Bob Mackin
Sept. 24, 2021.
The eyes of the world were on Brooklyn, N.Y. and Vancouver.
Meng Wanzhou embraces lawyer Tony Paisana (Bob Mackin Exclusive, copyright 2021)
First, Judge Ann Donnelly in U.S. District Court for Eastern New York, heard Huawei CFO Meng Wanzhou by videoconference from her lawyer’s office in Vancouver.
Meng pleaded not guilty to charges of conspiracy to commit bank fraud, conspiracy to commit wire fraud, bank fraud, and wire fraud.
She also agreed to a deferred prosecution agreement with the U.S. government.
If she meets the terms through Dec. 1, 2022, the charges will disappear.
What won’t disappear is Meng’s long-awaited admission that she lied to HSBC — a point that her legal dream team denied repeatedly in front of B.C. Supreme Court Associate Chief Justice Heather Holmes, during an extradition process that Canadian government lawyers complained was morphing into a trial.
Read the full statement of facts below.
Meng Wanzhou’s tearful goodbye at Vancouver International Airport (Bob Mackin Exclusive, copyright 2021)
Acting U.S. Attorney Nicole Broeckmann said afterward: “In entering into the deferred prosecution agreement, Meng has taken responsibility for her principal role in perpetrating a scheme to defraud a global financial institution.”
Two hours after Donnelly was done, Holmes freed Meng. The extradition application was withdrawn. Her court-appointed Lions Gate security bodyguards whisked Meng to a secured loading bay next to the Fairmont Hotel in the Vancouver International Airport, not far from where she had been arrested Dec. 1, 2018.
Meng departed on a chartered Air China flight to Shenzhen, with an entourage that included Canadian ambassador to China, Cong Peiwu. Wheels-up 4:28 p.m.
Meng Wanzhou’s tearful goodbye at Vancouver International Airport. She is photographed with a Hong Kong passport and Air China boarding pass. (Bob Mackin Exclusive, copyright 2021)
Hostages Michael Kovrig and Michael Spavor, we later learned, departed China around the same time. First to Anchorage, Alaska on a U.S. Air Force jet, then to Calgary by Canadian Forces Challenger. Kovrig transferred to a Toronto flight.
One chapter ends, another begins.
U.S. prosecutors continue to prepare for trial against Huawei.
Will Canada finally decide to ban Huawei from its 5G network?
Statement of Facts in U.S.A. vs. Meng Wanzhou
Huawei Technologies Co., Ltd. (“Huawei”) has been charged with a total of 16 counts in the U.S. District Court in the Eastern District of New York (“EDNY”), and two Huawei subsidiaries have been charged with nine counts in the U.S. District Court for the Western District of Washington. See United States v. Huawei Technologies Co., Ltd., et al., 18-CR-457 (E.D.N.Y.), Dkt. No. 126 (the “EDNY Indictment”). Meng Wanzhou, Huawei’s Chief Financial Officer, has also been charged in four of the counts in the EDNY Indictment. Ms. Meng and the U.S. Department of Justice—the Criminal Division’s Money Laundering and Asset Recovery Section, the National Security Division’s Counterintelligence and Export Control Section, and the U.S. Attorney’s Office for the Eastern District of New York (the “Government”)—have agreed to enter into a Deferred Prosecution Agreement (the “Agreement”) in connection with the EDNY Indictment.
The following Statement of Facts is incorporated by reference as part of the Agreement between Ms. Meng and the Government.
***
Huawei is a Chinese company headquartered in Shenzhen, Guangdong, and a leading global provider of information and communications technology. Huawei, including its corporate subsidiaries and affiliates, employs more than 197,000 people and operates in over 170 countries and regions.
Ms. Meng is a Chinese citizen and the daughter of Huawei’s founder, Ren Zhengfei, and since 2010 has served as Huawei’s Chief Financial Officer. Ms. Meng also serves as Deputy Chairwoman of Huawei’s Board of Directors.
Skycom Tech. Co. Ltd. (“Skycom”) was a Hong Kong company that primarily operated in Iran. As of February 2007, Skycom was wholly owned by Huawei subsidiary Hua Ying Management (“Hua Ying”). In November 2007, Hua Ying transferred its shares of Skycom to another entity that Huawei controlled, Canicula Holdings (“Canicula”). At the time Hua Ying transferred its Skycom shares to Canicula, Ms. Meng was the Secretary of Hua Ying.
In February 2008, after Huawei transferred ownership of Skycom from Hua Ying to Canicula, Ms. Meng joined Skycom’s Board of Directors, which was comprised of Huawei employees. She served on the Board until April 2009. After Ms. Meng departed from Skycom’s Board, Skycom’s Board members continued to be Huawei employees, Canicula continued to own Skycom, and Canicula continued to be controlled by Huawei. As of August 2012, Huawei included Skycom among a list of “other Huawei subsidiaries” in Huawei corporate documents written in English.
Between 2010 and 2014 (the “Relevant Time Period”), Huawei controlled Skycom’s business operations in Iran, and Skycom was owned by an entity controlled by Huawei. All significant Skycom business decisions were made by Huawei. Moreover, Skycom’s country manager—the head of the business—was a Huawei employee. Individuals employed by Skycom believed they worked for Huawei. Indeed, Skycom employees used email addresses with the domain “huawei.com.”
During the Relevant Time Period, Huawei employees engaged with a U.K. staffing company to provide engineers in Iran to support Skycom’s work with Iranian telecommunications service providers. Negotiations and contracting on behalf of Skycom were conducted by Huawei employees. To pay for these contractors, Huawei sent at least $7.5 million to the U.K. staffing company in a series of approximately 80 payments from Skycom’s bank accounts in Asia, including at a multinational financial institution (“Financial Institution 1”), to the U.K. staffing company’s account in the United Kingdom. The transactions were denominated in U.S. dollars and cleared through the United States.
In December 2012 and January 2013, various news organizations, including Reuters, reported that Skycom offered to sell “embargoed” equipment from a U.S. computer equipment manufacturer in Iran in potential violation of U.S. export controls law, and that Huawei had close ties with Skycom. In a statement to Reuters published in a December 2012 article, Huawei claimed that Skycom was one of its “major local partners” in Iran. Reuters reported that Huawei had further stated that “Huawei’s business in Iran is in full compliance with all applicable laws and regulations including those of the U.N., U.S. and E.U. This commitment has been carried out and followed strictly by our company. Further, we also require our partners to follow the same commitment and strictly abide by the relevant laws and regulations.”
In January 2013, a subsequent Reuters article reported that Ms. Meng had served on the Board of Directors of Skycom between February 2008 and April 2009 and identified other connections between Skycom directors and Huawei. The article also quoted a statement from Huawei that: “The relationship between Huawei and Skycom is a normal business partnership. Huawei has established a trade compliance system which is in line with industry best practices and our business in Iran is in full compliance with all applicable laws and regulations including those of the UN. We also require our partners, such as Skycom, to make the same commitments.” This statement was incorrect, as Huawei operated and controlled Skycom; Skycom was therefore not Huawei’s business “partner.”
After these articles were published, Financial Institution 1 and other global financial institutions that provided international banking services to Huawei (collectively, the “Financial Institutions”), including U.S. dollar-clearing, made inquiries to Huawei in response to the above- described press reports. In early 2013, Huawei employees represented to the Financial Institutions that Skycom was just a local business partner of Huawei in Iran and that Skycom had not conducted Iran-related transactions using its accounts at the Financial Institutions.
To address the allegations in the news reports, Huawei requested an in-person meeting with a senior Financial Institution 1 employee. That meeting occurred on August 22, 2013 (the “August Meeting”), at which time Ms. Meng met in Hong Kong with an executive of Financial Institution 1 responsible for operations in the Asia Pacific region. During the meeting, Ms. Meng delivered a PowerPoint presentation written in Chinese, which was translated by an interpreter into English. Ms. Meng stated that she was using an interpreter to be precise in her language.
In her presentation, Ms. Meng stated, among other things, that Huawei’s relationship with Skycom was “normal business cooperation” and “normal and controllable business cooperation,” and she described Skycom as a “partner,” a “business partner of Huawei,” and a “third party Huawei works with” in Iran. Those statements were untrue because, as Ms. Meng knew, Skycom was not a business partner of, or a third party working with, Huawei; instead, Huawei controlled Skycom, and Skycom employees were really Huawei employees. It would have been material to Financial Institution 1 to know that Huawei controlled Skycom. In addition, Ms. Meng stated that Huawei “was once a shareholder of Skycom” but had “sold all its shares in Skycom.” Those statements were untrue, because, as Ms. Meng knew, Huawei had “sold” its shares to an entity that Huawei controlled. Specifically, Huawei transferred Skycom shares from a Huawei subsidiary (Hua Ying) to another entity that was controlled by Huawei (Canicula). It would have been material to Financial Institution 1 to know that Skycom was transferred from one Huawei- controlled entity to another. Finally, Ms. Meng stated that Huawei “operates in Iran in strict compliance with applicable laws, regulations and sanctions” and that “there has been no violation of export control regulations” by “Huawei or any third party Huawei works with.” These statements were untrue because Huawei’s operation of Skycom, which caused the Financial Institutions to provide prohibited services, including banking services, for Huawei’s Iran-based business while Huawei concealed Skycom’s link to Huawei, was in violation of the U.S. Department of the Treasury’s Office of Foreign Assets Control’s Iranian Transactions and Sanctions Regulations, 31 C.F.R. Part 560. Moreover, during the Relevant Time Period, Huawei caused Skycom to conduct approximately $100 million worth of U.S.-dollar transactions through Financial Institution 1 that cleared through the United States, at least some of which supported its work in Iran in violation of U.S. law, including $7.5 million for Iran-based contractors from the U.K. staffing company to do work in Iran.
At no point during or after the August Meeting did Ms. Meng, who was aware of Huawei’s public statements about Skycom published by Reuters, retract or amend any of those statements. Moreover, Huawei’s Treasurer, who also attended the August Meeting, did not correct or amend any of the statements made by Ms. Meng.
During the Relevant Time Period, Ms. Meng possessed a computer file that contained “Suggested Talking Points” about Huawei’s relationship with Skycom that closely tracked the untrue statements made during the meeting in Hong Kong. Specifically, that file contained the following text, written in Chinese: “The core of the suggested talking points regarding Iran/Skycom: Huawei’s operation in Iran comports with the laws, regulations and sanctions as required by the United Nations, the United States and the European Union. The relationship with Skycom is that of normal business cooperation. Through regulated trade organizations and procedures, Huawei requires that Skycom promises to abide by relevant laws and regulations and export controls. Key information 1: In the past — ceased to hold Skycom shares 1, With regards to cooperation: Skycom was established in 1998 and is one of the agents for Huawei products and services. Skycom is mainly an agent for Huawei.”
Shortly after the August Meeting, Huawei prepared an English version of the PowerPoint presentation at Financial Institution 1’s request. Ms. Meng later arranged for a paper copy of that PowerPoint presentation to be delivered to the Financial Institution 1 executive in September 2013. The representations in the English version of the PowerPoint presentation closely tracked the ones Ms. Meng gave during the in-person August Meeting.
After the August Meeting, and subsequent receipt of the PowerPoint presentation, Financial Institution 1 decided to continue its relationship with Huawei. The other Financial Institutions similarly continued their respective relationships with Huawei.
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