The U.S. Tightens The Noose On Huawei—and China

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Monday marked a major escalation in the U.S.’s legal war on Huawei—and on the People’s Republic of China (PRC). On Monday, the DoJ unsealed an indictment against two PRC intelligence agents charged with obstructing the DoJ’s criminal case against a Chinese telecommunications company widely understood to be Huawei. The U.S. has launched legal attacks against Huawei for years. Monday’s indictment, however, marks the first time that PRC officials have been charged in connection with the U.S.’s legal proceedings against Huawei. The unraveling of Huawei’s ties to the PRC may bode poorly for the U.S.’s relationship with other Chinese-owned tech companies, including TikTok. It may also have tremendous implications for relations between the U.S. and the PRC in the courtroom and beyond.

The U.S. and Huawei have been engaged in legal battles for the past five years. In August 2018, Congress enacted the 2019-2020 National Defense Authorization Act (NDAA), which blocked the U.S. government from procuring, extending, or renewing contracts with Huawei for telecommunications equipment, systems or services; from doing business with entities that use Huawei equipment, systems or services; and from contracting for any equipment, system, or service for which Huawei products are a substantial component or critical technology. The PRC requires its corporations to allow the state access to their products for government use, upon request. Congress’s concern was that Huawei, given its close ties to the Chinese Communist Party and history of industrial espionage, could provide a back door in its technology that would allow the PRC to spy on the U.S. In 2020, Huawei lost a federal lawsuit challenging the ban, in which it denied allegations that its products would be used for spying and argued that the ban was unconstitutional.

Meanwhile, the DoJ went after Huawei’s leadership. On December 6, 2018, Canada arrested Meng Wanzhou for bank fraud and violation of U.S. sanctions on Iran. Meng is Huawei’s CFO
CFO
, the deputy chair of its board, and the daughter of its founder. In response, Meng argued that her extradition would violate Canada’s constitution because the allegations against her were not crimes under Canadian law. Meng lost her motion, but struck a deferred prosecution agreement with the DoJ in exchange for her return to the PRC. Under the agreement, Meng did not admit guilt, but made statements regarding the company’s actions that, ostensibly, the DoJ could use in prosecutions against Huawei—which by then, were already underway.

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In Feburary 2020, the U.S. District Court in Brooklyn returned a superseding indictment against Huawei, its official and unofficial U.S. subsidiaries, and Sabrina Meng, updating earlier charges. The indictment included 16 charges involving Huawei’s alleged practice of fraudulently and deceptively misappropriating technology from U.S. companies, and allegations of Huawei’s attempts to conceal its involvement in business in countries subject to U.S., E.U., or U.N. sanctions. Monday’s indictments assert that Chinese intelligence officials attempted to obstruct its prosecution of Huawei, laundering money in the process. According to Monday’s indictment, Guochun He and Zen Wang, two PRC intelligence officers paid at least $61,000 in Bitcoin
BTC
bribes to a double-agent supervised by the FBI in order to obtain what they believed to be confidential information about witnesses, trial evidence, and potential new charges to be brought against Huawei. He and Wang were not arrested and are believed to be in the PRC.

By alleging that Chinese officials are directly involved in an attempt to obstruct Huawei’s prosecution, the DoJ has, for the first time, drawn a direct link between Huawei’s allegedly illegal activities and the Chinese state. DoJ officials made this explicit in their remarks accompanying the announcement of the indictments, and in their timing. Attorney General Merrick Garland announced the Huawei-related indictment simultaneously with two others involving “Alleged Participation in Malign Schemes in the United States on Behalf of the Government of the People’s Republic of China.” The other cases involved a conspiracy to forcibly repatriate PRC nationals, known as Operation Fox Hunt, and an effort to target individuals in the U.S. to act as PRC agents. Garland painted the three cases as part of a broad PRC effort to “interfere with the rights and freedoms of individuals in the United States and to undermine our judicial system that protects these rights.” Deputy Attorney General Lisa Monaco’s pointed remarks cited “ongoing efforts to steal sensitive U.S. technology.” In what may have been a warning, she asserted, “The case exposes the interconnection between PRC intelligence officers and Chinese companies, and it demonstrates, once again, why such companies—especially in the telecommunications industry—should not be trusted to securely handle our sensitive personal data and communications.”

The DoJ’s indictments, and allegations of the PRC’s intent to undermine democracy, will pressure lawmakers to restrict technology from exploitation by the PRC. The Biden administration has launched efforts to restrict the PRC from gaining access to sensitive technologies, particularly those with military applications. Earlier this month, the administration announced new limits on the sale of semiconductor technology to the PRC. The FCC is expected to vote soon on whether it will ban new Huawei products from being sold in the U.S. The indictments also come as the U.S. is negotiating a much-awaited deal with TikTok to ensure that it is not used as a spying tool by the PRC and to protect Americans’ data accordingly. If the deal fails, TikTok’s operations within the U.S. may be at risk—along with the Democratic Party’s relationship with many young voters who use the app. TikTok will now be on the defensive to prove it can safeguard Americans’ data from the long arm of the Chinese state—which apparently extends to spies on U.S. soil.

When Meng Wanzhou received a deferred prosecution agreement and was sent home to the PRC, many observers argued that she received a slap on the wrist. But experienced attorneys knew that the DoJ was using an old prosecutor’s trick: use the little fish to catch the big ones. As lawfare between the U.S. and Huawei continues, it seems that the bigger fish may be Huawei, the PRC’s tech industry—or even the PRC itself.

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