A 3D printed Huawei logo is placed on glass above displayed US flag in this illustration taken January 29, 2019. REUTERS/Dado Ruvic/Illustration
A 3D printed Huawei logo is placed on glass above displayed US flag in this illustration taken January 29, 2019. REUTERS/Dado Ruvic/Illustration

Shanghai — Fraud, obstruction of justice and cloak-and-dagger trade theft — a US rap sheet alleging systematic skullduggery by Chinese telecom giant Huawei has deepened the company’s problems just as it sought to win back global trust.

This week the US justice department unveiled a raft of charges against Huawei that could see its CFO Meng Wanzhou extradited to the US, and threaten its business worldwide.

Meng’s father, Huawei founder Ren Zhengfei, spearheaded a rare, recent charm offensive by the famously secretive company to salvage its reputation amid mounting espionage concerns. But that may be an uphill climb following the US allegations of brazen criminality at Huawei’s highest levels.

In a case centering on Meng, Huawei is charged with violating US and UN prohibitions on trading with Iran. A separate case details a sustained effort to steal technology from telecom operator T-Mobile US, plus the damaging allegation that Huawei rewarded staff for stealing competitors’ tech secrets.

None of the charges deal with deeper US concerns that Huawei’s cheap equipment — used in telecoms infrastructure across the globe — is a Trojan horse for potential Chinese state spying and sabotage.

Gathering clouds

However the justice department’s move strengthens Washington’s leverage in isolating the company, said Paul Triolo, a global tech-policy expert with Eurasia Group.

“The effort seems designed to make the case to allies ... that, while there is no smoking gun on cyber-security, there are a host of other business practice, cultural, and legal issues clouding the company’s future,” he said.

The New York charges reveal that Ren, whose background as a former Chinese army engineer has long raised red flags in Washington, was questioned by the FBI years ago, during which he repeatedly lied to US investigators about the nature of the Iran business

The main case levels 13 charges against Huawei Technologies, Meng — who faces an extradition hearing in Canada on March 6 — and two affiliates over Iran sanctions violations. The broader allegations in the case, filed in federal court in New York, were already known. But the charges detail efforts by Huawei and its subsidiaries to trick financial institutions into sanctions-busting activity.

They say Meng “repeatedly lied” to bankers and that Huawei obstructed justice by destroying evidence and putting witnesses beyond the reach of US law enforcement. Huawei strenuously denies wrongdoing and Beijing has said the allegations are politically motivated.

The charges stand in stark contrast to a narrative pushed by Huawei in recent weeks, perhaps in anticipation of the US revelations. Speaking to foreign reporters, the normally reclusive Ren portrayed Huawei as an unselfish global force for good in comments larded with flattery for US President Donald Trump and US tech leaders such as Apple.

“We stand strongly against any behaviour that violates laws and regulations,” Ren said on January 16, touting a “very sound” compliance system and tough discipline for violators.

But the New York charges reveal that Ren, whose background as a former Chinese army engineer has long raised red flags in Washington, was questioned by the FBI years ago, during which he repeatedly lied to US investigators about the nature of the Iran business.

Trade secrets

A separate case in Washington state cites internal e-mails and other evidence detailing a 2012-2013 effort to steal the tech specs of a phone-testing device developed by T-Mobile, then a partner in Huawei’s ultimately failed push to enter the US market.

Huawei staff repeatedly and surreptitiously took photos inside a T-Mobile facility and one staffer even stole a key part for the device, the charge sheet says. The company later concocted an “internal report” designed to cover up the theft and blame rogue staff.

Perhaps the most damning allegation is that Huawei set up a system of bonuses for tech stolen from rivals. “You are being encouraged and could possibly earn a monetary award for collecting confidential information regarding our competitors and sending it back to [Huawei China],” an internal staff e-mail is quoted as saying.

In a sign of US Congressional attitudes, Rep Chris Smith said on Wednesday that the charges show the need for a tough stance.  “Huawei is effectively an arm of the Chinese government and is working hard on behalf of the Communist Party to corner the global market on vital technologies,” he said.

Triolo said there is a “clear threat now hanging over the company”, possibly including fines, executive travel bans, and being officially branded a threat to US national security — which could have devastating worldwide repercussions on its business.

He added, “Carriers around the world will need to at least consider how to protect their investments and supply chains. This is the nub of the issue.” 

AFP