Huawei Co. Ltd: International Fraud, Espionage, & National Security Concerns

By Lydia Parenteau

Huawei Technologies Co. Ltd. is a “global provider of information and communications technology infrastructure and smart devices”.[1]  The company was started 30 years ago in China.[2]  Huawei currently employs 180,000 people; is close to launching a 5G network; and earned 92.5 million dollars in 2017.[3]However, in the last few months Huawei has been involved in multiple international transgressions.

Notably, Huawei’s chief financial officer, Meng Wanzhou, was arrested in Vancouver, Canada on December 1, 2018.[4]  The Canadian Government arrested Meng Wanzhou at the request of the U.S. Government.[5]  U.S. authorities allege that Huawei, to get around U.S. and European Union sanctions on Iran and Syria, created at least two shell companies.[6]One company, Skycom Tech Co. Ltd. sold telecom equipment in Tehran, Iran and the other company, Canicula Holdings Ltd., located in Syria, owned Skycom Tech.[7] The U.S. case against Meng Wanzhou alleges that she tricked international banks into clearing transactions with Iran by claiming the two companies (Skycom and Canicula) were independent of Huawei.[8]  However, multiple documents show that a Huawei executive was appointed Skycom’s Iran manager and that three Chinese-named individual had signing rights to both Huawei and Skycom bank accounts in Iran.[9]Currently, Meng Wanzhou is out on bail in Canada, while the U.S. government tries to extradite her to the U.S..[10]

Additionally, a Huawei executive was arrested in Poland on Jan. 11, 2019, on espionage charges.[11]As a result, Huawei fired the executive stating he brought the company “into disrepute”.[12]Yet, it is reported that Polish authorities had grown concerned on Poland’s reliance on Huawei as it exposes the country to espionage threats from China.[13]Other Countries had similar concerns.

In July 2018, a U.K. government report came out criticizing Huawei’s broadband and mobile infrastructure equipment.[14]  The governmental report concluded that U.K. has “only limited assurance” that Huawei products pose no threat to national security.[15]  It is reported that Chinese law requires companies to cooperate with Chinese intelligence services.[16]  On August 13, 2018, President Trump signed the John S. McCain National Defense Authorization Act which included banning the U.S. government from using Huawei tech that is a “substantial or essential component of any system” and/or is used to route or view user data.[17]  Later that month, Huawei claimed the Australian government banned Huawei from providing 5G technology in Australia.[18]However, the Australian government said that national security regulations that were typically applied to telecoms firms would apply now to equipment suppliers (i.e. Huawei).[19]  In November, New Zealand’s government would not allow a New Zealand telecom company to implement Huawei’s infrastructure equipment due to national security concerns.[20]  The Japanese government decided in December to block Huawei products from public procurement starting in April 2019 due to national security concerns.[21]

In conclusion, there is no conclusion. Meng Zhao and the ex-Huawei executive are awaiting their trials. Nations are still debating whether or not Huawei is a security concern for their respective country. It will be interesting to see how these events may impact future revenue for Huawei.

 

[1]Corporate Introduction, Huawei, available at https://www.huawei.com/us/about-huawei/corporate-information (last visited Jan. 13, 2019).

[2]Id.

[3]Id.; Research & Development, Huawei,available athttps://www.huawei.com/us/about-huawei/corporate-information/research-development (last visited Jan. 13, 2019); Financial Highlights, Huawei, available athttps://www.huawei.com/us/about-huawei/corporate-information/financial-highlights (last visited Jan. 13, 2019).

[4]Huawei Finance Chief Meng Wanzhou Arrested in Canada, BBC News Dec. 6, 2018, available at  https://www.bbc.com/news/business-46462858 (last visited Jan. 13, 2019).

[5]Id.

[6]Steve Stecklow et al., Exclusive: New Documents Link Huawei to Suspected Front Companies in Iran, Syria, Reuters(Jan. 8, 2019 10:38 AM), available athttps://www.reuters.com/article/us-huawei-iran-exclusive/exclusive-new-documents-link-huawei-to-suspected-front-companies-in-iran-syria-idUSKCN1P21MH (last visited Jan. 13, 2019).

[7]Id.

[8]Id.

[9]Id.

[10]Julia Horowitz et al., Facing Extradition to the US, Huawei’s CFO is Released on Bail in Canada, CNN Business(Dec. 12, 2018 5:03 AM), available at https://www.cnn.com/2018/12/11/tech/huawei-meng-wanzhou-bail-decision/index.html (last visited Jan. 13, 2019).

[11]Drew Hinshaw et al., Chinese Huawei Executive is Charged with Espionage in Poland, The Wall Street Journal(Jan. 11, 2019, 2:24 PM), available athttps://www.wsj.com/articles/chinese-huawei-executive-is-charged-with-espionage-in-poland-11547201100?mod=article_inline (last visited Jan. 13, 2019).

[12]Dan Strumpf, Huawei Fires Executive Charged in Poland with Espionage, The Wall Street Journal(Jan. 12, 2019 9:38 AM), available athttps://www.wsj.com/articles/huawei-terminates-employment-of-executive-detained-in-poland-11547298630 (last visited Jan. 13, 2019).

[13]Matthew Dalton, Poland Tries to Balance Reliance on Huawei with Spy Fallout, The Wall Street Journal(Jan. 14, 2019 5:51 AM), available athttps://www.wsj.com/articles/poland-tries-to-balance-reliance-on-huawei-with-spy-fallout-11547463104 (last visited Jan. 14, 2019).

[14]UK Criticises Security of Huawei Products,BBC News(July 19, 2018) available athttps://www.bbc.com/news/technology-44891913 (last visited Jan. 13, 2019).

[15]Id.

[16]Huawei and ZTE Handed 5G Network Ban in Australia,BBC News(Aug. 23, 2018), available athttps://www.bbc.com/news/technology-45281495 (last visited Jan. 13, 2019).

[17]Catherine Shu, New Defense Bill Bans the U.S. Government from Using Huawei and ZTE Tech, Tech Crunch(Aug. 13, 2018), available athttps://techcrunch.com/2018/08/13/new-defense-bill-bans-the-u-s-government-from-using-huawei-and-zte-tech/ (last visited Jan. 13, 2019).

[18]Huawei and ZTE Handed 5G Network Ban in Australia supranote 15.

[19]Id.

[20]Huawei: NZ Bars Chinese Firm on National Security Fears, BBC News(Nov. 28, 2018), available athttps://www.bbc.com/news/business-46368001 (last visited Jan. 13, 2019).

[21]Japan sets Policy that will Block Huawei and ZTE from Public Procurement as of April, Japan Times(Dec. 10, 2018), available at https://www.japantimes.co.jp/news/2018/12/10/business/japan-sets-policy-will-block-huawei-zte-public-procurement-april/#.XDxxNlxKhhE (last visited Jan. 13, 2019).