U.S. Secures Arrest Of Huawei Executive -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 6, 2018).

By Kate O'Keeffe and Stu Woo 

Canadian authorities in Vancouver have arrested Huawei Technologies Co.'s chief financial officer at the request of the U.S. for alleged violations of Iran sanctions, the latest move by Washington against the Chinese cellular-technology giant.

A spokesman for Canada's justice department said Meng Wanzhou was arrested in Vancouver on Dec. 1 and is sought for extradition by the U.S. A bail hearing has been tentatively scheduled for Friday, according to the spokesman. Ms. Meng, the daughter of Huawei's founder, Ren Zhengfei, also serves as the company's deputy chairwoman.

The arrest comes at a critical juncture in U.S.-Chinese relations. President Trump and Chinese President Xi Jinping last weekend agreed to a temporary truce in a trade spat to negotiate a settlement. The U.S. has raised other concerns with China, ranging from spying to intellectual-property theft to Beijing's military posture in the South China Sea. China has said its actions are appropriate.

The U.S. has undertaken a campaign against Huawei, which is viewed as a national-security threat because of its alleged ties to the Chinese government. In the past year, Washington has taken a series of steps to restrict Huawei's business on American soil and, more recently, launched an extraordinary international outreach campaign to persuade allied countries to enact similar curbs.

China strongly protests the arrest and has urged both U.S. and Canadian officials to free Ms. Meng, according to a statement released by the Chinese Embassy in Canada.

The U.S. is seeking Ms. Meng's extradition so as to have her appear in federal court in the Eastern District of New York, according to people familiar with the matter.

A Huawei spokesman said Wednesday that Ms. Meng was arrested at an airport during a layover. "The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng," he said. "The company believes the Canadian and U.S. legal systems will ultimately reach a just conclusion."

The spokesman said that Huawei complies with laws and regulations everywhere it operates.

The Wall Street Journal reported in April that the Justice Department had launched a criminal probe into Huawei's dealings in Iran, following administrative subpoenas on sanctions-related issues from both the Commerce Department and the Treasury Department's Office of Foreign Assets Control.

In 2007, Ms. Meng served as a board secretary for a Huawei holding company that owned Skycom Tech, a Hong Kong company with business in Iran and employees who said they worked for "Huawei-Skycom," according to a person familiar with the matter.

U.S. authorities have suspected Huawei's alleged involvement in Iranian sanctions violations since at least 2016, when the U.S. investigated ZTE Corp., Huawei's smaller Chinese rival, over similar allegations. The Commerce Department released internal ZTE documents that showed the company studied how a rival, identified only as "F7," had conducted similar business.

A ZTE representative didn't immediately respond to a request for comment. The Commerce Department this year penalized ZTE for breaking the terms of a sanctions-busting settlement -- nearly shutting down the company after banning U.S. firms from selling it supplies -- but then gave it a reprieve after ZTE agreed to pay a fine, change its management and fund a team of U.S. corporate monitors.

A document dated August 2011 said F7's proposal to acquire U.S. company 3Leaf was opposed by Washington. That strongly indicated F7 was Huawei, which tried to acquire 3Leaf in 2010, only to back away after a U.S. national-security panel recommended against the deal.

Ms. Meng is a Chinese citizen who went by the English name of Cathy Meng before changing it to Sabrina Meng a few years ago. The company says she joined Huawei in 1993 and has held a variety of positions in accounting divisions.

"China will see this as an escalation against Huawei and as an extraterritorial rendition," said James Mulvenon, general manager at defense contractor SOS International. "There will be tremendous domestic pressure in China to get her back."

Huawei is the world's biggest maker of equipment for cellular towers, internet networks and related telecommunications infrastructure. It is also the world's No. 2 smartphone brand.

For years, Washington has alleged the Chinese government could compel Huawei to tap into the hardware it sells around the world to spy or to disrupt communications. U.S. officials say they are intensifying efforts to curb Huawei because wireless carriers world-wide are about to upgrade to 5G, a new wireless technology that will connect many more items -- factory parts, self-driving cars and everyday objects like wearable health monitors -- to the internet. U.S. officials say they don't want to give Beijing the potential to interfere with an ever-growing universe of connected devices.

Huawei has long said it is an employee-owned company that has never conducted espionage or sabotage on behalf of any government, and that doing so would jeopardize its business. The company said it poses no greater risks than its rivals do, given they share a common supply chain.

Some of America's closest allies, including most of the countries in the "Five Eyes" intelligence-sharing pact among English-speaking countries, have followed the nation's lead. Australia in August banned Huawei from its 5G networks, while New Zealand last week blocked one of its major wireless carriers from using Huawei. In Britain, BT Group PLC said Wednesday that it was removing Huawei equipment from its network, two days after a British intelligence chief questioned whether the country should be using the Chinese gear.

Aruna Viswanatha, Nicole Hong and Paul Vieira contributed to this article.

Write to Kate O'Keeffe at [e-mail] and Stu Woo at [e-mail]

(END) Dow Jones Newswires

December 06, 2018 02:47 ET (07:47 GMT)

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