US v. Huawei: 4 key takeaways from the indictments

The United States just offered a rare glimpse into the inner workings of Huawei, the Chinese telecoms company at the heart of the escalating clash between Washington and Beijing over technology.

In indictments released late Monday, US prosecutors accuse Huawei’s employees, executives and even its founder of repeatedly lying to government officials and business partners for the Chinese company’s benefit. The documents outline in detail an alleged scheme to pay employees to steal trade secrets.

Huawei said in a statement that it is disappointed to learn of the charges brought against the company.

“The company denies that it or its subsidiary or affiliate have committed any of the asserted violations of US law set forth in each of the indictments,” the statement said.

Here are some of the most striking allegations from the US court documents.

1. Huawei’s founder lied to the FBI

Huawei founder Ren Zhengfei, who has played a prominent role in defending the company in recent weeks, repeatedly lied about its business dealings in Iran, US prosecutors say.

Ren told FBI agents 2007 that Huawei complied with all US export laws and had not directly done business with any Iranian company, according to one of the indictments. Ren said he believed Huawei had sold equipment to a third party, possibly in Egypt, that in turn sold the equipment to Iran.

The prosecutors’ case is that Huawei used an unofficial subsidiary in Iran to obtain prohibited US goods, technology and services for its official Iran-based business.

Huawei falsely claimed that the unofficial subsidiary, Skycom, was a separate company in order to pretend it was unaware of any sanctions-busting activities, according to the indictment. It accuses Huawei of misleading banks operating in the United States and US government officials about the nature of its relationship with Skycom.

Ren told reporters earlier this month that Huawei “must abide by all applicable laws and regulations in the countries where we operate.”

The US allegations against Ren will make it risky for the billionaire tech tycoon to travel to the United States or any country with which it has an extradition treaty. If he does, he could face the same fate as his daughter, Huawei’s Chief Financial Officer Meng Wanzhou, who was arrested in Canada last month.

The US formally requested Meng’s extradition on Tuesday. Her next court appearance in Vancouver is March 6.

2. Bonuses for employees who stole trade secrets

US prosecutors say Huawei had a policy in place that gave bonuses to employees who successfully stole confidential information from competitors.

Employees posted the trade secrets they nabbed from rival companies on an internal Huawei website, according to one of the indictments. If the information was especially sensitive, they would send encrypted emails to a special inbox.

“A ‘competition management group’ was tasked with reviewing the submissions and awarding monthly bonuses to the employees who provided the most valuable stolen information,” the indictment said. Twice a year, the top three regions that provided the most valuable stolen information would also get bonuses.

Theft of trade secrets is a key issue in the trade clash between the United States and China. The Trump administration has stepped up efforts to crack down on Chinese economic espionage.

According to the US indictment, the human resources director of Huawei’s US operations tried to put a stop to the bonus scheme, writing in an email to all US-based employees that “such a behavior is expressly prohibited by [Huawei USA’s] policies.”

3. The ‘home’ team pressured colleagues to steal

Aside from a cash incentive, Huawei employees were allegedly under enormous pressure to obtain trade secrets.

Prosecutors claim that Huawei worked for years to steal T-Mobile’s proprietary phone testing technology, known as “Tappy.” Huawei was one of T-Mobile’s suppliers, so the US carrier had agreed to grant Huawei engineers access to its phone testing system.

The court documents detail multiple emails where Huawei employees in China told colleagues in the United States to send specific details about Tappy, including serial numbers of parts, hardware and software specifications, and the speed of the device’s mechanical arm.

Huawei at the time was developing a similar robot, but it lagged behind T-Mobile’s, according to the indictment.

The US employees did as they were told, but repeatedly told counterparts in China that T-Mobile was becoming suspicious and had installed a camera in the room that housed Tappy, the court documents said. They suggested that Huawei send an engineer to the United States who might be able to get a better understanding of the T-Mobile device after “playing” with it.

Huawei did so, and soon after, one of the US employees smuggled out Tappy’s arm in a bag and kept it overnight. The engineer was able to take detailed measurements and multiple photographs of the robot arm, emailing them to Huawei engineers in China. He also sent an explanation of how the pieces of the device were configured together.

After discovering the alleged theft, T-Mobile revoked the engineer’s badge and wouldn’t let Huawei employees access Tappy without a T-Mobile employee present.

4. US investigators accessed Meng Wanzhou’s electronic device

Prosecutors allege that Meng, the Huawei CFO, was part of a decade-long conspiracy to evade American sanctions on Iran and dupe Congress and US investigators.

The court documents accuse Meng of lying to banks about Huawei’s business activities in Iran. In 2013, for example, she allegedly gave a presentation to a banking executive that misrepresented Huawei’s compliance with US sanctions on Iran and its relationship with a subsidiary doing business in Iran.

A few months later, Meng traveled to the United States, the indictment says. When she arrived at John F. Kennedy International Airport in New York, investigators found talking points for the meeting with the banking executive on an “electronic device” Meng was carrying.

The file appeared to have been deleted, according to court documents.

No details were given on how investigators accessed Meng’s device. JFK airport falls under the jurisdiction of the district where criminal charges against Meng and Huawei have been filed.

A lawyer for Meng said Tuesday that she is “an ethical and honorable businesswoman who has never spent a second of her life plotting to violate any US law, including the Iranian sanctions.”

The lawyer, Reid Weingarten, said in a statement released by Huawei that Meng “should not be a pawn or a hostage” in the US-China relationship.