Huawei’s CFO arrested in Canada, facing extradition to the U.S. for violating Iran sanctions
December 11, 2018 Category Foreign trade, Weekly
The Chief Financial Officer (CFO) of Chinese telecom company Huawei, Sabrina Meng, 41, has been detained by Canadian authorities on December 1 in Vancouver as she transferred to a flight to Mexico, at the request of the U.S. government. U.S. prosecutors alleged that she violated U.S. sanctions on Iran between 2009 and 2014 and engaged in “conspiracy to defraud multiple financial institutions” in 2013 when she attempted to convince bankers that Huawei and a former Hong Kong subsidiary SkyCom were wholly separate entities when in fact they were not. Meng is the daughter of Huawei’s Founder Ren Zhengfei, but adopted her mother’s surname. She is considered a leading contender to succeed her father at the head of the company and is Vice Chairperson of the Board of Directors. She is risking up to 30 years imprisonment in an U.S. jail.
The Chinese Embassy in Ottawa protested the move in a statement issued shortly after the Canadian government made the detention public. It said in a statement: “The Chinese side has lodged stern representations with the U.S. and Canadian side, urged them to immediately correct the wrongdoing and restore the personal liberty of Ms. Meng Wanzhou. Huawei stated: “The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng. The company believes the Canadian and U.S. legal systems will ultimately reach a just conclusion.” “Huawei complies with all applicable laws and regulations where it operates, including applicable export control and sanction laws and regulations of the UN, U.S. and EU,” the company added.
Following the news of the CFO’s arrest, stocks of Huawei’s suppliers tumbled in mainland China and Hong Kong trading. If Meng fights extradition, her case could go on for years, lawyers said, but if she chooses not to fight, she could be in the United States within weeks. The Chinese government warned Canada that it would face “grave consequences” if Meng is not freed. China’s Foreign Ministry called in the Canadian and U.S. Ambassadors to lodge a protest.
There is also growing anxiety that U.S. executives in China may be targeted in retaliation for the “aggressive” U.S. action. Bill Bishop, China watcher and publisher of the Sinocism newsletter, said Chinese retaliation in tit-for-tat form would be “explosive”. But Chinese foreign ministry spokesman Geng Shuang said China “has always protected the legitimate rights and interests of foreign nationals in China and they should obey Chinese laws when they are in China”. Chinese corporate executives are also concerned. They fear that the arrest of an individual executive at a prominent Chinese firm means the U.S. has become more aggressive in its strategy to erode China’s technological advances and so could take aim at any executive at any Chinese tech firm at any time.
U.S. authorities have been investigating Huawei since at least 2016 for allegedly shipping U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws. U.S. security services also suspect that Huawei equipment could be used for espionage purposes and government agencies are prohibited from buying Huawei products. Australia has followed the U.S. in banning Huawei’s equipment from the country’s 5G roll-out. Spark, New Zealand’s biggest telecoms network operator, also said that the country’s intelligence agency blocked its proposal to use Huawei’s equipment for its 5G development plans, and BT Group of the UK would remove Huawei’s gear from its core 4G network within two years, and would not use the Chinese company’s products in central parts of the next-generation 5G network. Huawei has been in Britain for more than 17 years, with its equipment checked and monitored by a special company laboratory overseen by government and intelligence operators.
China’s push to lead the global development and roll-out of 5G mobile networks could be at risk, following the arrest of Meng, analysts said, as the company might incur U.S. sanctions. “It is not yet clear whether there has been a breach committed, but for the CFO to be detained we can expect serious accusations to be levied against Huawei in the coming days,” said Paul Haswell, Partner at law firm Pinsent Masons. In Belgium, the Center for Cybersecurity Belgium (CCB) is investigating whether to recommend banning Huawei’s equipment from the networks of Proximus and Orange Belgium.
Meanwhile, Huawei Technologies has signed a contract to upgrade Portugal’s No 1 phone network to the 5G standard, giving the Chinese company its 23rd global network client – 15 in Europe, five in the Middle East and three in Asia – to extend its lead as the world’s largest maker of telecommunications equipment, ahead of Nokia and Ericsson. The company will supply the equipment and software to Altice Portugal.
Earlier this year, Shenzhen-based ZTE was brought to the brink of collapse after the U.S. activated an export ban that prohibited American companies from doing business with the telecommunications equipment company. The ban was subsequently lifted under a new 10-year probation, a USD1.76 billion fine, and the placement of U.S. compliance officers at the company. Unlike ZTE, Huawei has not been formally accused of breaching U.S. export sanctions on Iran and North Korea.
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