On Sept. 24, Meng Wanzhou, chief financial officer of Chinese telecommunications company Huawei, returned to China after nearly three years of house arrest in Canada.
Earlier that day, she appeared by video from Canada in U.S. District Court in Brooklyn. Under a so-called “deferred prosecution agreement” (DPA) between Meng and the U.S. Department of Justice, she admitted to misleading Britain’s HSBC about Huawei’s Iranian business.
As part of that agreement, Meng did not have to plead guilty. If Meng complies with the terms of the agreement, the U.S. can drop the criminal charges against her in December 2022.
Meng’s return to China was greeted with a hero’s return, and her release was seen as a diplomatic victory for the “strong motherland.
On Sept. 25, Chinese Foreign Ministry spokeswoman Hua Chunying said on Meng’s arrival in China, “It has long been proven that this was an incident of political persecution against Chinese citizens, aimed at suppressing Chinese high-tech enterprises.”
Hua said, “The accusation of so-called ‘fraud’ against Ms. Meng Wanzhou is pure fabrication.”
She is wrong to make such a claim. While guilt or innocence is something that should ultimately be determined by the courts, the U.S. Department of Justice has presented persuasive evidence for Meng’s alleged involvement in the fraudulent bank, including a series of documents and officially documented incidents.
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The evidence is not “fabricated. Meanwhile, Meng’s lawyers have not made the evidence public, although they say they have evidence to refute the allegations.
First, a little background on the matter.
In 2018, Canada, which has a bilateral extradition treaty with the United States, arrested Meng at the request of the United States. The incident severely worsened already increasingly tense U.S.-China relations, and Ottawa was caught in the middle. China promptly imprisoned two Canadian citizens on charges of espionage, a move condemned by Canada and its allies as “hostage diplomacy.
The two Canadians – former diplomat Michael Kovrig and businessman Michael Spavor – were released just hours before Meng left Vancouver in what some Western media described as an “apparent prisoner exchange. “. Two U.S. citizens who had previously been barred from leaving China were subsequently released.
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Both Beijing and Washington have denied any connection between Meng’s agreed return and the “two Michaels” regaining their freedom. But Beijing has portrayed Meng as a hostage held by the United States to suppress China’s rise.
Although Meng did not plead guilty, she admitted that all the facts in the U.S. Justice Department’s statement of facts for the fraud charges were “true and accurate to the best of her knowledge and belief.
This was one of the conditions of the deferred prosecution agreement.
“In signing the deferred prosecution agreement, Meng has accepted responsibility for her primary role in the commission of a scheme to defraud a global financial institution,” Nicole Boeckmann, acting U.S. attorney for the Eastern District of New York, was quoted as saying in a Sept. 24 statement by the U.S. Department of Justice. said.
The “global financial institution” in question is HSBC. Huawei and Hong Kong’s Starcom Technologies Ltd. both hold bank accounts at HSBC. The United States insists that Starcom is a shell company in Hong Kong controlled by Huawei. HSBC conducts transactions for Huawei that are settled in U.S. dollars.
The U.S. Department of Justice alleges that Meng misled HSBC into believing that Starcom was merely a partner of Huawei, prompting HSBC to approve U.S. dollar transactions used by Starcom to operate its Iranian business between 2010 and 2014, in violation of U.S. sanctions against Iran.
The U.S. dollar transactions used to support Starcom’s Iranian operations included a deal for at least $7.5 million to pay Iranian contractors working with Iranian telecommunications service providers.
Reuters reported in December 2012 and January 2013 that Starcom’s Tehran office had offered to sell “embargoed” computer equipment made by Hewlett-Packard to Iran’s largest cell phone operator in late 2010. Reuters also found documents showing Huawei’s close ties to the company.
Huawei responded to Reuters at the time, saying that the deal had not been completed and insisting that Starcom was only one of Huawei’s “major local partners” in Iran.
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After the Reuters reports were published, HSBC and several other banks that provide Huawei with dollar-denominated business asked Huawei about its relationship with Starcom. Huawei again stated that Starcom is its business partner in Iran.
In August 2013, with the help of an interpreter, Meng gave a face-to-face presentation (PowerPoint) in Hong Kong to an HSBC executive in charge of Asia Pacific affairs in response to questions raised by the Reuters report.
In her PowerPoint presentation, Meng stated that Huawei’s relationship with Starcom was “normal business cooperation” and reiterated that Starcom was “Huawei’s business partner” and that it was “a good business partner” in Iran, according to the U.S. Department of Justice’s factual statement. The presentation also reiterated that Starcom is a “business partner of Huawei” and a “third party working with Huawei” in Iran. Meng also told the HSBC executive that Huawei “was once a shareholder of Starcom” but had “sold all its shares in Starcom”.
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The U.S. Department of Justice said Meng’s statements to HSBC were untrue, saying Huawei actually controls Starcom.
According to the DOJ’s factual statement, Huawei made all of Starcom’s major business decisions between 2010 and 2014. Starcom’s country manager – the head of operations – was a Huawei employee. The DOJ noted that employees hired by Starcom believed they were working for Huawei.
Starcom filed annual statements in May 2007 showing that the company was wholly owned by Huaying Management Co. in February 2007, according to a 2013 Reuters report. while its shares are owned by Huawei’s parent company, Shenzhen Huawei Investment Holdings Co. according to Huaying’s company statement.
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According to the DOJ’s factual statement, Huawei did not actually “sell all of its shares in Starcom” in November 2007, but rather transferred ownership of Starcom to another entity, Canicula Holdings, also controlled by Huawei. The records also show that Meng was working as a secretary at Huaying when it transferred its Starcom shares to Canicula.
Starcom’s corporate filing records also show that Meng served on Starcom’s board of directors, which was comprised of Huawei employees, from February 2008 to April 2009. After Meng left Starcom’s board of directors, the members of that board remained Huawei employees. As Reuters wrote in its 2013 report, both the former and current heads of Starcom appear to be Huawei employees, both have email accounts using Huawei domains, and both are in Huawei’s employee directory.
HSBC decided to maintain its business relationship with Huawei after receiving the English version of Meng’s presentation notes made in Hong Kong. The U.S. Department of Justice concluded that it was Meng’s misrepresentation of facts about the nature of Huawei’s business in Iran that caused HSBC to be deceived into continuing to provide services and maintain its business relationship with it, in violation of U.S. sanctions against Iran.
Meng’s legal team has rebutted this claim by the U.S. Department of Justice.
Huawei and two of its subsidiaries – Huawei Device USA Inc and Starcom – were also indicted at the same time Meng was indicted. The related indictment was announced in January 2019.
According to the U.S. Department of Justice, “Huawei and Starcom are charged with bank fraud and conspiracy to commit bank fraud, telecommunications fraud and conspiracy to commit telecommunications fraud, violations of the International Emergency Economic Powers Act (IEEPA), and conspiracy to violate IEEPA.”
One of the conditions of Meng’s deferred prosecution agreement is that she cannot rebut the U.S. government’s claim that she “played (a) major role in carrying out a scheme to defraud a global financial institution.
How will Meng’s admissions to the U.S. Justice Department’s factual statements affect the U.S. case against Huawei and Starcom? There are still unanswered questions about this. Some legal experts believe that Meng’s admission will not necessarily be used by the U.S. Justice Department to prosecute Huawei at trial.
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Juan Morillo, a partner at Quinn Emanuel Urquhart & Sullivan, LLP, is in charge of white-collar economic crime defense and internal corporate investigations in the firm’s Washington office. He told Reuters that Huawei could argue that Meng’s agreement is the “product of blackmail,” meaning that Meng may feel she was forced to sign the agreement in order to gain her freedom.
Similarly, Huawei could argue that the company did not sign the deferred prosecution agreement and is not bound by it.
“I’ve run into similar situations where this would be Huawei’s strategy,” Morillo said. “They would say ‘This is fabricated. It’s the product of blackmail and it’s not binding on us at all.'”
Charles Stillman, another New York-based lawyer, told Reuters that Meng’s agreement with U.S. prosecutors would not stand up in court unless she testified against Huawei.
The Sixth Amendment to the U.S. Constitution gives a defendant the right to “confront the witnesses against him.
“If she doesn’t come back (to the U.S.) and no one has a chance to cross-examine her, that’s inadmissible,” Stillman said.
In June, Meng’s lawyers said the U.S. allegations that Meng fraudulently misled HSBC were themselves “false and misleading. They said they had documents such as HSBC’s emails and other corporate files that showed “no evidence of fraud against HSBC.”
“(The documents) show that Huawei’s control of Starcom was not concealed from HSBC executives; that the ongoing nature of Starcom’s business with Huawei in Iran was not concealed from HSBC executives; that HSBC’s internal risk assessment was based on knowledge of the true facts; and that any reputational risk was managed with the knowledge of HSBC executives,” Huawei Canada the company wrote in a statement.
The aforementioned documents to which Huawei refers have not been made public. Meng’s lawyers obtained the documents by suing HSBC in London and Hong Kong.
Huawei has settled the lawsuit with HSBC; under the settlement, Huawei was given the materials “with a confidentiality clause,” according to the U.K. newspaper The Guardian.
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However, the Canadian judge hearing the case did not allow the documents to be used at the extradition hearing. Canadian prosecutors claimed the evidence was more appropriate for trial than for an extradition hearing.
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