Published: Fri, January 11, 2019
Finance | By Loren Pratt

Huawei CFO Case Deepens Amid Documents Discovery

Huawei CFO Case Deepens Amid Documents Discovery

Huawei was closely involved with firms that breached U.S. sanctions by doing business in Iran, according to court filings and other documents that Reuters claims to have unearthed. Why would the daughter of Huawei's founder do something like that? United States authorities suspect Meng deceived U.S. banks in order to clear hundreds of millions of dollars of sanction-breaking transactions.

Huawei, which overtook Apple as the world's number two smartphone maker this year, said it was unaware of any wrongdoing by Meng and was provided "very little information" about the charges.

Ever since Huawei CFO Meng Wanzhou was arrested previous year in Canada, on behalf of the U.S government, the Chinese telecom equipment giant has maintained it has no ties to the two obscure firms accused of VIOLATING U.S. sanctions against Iran and Syria.

And a Middle East based lawyer who once worked with Huawei told Reuters that Huawei continues to operate in both Syria and Iran despite what appear to be attempts to throw off United States investigators.

But Reuters has exclusively seen documents that show both entities - Skycom Co in Iran and Canicula Holdings in Syria were actually part of the Huawei family. Additionally, three people had signing rights for bank accounts associated with both Huawei and Skycom in Iran, and a Middle Eastern lawyer claimed that Huawei used Canicula to operate in Syria. Meng allegedly told a USA bank executive that Huawei had sold its shares in Skycom in 2009. Following that, Huawei claimed to have sold its shares in Skycom, but other corporate records contradict this.

Records in Hong Kong show that Skycom was voluntarily liquidated in June 2017 and that Canicula was paid about $US132,000 as part of the resolution. And even though the outcome of her case has a direct impact on any potential punishment Huawei could be hit with moving forward, it doesn't guarantee it in any shape or form as much could depend on whether USA prosecutors can prove other senior officials were involved or had knowledge of the affair as well.

ZTE, another China-based telecom network supplier, had earlier faced business pressure and penalty from the U.S. due to its alleged supply of telecom gear to Iran. Payments were taken out of the country using the global banking system. "In his letter, he goes on to explain that Huawei is going to operate and executing contracts and operates through two companies and one of them in Canicula". The liquidator, Chan Leung Lee, of BDO Ltd in Hong Kong, declined to comment. Canicula had an office in Damascus and operated in Syria on behalf of Huawei, another person said. In May 2014, a Middle Eastern business website called published a brief article about the dissolution of a Huawei company in Syria that specialized in automated teller machine (ATM) equipment.

Until two years ago, Canicula had an office in Syria, another country that has been subject to USA and European Union sanctions. Though Huawei had apparently tried to cover its tracks - presumably after catching wind of the USA investigation - by publishing notices proclaiming that Canicula was no longer operating in Syria. In his letter, which was linked to on the Aliqtisadi website, he said Huawei was still in business. While the Canicula branch in Syria may have closed down, the shell company is still registered in Mauritius. One is MTN Syria, controlled by South Africa's MTN Group Ltd, which has mobile-phone operations in both Syria and Iran. MTN advised Huawei on setting up the structure of Skycom's office in Iran, according to another source familiar with the matter.

In December 2017, a notice was placed in a Syrian newspaper by "the General Director of the branch of the company Canicula Ltd".

In May, the Pentagon said that devices from Huawei and ZTE posed an "unacceptable" security risk. No explanation was given.

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