The US Department of Justice on Monday charged Huawei with theft of trade secrets, wire fraud and obstruction of justice.
A 10-count indictment alleges that China's Huawei stole trade secrets from US carrier T-Mobile beginning in 2012. Huawei also allegedly offered bonuses to employees who stole confidential information from companies. In addition, a 13-count indictment charged four defendants, including Huawei and Chief Financial Officer Meng Wanzhou, with financial fraud. The indicted defendants also include affiliates Huawei USA and Skycom.
"The charges unsealed today clearly allege that Huawei intentionally conspired to steal the intellectual property of an American company in an attempt to undermine the free and fair global marketplace," said FBI Director Christopher Wray in a statement. "To the detriment of American ingenuity, Huawei continually disregarded the laws of the United States in the hopes of gaining an unfair economic advantage."
The charges come amid heightened scrutiny for Huawei, the world's largest supplier of telecom equipment and the No. 2 smartphone maker behind Samsung. The US has already banned Huawei from selling networking equipment here, but a number of other countries have either already ceased working with the company, or are considering a ban. The Chinese government and Huawei have said the moves could have ramifications since the company contributes to industry-standard wireless technologies like 5G.
Both the US and China are jockeying for leadership in the next-generation of cellular technology, which promises higher speeds and the ability to handle more connected devices. US officials have offered warnings about Huawei and its ties to China.
"There is ample evidence to suggest that no major Chinese company is independent of the Chinese government and Communist Party -- and Huawei, which China's government and military tout as a 'national champion,' is no exception," said Sen. Mark Warner, a Virginia Democrat who's vice chairman of the Senate Select Committee on Intelligence.
Huawei, meanwhile, denied any wrongdoing.
"Huawei is disappointed to learn of the charges brought against the company today," the company said in an emailed statement.
"After Meng's arrest, the company sought an opportunity to discuss the Eastern District of New York investigation with the Justice Department, but the request was rejected without explanation," Huawei continued. "The allegations in the Western District of Washington trade secret indictment were already the subject of a civil suit that was settled by the parties after a Seattle jury found neither damages nor willful and malicious conduct on the trade secret claim."
T-Mobile declined to comment.
According the first set of indictments, Huawei began stealing information about a phone-testing robot from T-Mobile called Tappy. Huawei engineers allegedly violated confidentiality and nondisclosure agreements by taking pictures of Tappy, taking measurements of parts of the robot and stealing a piece of it. When T-Mobile found out and threatened to sue, Huawei falsely said the theft was done by rogue actors within the company, according to the indictment.
T-Mobile sued anyway, and in 2017 won its case against Huawei, with a jury awarding it $4.8 million.
Despite Huawei's insistence that the action was a one-off affair, the Justice Department says emails obtained during the investigation found that the theft of secrets from T-Mobile was a companywide effort.
Huawei could face a fine of up to either $5 million or three times the value of the stolen trade secret, for conspiracy and attempt to steal trade secrets. The company could also face a fine of up to $500,000 for wire fraud and obstruction of justice.
In the second set of indictments, Meng was charged with bank fraud, wire fraud and conspiracies to commit bank and wire fraud. Huawei and Huawei USA are charged with conspiracy to obstruct justice. Huawei and Skycom are charged with bank fraud and conspiracy to commit bank fraud, wire fraud and conspiracy to commit wire fraud, violating the International Emergency Economic Powers Act and conspiracy to violate IEEPA, and conspiracy to commit money laundering.
The charges are related to the company's alleged efforts to evade US sanctions and do business with Iran. Last month, Meng was detained in Canada at the behest of the Justice Department over those claims. While in a Vancouver courthouse to discuss her bail, a lawyer with Canada's Justice Department alleged she defrauded US banks into making transactions that violated those sanctions, according to Bloomberg.
The founder's daughter
Notably, Meng isn't just the CFO of Huawei. She's the daughter of the founder and president, Zhengfei Ren. And her arrest doesn't just have ripple effects across the tech industry; it threatens to blow up an already precarious relationship between the US and China over trade talks.
Beyond trade, others see Huawei as a national security issue.
"It has been clear for some time that Huawei poses a threat to our national security, and I applaud the Trump Administration for taking steps to finally hold the company accountable," Warner said.
Huawei has consistently denied any wrongdoing by Meng. At the World Economic Forum at Davos, Huawei Chairman Liang Hua called for a quick resolution of the case and the release of Meng, according to Reuters.
Meng's lawyer, Reid Weingarten, told Reuters on Tuesday that she was a victim of "complex" China-US relations.
"Our client, Sabrina Meng, should not be a pawn or a hostage in this relationship." he said, using one of her Western names. "Ms. Meng 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."
Huawei also told Reuters that it had sought to discuss the charges with US authorities, "but the request was rejected without explanation."
Over the past few months, Huawei has endured a wave of negative sentiment. UK carrier BT said it'd pull Huawei equipment out of its 4G network and ban it from any future 5G deployments. Japan reportedly banned government purchases from Huawei. Also last month, Andrus Ansip, the EU's technology chief, warned that Huawei and other Chinese companies pose a risk to the bloc's industry and security, according to Reuters.
All of the negativity could have a trickle-down effect on the company.
"[The case] puts every aspect of Huawei's business in jeopardy in the US and EU, including consumer sales," said Maribel Lopez, an analyst at Lopez Research. "Instead of being known for innovation, the company is positioned as criminal."
First published Jan. 28 at 2:09 p.m. PT
Update Jan. 29 at 2:59 a.m. PT: Added Reuters comments from Meng's lawyer and Huawei.
Update at 5:08 a.m. PT: Added comment from Huawei.
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