Huawei Exec Meng Wanzhou Arrested in Vancouver

Meng Wanzhou, Chief Financial Officer and Deputy Chairwoman of Huawei Technologies, was detained and arrested at Vancouver International Airport at the request of US authorities while in transit on December 1st. This has infuriated the Chinese government and worsened ongoing tensions between China and the US.

The daughter of Ren Zhengfei, a wealthy former military man and founder of what would ultimately become one of the world’s most significant telecom companies, Meng faces extradition to the US on charges of fraud involving millions of dollars. According to Canadian prosecutors, Wanzhou allegedly helped Huawei dodge US sanctions on Iran for five years by telling financial institutions that a Huawei subsidiary was a separate company.


Huawei, Skycom & Meng Wanzhou


Meng joined Huawei in 1993 and has held multiple positions across the company, including Director of International Accounting and CFO of Huawei Hong Kong.

The company was initially founded by her father, Ren Zhengfei, in 1987 and has grown substantially into a major multinational conglomerate with more than 170,000 employees conducting business in over 170 countries. Meng, who also goes by the first name Sabrina, is one of four deputy chairs listed on the Huawei company website, and one of only three women to sit on the Huawei board. “Since 2007, the company says Meng has been in charge of something called the Integrated Financial Services Transformation Program, a partnership between Huawei and IBM.”  

Huawei is one of the world’s largest makers of smartphone and networking equipment.

Meng, operating under the first name of Cathy at the time, served on the board of Hong-Kong based Telecommunication company Skycom Tech Co. Ltd. between February 2008 and April 2009. As reported by Reuters despite US sanctions Skycom’s office in Tehran offered to sell at least €1.3 million worth of HP gear to Mobile Telecommunication Co. of Iran. At least 13-pages of the proposal were emblemed with “Huawei confidential” and dawned (bore?) the company’s logo. However, Huawei stated that neither they nor Skycom provided the equipment.

Huawei has described Skycom as one of their “major local partners,” although corporate records and other documentation have found numerous financial and other links throughout the past decade connecting Huawei, Meng, and Skycom, suggesting the two firms shared a much closer relationship. For example, in 2007, a management company run by Huawei’s parent company possessed all of Skycom’s shares. At this time, Meng served as the management firm’s company secretary.

In an emailed statement, Huawei said, “The relationship between Huawei and Skycom is a normal business partnership. Huawei has established a trade compliance system which is in line with industry best practices and our business in Iran is in full compliance with all applicable laws and regulations including those of the UN. We also require our partners, such as Skycom, to make the same commitments.”  

 

International Tensions

The arrest of Meng Wanzhou has sparked outrage in China and has only added to the already-tense relationship between Washington and Beijing as the two parties continue to negotiate an end to their volatile trade war.

The Chinese Foreign Ministry stated over the weekend that it had summoned both US Ambassador to China, Terry Branstad, and Canadian Ambassador to China, John McCallum, to address Meng’s detention which they describe as, “lawless, reasonless, and ruthless.” Chinese Vice Foreign Minister Le Yucheng warned, “for Canada, if they do not correctly handle this matter, there will be serious consequences. You asked, what kind of serious consequences would these be? I can tell you in one sentence: It is totally up to Canada.”

David Mulroney, Canada’s former ambassador to China, told CBC that China seems to be executing a strategy called “kill the chicken, scare the monkey,” in which China engages with opponents of unequal sizes. To get the larger opponent to do what they want – in this instance, the United States – it makes an example of a smaller, more susceptible opponent – Canada.   

“The warning is that it will go any distance, it will take any measure to defend its national integrity … ‘Look what we are doing to a country like Canada.”

Mulroney also stated, however, that China typically attempts to admonish and intimidate other countries without actually having to follow through on their threats.
 
Foreign Affairs Minister Chrystia Freeland stated that high-level extradition arrests are ordered by officials without political interference. The action was taken at an officials level.

Many Canadians are willing to accept the realities of Canada’s extradition system, however, convincing the Chinese that Canada had no choice in the matter and that they need to take their fight directly to the US is proving to be challenging, to say the least. Canadian officials are having difficulty persuading the Chinese that Canada’s extradition treaty with the US is not something that the Liberal government can interfere with.


Law & Order


In a hearing on December 7th set to determine whether or not Meng should be released on bail, a judge heard arguments from Meng’s lawyer and prosecutors but was unable to make a decision. David Martin, Meng’s attorney, stated that she has ties to Canada and is not a flight risk; he proposed that she be allowed to stay in one of her properties in Vancouver and be closely monitored. She and her husband, who lives in Vancouver, would cover all related security costs

and possibly bring their daughter to Canada to attend school during the proceedings. He also claimed that the case has not been fully laid out, even though an arrest warrant for Meng was issued on August 22nd by a US federal judge and he further argued in court that Meng should be released on bail while awaiting extradition because of health concerns, including severe hypertension. (Meng was taken to hospital to be treated for hypertension after she was arrested, according to court documents.) The hearing resumed December 10th and again ended without a final decision, which finally came on December 11th. Under the terms of Meng’s bail, she was released on a $10 million surety and will remain in Vancouver while awaiting her extradition proceedings.

A lot hangs in the balance. US stocks plummeted last week, partly because of Meng’s arrest and uncertainty about how it will affect trade talks between the US and China.