Huawei CFO, US DoJ Reach Deferred Prosecution Agreement

Last week, the three-year saga of Huawei’s CFO, Meng Wanzhou, accused of trade secret theft, obstruction of justice and sanctions-busting reached its conclusion. Meng and the U.S. Attorney’s office reached a deferred prosecution agreement (DPA). Meng pleaded not guilty to the various fraud charges as part of the proceedings.

The agreement defers time for four years from the date of Meng’s original arrest to December 1, 2022; requires Meng to comply with the obligations in the agreement and, in exchange, the U.S. government will move to dismiss all charges against her. While Meng did not plead guilty to the fraud charges, she did acknowledge that violation of the DPA will result in her being prosecuted on the 16-count third superseding indictment of February 13, 2020 (alleged misappropriation of intellectual property, obstruction of justice, false statements to the U.S. government, financial fraud, violation of International Emergency Economic Powers Act).

Attached to the DPA was a four-page statement of facts, in which is it clear that Meng and Huawei misled global financial institutions. Federal judge Ann Donnelly confirmed that Meng read the statement of facts in Mandarin. Meng attested to the judge that she reviewed the document and agreed that all the facts are true and correct.

Meng Wanzhou – Huawei CFO

China’s diplomats made clear that resolving Meng’s case was of import to the government of China during a series of high-level diplomatic exchanges with the United States. Concurrent with the negotiations which resulted in today’s announcement, on September 21, 2021, the Committee of 100 released a whitepaper Racial Disparities in Economic Espionage Act Prosecutions: A Window into the New Red Scare which posits the U.S. Department of Justice is arbitrary in their prosecutions, with a decided tilt toward those of Chinese ethnicity, while also noting “the vast majority (70%) of defendants in the sample (276 defendants and 190 cases) were convicted of theft of trade secrets.”

Meng, daughter of Huawei CEO, Ren Zhengfei, was detained in Vancouver, Canada on an outstanding arrest warrant which alleged that she directed the effort of Huawei to circumvent U.S. sanctions on Iran via China-based Skycom Tech and to steal trade secrets and obstruct a criminal investigation. Her extradition hearing has concluded, and judgment was expected in mid-October 2021.

Immediately after her arrest, China arrested 13 Canadians, eventually releasing all but two who were identified as a national security risk. In August 2021, one of those, Michael Spavor, a Canadian businessman, was found guilty of obtaining state secrets and passing them to a foreign recipient—he was sentenced to 11 years in a Chinese prison. The other Canadian, and the presumed recipient of those “state secrets,” was former Canadian diplomat, Michael Korvig. The duo has been held for over 1000 days in a Chinese prison; Meng has been ensconced in a palatial Vancouver residence, fitted with an ankle monitor and free to move about the city. The U.S. Department of State issued a statement on September 5, 2021 calling for the release of the Canadians, as well as U.S. citizens being held in “arbitrary detention.”

China – Iran

Huawei was the door through which China hoped to garner a foothold in Iran’s telecommunications infrastructure. As described in a prior Security Boulevard piece from January 2019, the crux of the case against Huawei is, “The United States alleges that Huawei controls Skycom and used it as a front company to work around the U.S. sanctions. On Jan. 8, Reuters released its own research that identifies equipment seller Skycom Tech Co. Ltd. and shell company Canicula Holdings Ltd. as both being under Huawei’s control.”

“In entering into the deferred prosecution agreement, Meng has taken responsibility for her principal role in perpetrating a scheme to defraud a global financial institution,” stated Acting U.S. Attorney Boeckmann. “Her admissions in the statement of facts confirm that, while acting as the Chief Financial Officer for Huawei, Meng made multiple material misrepresentations to a senior executive of a financial institution regarding Huawei’s business operations in Iran in an effort to preserve Huawei’s banking relationship with the financial institution. The truth about Huawei’s business in Iran, which Meng concealed, would have been important to the financial institution’s decision to continue its banking relationship with Huawei. Meng’s admissions confirm the crux of the government’s allegations in the prosecution of this financial fraud—that Meng and her fellow Huawei employees engaged in a concerted effort to deceive global financial institutions, the U.S. government, and the public about Huawei’s activities in Iran.”

Doing Business in China?

The takeaway for all multinational companies and those engaged in international commerce is that, when doing business in China, remember that the Chinese government has an arrow in their quiver marked ‘Arbitrary Detention.’ The government has shown itself willing to use that arrow at a time and circumstance of their choosing. The release of the two Canadians, which immediately followed the DPA, demonstrates that the arrests, trials and convictions were not based on violations of law, but rather were retaliatory.

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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