Huawei saga

Top exec allegedly tricked banks into violating sanctions

Ms Meng Wanzhou.
Ms Meng Wanzhou.

CFO said the Chinese firm operated in Iran in compliance with US sanctions, say authorities

A bail hearing in Canada last Friday shed more light on why top Huawei executive Meng Wanzhou was arrested earlier this month at the request of the United States while in transit in Vancouver.

Ms Meng, 46, Huawei's chief financial officer and daughter of the firm's founder, is alleged to have lied to banks, which caused them to violate United States sanctions on Iran.

She was on the board of Skycom Tech, a Hong Kong company, which Huawei used as an unofficial subsidiary to do business with telecoms companies in Iran, said the Canadian authorities.

Yet, she told at least one bank executive in a face-to-face meeting that Chinese firm Huawei operated in Iran in strict compliance with US sanctions.

Her presentation to the bank - later revealed by her attorney as London-headquartered HSBC - constituted fraud, said Mr John Gibb-Carsley, a prosecutor in Canada's Justice Department.

Describing her as a high flight risk, he argued against bail for her.

No decision was reached after nearly six hours of legal arguments and counter-arguments, and the hearing was adjourned until tomorrow.

Based on the bail hearing last Friday, Ms Meng Wanzhou, if extradited to the US, would face charges of conspiracy to defraud multiple financial institutions, with a maximum sentence of 30 years on each charge.

China yesterday warned Canada that there would be severe consequences if it did not immediately release Ms Meng.

The Chinese Foreign Ministry said Vice-Foreign Minister Le Yucheng issued the warning to Canada's ambassador in Beijing, summoning him to lodge a "strong protest". Canada's arrest of Ms Meng "ignored the law, was unreasonable", Mr Le said, adding that the very nature of the move was "extremely nasty".

"China strongly urges the Canadian side to immediately release the detained person, and earnestly protect their lawful, legitimate rights, otherwise Canada must accept full responsibility for the serious consequences caused," he said, but did not elaborate.

A Huawei spokesman said last Friday: "We have every confidence that the Canadian and US legal systems will reach the right conclusion."

A US legal expert told The Sunday Times that such cases of sanctions violations are usually brought against companies rather than individuals, as the authorities do not often have good evidence linking the transgressions to a specific person.

"It looks like they have very good evidence that she knew and is personally involved," said Ms Alma Angotti, one of the most prominent experts in risk and compliance on sanctions issues.

Referring to the probe of ZTE, another major Chinese telecoms equipment maker, she noted that it was a case against the whole company, which pleaded guilty.

ZTE paid a fine of US$892 million (S$1.2 billion) last year for illegally selling US-made hardware to Iran and North Korea.

"In the case of a person, there is a possibility that it could involve jail, so usually they won't settle and will go to trial," said Ms Angotti, a managing director and co-lead of the global investigations and compliance practice at Navigant Consulting.

Based on the bail hearing last Friday, Ms Meng, if extradited to the US, would face charges of conspiracy to defraud multiple financial institutions, with a maximum sentence of 30 years on each charge.

Economic sanctions are the very tool of US foreign policy and national security, Ms Angotti said, adding: "We take it very seriously."

She believed that the outcome of the case would have "quite an impact" on the ongoing trade war, as well as issues with Iran.

Chinese experts are concerned that the case would weaken Beijing's position.

"The arrest of Ms Meng Wanzhou is the latest manifestation of US power politics," said China-US expert Shen Dingli. "It has damaged the cooperation between the two countries to restore trust, and cast a dark shadow on the future Sino-US economic and trade consultations," the Shanghai-based scholar said.

A version of this article appeared in the print edition of The Sunday Times on December 09, 2018, with the headline 'Top exec allegedly tricked banks into violating sanctions'. Print Edition | Subscribe