Huawei rejects racketeering and theft claims from US Department of Justice

Ongoing spat between US and China intensifies after US Department of Justice accuses Huawei of racketeering and intellectual property confidentiality violations

The ongoing dispute between the US and Chinese governments, which seems to be played out through Huawei, has taken another turn with the US Department of Justice (DoJ) charging the communications technology firm and subsidiaries with racketeering conspiracy and conspiracy to steal trade secrets.

The DoJ served a superseding indictment on 13 February 2020, which also contains the charges from a prior superseding indictment which was unsealed in January 2019,  at the federal court in Brooklyn, charging Huawei and subsidiaries – Huawei Device Co. Ltd. (Huawei Device), Huawei Device USA Inc. (Huawei USA), Futurewei Technologies Inc. (Futurewei) and Skycom Tech Co. Ltd. (Skycom) – with conspiracy to violate the Racketeer Influenced and Corrupt Organisations Act.

The new charges in this case relate to what the DoJ says are 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.

It noted that the misappropriated intellectual property included trade secret information and copyrighted works, such as source code and user manuals for internet routers, antenna technology and robot testing technology.

The DoJ added that Huawei, Huawei USA and Futurewei allegedly agreed to reinvest the proceeds of this alleged racketeering activity in Huawei’s worldwide business, including in the US.

As part of the scheme, Huawei allegedly launched a policy instituting a bonus programme to reward employees who obtained confidential information from competitors. The policy made clear that employees who provided valuable information were to be financially rewarded.

The new indictment adds a charge of conspiracy to steal trade secrets stemming from the China-based company’s alleged long-running practice of using fraud and deception to misappropriate sophisticated technology from US counterparts. The indicted defendants include Huawei and four official and unofficial subsidiaries, as well as Huawei’s chief financial officer (CFO) Wanzhou Meng.

The superseding indictment also includes new allegations about Huawei and its subsidiaries’ involvement in business and technology projects in countries subject to US, EU and/or UN sanctions, such as Iran and North Korea, as well as the company’s efforts to conceal the full scope of that involvement.

Interestingly, the new legal action also saw the DoJ renew the Temporary General License that allows Huawei to do business with US suppliers and partners for a further 45 days.

The license was extended by a period of 90 days on 18 November 2019 by the US Department of Commerce’s Bureau of Industry and Security (BIS), authorising specific, limited engagements in transactions involving the export, re-export and transfer of items to Huawei and several of its non-US affiliates.

Replying to the new charges, Huawei dismissed the indictment as part of what it called the DoJ’s attempt to “irrevocably damage” Huawei’s reputation and its business for reasons related to competition rather than law enforcement.

The company said in an official statement: “These new charges are without merit and are based largely on recycled civil disputes from the past 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. Extending the Temporary General License won’t have a substantial impact on Huawei's business either way. This decision does not change the fact that Huawei continues to be treated unfairly either.”

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