Huawei sanctions evidence deemed too risky for China to see

Huawei sanctions evidence deemed too risky for China to see
Some evidence used to charge Huawei Technologies Co. with bank fraud and violating U.S. sanctions on Iran was deemed so sensitive that the Chinese telecom giant’s lawyers must now take unusual steps to review the information — and even then, the company may never see it.

While specific evidence wasn’t disclosed, prosecutors convinced a federal judge that releasing too much would pose a risk to national security and other governmental concerns. The U.S. already had banned the company’s technology and accused Huawei of aiding Beijing in espionage. Last week, the court imposed restrictions on when and how information in the criminal case gets shared, and who can see it.

“What underlies all of this is the allegation that there are deep and close connections between Huawei and the Chinese government,” said Ryan Fayhee, a former Justice Department national security lawyer. “That’s why this presents differently than a traditional fraud case.”

The Huawei prosecution has forced government lawyers to balance evidence rules and a defendant’s right to a fair trial, while safeguarding intelligence gathering. A similar dilemma has threatened to undermine a case brought by Special Counsel Robert Mueller against 16 individuals and companies in Russia over election meddling, because the government is refusing to disclose some sensitive evidence.

For now, the Huawei case is proceeding with disclosures to the company’s American defence lawyers under restrictions set June 10 by U.S. District Judge Ann Donnelly in Brooklyn, New York. On Wednesday, Donnelly and lawyers in the case will discuss a briefing schedule on a separate issue — whether one Huawei lawyer, James M. Cole, should be disqualified because he had access to classified data when he worked as a Deputy Attorney General of the U.S. from 2011 to 2015. Cole, now a partner at Sidley Austin LLP, has said he has no conflict.

Criminal probe

As the criminal case against Huawei moves forward, the prosecution of its chief financial officer, Meng Wanzhou, remains on hold. She is fighting extradition from Vancouver, Canada, after being arrested at the request of the U.S. last year. She is accused of defrauding banks by lying about Huawei’s business dealings in Iran, in violation of U.S. sanctions.

Her billionaire father, Huawei founder Ren Zhengfei, has rejected the U.S. accusations against the company and his daughter. On Monday, Ren said the U.S. sanctions against Huawei — one of the world’s largest makers of smartphones and networking equipment — could reduce revenue by about $30 billion over the next two years, wiping out any growth prospects by withholding critical American technology.

The indictment against Huawei and Meng also mentions Ren, a former engineer with the People’s Liberation Army. Prosecutors say the founder of Huawei lied to FBI agents in 2007 when he “falsely stated” it had no business dealings in Iran. He hasn’t been criminally charged. The same day the U.S. charged Meng, Huawei and its U.S. subsidiaries with violating sanctions, prosecutors disclosed a separate case in Seattle accusing the company with stealing trade secrets from American rival T-Mobile.

Under the restrictions imposed by Donnelly, some evidence labelled “sensitive” by the government can’t be distributed beyond Huawei’s legal team, can only be accessed by certain witnesses in the presence of American lawyers, and must remain in the U.S. If there are disputes over evidence handling, a separate group of government lawyers not involved in the prosecution can be consulted or the judge can get involved.

David Bitkower, a lawyer for Huawei, declined to comment on the case, as did John Marzulli, a spokesman for Brooklyn U.S. Attorney Richard Donoghue.

The rules are even tighter for classified information, and evidence gathered under the Foreign Intelligence Surveillance Act will require a separate process to determine what the defence will be able to view, prosecutors said in a court filing Monday.

Donnelly’s order includes unusual restrictions, even for sanctions cases, legal experts said.

Some of the evidence can only be reviewed by defence lawyers who are U.S. citizens, because the information could identify potential witnesses or contains “national security” material, court filings show. Those documents must be stored on a computer that isn’t connected to the internet and can’t be taken or transmitted outside the country or shared with Huawei.

Safe-passage guarantees

If Huawei lawyers want to share sensitive material with anyone outside the U.S., they must notify the government. There are also provisions for allowing foreign nationals to view the evidence in the U.S., including with safe-passage guarantees against arrest. There also are options for reviewing information outside the country, but only in the presence of U.S. defence lawyers.

Without such provisions, Huawei could accuse the U.S. of hampering its ability to defend itself, said Henry Mazurek, a partner at law firm Meister Seelig and Fein LLP in New York.

Huawei’s close ties to the Chinese government have impacted the willingness of the U.S. to share evidence with the company, but prosecutors are obligated to turn over evidence, said Fayhee, the former federal prosecutor.

“The government has the view, as also substantiated by its recent blacklisting, that Huawei is an arm of the Chinese government,” Fayhee said. “The founder of the company served nearly a decade as an engineer with the People’s Liberation Army, and continued connections have been regularly alleged. But that’s what the government signed up for when it decided to bring this case.”

The case is U.S. v. Huawei Technologies Co., 18-cr-457, U.S. District Court, Eastern District of New York (Brooklyn).
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