By Margot Patrick and Eva Dou
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 10, 2018).
Two large British banks are among those ensnared in the
controversy over Huawei Technologies Co., which escalated over the
weekend after the Chinese government warned Canada it would face
"severe consequences" if it didn't release the Chinese
telecommunications giant's finance chief.
Canada this month arrested Meng Wanzhou at the behest of U.S.
authorities, who are seeking her extradition over allegations she
misled banks about Huawei's business dealings with Iran to skirt
international sanctions against that country. Ms. Meng, 46 years
old, is in the midst of hearings in Vancouver that are expected to
reconvene Monday and lead to a decision on bail.
HSBC Holdings PLC and Standard Chartered PLC were among the
institutions told by Huawei in recent years that it wasn't doing
business in Iran through a Hong Kong company called Skycom Tech,
according to people familiar with the matter. For the two lenders,
it was a crucial assurance since both were under court oversight
for their own U.S. sanctions violations involving Iran, and
couldn't risk further missteps.
A spokesman for Huawei declined to comment Sunday.
Ms. Meng's arrest, which roiled financial markets last week,
draws Canada into a rift between the U.S. and China that has so far
been mostly about trade. In a statement Saturday, the Chinese
Foreign Ministry accused Canada of "severely violating the legal,
legitimate rights of a Chinese citizen," but didn't name Ms. Meng,
instead referring to a Huawei "principal."
A Canadian Foreign Ministry spokesman had no comment beyond
Foreign Minister Chrystia Freeland's remarks to reporters Friday
that there was no political interference in the decision to detain
Ms. Meng.
China's Foreign Ministry separately summoned the American
ambassador on Sunday to demand the U.S. drop its arrest warrant for
the Huawei executive, according to a Foreign Ministry statement.
The statement stopped short of the kind of warning given to
Canada.
U.S. lawmakers for years have accused Huawei, the world's
biggest maker of telecom equipment, of spying and criticized its
links to the Chinese government. Those fears have accelerated
recently with the U.S. and China locked in a race over 5G, the
next-generation wireless technology that is considered
strategically important.
Huawei has repeatedly said it is owned by its employees,
operates independently from the government and that its equipment
is safe.
Coming as it did just as the two countries struck a trade
detente in Argentina, news of Ms. Meng's detention in Canada en
route from Hong Kong to Mexico fueled market fears that the
progress on trade talks would be undercut.
Trump administration officials on Sunday sought to draw a
distinction between Ms. Meng's arrest and the continuing trade
talks, indicating they didn't believe the Huawei matter would
derail negotiations on tariffs, intellectual-property transfer and
other economic issues.
"It's my view that it shouldn't really have much of an impact,"
U.S. Trade Representative Robert Lighthizer said on CBS. "It is
totally separate from anything that I work on." White House
economic adviser Larry Kudlow said on Fox he thought Messrs. Trump
and Xi would distinguish between a "trade lane" and a
"law-enforcement lane."
The U.S. Justice Department is alleging that Ms. Meng lied to
banks about Huawei's ties to Skycom, which operated in Iran. Her
statements, the U.S. alleges, and those of other Huawei
representatives, meant the banks potentially violated sanctions by
clearing hundreds of millions of dollars of transactions.
To comply with banking and anti-money-laundering laws, banks
must collect information from clients on their business and
financial activities, and do additional due diligence and
monitoring of high-risk clients. But in a twist to the usual
narrative, the banks in this matter haven't been accused of any
wrongdoing and are instead portrayed as victims in court
filings.
The court filings in Canada allege that at least three other
global banks were misled by Huawei employees and representatives
about the relationship between Huawei and Skycom.
One filing describes an August 2013 meeting and presentation by
Ms. Meng to an executive at one bank -- identified Friday as HSBC
by Ms. Meng's lawyer. Ms. Meng came to the meeting with an English
interpreter and a PowerPoint presentation written in Chinese, and
made a series of statements.
In an English translation delivered to the HSBC executive soon
after, Ms. Meng stated in the presentation that Huawei complied
with international sanctions laws and had sold shares it previously
held in Skycom. The relationship was one of "normal business
cooperation," Ms. Meng stated, according to the filing.
Her lawyer said Friday the idea Ms. Meng engaged in fraud would
be "hotly contested."
As a fast-expanding telecom giant, Huawei's access to global
banks was paramount in helping it supply equipment across dozens of
countries' telecom networks. For the banks, the growing Chinese
client produced a steady stream of fees. Dealogic data shows HSBC
and Standard Chartered were two of Huawei's biggest financing
partners, with top roles on most of its $17 billion in loan and
bond sales in the past decade. Citigroup Inc., Australia & New
Zealand Banking Group Ltd., DBS Group Holdings Ltd. and Bank of
China were among the other main arrangers. The banks didn't
immediately return requests for comment or couldn't immediately be
reached.
Canadian prosecutors said the alleged conspiracy between Ms.
Meng and other Huawei representatives to mislead banks was driven
by the company's need to move money out of sanctioned countries
through the international banking system.
In the court filings, authorities alleged that the
misrepresentations by Huawei to banks "violated their internal
policies, potentially violated U.S. sanctions laws and exposed the
banks to the risk of fines and forfeiture." Banks carried out
transactions for Huawei through New York and Europe, exposing them
to "serious harm" and decisions made without knowing Huawei's true
risk, the filings said.
On Monday, a Canadian judge is expected to consider if Ms. Meng
is a flight risk. At the end of Friday's hearing, her lawyer David
Martin told the judge he would call witnesses Monday to testify
about electronic monitoring devices that he proposed Ms. Meng would
wear if released. The judge could rule on Ms. Meng's bail after
that.
Ms. Meng's bail hearing is separate from the extradition process
to the U.S. Filings and legal wrangling over transferring her to
U.S. authorities could take several months.
--Aruna Viswanatha and Jay Greene contributed to this
article.
Write to Margot Patrick at margot.patrick@wsj.com and Eva Dou at
eva.dou@wsj.com
(END) Dow Jones Newswires
December 10, 2018 02:47 ET (07:47 GMT)
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