#AceNewsReport – Sept.26: 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,” said Acting U.S. Attorney Nicole Boeckmann for the Eastern District of New York. “Her admissions in the statement of facts confirm that, while acting as the Chief Financial Officer for Huawei, Meng made multiple material misrepresentations to a senior executive of a financial institution regarding Huawei’s business operations in Iran in an effort to preserve Huawei’s banking relationship with the financial institution.
#AceDailyNews reports that The Chief Financial Officer of Huawei Technologies Co. Ltd., Wanzhou Meng, 49, of the People’s Republic of China (PRC), appeared today in federal district court in Brooklyn, entered into a deferred prosecution agreement (DPA) and was arraigned on charges of conspiracy to commit bank fraud and conspiracy to commit wire fraud, bank fraud and wire fraud.
The truth about Huawei’s business in Iran, which Meng concealed, would have been important to the financial institution’s decision to continue its banking relationship with Huawei. Meng’s admissions confirm the crux of the government’s allegations in the prosecution of this financial fraud — that Meng and her fellow Huawei employees engaged in a concerted effort to deceive global financial institutions, the U.S. government and the public about Huawei’s activities in Iran.”
“This Deferred Prosecution Agreement will lead to the end of the ongoing extradition proceedings in Canada, which otherwise could have continued for many months, if not years,” said Acting Assistant Attorney General Mark J. Lesko for the Justice Department’s National Security Division. “We are enormously grateful to Canada’s Department of Justice for its dedicated work on this extradition and for its steadfast adherence to the rule of law.”
“Financial institutions are our first line of defense in maintaining the safety and security of the U.S. financial system,” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division. “That is why the law requires that companies who avail themselves of the U.S. financial system provide financial institutions with truthful information about their business operations. Meng Wanzhou, CFO of Huawei Technologies, admitted today that she failed to tell the truth about Huawei’s operations in Iran, and as a result the financial institution continued to do business with Huawei in violation of U.S. law. Our prosecution team continues to prepare for trial against Huawei, and we look forward to proving our case against the company in court.”
“Meng’s admissions are evidence of a consistent pattern of deception to violate U.S. law,” said Assistant Director Alan E. Kohler Jr. of the FBI’s Counterintelligence Division. “The FBI will continue to aggressively investigate companies doing business in the United States when there are signs they behave with contempt for our laws.”
The Scheme to Defraud Financial Institutions
According to court documents, and as agreed to by Meng in the DPA’s statement of facts, Skycom Tech. Co. Ltd. (Skycom) was a Hong Kong company that primarily operated in Iran. As of February 2007, Skycom was wholly owned by a subsidiary of Huawei Technologies Co., Ltd. (Huawei), 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, Meng was the Secretary of Hua Ying.
In February 2008, after Huawei transferred ownership of Skycom from Hua Ying to Canicula, Meng joined Skycom’s Board of Directors, which was comprised of Huawei employees. She served on the Board until April 2009. After 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, 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 countrymanager – the head of the business – was a Huawei employee. Individuals employed by Skycom believed they worked for Huawei.
During the same 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 Meng 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 the following statement from Huawei: “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 Aug. 22, 2013 in Hong Kong, at which time Meng met with an executive of Financial Institution 1 responsible for operations in the Asia Pacific region. During the meeting, Meng delivered a PowerPoint presentation written in Chinese, which was translated by an interpreter into English. Meng stated that she was using an interpreter to be precise in her language.
In her presentation, 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 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, Meng stated that Huawei “was once a shareholder of Skycom” but had “sold all its shares in Skycom.” Those statements were untrue, because, as 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, 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, between 2010 and 2014, 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 meeting did Meng, who was aware of Huawei’s public statements about Skycom in 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 Meng.
Shortly after the meeting between Meng and Financial Institution 1, Huawei prepared an English version of the PowerPoint presentation at Financial Institution 1’s request. Meng later arranged for a paper copy of that PowerPoint presentation to be delivered to the Financial Institution 1 executive she had met with in September 2013. The representations in the English version of the PowerPoint presentation closely tracked the ones Meng had made during the meeting.
After the meeting and subsequent to receipt of Meng’s PowerPoint presentation, Financial Institution 1 decided to continue its relationship with Huawei. The other Financial Institutions similarly continued their respective relationships with Huawei.
Under the terms of the DPA, Meng has agreed to the accuracy of a four-page statement of facts that details the knowingly false statements she made to Financial Institution 1. Meng also has agreed not to commit other federal, state or local crimes. If Meng breaches the agreement, she will be subject to prosecution of all the charges against her in the third superseding indictment filed in this case. The government also agreed to withdraw its request to the Ministry of Justice of Canada that Meng be extradited to the United States.
Assistant U.S. Attorneys Alexander A. Solomon, Julia Nestor, David K. Kessler, Sarah M. Evans and Meredith A. Arfa for the Eastern District of New York; Trial Attorneys Laura Billings and Christian Nauvel for the Criminal Division’s Money Laundering and Asset Recovery Section; and Trial Attorneys Thea D. R. Kendler, David Lim and R. Elizabeth Abraham of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the case. Valuable assistance was provided by Assistant U.S. Attorneys Brian Morris and Brendan King of the Eastern District of New York’s Civil Division and Associate Director John Riesenberg, Attaché Andrew Finkelman of U.S. Embassy Paris and former Trial Attorney Margaret O’Malley of the Justice Department’s Office of International Affairs.
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