Huawei Denies RICO, Trade Secret Theft Charges In NY Case

Law360, New York (March 4, 2020, 9:57 PM EST) -- Huawei on Wednesday denied a new round of trade secret theft and racketeering charges in the New York case that also accuses the Chinese telecommunications giant of bank fraud and violating U.S. sanctions on Iran, while a Huawei attorney voiced concern that the coronavirus outbreak is hampering their defense preparations.

At an afternoon arraignment before U.S. Magistrate Steven Gold in Brooklyn, an attorney for Huawei, Thomas Green of Sidley Austin LLP, pled not guilty on the company’s behalf to a superseding indictment that includes new allegations of Racketeer Influenced and Corrupt Organizations Act conspiracy and conspiracy to steal trade secrets.

Huawei and various subsidiaries are accused in the new charges of conspiring to steal six U.S. companies’ intellectual property, including source code for internet routers developed by Cisco Systems Inc. and Quintel Tech. Ltd.'s technology to boost cellphone reception.

The superseder also claims Huawei lied to Congress and banks about its business with North Korea.

These allegations add to the case accusing Huawei and its Chief Financial Officer Meng Wanzhou of deceiving banks and the U.S. government for years about Huawei's business dealings in Iran. Meng was arrested in Canada in December 2018 at the request of U.S. authorities and is contesting efforts to extradite her to the U.S.

At a conference before U.S. District Judge Ann Donnelly following Huawei’s arraignment before Judge Gold, Assistant U.S. Attorney Alexander A. Solomon told the judge the government has already been providing substantial discovery to the defense, and will shortly hand over more evidence related to the latest charges.

Green told the judge he and his fellow attorney’s efforts in defending their clients, which include three Huawei subsidiaries, “have become more complicated because of this virus.” COVID-19 is the disease caused by the novel coronavirus that first appeared in Wuhan, China, in late 2019.

“Now we can’t even visit our clients,” Green said. “That’s just I think going to inevitably impact the progress of this.”

Complicating matters, according to Green, is the review of documents subject to Judge Donnelly’s June 10 protective order.

In that order, Judge Donnelly placed restrictions on unclassified discovery material deemed “sensitive” by the government, including that none of it can leave the U.S. and it can only be reviewed in the presence of defense counsel. Further restrictions on viewing the sensitive evidence are placed on individuals who are located outside of the U.S., while other non-classified discovery material can be designated by the government as “attorneys’ eyes only.”

Judge Donnelly set another conference for April 21.

Some details in the new indictment in Brooklyn overlap with a second federal case out of Seattle, where the company was accused of attempting to steal the technology behind Tappy, the T-Mobile phone-testing robot.

The preexisting charges in the Brooklyn case focused on Huawei's alleged lies to banks about its relationship with its Iranian unit, Skycom Tech Co. Ltd.

The new indictment adds detail, including allegations that Huawei Senior Vice President Charles Ding lied at a hearing on Chinese technology before the U.S. House of Representatives in 2012.

Ding told Congress the company had not violated U.S. sanctions on Iran, and that it had only provided technology to Iran for "commercial civilian use."

Prosecutors also claim Huawei provided surveillance equipment the Iranian government used to watch and detain protesters who took to the streets after now-former President Mahmoud Ahmadinejad was elected in 2009.

Ding was not named in the indictment. The companies alleged to have been targets of trade secret theft were also not named but were identifiable from public sources, including a string of lawsuits against Huawei.

Huawei's alleged theft of source code from Cisco was the subject of a lawsuit the U.S. company filed in Texas and settled in 2004. Prosecutors claim that Huawei destroyed evidence and filed a false declaration in the suit "to save costs from litigation and avoid possible regulatory or law enforcement action."

Fujitsu Ltd. is another alleged victim. The indictment matches reports in 2004 of a Huawei employee being caught at a trade show trying to photograph the circuitry inside a Fujitsu networking device. The Japanese company has operations in California and Texas.

Prosecutors also allege Huawei tried to poach an engineer from a company identifiable as Motorola in 2003, and got the employee to send confidential information about wireless base station technology.

That claim lines up with a prior Motorola lawsuit claiming Huawei had stolen trade secrets. The companies settled in 2011, with Motorola Solutions CEO Greg Brown saying the deal would let the companies resume their "traditional relationship of confidence and trust."

Quintel sued Huawei in 2015 alleging the Chinese company violated a nondisclosure agreement in 2009 that governed a potential partnership. The parties settled last year. Allegations in the indictment mirror the lawsuit's claims that Huawei stole antenna technology.

Details about a sixth alleged victim company match allegations in another criminal case alleging Chinese professor Bo Mao helped Huawei steal hard drive technology from California-based CNEX Labs Inc.

Huawei has previously denounced the charges as part of a U.S. campaign of “political persecution” against the company.

“This is selective, politically-motivated enforcement of the law, and contrary to common judicial conventions,” the company said.

The government is represented by Alexander A. Solomon, David K. Kessler, Julia Nestor, Sarah Evans and Kaitlin T. Farrell of the U.S. Attorney's Office for the Eastern District of New York, Laura Billings and Christian Nauvel of the U.S. Department of Justice's Money Laundering and Asset Recovery Section as well as David Lim and Thea D. R. Kendler of the DOJ’s Counterintelligence and Export Control Section.

Huawei is represented by David Bitkower of Jenner & Block LLP and Thomas C. Green, Mark D. Hopson and Michael A. Levy of Sidley Austin LLP.

The case is U.S. v. Huawei Technologies Co. Ltd. et al., case number 1:18-cr-00457, in the U.S. District Court for the Eastern District of New York.

--Additional reporting by Jody Godoy. Editing by Amy Rowe.

For a reprint of this article, please contact reprints@law360.com.

Hello! I'm Law360's automated support bot.

How can I help you today?

For example, you can type:
  • I forgot my password
  • I took a free trial but didn't get a verification email
  • How do I sign up for a newsletter?
Beta
Ask a question!