Chinese technology giant Huawei has gone on trial in New York on charges that it deceived banks about its business in Iran, violated U.S. sanctions and conspired to steal trade secrets from American companies.
Jury selection began on Tuesday, Sept. 8, in federal court in Brooklyn, according to Reuters. The trial before U.S. District Judge Ann Donnelly is expected to last about three months. Huawei has pleaded not guilty and denied wrongdoing, saying in a statement that “the government’s overarching narrative is demonstrably false.”
The indictment covers alleged conduct from roughly 1999 to 2020 and includes charges involving racketeering, sanctions violations, money laundering, wire fraud, obstruction of justice and theft of trade secrets. Huawei has characterized the prosecution as an effort to damage its competitiveness and described some of the intellectual-property allegations as repackaged commercial disputes.
Iran dealings and Meng Wanzhou at center of case
A central part of the prosecution involves Skycom, a Hong Kong company that operated in Iran. U.S. prosecutors allege Huawei secretly controlled Skycom while portraying it to banks as an independent business partner, allowing the companies to obtain U.S.-restricted technology and move money through the international banking system.
Reuters previously reported that Skycom offered to sell at least €1.3 million, about $1.5 million, in embargoed Hewlett-Packard equipment to Iran’s largest mobile-phone operator. U.S. authorities say HSBC later cleared more than $100 million in U.S.-dollar transactions related to Skycom.
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Huawei Chief Financial Officer Meng Wanzhou, who was arrested in Vancouver in 2018, is not a defendant in the current trial but is expected to figure prominently. In a 2021 deferred prosecution agreement documented by the U.S. Justice Department, Meng acknowledged making false statements about Huawei’s control of Skycom.
Acting U.S. Attorney Nicole Boeckmann said at the time that Meng’s admissions showed she made “multiple material misrepresentations” about Huawei’s Iranian operations. Prosecutors have received permission to present documents containing Meng’s admissions to the jury.
Trade-secret theft allegations broaden the case
Prosecutors are also seeking to prove that Huawei operated as a racketeering enterprise that used fraud and deception to obtain technology from U.S. competitors.
The Justice Department’s 2020 racketeering case accused Huawei of conspiring to steal intellectual property involving internet-router software, cellular antennas and robotics. Prosecutors allege employees could receive bonuses for valuable information obtained from competitors and submit it through an encrypted email system.
One of the best-known allegations involves T-Mobile’s “Tappy” phone-testing robot. Prosecutors say Huawei employees secretly photographed and measured the machine, and that one employee removed part of the robotic arm from a laboratory. The Justice Department said the alleged conduct represented an effort to gain an “unfair advantage in the global marketplace.”
The broader indictment also accuses Huawei of concealing business in North Korea and helping Iran obtain surveillance technology. Prosecutors allege Skycom supplied equipment used to “monitor, identify and detain” protesters during demonstrations in Tehran in 2009. Huawei denies the allegations.
Conviction for Huawei could bring massive penalties
The case could expose Huawei to substantial financial penalties if prosecutors secure convictions. Under federal racketeering law, fines can be tied to the financial benefit obtained through criminal conduct, and prosecutors are also seeking forfeiture of proceeds allegedly derived from illegal activity.
Todd Haugh, a business law professor at Indiana University, told Reuters that potential penalties “could range from hundreds of millions to billions of dollars.” A conviction would likely trigger a separate fight over how much Huawei financially benefited from any criminal conduct proven at trial.
The trial also arrives amid heightened U.S.-China competition over semiconductors, artificial intelligence and telecommunications. Huawei has already been subject to extensive U.S. export and trade restrictions since Washington placed it on the Entity List in 2019.
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