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Huawei charged with racketeering and trade theft in US

Image credit: reuters

The US Department of Justice has charged Shenzhen-based Huawei Technologies with racketeering and conspiracy to steal trade secrets, while the Department of Commerce has granted the company a 45-day trading extension.

In January 2019 Huawei – the world’s largest telecommunications company – and two of its subsidiaries were charged by the Department of Justice with 23 crimes including violating trade sanctions against Iran and trade theft. In May, the US government added Huawei to the Entity List, citing national security concerns and preventing American companies like Intel and Google from working with the Huawei. Huawei has repeatedly denied allegations that it assists the Chinese Communist Party in espionage operations.

Huawei has since been granted temporary licences to permit to continue trading with its US partners, although its current licence was due to expire on 16 February.

The government has now issued a further 45-day extension to permit Huawei to continue doing some business with US companies; it will continue to be allowed to purchase some US-made goods until April. According to the Department of Commerce, this decision is aimed at minimising disruption for Huawei’s customers, such as network operators. The decision is unlikely to lead to reconciliation between the US government and the Chinese telecommunications giant, however, given its escalating legal war with the US.

The government has indicted Huawei and two of its subsidiaries with additional criminal charges. The Department of Justice accused Huawei of a “pattern of racketeering activity” and conspiracy to steal trade secrets from six American companies including source codes and manuals for wireless communications technology. A source told the Times that the six companies are Cisco, Motorola, Fujitsu, Quintel, T-Mobile, and CNEX Labs. Huawei was previously accused of theft of robotic phone-testing technology from T-Mobile, while both Cisco and Quintel have sued Huawei for trade theft.

“The new charges in this case relate to the alleged decades-long efforts by Huawei, and several of its subsidiaries, both in the US and in the People’s Republic of China, to misappropriate intellectual property, including from six US technology companies, in an effort to grow and operate Huawei’s business,” the Department of Justice said in a statement.

The indictment accuses Huawei of stealing trade secrets through crude means, such as by sending a Huawei employee to take a photograph of circuitry from a competitor’s networking device in the middle of the night after a trade show while wearing a badge identifying him as a “Weihua” employee. Despite Huawei’s sometimes low-tech approach, the Department of Justice claims that “Huawei was able to drastically cut its research and development costs and associated delays, giving the company a significant and unfair competitive advantage”.

The statement also accused Huawei of being engaged in a racketeering conspiracy – an accusation usually reserved for organised crime leaders – since 1999.

Huawei USA chief security officer Andy Purdy has argued that the latest criminal charges are part of a broader “campaign to carpet-bomb Huawei out of existence”, and that the company is likely to be exonerated in court.

Today, Huawei said in an official statement: "This new indictment is part of the Justice Department’s attempt to irrevocably damage Huawei’s reputation and its business for reasons related to competition rather than law enforcement. These new charges are without merit and are based largely on recycled civil disputes from last 20 years that have been previously settled, litigated and in some cases, rejected by federal judges and juries. The government will not prevail on its charges, which we will prove to be both unfounded and unfair."

On the Department of Commerce action, Huawei insisted that it was being treated unfairly but commented that extending the General License wouldn't have a substantial impact on its business either way. 

In its statement the company also said that being placed on the Entity List had "done significant economic harm to the American companies with which Huawei does business, and has already disrupted collaboration and undermined the mutual trust on which the global supply chain depends."

 

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