The Department of Justice (DoJ) filed broad charges against Chinese telecom giant Huawei Technologies Co. Ltd. and its CFO Wanzhou Meng for allegedly stealing trade secrets from U.S. mobile firm T-Mobile and deceiving U.S. stakeholders about its business activity in Iran, among a number of other fraud and conspiracy activities over a 10-year period.
The DoJ this week partially unsealed two indictments–a 13-count indictment and a 10-count indictment-–returned by a grand jury on Jan. 16 against Meng, Huawei, and its affiliates Huawei Device USA Inc. and Skycom Tech Co. Ltd., showing multiple charges against the world’s largest telecom company.
The DoJ is charging Meng with bank fraud, wire fraud, and conspiracies to commit bank and wire fraud, while Huawei and Huawei USA are charged with conspiracy to obstruct justice related to the grand jury investigation in the Eastern District of New York.
The DoJ also is charging defendants Huawei and Skycom with bank fraud and conspiracy to commit bank fraud, wire fraud and conspiracy to commit wire fraud, violations of the International Emergency Economic Powers Act (IEEPA) and conspiracy to violate IEEPA, and conspiracy to commit money laundering.
U.S. lawmakers had harsh words for China and its alleged long-time illegal business practices in the United States, deeming them a threat to economic and national security as well as a blatant slap in the face against global business practices.
“For years, Chinese firms have broken our export laws and undermined sanctions, often using U.S. financial systems to facilitate their illegal activities,” said Secretary Wilbur Ross of the U.S. Department of Commerce in a statement. “This will end.”
Huawei did not immediately respond to request for comment on Tuesday, but denied any wrongdoing on either Weng’s or the company’s part in comments to the New York Times.
Thievery and deceit
Among the specific charges revealed this week include one that alleges Huawei stole trade secrets from T-Mobile regarding a phone-testing robot dubbed “Tappy,” according to the DoJ.
“In an effort to build their own robot to test phones before they were shipped to T-Mobile and other wireless carriers, Huawei engineers violated confidentiality and non-disclosure agreements with T-Mobile by secretly taking photos of ‘Tappy,’ taking measurements of parts of the robot, and in one instance, stealing a piece of the robot so that the Huawei engineers in China could try to replicate it,” according to the DoJ’s indictment.
After T-Mobile discovered what Huawei was up to, the company and produced a report falsely claiming that the theft was the work of rogue actors within the company and not the company itself. The DoJ alleges, however, that e-mails obtained in the course of the investigation reveal it was a company-wide effort involving many engineers and employees that stole trade secrets from T-Mobile. Reached Tuesday via e-mail, T-Mobile declined to comment on the case.
Other charges show that China knowingly deceived the U.S. government and a number of global financial institutions by destroying evidence and lying about its business activities in Iran, another country with known hostilities against the United States and with an active state-sponsored cyber-crime campaign against U.S. targets.
Huawei has been operating Skycom as an unofficial affiliate in Iran since 2007. However, in an effort to avoid economic sanctions, Huawei officials downplayed its true connection to Skycom to global banking partners even after news publications in late 2012 and 2013 disclosed that this was the case and that Meng had actually served on the board of directors of Skycom, according to the DoJ.
History of tension, suspicion
The U.S. government and security officials long have been suspicious of Huawei’s business activities and intentions and have been engaged in an active campaign to sway allies across the world not to do business with Huawei nor allow the company to build networks in their countries. The DoJ are the result of a long-term investigation and campaign to prove these suspicions correct.
There is little love lost in general between the United States and China, with the latter well known as one the United States’ chief adversaries in its fight against foreign espionage and cybercrime. Tensions between the two countries have been brewing recently with Huawei at the center of the controversy after company CFO Meng was arrested in Canada on Dec. 5, 2018, at the request of U.S. authorities. The indictments now shed more light on the U.S. case against Meng and Huawei, the company founded by her father Ren Zhengfei.
The criminal charges against Huawei are not surprising given historical evidence that China has been engaged in cybercrimes against the United States, using the telecom company in particular to perform nefarious activities.
Last year the Department of Defense banned the sale of all Huawei and ZTE cellphones, personal mobile Internet modems, and related products by concessions at military locations worldwide out of suspicion that China is using these products for espionage purposes.
The U.S. China Commission also last year issued a report that discovered that China has a number of strategic relationships with U.S. tech companies–including Microsoft, Dell and VMWare–through partnerships with Chinese state-owned enterprises linked to China’s military, nuclear, or cyber-espionage programs. The ties put the federal supply chain at increased risk in myriad ways, giving China ways to engage in cyber-espionage or other criminal activity, the report found.
The U.S. government isn’t the only entity investigating China’s ties to cyber-related and other criminal activity. Security research firm Recorded Future last year also discovered that China attempted to cover up inexplicable delays in public reporting of high-risk software security holes by changing the dates of vulnerability-publication to its national vulnerability database so they match those in the U.S. database. The firm surmised that this activity afforded China’s equivalent to the U.S. CIA, the Ministry of State Security (MSS), some lead time on figuring out how China could use the vulnerabilities against the United States in cyber-offensive actions.