US prosecutors bring new charges against China’s Huawei

U.S. prosecutors have brought two new charges against embattled Chinese telecommunications giant Huawei, according to an indictment unsealed Thursday.

The indictment in the Eastern District Court of New York alleges that Huawei conspired and used deception to steal trade secrets and U.S. technology. It also charges Huawei and two America-based subsidiaries of Huawei with conspiracy to commit racketeering.

Those follow previous charges of stealing intellectual property, wire fraud and obstruction of justice.

Huawei Devices, Huawei USA, Futurewei, Skycom and Huawei chief financial officer Meng Wangzhou are also listed as defendants.

Huawei declined to comment immediately on the charges.

Much of the addition to last year’s indictment centers around allegations that Huawei USA and Futurewei — which were both located in the U.S. at the time of the alleged Racketeer Influenced and Corrupt Organizations Act violations — misappropriated the technology of six U.S. companies by entering into confidentiality agreements and then breaking them. They allegedly recruited employees of the American companies and offered incentives for those employees to provide confidential information to Huawei.

Policies allegedly encouraged employees to obtain secrets and made it clear those who did so would be given financial rewards.

The new charges stem from what prosecutors described as a “decades-long effort” by Huawei and its affiliates to steal U.S. intellectual property, including source codes, internet routers and antenna technology, to grow its business.

The indictment claims that Huawei was broadly successful in these efforts, allowing the world’s largest telecom equipment company to increase its margins.

“As a consequence of its campaign to steal this technology and intellectual property, Huawei was able to drastically cut its research and development costs and associated delays, giving the company a significant and unfair competitive advantage,” prosecutors wrote in a press release.

The company also allegedly obstructed investigations, including the one that led to the charges unsealed Thursday.

The indictment alleges that when pressed with the charges, Huawei made multiple misstatements about its efforts to obtain trade secrets to both FBI agents and the House Intelligence Committee.

Prosecutors separately alleged that Huawei did business in countries sanctioned by the U.S., the United Nations or the European Union, such as North Korea and Iran, and that Huawei arranged for shipment of its equipment to these sanctioned countries in violation of international law.

The indictment further alleges that Skycom, a company that did business in Iran, including assisting the government in conducting domestic surveillance, was an unofficial Huawei affiliate group.

Huawei denied the allegations Thursday.

“This new indictment is part of the Justice Department’s attempt to irrevocably damage Huawei’s reputation and its business for reasons related to competition rather than law enforcement,” a spokesperson for the company told The Hill in a statement.

“These new charges are without merit and are based are based largely on recycled civil lawsuits from last 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.”

Senate Intelligence Committee Chairman Richard Burr (R-N.C.) and Vice Chairman Mark Warner (D-Va.) in a joint statement commended the FBI and New York prosecutors for pursuing the investigation and said the indictment painted a “damning portrait of an illegitimate organization.”

“Intellectual property theft, corporate sabotage, and market manipulation are part of Huawei’s core ethos and reflected in every aspect of how it conducts business,” Burr and Warner said. “It uses these tactics indiscriminately against competitors and collaborators alike. Huawei’s unlawful business practices are a threat to fair and open markets, as well as to legitimate competition in a tech space that is critical for the global economy.”

The indictment comes amid rising scrutiny over the company from U.S. lawmakers and agencies after warnings from the intelligence community that Huawei poses a threat to national security.

Huawei was added in May to the Department of Commerce’s “entity list,” which banned American companies from doing business with groups on the list.

But Huawei’s full inclusion on this list has been delayed multiple times to avoid disruptions to U.S. tech firms that have deals with the company.

The Federal Communications Commission also took action against Huawei in November, when the commission voted unanimously to designate the company a national security threat, and to ban U.S. telecom groups from using FCC funds to buy Huawei equipment. Huawei pushed back strongly against the charges and announced in December that it was suing the FCC. 

The Trump administration has also made it a priority to convince allied countries to exclude Huawei from the buildout of 5G networks. This effort suffered a setback last month when the United Kingdom announced that it would allow the use of Huawei equipment in “periphery” portions of its 5G networks. That decision led lawmakers on Capitol Hill to warn that the U.S.-U.K. intelligence sharing relationship may be at risk.

Updated at 5:10 p.m.