The U.S. government is moving ahead with its pursuit of criminal charges against China’s Huawei Technologies despite the temporary truce in the trade war between Washington and Beijing.
Huawei is facing major criminal cases in New York and Washington state, and court papers provide details of the operating methods used by the world’s largest government-linked telecommunications firm.
In Seattle, federal prosecutors have charged two Huawei subsidiaries with stealing technology and components related to T-Mobile’s proprietary phone testing robot called Tappy.
A second prosecution in New York involves charges of fraud related to Huawei’s dealings with Iran in violation of U.S. sanctions. That case has ensnared the company’s chief financial officer, Meng Wanzhou, dubbed the “princess” as the daughter of Huawei founder Ren Zhengfei, a former People’s Liberation Army officer.
The Huawei prosecutions are advancing despite the high-profile White House signing last week of a phase 1 trade agreement with China that President Trump hailed as the “biggest deal anybody has ever seen.”
Ms. Meng, who is considered to be the company’s future senior executive, this week launched a legal challenge to her extradition from Canada to the United States in a British Columbia court.
Mr. Ren, the Huawei founder, told reporters Tuesday at the annual global economic summit in Davos, Switzerland, that Huawei is braced for further U.S. opposition.
“This year in 2020, since we already gained experience from last year and we got a stronger team, I think we are more confident that we can survive even further attacks,” he said.
Mr. Trump, also speaking in Davos, praised the partial deal, which seeks to end Chinese technology theft and other unfair trade practices.
“Our relationship with China, right now, has probably never been better,” Mr. Trump said. “We went through a very rough patch, but it’s never, ever been better. My relationship with [Chinese President Xi Jinping] is an extraordinary one. He’s for China; I’m for the U.S. But other than that, we love each other.”
In addition to the criminal cases, Huawei was banned by the Commerce Department in August from buying U.S. goods. Some export restrictions were lifted in November for three months at the request of American companies that use the company’s technology and equipment.
A bipartisan group of senators introduced legislation last week targeting Huawei that would fund alternatives to Chinese 5G technology.
The cybersecurity company Finite State, in a report last year, said 55% of Huawei hardware devices it tested had at least one backdoor access point that could be used for Chinese electronic spying. The Trump administration is pressuring allies across Europe, North America and Asia to block Huawei from their plans for national 5G networks.
The T-Mobile indictments provide an inside look at some of Huawei’s operating techniques, including its targeting of key American technology and a broader effort to offer bonuses to Chinese corporate spies. A senior Justice Department official involved in China said the criminal cases against Huawei are not directly related to its global marketing efforts.
“I want to be clear: The Huawei prosecution in New York, it’s a sanctions and bank fraud case, and in Washington, the allegations are that it’s a trade secrets theft,” the official said.
Attorney General William Barr, however, wrote to the Federal Communications Commission in November warning that allowing Huawei and a second Chinese telecommunications firm, ZTE, to sell equipment in the United States posed a national security threat. Mr. Barr said the Commerce Department noted the New York fraud and obstruction prosecution of Huawei in placing the company on its list of companies blocked from purchasing U.S. goods without an export license.
Huawei and Chinese government representatives say the prosecutions are motivated by economics and are part of U.S. efforts to prevent Huawei from dominating the global market on emerging 5G telecommunications technology. Huawei is said to be leading that area.
In 2017, T-Mobile was awarded $4.8 million in damages in a civil lawsuit against Huawei over the telephone robot theft. The criminal prosecution was pursued after the FBI uncovered evidence in the case, including conspiracy, to cover up the theft.
Bob Westinghouse, a Huawei attorney in the Washington state case, declined to comment.
Larry Wortzel, a member of a congressional Chinese commission, said the T-Mobile prosecution is significant.
The incident “follows a pattern of technology thefts from the U.S. and other countries by companies from China, as well as agents controlled by the PRC,” Mr. Wortzel said of the U.S.-China Economic and Security Review Commission. “All of this is part of Xi Jinping’s plan to build a stronger economy for China.”
Decades of Chinese technology theft has been a drain on U.S. companies and has saved Chinese companies billions of dollars in research and development costs, he said.
The T-Mobile robot, developed in the early 2000s, uses an automated arm to simulate a person touching a cellphone screen multiple times. The process allows manufacturers to fix flaws and increase the endurance of their devices.
Huawei began supplying its cellphones to T-Mobile in 2010, and Huawei technicians were allowed to use Tappy to test its phones in 2012. As part of the arrangement, Huawei signed an agreement promising not to copy or steal the robot technology.
When T-Mobile declined to sell Tappy technology to Huawei, the company launched a scheme to steal the robotic technology for use in Huawei’s tester known as xDeviceRobot, the court papers state. Investigators say Huawei employees sought details on the design, components and software, including the sliding robotic arm used to simulate screen touches.
“The main point is to figure out [Tappy] Robot’s specifications and functions,” said an email quoted in the indictment from Huawei’s director of device testing management.
Huawei officials in China tasked their counterparts in the United States with obtaining the robot technology for months, and emails revealed the Chinese developers were struggling to develop their own testing robot. By the spring of 2013, Huawei dispatched its own engineer, identified in court papers only as “F.W.,” who gained access to a secure area and photographed Tappy for Huawei’s engineers in China.
Another Huawei employee who had access to T-Mobile’s Seattle facility “surreptitiously placed one of the Tappy robot arms in his laptop bag and secretly removed it from the laboratory.” The employee was caught and returned the arm after it was closely measured and analyzed outside the plant. At that point, T-Mobile banned Huawei from access to its facility.
Huawei then sought to cover up the theft, prosecutors said, by issuing a company-produced investigative report that blamed rogue employees for the theft.
Contrary to the Huawei report, the indictment also contends that the Chinese company initiated a formal policy in July 2013 of offering bonuses to employees for stealing confidential information from competitors.
“Employees were directed to post confidential information obtained from other companies on an internal Huawei website, or in the case of especially sensitive information, to send an encrypted email to a special email mailbox,” the indictment says.