Huawei under criminal investigation in US, says WSJ report

Shenzhen-based Huawei Technologies Co is the world’s largest manufacturer of telecommunications equipment and the second-largest smartphone maker. The company has been at the centre of US-China trade tensions, and stands accused of acting as an earpiece for the Chinese government, and having committed industrial espionage. Amid these suspicions, Japan, Australia and New Zealand have blocked Huawei from involvement in the building of its 5G infrastructure, with similar actions under discussion in some western countries. In the UK, BT has started to remove Huawei equipment from its 4G infrastructure.

Now, the Wall Street Journal has reported that US prosecutors are building a criminal case, alleging that Huawei stole trade secrets from their US-based business partners. T-Mobile US has been named as a victim of trade theft.

T-Mobile US was at the centre of a 2017 civil lawsuit against Huawei; Huawei employees were accused of misappropriating robotic technology developed by T-Mobile to test its smartphones, with Huawei employees copying specifications and software, taking photos of the robot without authorisation, and attempting to remove a part of the robot from the lab despite the existence of non-disclosure agreements. The employee who attempted to smuggle the component admitted that he did so because Huawei’s R&D office thought that the information would help improve their own phone-testing robot.

A Seattle jury found Huawei to be guilty of “abusing its relationship as a phone handset supplier for T-Mobile”, and T-Mobile was awarded $4.8m (£3.7m).

Now, the Department of Justice’s criminal investigation against Huawei is said to already be at an advanced stage. Anonymous Wall Street Journal sources believe that it could soon lead to an indictment.

A Huawei spokesperson did not comment on the probe to WSJ but said that Huawei and T-Mobile had settled their civil dispute in 2017 and that the jury had not found “damage, unjust enrichment nor wilful and malicious conduct” by the company with relation to claims of misappropriation of trade secrets.

Meanwhile, a bipartisan group of US lawmakers yesterday introduced legislation that would ban the export of US components to Chinese telecommunications companies found to be in violation of US export control of sanctions. Penalties would be withdrawn when the companies show a pattern of compliance with US rules and cooperates with US investigations. The legislation explicitly targets Huawei and fellow Chinese telecoms giant ZTE.

“Huawei and ZTE are two sides of the same coin,” said Senator Chris Van Hollen, who sponsored the Telecommunications Denial Order Enforcement Act. “Both companies have repeatedly violated US laws, represent a significant risk to American national security interests, and need to be held accountable.”

“Huawei is effectively an intelligence-gathering arm of the Chinese Communist Party, whose founder and CEO was an engineer for the People’s Liberation Army,” said Senator Tom Cotton, another sponsor. “It’s imperative we take decisive action to protect US interests and enforce our laws.”

This week, Huawei founder and CEO Ren Zhengfei denied that the company was being used as a tool for espionage by the Chinese government, while a spokesperson for the Chinese ministry of foreign affairs responded to the proposed legislation in a press briefing, commenting that: “The real intent of the United States is to employ its state apparatus in every conceivable way to block out China’s high-tech companies.”