On January 28, 2019, the Department of Justice announced that a 13-count indictment against Chinese telecommunications conglomerate Huawei Technologies Co. Ltd. and various affiliated parties was unsealed earlier that day. Huawei is charged with bank fraud, wire fraud, violations of the International Emergency Economic Powers Act, obstruction of justice, and various related conspiracy charges.
All charges in the indictment stem from Huawei’s alleged long-standing ploy to deceive financial institutions and the U.S. Government with respect to Huawei’s activity in Iran. The indictment alleges that from approximately 2007 until 2018, Huawei told numerous lies about its affiliation with Skycom Tech Co. Ltd., an Iranian-based company. The Government alleges that despite Huawei’s repeated claims that it had no affiliation with Skycom, it was in fact running Skycom as an unaffiliated entity. After a few news outlets reported a possible connection between the two entities in late 2012 and early 2013, Huawei responded by claiming that it had sold any interest it once owned in Skycom in 2007. Despite Huawei’s statements to the contrary, the indictment alleges that Huawei sold Skycom to an affiliate that Huawei owned, and proceeded with the relationship until 2018.
Generally, U.S. laws and regulations prohibit American financial institutions from processing any transactions related to Iran. Because of Huawei’s continuous misrepresentations, many American financial institutions allegedly violated these laws and regulations by virtue of their continued business with Huawei. As the U.S. Government continued its investigation into Huawei, company officials maintained its position that it was in strict compliance with the existing U.S.-Iran regulatory structure. When Huawei officials learned of the investigation, it allegedly tried to obstruct the investigation by attempting to displace witnesses to locations outside of the U.S. and by destroying evidence related to its business with Skycom.
In announcing the charges, U.S. officials took a strong stand against the violation of U.S. export control laws, and particularly those related to Iran. U.S. Department of Homeland Security Secretary Kirstjen Nielsen explained that Huawei “willfully conducted millions of dollars in transactions that were in direct violation of the Iranian Transactions and Sanctions Regulations, and such behavior will not be tolerated.” U.S. Attorney Richard Donoghue, out of the Eastern District of New York, proclaimed: “This Office will continue to hold accountable companies and their executives, whether here or abroad, that commit fraud against U.S. financial institutions and their international counterparts and violate U.S. laws designed to maintain our national security.”