Huawei argues Meng couldn’t have misled bankers

Huawei Technologies Co. Ltd. is exploring another line of defence for beleaguered executive Meng Wanzhou, who remains detained in Canada as she fights extradition to the United States.

She faces a multitude of charges in the U.S., along with Huawei, including allegedly violating U.S. sanctions against Iran. However, prosecutors in Canada have said that she was arrested in this country on the charge of bank fraud – lying to a bank – which is a crime in both here and the U.S.

The Chinese telecom equipment maker’s legal team in the U.S. has suggested in arguments to the U.S. District Court for the Eastern District of New York that Ms. Meng couldn’t have misled bankers because those banks knew that Huawei was working with an affiliate that was selling gear to Iran in violation of U.S. sanctions laws.

The U.S. Department of Justice court filings have been censored to keep some of what is being discussed from public view so some sentences are blacked out or truncated.

It’s not clear from the U.S. court documents how this reasoning would help Huawei as a company extricate itself from charges that it violated U.S. sanctions. But it appears to be part of an effort to fight back against the fraud charge that Ms. Meng faces in Canada.

This avenue of attack by Huawei came to light in a May 7 filing by the U.S. Department of Justice where prosecutors cited arguments that Huawei is making in the U.S. case but that have not been made public by the Chinese company itself. The discussion concerned evidence being disclosed by the government during the U.S. trial.

“Huawei suggests that this evidence contradicts the allegations in the indictment that Meng ‘misled’ a financial institution about Huawei’s relationship with Skycom,” the May 7 Department of Justice filing says.

It later adds: “Huawei is suggesting that a financial institution should have deduced the true relationship between Huawei and Skycom.”

U.S. prosecutors reject this line of reasoning in the same May 7 filing, saying “such an argument is not a defence against fraud."

Huawei and Ms. Meng are accused of conspiring to defraud HSBC Holdings – one of the world’s largest banks – by lying about the Chinese company’s controlling relationship with Skycom Tech Co. Ltd., a company U.S. prosecutors say operated as the tech giant’s Iranian affiliate. HSBC used to provide banking services to Skycom.

Huawei’s Canadian subsidiary declined to discuss arguments that the company is making in U.S. courts.

Canadian Crown prosecutor John Gibb-Carsley has argued in the extradition case in Vancouver that Ms. Meng “personally represented” to HSBC in 2013 that “Skycom and Huawei were separate when in fact they were not separate.”

However, confidential e-mails obtained by The Globe and Mail and dated as early as 2010 suggest some employees of HSBC Holdings, at least in China and Hong Kong, were aware that the Chinese company had close ties to Skycom.

The e-mails, all between HSBC employees based in Hong Kong and Shenzhen, China, and Huawei employees based in Shenzhen, discuss cash transfers on behalf of Skycom and employees at Huawei who had signing authority for the Skycom bank account. In these e-mails, the HSBC staff include a senior vice-president and assistant vice-president at HSBC’s Hong Kong office.

In a 2011 e-mail, an assistant HSBC client-services manager in Hong Kong tells a colleague in Shenzhen with the title “global banking officer” that “Huawei is going to add four new authorized signors" for the Skycom account. And, and in another exchange, that HSBC colleagues are arranging to have a team visit Huawei offices to verify these new signatories’ identities.

U.S. authorities allege Huawei used Skycom to obtain U.S. goods and technology and to move money out of Iran via the international banking system. As a result of Huawei’s deception, U.S. authorities allege, banks cleared more than US$100-million of transactions related to Skycom through the U.S. – a potential violation of economic sanctions.

The e-mails obtained by The Globe match up with information available in the U.S. Department of Justice record of its case against Huawei, filed in Canadian court. That information says FBI investigators found HSBC records showing Skycom maintained a bank account at HSBC between 2007 and 2013 and that “virtually all of the authorized signatories were known to HSBC as Huawei employees and/or were signatories on other Huawei accounts at HSBC.”

As for the Iran connection, investigators also found that in 2011, Huawei employees, including a financial manager at Huawei, provided junior HSBC employees with audited financial statements for Skycom for the years 2009 and 2010 that explained the “principal activities of the company were … investment holding and acting as a contractor for contracts [sic] undertaking in Iran.”

According to the record of the case against Huawei, however, these employees did not bring this information to the attention of senior HSBC executives, even after late 2012 when news of the Huawei-Skycom relationship broke in the media.

A Huawei source confirmed the authenticity of the e-mails obtained by The Globe. The Globe is not identifying the company source, who was not authorized to speak about the transactions because of the extradition case in Canada and criminal proceedings against Huawei in the U.S.

John Marzulli, a spokesperson for the U.S. Attorney’s Office in the Eastern District of New York, where the U.S. case against Huawei is being prosecuted, could not be immediately reached for comment.

Robert Sherman, the U.S. head of media relations for HSBC, would not comment on the e-mails. “We are not a party to this case, so it would be inappropriate for us to comment on any particular evidence,” he said.