- The Washington Times
Monday, January 28, 2019

The Justice Department on Monday announced criminal charges against China’s largest smartphone manufacturer, accusing Huawei of stealing trade secrets from an American rival, even handing out bonuses to employees based on the value of the technology they stole.

Acting Attorney General Matthew G. Whitaker said Huawei, its chief financial officer, Meng Wanzhou, and two affiliate companies also were indicted on charges of laundering money in an effort to violate U.S. sanctions on Iran.

Ms. Meng, the daughter of Huawei founder Ren Zhengfei, was arrested last month in Canada on an American request, and Mr. Whitaker said the U.S. has asked for her extradition.

Justice Department officials said Huawei’s behavior also included trying to destroy evidence and hiding potential witnesses by sending them back to China.

“The criminal activity in this indictment goes back 10 years and goes all the way to the top of the company,” Mr. Whitaker said.

One 10-count indictment detailing the allegations of industrial spying was filed in the Western District of Washington, and a 13-count indictment stemming from the Iran sanctions allegations was filed in New York.

The charges are the latest steps by the U.S. government against a Chinese entity, and they come as President Trump is negotiating over American trade with the world’s second-largest economy. The White House on Monday announced that a Chinese delegation is scheduled to meet Wednesday and Thursday in Washington with senior administration officials about the countries’ trade relationship.

Both countries hope to avoid a tariff war and strike a deal for control over next-generation 5G infrastructure. But some administration officials appeared to dash hopes of a deal, saying more work is needed.

Chinese efforts to steal American intellectual property through hacking and espionage have drawn particular scrutiny.

Since October, the Justice Department has filed trade theft charges in four cases against individuals with ties to the Chinese government.

“More than 90 percent of the department’s cases alleging economic espionage involve China. More than two-thirds of the department’s cases involving thefts of trade secrets are connected to China,” Deputy Attorney General Rod Rosenstein said last month.

Huawei has been a U.S. target for some time. U.S. officials suspect Huawei’s close ties to the Chinese government made it a vehicle for spying.

Mr. Trump in August signed a bill prohibiting the federal government from procuring or entering into a contract with entities that use equipment or services provided by Huawei. Six U.S. intelligence agencies urged Americans not to buy Huawei phones out of fears of spying.

“A lot of Beijing’s so-called private sector is just another arm of the corrupt Chinese Communist Party,” said Sen. Ben Sasse, Nebraska Republican.

“Huawei has posed a threat to U.S. national security for a long time, and it is good that the American people, our allies and partners, and most importantly, [Chinese President] Xi Jinping see the details of this investigation.”

Sen. Mark R. Warner, Virginia Democrat and vice chairman of the Senate Select Committee on Intelligence, said Huawei is a national security threat and that it’s time the U.S. deals with it.

“I will continue to urge the Trump administration to make China’s rampant IP theft a top priority in ongoing trade negotiations, and will continue pressing for a more coherent, cohesive national strategy to protect U.S. technology and ensure U.S. technological competitiveness,” Mr. Warner said.

The industrial espionage indictment Monday grew out of a civil case T-Mobile fought against Huawei in Seattle. A jury there found Huawei liable for breach of contract and misappropriation of trade secrets.

After T-Mobile threatened a lawsuit, Huawei produced a fraudulent report claiming the pilfering was the result of “rogue actors,” not a concerted effort by the company, according to the indictment.

Prosecutors say the trade secret theft was a companywide conspiracy. The company even offered bonuses to engineers based on the value of information they stole and provided an encrypted email address to report the technology, the indictment said.

The Justice Department views the charges against Ms. Meng as separate from the trade secret case.

Prosecutors said Ms. Meng lied to banking authorities about the company’s relationship with a firm doing business in Iran, defying American sanctions.

The Justice Department said the company, Skycom, was operating as a Huawei affiliate, even as Huawei said it didn’t have control of the operations. The indictment says Ms. Meng lied repeatedly to a bank executive about the relationship.

In 2017, when Huawei became aware of the Justice Department investigation, the company’s U.S. affiliate sought to thwart that investigation by moving witnesses with knowledge about Huawei’s interactions with Iran back to China, shielding them from FBI interrogations, the indictment says.

FBI Director Christopher A. Wray said Huawei’s actions “pose a dual threat to both our economic and national security, and the magnitude of this charges make clear just how seriously the FBI take this threat.”

• Jeff Mordock can be reached at jmordock@washingtontimes.com.

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