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US Department of Justice charges Huawei with a wide range of offences.

Publication: 
Editorial Staff
chiefofficersnet

“The charges unsealed today are the result of years of investigative work conducted by the FBI and our law enforcement partners,” FBI Director Christopher Wray said announcing the charges "unsealed" by United States Attorneys Offices in the Eastern District of New York and the Western District of Washington. The list reads as if someone decided to find a copy Title 18 of the US Code and throw it at Huawei Technologies Co., Ltd. Sadly, Wray's language is political and intemperate and undermines the credibility of the action from the outset.

Wray said "Both sets of charges expose Huawei’s brazen and persistent actions to exploit American companies and financial institutions and to threaten the free and fair global marketplace." Well, maybe. The pejorative adjectives may gain Wray attention in the tabloids, but more serious commentators will shake their heads and ask if there is any substance of if the whole thing is grandstanding to turn Americans away from the company's products so as to put commercial pressure on it to come to some kind of financial settlement. In short, is the whole thing little more than blackmail?

The answer to that last question is probably not. First, Huawei is charged with falling foul of the same sanctions issues as so many banks - failing to recognise the extra-territorial effect of the USA's ownership of the US dollar. It's not a new idea - the Manhattan District Attorney Robert Morgenthau floated it in the mid 1970s (as reported by Clarke and Teague, his sometime assistant) but it gained real teeth with the USA PATRIOT Act. The allegations are simple: the company conducted business with Iran in USD and under US sanctions that business was illegal. The fact that the currency used was the USD meant that, under US law, all transactions were conducted through the correspondent banking system by banks in the USA and, by a legal fiction (1), all clearing between US banks takes place in Manhattan.

The company is accused of making false statements in relation to those transactions in order to evade reporting for sanctions offences. The USA tends to the view that offences involving its currency are, or are close to, absolute offences and if the basic facts (the deals happened and were paid in USD) there is little chance of Huawei establishing a defence.

The cases in Washington relate to alleged industrial espionage. The FBI says "employees at Huawei Device Co. and Huawei Device USA, Inc. worked to steal the details of an innovative and proprietary tool built by T-Mobile to test the performance of new mobile phones prior to launch." In this case, the State is on far shakier ground because the prosecutions smack of state enforcement of private contracts: on the face of it, this should be a civil not criminal trial: "According to the indictment, Huawei employees who were granted limited access to T-Mobile’s Tappy Robot System stole information about the technology in violation of non-disclosure and confidentiality agreements and then sought to cover up their actions."

Wray said the company’s intentional and systematic efforts to steal valuable intellectual property were designed to “circumvent hard-earned, time-consuming research and gain an unfair market advantage.”

It will be interesting to see how criminality is established because, in the absence of specific statutory provision, this case seems to be, as the Americans say, a stretch.

And then Wray went and spoiled it all by making a political statement and the FBI's press release gives him a platform "“These cases make clear,” Wray stressed, “that, as a country, we must consider carefully the risk that companies like Huawei pose if we allow them into our telecommunications infrastructure. The FBI does not—and will not—tolerate businesses that violate our laws, obstruct our justice, and jeopardize our national security.”"

He was not the only one: this case has brought out the big guns in making the case in the media before there is chance for it to be made in Court. Acting U.S. Attorney General Matthew G. Whitaker, Secretary Kirstjen Nielsen of the U.S. Department of Homeland Security, Secretary Wilbur Ross of the U.S. Department of Commerce, U.S. Attorney Richard P. Donoghue for the Eastern District of New York, FBI Director Christopher A. Wray, Assistant Attorney General Brian A. Benczkowski of the Justice Department's Criminal Division and Assistant Attorney General John C. Demers of the National Security Division, announced the charges.

Neilson turned the announcement into a near declaration of economic war: "As charged in the indictment, Huawei and its Chief Financial Officer broke U.S. law and have engaged in a fraudulent financial scheme that is detrimental to the security of the United States,” said Secretary Nielsen. “They wilfully conducted millions of dollars in transactions that were in direct violation of the Iranian Transactions and Sanctions Regulations, and such behaviour will not be tolerated. The Department of Homeland Security is focused on preventing nefarious actors from accessing or manipulating our financial system, and we will ensure that legitimate economic activity is not exploited by our adversaries."

"For years, Chinese firms have broken our export laws and undermined sanctions, often using U.S. financial systems to facilitate their illegal activities,” said Secretary Ross. “This will end. The Trump Administration continues to be tougher on those who violate our export control laws than any administration in history."

"As charged in the indictment, Huawei and its subsidiaries, with the direct and personal involvement of their executives, engaged in serious fraudulent conduct, including conspiracy, bank fraud, wire fraud, sanctions violations, money laundering and the orchestrated obstruction of justice,” stated U.S. Attorney Donoghue. “For over a decade, Huawei employed a strategy of lies and deceit to conduct and grow its business. This Office will continue to hold accountable companies and their executives, whether here or abroad, that commit fraud against U.S. financial institutions and their international counterparts and violate U.S. laws designed to maintain our national security."

The "national security" question is open to interpretation: if it relates solely to matters involving Iran, then that is unarguable under current US attitudes to Iran. However, one has to suspect that it also relates to earlier suggestions that Huawei had embedded "phone home" capability into telecoms devices with the expressed concern that these were being, or could be used, for espionage purposes. That allegation has led to bans or restrictions on Huawei's products in a number of countries in recent months.

https://www.fbi.gov/news/stori...
https://www.justice.gov/opa/pr...

(1) a legal fiction is where the law recognises something as true when it is not. It is a means of simplifying otherwise complex things and is a common approach that has been used in the common law for many hundreds of years.

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