By R. Mitchell –
NEW YORK – Following an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) New York’s EL Dorado Task Force, a 13-count financial fraud indictment was unsealed Monday charging four, all of whom are affiliated with Huawei Technologies Co. Ltd. (Huawei), the world’s largest telecommunications equipment manufacturer, with headquarters in the People’s Republic of China (PRC) and operations around the world. The indicted defendants include Huawei and two Huawei subsidiaries – Huawei Device USA Inc. (Huawei USA) and Skycom Tech Co. Ltd. (Skycom) – as well as Huawei’s Chief Financial Officer (CFO) Wanzhou Meng (Meng). The case was initiated by HSI New York who worked in coordination with the FBI, the U.S. Department of Commerce Office of Export Enforcement (OEE) and the Defense Criminal Investigative Service (DCIS). Other charges include money laundering, conspiracy to defraud the united states, obstruction of justice and sanctions violations
Huawei and Skycom are charged with bank fraud and conspiracy to commit bank fraud, wire fraud and conspiracy to commit wire fraud, conspiracy to defraud the United States, conspiracy to violate and substantive 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 the grand jury investigation in the Eastern District of New York. Meng is charged with bank fraud, wire fraud, and conspiracy to commit bank and wire fraud.
“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 Department of Homeland Security Secretary Kirstjen M. Nielsen. “They willfully conducted millions of dollars in transactions that were in direct violation of the Iranian Transactions and Sanctions Regulations, and such behavior 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. I would like to thank ICE Homeland Security Investigations for their exceptional work on this case.”
“Two months ago, the Department of Justice announced our China Initiative, which these charges demonstrate, continues to be a top priority for us,” said U.S. Acting Attorney General Matthew G. Whitaker. “Today we are announcing our next steps to hold Chinese entities accountable for their unlawful actions. We will continue to stand up to these illegal actions whenever, and from wherever, they arise until China holds their companies and individuals responsible for complying with the law. I’d like to thank the many dedicated criminal investigators from several different agencies who contributed to this investigation and the Department of Justice attorneys who are moving the prosecution efforts forward.”
“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 controls than any administration in history. I commend the Commerce Department’s Office of Export Enforcement, and our partners in the FBI, Justice Department, Department of Defense, and Department of Homeland Security for their excellent work on this case.”
“These charges lay bare Huawei’s blatant disregard for the laws of our country and standard global business practices,” said FBI Director Christopher Wray. “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.”
Overview of the Indictment
The charges in this case relate to a long-running scheme by Huawei, its CFO, and other employees to deceive numerous global financial institutions and the U.S. government regarding Huawei’s business activities in Iran. Beginning in 2007, Huawei employees lied about Huawei’s relationship to a company in Iran called Skycom, falsely asserting it was not a subsidiary of Huawei. The company further claimed that Huawei had only limited operations in Iran and that Huawei did not violate U.S. or other laws or regulations related to Iran. Most significantly, after news publications in late 2012 and 2013 disclosed that Huawei operated Skycom as an unofficial subsidiary in Iran and that Meng had served on the board of directors of Skycom, Huawei employees, and in particular Meng, continued to lie to Huawei’s banking partners about Huawei’s relationship with Skycom. They falsely claimed that Huawei had sold its interest in Skycom to an unrelated third party in 2007 and that Skycom was merely Huawei’s local business partner in Iran. In reality, Skycom was Huawei’s longstanding Iranian subsidiary, and Huawei orchestrated the 2007 sale to appear as an arm’s length transaction between two unrelated parties, when in fact Huawei actually controlled the company that purchased Skycom.
As part of this scheme to defraud, Meng 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 partners for banking services that included processing U.S.-dollar-denominated transactions through the United States. U.S. laws and regulations generally prohibited these banks from processing transactions related to Iran through the United States. The banks could have faced civil or criminal penalties for processing transactions that violated U.S. laws or regulations. Relying on the repeated misrepresentations by Huawei, banking partners continued their banking relationships with Huawei. One banking partner cleared more than $100 million worth of Skycom-related transactions through the United States between 2010 and 2014.
As a further part of this scheme to defraud, Huawei and its principals repeatedly lied to U.S. government authorities about Huawei’s business in Iran in submissions to the U.S. government, and in responses to government inquiries. For example, Huawei provided false information to the U.S. Congress regarding whether Huawei’s business in Iran violated any U.S. law. Similarly, as indicated in the indictment, in 2007 – months before Huawei orchestrated the purported sale of Skycom to another Huawei-controlled entity – Huawei’s founder falsely stated to FBI agents that Huawei did not have any direct dealings with Iranian companies and that Huawei operated in compliance with all U.S. export laws.
After one of Huawei’s major global banking partners (identified as Financial Institution 1 in the indictment) decided to exit the relationship in 2017 because of Huawei’s risk profile, Huawei allegedly made additional misrepresentations to several of its remaining banking partners in an effort to maintain and expand those relationships. Huawei and its principals are alleged to have repeatedly and falsely claimed that Huawei had decided to separate from Financial Institution 1, and not that Financial Institution 1 had decided to cause the separation. On the basis of these misrepresentations, those other banking partners continued their banking relationships with Huawei.
In 2017, when Huawei became aware of the government’s investigation, Huawei and its subsidiary Huawei USA tried to obstruct the investigation by making efforts to move witnesses with knowledge about Huawei’s Iran-based business to the PRC, and beyond the jurisdiction of the U.S. government, and by destroying and concealing evidence of Huawei’s Iran-based business that was located in the United States.
In December 2018, Canadian authorities apprehended Meng in Vancouver pursuant to a provisional arrest warrant issued under Canadian law. The U.S. government is seeking Meng’s extradition to the United States.
The charges in the indictment are merely allegations, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
The indictment unsealed today is assigned to U.S. District Judge Ann M. Donnelly of the Eastern District of New York.
The government’s investigation is ongoing.
The investigation is being jointly conducted by HSI’s New York Field Office, the FBI, OEE’s New York Field Office, and DCIS’s Southwest and Northeast Field Offices. Agents from the HSI and the FBI, and OEE offices in Dallas provided significant support and assistance. The government’s case is being handled by the National Security and Cybercrime and Business and Securities Fraud Sections of the U.S. Attorney’s Office for the Eastern District of New York, the Justice Department’s Criminal Division’s Money Laundering and Asset Recovery Section (MLARS), and the Justice Department’s National Security Division’s Counterintelligence and Export Control Section (CES).
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