huawei’s actions to not be in a “willful and malicious manner.”

The key word in this side of the tale is “misappropriated,” and with this verdict in hand, the U.S. Department of Justice could then put forward its case against the Chinese firm for the theft of trade secrets. “Huawei and its senior executives repeatedly refused to respect the laws of the United States and standard international business practices, so the U.S. government has taken the extraordinary step of filing not one but two indictments against a major Chinese company,” said FBI Director Christopher Wray.

Open Season on Competitor’s Trade Secrets

Indeed, Huawei went on to punish two of its employees, who were “terminated for cause.” This action flies in the face of an internal award program, which was instituted to reward employees who purloined the intellectual property of others to advance Huawei’s R&D: “In July 2013, “Huawei China launched a formal policy instituting a bonus program to reward employees who stole confidential information from competitors. Under the policy, Huawei established a formal schedule for rewarding employees for stealing information from competitors based on the confidential value of the information obtained.”

The sequence of events is straight out of the Department of Justice playbook. In the case of Micron Technology, the department allowed Micron to pursue its civil suit and when the actions came to its natural end with a settlement, the department arrived with indictments against the entities and persons against whom Micron Technology had filed its civil suit.

As can be expected, the Chinese Foreign Ministry spokesperson dismissed all the allegations against Huawei and the conglomerate’s personnel. “China will resolutely defend the legitimate rights and interests of its enterprises,” the spokesperson said.

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Christopher Burgess

Christopher Burgess (@burgessct) is a writer, speaker and commentator on security issues. He is a former Senior Security Advisor to Cisco and served 30+ years within the CIA which awarded him the Distinguished Career Intelligence Medal upon his retirement. Christopher co-authored the book, “Secrets Stolen, Fortunes Lost, Preventing Intellectual Property Theft and Economic Espionage in the 21st Century”. He also founded the non-profit: Senior Online Safety.

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