The FBI says Huawei paid employees bonuses for stolen information
The United States Justice Department has charged China’s Huawei – the world’s largest telecommunications equipment manufacturer – with 23 crimes, including conspiracy to commit money laundering, theft of trade secrets and obstruction of justice.
In two indictments, unsealed Monday, the Justice Department said Huawei and its CFO Meng Wanzhou had conspired to violate sanctions on Iran via a subsidiary it tried to hide. It also charged the company with stealing technology from T-Mobile.
As part of its investigation, FBI obtained emails revealing that in July 2013, Huawei offered bonuses to employees based on the value of information they stole from other companies around the world, and could provide to Huawei via encrypted email.
Huawei employed a “strategy of lies and deceit” to grow its business, the department said. FBI Director Christopher Wray added: “These charges lay bare Huawei’s alleged blatant disregard for the laws of our country and standard global business practices.”
He said “Companies like Huawei pose a dual threat to both our economic and national security, and the magnitude of these charges make clear just how seriously the FBI takes this threat.”
“Today should serve as a warning that we will not tolerate businesses that violate our laws, obstruct justice, or jeopardize national and economic well-being.”
The first 13-count indictment relates to violation of Iran sanctions. Unsealed Monday in federal court in Brooklyn, New York, it charges four defendants: Huawei, its affiliates Huawei USA and Skycom, and Huawei’s CFO Wanzhou Meng.
They have been accused of bank fraud and conspiracy to commit bank fraud, wire fraud and conspiracy to commit wire fraud, violations of the International Emergency Economic Powers Act (IEEPA) and conspiracy to commit money laundering.
Huawei and Huawei USA are charged with conspiracy to obstruct justice related to a grand jury investigation in the Eastern District of New York. Meng is charged with bank fraud, wire fraud, and conspiracies to commit bank and wire fraud.
The Huawei charges pivot around allegations that Huawei lied to banking partners about its relationship with affiliate Skycom, saying it was merely Huawei’s local business partner in Iran
“In reality,” the US alleges, “Skycom was Huawei’s longstanding Iranian affiliate [and it] actually controlled the company that purchased Skycom. As part of this scheme to defraud, Meng allegedly personally made a presentation in August 2013 to an executive of one of Huawei’s major banking partners in which she repeatedly lied about the relationship between Huawei and Skycom.”
“Huawei relied on its global banking relationships for banking services that included processing US-dollar transactions through the United States… Relying on the repeated misrepresentations by Huawei, these banks continued their banking relationships with Huawei. One bank cleared more than $100 million worth of Skycom-related transactions through the United States between 2010 and 2014.”
Wen Ku, a senior official at the ministry of industry and information technology, told reporters in Beijing on Tuesday the indictments were “unfair and immoral”.
US authorities had “mobilised state power to blacken some companies” in an attempt to strangle fair and just operations” he said.
The second 10-count indictment charges Huawei Device Co., Ltd. and Huawei Device Co. USA with theft of trade secrets conspiracy, attempted theft of trade secrets, seven counts of wire fraud, and one count of obstruction of justice.
It details Huawei’s efforts to steal trade secrets from Bellevue, Washington based T-Mobile USA between 2012-2014 and then obstruct justice when T-Mobile threatened to sue Huawei in U.S. District Court in Seattle.
According to the indictment, in 2012 Huawei began a concerted effort to steal information on a T-Mobile phone-testing robot dubbed “Tappy.”
In an effort to build their own robot to test phones before they were shipped to T-Mobile and other wireless carriers, Huawei engineers violated confidentiality and non-disclosure agreements with T-Mobile by secretly taking photos of “Tappy,” taking measurements of parts of the robot, and in one instance, stealing a piece of the robot so that the Huawei engineers in China could try to replicate it, the indictment claims.
“After T-Mobile discovered and interrupted the activities and then threatened to sue, Huawei claimed the theft was the work of rogue actors within the company and not a concerted effort by Huawei corporate entities in the United States and China.
However: “As emails obtained in the course of the investigation reveal, the conspiracy to steal secrets from T-Mobile was a company-wide effort involving many engineers and employees within the two charged companies.”
Huawei said in an emailed statement: “Huawei is disappointed to learn of the charges brought against the company today. After Ms. Meng’s arrest, the company sought an opportunity to discuss the Eastern District of New York investigation with the Justice Department, but the request was rejected without explanation.”
“The allegations in the Western District of Washington trade secret indictment were already the subject of a civil suit that was settled by the parties after a Seattle jury found neither damages nor willful and malicious conduct on the trade secret claim. The company denies that it or its subsidiary or affiliate have committed any of the asserted violations of U.S. law set forth in each of the indictments, is not aware of any wrongdoing by Ms. Meng, and believes the U.S. courts will ultimately reach the same conclusion.”