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Trade war

US files sweeping criminal charges against Huawei

Move escalates tensions between Washington and Beijing ahead of key trade talks

Acting U.S. Attorney General Matthew Whitaker answers questions from reporters as he stands in front of Commerce Secretary Wilbur Ross, right, at the Justice Department in Washington on Jan. 28.   © Reuters

WASHINGTON -- U.S. prosecutors announced Monday that they have filed criminal charges against Huawei Technologies, including allegations that China's biggest tech company committed bank fraud, broke international sanctions and stole trade secrets from T-Mobile USA.

The charges are an escalation of already high tensions between Washington and Beijing, and come on the eve of talks in Washington aimed at reaching a truce in the trade war between the world's two biggest economies. The move has also fanned concerns in the industry that the U.S. could now ban Huawei from using U.S. technology exports, as it did last year with telecom equipment maker ZTE.

Wen Ku, a spokesman for China's Ministry of Industry and Information Technology, told reporters Tuesday in Beijing that the U.S. had no proof to back up the charges, which he called "unfair and immoral." China's Foreign Ministry said in a statement that Beijing would resolutely protect the interests of Chinese companies.

Huawei issued a statement Tuesday denying that the company or any affiliate had committed any of the alleged violations of U.S. law, saying that it was "disappointed" by the charges brought against it.

In a 13-count indictment filed in New York, Huawei, two affiliated companies, Chief Financial Officer Meng Wanzhou and unidentified others still at large were accused of hiding transactions with Iran through subsidiary Skycom Tech. Acting Attorney General Matthew Whitaker told reporters that Huawei began misrepresenting its relations with Tehran as early as 2007, telling banks it had sold its interest in Skycom when in reality "Huawei had sold Skycom to itself."

The issue "goes all the way to the top of the company," Whitaker said, later noting that one bank "facilitated more than $100 million worth of Skycom transactions through the United States in just four years."

In its statement, Huawei said the company "is not aware of any wrongdoing by Ms. Meng, and believes the U.S. courts will ultimately reach the same conclusion."

In a separate 10-count indictment in Seattle, Huawei is accused of attempting to steal trade secrets surrounding a cellphone-testing robot called Tappy from T-Mobile between 2012 and 2014. Prosecutors cited email evidence showing Huawei's determination, including allegations of unauthorized entry into a T-Mobile lab and the theft of a Tappy robotic arm.

A "competition management group" within Huawei reviewed submissions to an internal website and a special email address, "awarding monthly bonuses to the employees who provided the most valuable stolen information," the indictment said. "Biannual awards also were made available to the top three regions that provided the most valuable information. The policy emphasized that no employees would be punished for taking actions in accordance with the policy."

When T-Mobile discovered the activities and threatened to sue Huawei, the Chinese company produced a report falsely claiming that the theft was the work of "rogue actors within the company," as the Justice Department put it in a news release, concealing "a companywide effort involving many engineers and employees."

In a news conference at the Justice Department, Whitaker said the U.S. would officially request the extradition of CFO Meng. The 46-year-old daughter of Huawei's founder, was arrested Dec. 1 in Canada at Washington's behest on allegations of lying to banks over dealings with Iran that violated American sanctions.

Huawei and Meng "broke U.S. law and have engaged in a fraudulent financial scheme that is detrimental to the security of the United States," Homeland Security Secretary Kirstjen Nielsen said in the news release. "They willfully conducted millions of dollars in transactions that were in direct violation of the Iranian transactions and sanctions regulations, and such behavior will not be tolerated."

Commerce Secretary Wilbur Ross said in the news conference that Monday's actions were "wholly separate" from the U.S.-China trade negotiations.

While the charges underscore U.S. President Donald Trump's tough stance on China's acquisition of foreign tech, they threaten to derail trade talks starting on Wednesday in Washington.

U.S. Treasury Secretary Steven Mnuchin said Monday that Washington expects significant progress in the talks with Chinese Vice Premier Liu He, but that the two sides will be tackling "complicated issues." The discussions will include a meeting between Trump and Liu.

The talks are expected to include issues such as Beijing's promise to buy more American goods and U.S. demands for Beijing to make concessions on structural economic reforms.

Separately, Australia's TPG Telecom said in a statement that it had canceled the rollout of its mobile telephone network on Monday because it relied on Huawei equipment that has been banned by Canberra on security grounds.

Ken Moriyasu in New York and Akihide Anzai in Tokyo contributed to this report.

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