Huawei Technologies Co. Ltd., the world’s largest telecommunications equipment manufacturer, and two U.S. subsidiaries and its chief financial officer are facing charges of conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act (RICO).
The 16-count superseding indictment unsealed Wednesday also added a charge of conspiracy to steal trade secrets stemming from the China-based company’s practice of using fraud and deception to misappropriate sophisticated technology from U.S. counterparts.
The indicted defendants include Huawei and four official and unofficial subsidiaries — Huawei Device Co. Ltd. (Huawei Device), Huawei Device USA Inc. (Huawei USA), Futurewei Technologies Inc. (Futurewei) and Skycom Tech Co. Ltd. (Skycom) — as well as Huawei’s Chief Financial Officer (CFO) Wanzhou Meng (Meng). The new superseding indictment also contains the charges from the prior superseding indictment unsealed in January 2019.
As revealed by the government’s independent investigation and review of court filings, the new charges in this case relate to moves Huawei, and several of its subsidiaries, made to misappropriate intellectual property from six U.S. technology companies in an effort to grow and operate Huawei’s business.
The misappropriated intellectual property included trade secret information and copyrighted works, such as source code and user manuals for Internet routers, antenna technology and robot testing technology. Huawei, Huawei USA and Futurewei agreed to reinvest the proceeds of this activity in Huawei’s worldwide business, including in the United States.
The means and methods of the misappropriation included entering into confidentiality agreements with the owners of the intellectual property and then violating the terms of the agreements by misappropriating the intellectual property for the defendants’ own commercial use, recruiting employees of other companies and directing them to misappropriate their former employers’ intellectual property, and using proxies such as professors working at research institutions to obtain and provide the technology to the defendants, according to court documents. As part of the scheme, Huawei launched a policy instituting a bonus program to reward employees who obtained confidential information from competitors. The policy made clear that employees who provided valuable information were to be financially rewarded.
Huawei’s efforts to steal trade secrets and other sophisticated U.S. technology were successful, according to court documents. Through the methods of deception described above, the defendants obtained nonpublic intellectual property relating to Internet router source code, cellular antenna technology and robotics. 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.
When confronted with evidence of wrongdoing, the defendants made repeated misstatements to U.S. officials, including FBI agents and representatives from the U.S. House Permanent Select Committee on Intelligence, regarding their efforts to misappropriate trade secrets, according to court documents. Similarly, the defendants engaged in obstructive conduct to minimize litigation risk and the potential for criminal investigations, including the very investigation that led to this prosecution.
The superseding indictment also includes new allegations about Huawei and its subsidiaries’ involvement in business and technology projects in countries subject to U.S., EU and/or UN sanctions, such as Iran and North Korea – as well as the company’s efforts to conceal the full scope of that involvement, according to court documents. The defendants’ activities, which included arranging for shipment of Huawei goods and services to end users in sanctioned countries, were typically conducted through local affiliates in the sanctioned countries. Reflecting the inherent sensitivity of conducting business in jurisdictions subject to sanctions, internal Huawei documents allegedly referred to such jurisdictions with code names. For example, the code “A2” referred to Iran, and “A9” referred to North Korea.