The Spied Spy

By spying on Huawei, U.S. found evidence against the rogue firm

By Brendan Pierson, Karen Freifeld

NEW YORK -- U.S. authorities gathered information about Huawei Technologies Co Ltd through secret surveillance that they plan to use in a case accusing the Chinese telecom equipment maker of sanctions-busting and bank fraud, prosecutors said on Thursday.
Assistant U.S. Attorney Alex Solomon said at a hearing in federal court in Brooklyn that the evidence, obtained under the U.S. Foreign Intelligence Surveillance Act (FISA), would require classified handling.
The government notified Huawei in a court filing on Thursday of its intent to use the information, saying it was “obtained or derived from electronic surveillance and physical search,” but gave no details.
The United States has been pressuring other countries to drop Huawei from their cellular networks, worried its equipment could be used by Beijing for spying. 

Brian Frey, a former federal prosecutor who is not involved in the Huawei case, said FISA surveillance, which requires a warrant from a special court, is generally sought in connection with espionage.
“The reason they typically would have gotten the surveillance through a FISA court is where we suspect someone may be spying on behalf of a foreign power,” Frey said.
The U.S. government has been concerned about espionage by Huawei for years, he added.
In the Brooklyn case, Huawei and its chief financial officer, Meng Wanzhou, are accused of conspiring to defraud HSBC Holdings Plc and other banks by misrepresenting Huawei’s relationship with Skycom Tech Co Ltd, a Huawei front company that operated in Iran.
Meng was arrested in Canada in December at the request of the United States to face the charges of bank and wire fraud laid out in the indictment, which was not unsealed until January. 

Huawei last month pleaded not guilty to the 13-count indictment. 

Chasen Skinner, a spokesman for the company, declined to comment on Thursday on the secret U.S. surveillance, saying the company does not comment on pending litigation.
Huawei has said Skycom was a local business partner, but prosecutors said in their indictment against Huawei and Meng that it was an unofficial subsidiary used to conceal Huawei’s Iran business.
Huawei used Skycom to obtain embargoed U.S. goods, technology and services in Iran, and to move money via the international banking system. 

The charges against the company include violating U.S. sanctions on Iran.
Last month, Reuters detailed how U.S. authorities secretly tracked Huawei’s activities by collecting information copied from electronic devices carried by Chinese telecom executives traveling through airports.
Reuters also broke news of the bank fraud charges in December and exclusively reported in February how an internal HSBC probe helped lead to the charges against Huawei and Meng.
The U.S. sanctions investigation was spurred by Reuters reports over six years ago that Skycom offered to sell embargoed Hewlett-Packard computer equipment to Iran's largest mobile-phone operator and detailed the close ties between Huawei and Skycom. (reut.rs/2sUq8RT here)
Trump told Reuters in December that he would intervene in the case if it helped secure a trade deal with China. 

The next court date in the Brooklyn case is set for June 19.

Rogue Company

Huawei CFO seeks bail on "health" concerns; Canada wants her in jail

By Anna Mehler Paperny, Ben Blanchard

TORONTO/BEIJING -- The CFO of China’s Huawei Technologies Co Ltd argued that she should be released on bail while awaiting an extradition hearing, citing her longstanding ties to Canada, properties she owns in Vancouver and fears for her health while incarcerated, court documents showed on Sunday.

Huawei Chief Financial Officer Meng Wanzhou is fighting to be released on bail after she was arrested on Dec. 1 in Vancouver at the request of the United States. 

She is also fighting the extradition request, and China has protested her arrest to U.S. and Canadian officials.
Meng, 46, faces U.S. accusations that she misled multinational banks about Huawei’s control of a company operating in Iran. 

This deception put the banks at risk of violating U.S. sanctions and incurring severe penalties, according to court documents seen by Reuters. 

U.S. officials allege that Huawei was trying to use the banks to move money out of Iran.

In a sworn affidavit, Meng, the daughter of Huawei’s founder, said she is innocent and will contest the allegations at trial in the United States if she is surrendered there.
Meng said she was taken to a hospital for treatment for hypertension after being detained. 

She cited hypertension in a bail application seeking her release pending an extradition hearing. 

She also noted that she owns two homes in Vancouver worth millions of dollars each.

BACK IN THE COURT
Her family assured the court she would remain in Vancouver if she was granted bail, according to the court documents. 

Her husband said he plans to bring the couple’s daughter to Vancouver to attend school during the proceedings. 

Meng will be back in the court for a bail hearing on Monday.
Huawei, the world’s biggest supplier of telecoms network equipment and second biggest smartphone seller, did not offer an immediate comment on the court documents. 

Earlier on Sunday, China’s foreign ministry summoned the U.S. ambassador to lodge a “strong protest” over the arrest, and said the United States should withdraw its arrest warrant.
Chinese Vice Foreign Minister Le Yucheng told U.S. ambassador Terry Branstad the United States had made an “unreasonable demand” on Canada to detain Meng while she was passing through Vancouver, China’s Foreign Ministry said.

On Saturday, Le warned the Canadian ambassador there would be severe consequences if it did not immediately release Meng. 

There was no immediate reaction from Canada. 

On Friday, the country’s ambassador in Beijing has assured the Chinese consular access will be provided to Meng.

THE CASE
The United States has been looking since at least 2016 into whether Huawei shipped U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws, Reuters reported in April.
The U.S. case against Meng involves Skycom Tech Co. Ltd, which Huawei has described as one of its “major local partners” in Iran. 

Huawei used Skycom’s Tehran office to provide mobile network equipment to several major telecommunications companies in Iran.
In December 2012, Reuters reported that documents showed Skycom had tried to sell embargoed Hewlett-Packard computer equipment in 2010 to Iran’s largest mobile-phone operator. 

Reuters later reported that Skycom had much closer ties to Huawei and Meng than previously known.
In Canadian court papers made public on Friday, an investigation by U.S. authorities found Huawei operated Skycom as an “unofficial subsidiary” to conduct business in Iran.
Meng and other Huawei representatives misled financial institutions about Huawei’s control of Skycom, so the Chinese company could gain access to the international banking system. 

As a result, an unidentified financial institution cleared more than $100 million worth of transactions related to Skycom through the U.S. between 2010 and 2014, the court papers said.
On Thursday, Reuters identified HSBC Holdings Plc as one of the banks involved in the Meng case and, citing sources, reported that the probe included possible bank fraud.
Companies are barred from using the U.S. financial system to funnel goods and services to sanctioned entities.
U.S. Senator Marco Rubio said on Sunday he would “100 percent absolutely” introduce a measure in the new Congress that would ban Chinese telecom companies from doing business in the United States.
“We have to understand Chinese companies are not like American companies. OK. We can’t even get Apple to crack an iPhone for us in a terrorist investigation,” he told CBS “Face the Nation.”
“When the Chinese ask a telecom company, we want you to turn over all the data you’ve gathered in the country you’re operating in, they will do it. No court order. Nothing like that. They will just do it. They have to. We need to understand that.”
Rubio was a strong critic of China’s ZTE Corp, which pleaded guilty in 2017 to violating U.S. laws that restrict the sale of American-made technology to Iran.