A senior executive for Chinese communications giant Huawei Technologies committed fraud because of what she said during a meeting with a bank official, and what she did not say, a Canadian government lawyer told an extradition hearing Wednesday.
Canada arrested Meng Wanzhou, the daughter of Huawei's founder and the company's chief financial officer, at Vancouver's airport in late 2018. The U.S. wants her extradited to face fraud charges. Her arrest infuriated Beijing, which sees her case as a political move designed to prevent China's rise.
The U.S. accuses Huawei of using a Hong Kong shell company called Skycom to sell equipment to Iran in violation of U.S. sanctions. It says Meng, 49, committed fraud by misleading the HSBC bank about the company's business dealings in Iran.
The lengthy extradition proceeding is entering a phase which involves arguments over the U.S. government's request to extradite Meng.
Justice Department lawyer Robert Frater said the case against Meng is "about dishonest commercial dealings."
Meng met with an HSBC executive after a series of news stories connected Huawei with Skycom.
"Ms. Meng's statements (during the meeting) were dishonest because of what she did say and because of what she did not say," Frater said.
Meng told the bank official that Huawei "was not engaged in any activity that may cause HSBC to run afoul of U.S. sanction law," Frater said.
She also said Huawei was rigorous in its sanction compliance and demanded the same of any partners working in Iran.
"The truth is, Huawei was in full control of Skycom," Frater said. "Skycom is Huawei.”
“The dishonesty was partly through painting a picture of distance through what Ms. Meng did say and neglecting to disclose the true nature of the relationship by omission. What we have here are sins of both commission and omission,” Frater said.
Associate Chief Justice Heather Holmes asked Frater why a large bank like HSBC would rely on the word of one person.
Frater said Meng was important because she was Huawei's CFO.
Holmes wondered if it was Meng's responsibility to explain risk to HSBC.
"She is the one that gives them the information which they can assess the risk," Frater said. "The message she is convening to them is you are at not risk at all because we are complying with all sanctions."
Under further questioning from Holmes, Frater said some business could legally be done with Iran, and it was part of Meng's job to know what the restrictions were.
The judge also asked if Meng assured the bank there was no risk of sanction violations, wouldn't they assume Huawei had control of Skycom.
Frater said the message Meng sent was that Huawei "didn't work with bad people."
Meng, who attended court wearing a face mask and an electronic monitoring device on her ankle, followed the proceedings through a translator.
Holmes isn't expected to rule on Meng's extradition until later in the year. Whatever her decision, it will likely be appealed.
Meng's lawyers have denied any dishonesty on her part. They also argue HSBC was not placed at any risk and the charges against her are politically motivated.
China's government has criticized the arrest as part of U.S. efforts to hamper its technology development. Huawei, a maker of network equipment and smartphones, is China's first global tech brand and is at the center of U.S.-Chinese tension over technology and the security of information systems.
On Tuesday, a Chinese court sentenced Canadian entrepreneur Michael Spavor to 11 years in prison for spying. Spavor and fellow Canadian Michael Kovrig were arrested in December 2018 in apparent retaliation for Meng's arrest.
Spavor was sentenced by a court in Dandong, about 340 kilometers east of Beijing on the North Korean border. The government has released few details other than to accuse Spavor of passing along sensitive information to Kovrig, beginning in 2017. Both have been held in isolation and have little contact with Canadian diplomats.
Earlier in the week, the Higher People's Court of Liaoning province in the northeast rejected an appeal by Canadian Robert Schellenberg, whose 15-year prison term on drug smuggling charges was increased to death in January 2019 following Meng's arrest.
Meng remains free on bail in Vancouver and is living in a mansion.
Canada and other countries, including Australia and the Philippines, face trade boycotts and other Chinese pressure in disputes with Beijing over human rights, the coronavirus and control of the South China Sea.
China has tried to pressure Canadian Prime Minister Justin Trudeau's government by imposing restrictions on imports of canola seed oil and other products from Canada.
Meanwhile, Beijing is blocking imports of Australian wheat, wine and other products after its government called for an investigation into the origin of the coronavirus pandemic.