Huawei heads to trial in US over Iran dealings, trade-secret theft allegations

NEW YORK (Reuters) — Eight years after US prosecutors secretly charged China’s Huawei Technologies with defrauding HSBC and other banks over its business with Iran, the case is finally heading for trial.

Huawei also faces charges of conspiring to steal trade secrets from five US technology companies, and is accused of lying about its dealings in North Korea and supplying surveillance equipment to Iran to track protesters during 2009 anti-government demonstrations in Tehran. Jury selection began on Tuesday in federal court in Brooklyn, New York.

The trial will bring to a close one of the US government’s earliest and most closely watched battles against a Chinese company. The case will play out as tech competition heats up between the two countries and Washington seeks to prevent American technology from aiding Beijing’s military. The US-China tech war has now spread across multiple technology sectors, including artificial intelligence.

The saga began in 2018 with the arrest of Huawei Chief Financial Officer Meng Wanzhou in Vancouver, which sparked a diplomatic crisis involving the US, China and Canada.

Convictions on the Iran-related charges would bolster Washington’s case for having placed Huawei, one of China’s leading technology companies, on a US trade blacklist in 2019, citing alleged criminal conduct that threatened national security.

The trial before US District Judge Ann Donnelly in Brooklyn, New York, is expected to last about three months and overlap with Chinese President Xi Jinping’s September 24 meeting with President Donald Trump in Washington. Potential jurors have filled out 27-page questionnaires, including about their views on China’s and Iran’s governments.

Other charges include violating US sanctions against Iran, money laundering, racketeering, wire fraud and obstruction. Huawei has pleaded not guilty to all charges and denied any wrongdoing.

The criminal case is based in part on reporting by Reuters in 2012 and 2013 about close ties between Huawei and Skycom, a firm that operated in Iran.

Reuters reported that Skycom had offered to sell at least €1.3 million ($1.5 million) worth of embargoed Hewlett-Packard computer equipment to Iran’s largest mobile-phone operator in 2010. Reuters also reported that Meng had served on Skycom’s board of directors between February 2008 and April 2009.

Beijing says case aims to undermine Chinese tech

Beijing has long criticized the case, saying it was part of a bigger campaign against China’s technological rise. A Huawei spokesperson said in a statement on Saturday, “The government’s overarching narrative is demonstrably false.”

Today, Huawei is a centerpiece of China’s AI chip ambitions, and has diversified beyond network gear and smartphones. It has described the criminal case as an effort to undermine its competitiveness and the theft accusations as a repackaging of long-resolved commercial disputes.

If Huawei is convicted, prosecutors will seek the forfeiture of property or proceeds obtained from its illegal activity. Should the company be found guilty on all counts, experts said it could face a significant financial penalty.

“The penalty is going to be determined by the benefit to the company and then multiplied by how serious the wrongdoing is — and that could range from hundreds of millions to billions of dollars,” said Todd Haugh, a professor of business law at Indiana University Kelley School of Business.

If there’s a guilty verdict, he added, “a big fight is going to be proving how much Huawei benefited from their criminal behavior.”

The case against the company was brought during the first Trump administration, which also took actions to curb the use of Huawei equipment in the US and pressed other countries to drop Huawei from their telecommunications networks, saying China could use its equipment for espionage.

The indictment covers alleged wrongdoing between about 1999 and 2020.

It accuses Huawei of using Skycom to obtain embargoed US goods, technology and services for Huawei’s Iran-based business, and to move money out of that country through the international banking system.

The US said one bank, which was not named in the indictment but which sources and documents reviewed by Reuters identified as HSBC, cleared more than $100 million worth of US-dollar transactions related to Skycom.

Prosecutors accused Meng of misrepresenting Huawei’s ownership and control of Skycom in a presentation to an HSBC executive. She later admitted the statements were false, as part of an agreement with prosecutors to drop the charges against her.