LONDON / SAO PAULO (Reuters) – An obscure Hong Kong-registered company has been at the center of the U.S. criminal case against China’s Huawei Technologies and its chief financial officer.
US authorities allege that the telecommunications equipment giant used the company to circumvent US economic sanctions against Iran between 2007 and 2014. Huawei said it sold the company in 2007 and denied any wrongdoing.
Today, Reuters uncovered unreported links in Brazil between Huawei and Skycom Tech Co Ltd, which could offer support in the US case against the tech giant and Meng Wanzhou, its chief financial officer and daughter of his. founder. Company records filed with the state of Sao Paulo in Brazil show that Huawei and Skycom were closely linked there for five years after Huawei divested its shares in Skycom in 2007.
Until late 2007, two other senior Huawei executives also had close ties to Skycom, with corporate files filed in Brazil and Hong Kong. The two men – Ken Hu and Guo Ping – are currently vice chairmen of Huawei and take turns serving as the chairman of the company. Guo now has the role of president.
The criminal case is part of a multi-faceted global campaign by Washington to verify the power of Huawei, a front in expanding the Cold War between America and China. The United States has pressured its allies to avoid using Huawei equipment in its next-generation mobile telecommunications systems, known as 5G. Washington argues that China could use technology to attack critical infrastructure and undermine intelligence sharing. Huawei and China have strenuously denied this.
Huawei’s relationship with Skycom is at the heart of the high-profile US criminal case. A US indictment alleges that Huawei controlled Skycom and used it to violate US sanctions by getting US computer hardware under embargo in Iran. Huawei and Meng have argued that while Huawei once owned Skycom, the company subsequently became an independent business partner. In a recent court file related to the case, however, Meng’s attorneys acknowledged that Huawei “has some control over Skycom.”
Information recently uncovered by Reuters supports the U.S. case by establishing that Huawei’s control over Skycom was even stronger than U.S. prosecutors claimed. Company records show that two other Huawei executives ran a company owned by Skycom – not just Meng, the only executive appointed by prosecutors. Records also show that Huawei’s control of Skycom extended to Brazil, not just Iran, and lasted throughout the period of the alleged sanctions violations, long after the Chinese tech giant claimed it sold. its 100% stake.
Huawei declined to comment for this article.
So far, only Skycom’s business activities in Iran have captured public attention. But company records filed in Sao Paulo show that Skycom also had a little-known presence in Brazil between 2002 and 2012.
Records show that Hu was based in Sao Paulo in May 2002 when Skycom acquired a small stake in Huawei Brazil, where he was then a manager. Hu’s LinkedIn profile indicates that he was also president of Huawei’s Latin America region at that time.
Hu later left Brazil, but made another connection with Skycom. The Hong Kong company records show that in 2007, Hu and Guo were directors of a subsidiary of Huawei, Hua Ying Management Co Ltd, which owned Skycom. Hua Ying transferred his shares in Skycom to another company that year. Meng was on Hua Ying’s secretary general’s list at the time.
Documents filed by US authorities in the US criminal case describe the transfer of shares as essentially a fictitious transaction and that Huawei continued to control Skycom as “an unofficial subsidiary”.
Last year, the US Department of Commerce added Huawei and many of its affiliates, including Hua Ying, to its so-called “entity list”. The move restricted sales of U.S. products and technologies to Huawei. Washington has stated that affiliates “pose a significant risk of participation in activities contrary to national security or the interests of US foreign policy.”
Hu, Guo and Meng are currently listed as the three directors of Hua Ying in the Hong Kong Companies Register.
Hu, also known as Hu Houkun, and Guo are not named in the US criminal case. Their ties to Skycom and its activities in Brazil have not been reported previously.
Huawei’s close ties to Skycom in Iran after the alleged 2007 sale have already been documented by Reuters. The Brazilian documents, filed in the Sao Paulo Companies Register, show how closely Huawei and Skycom have also continued to be closely linked with Brazil for five years.
For example, in July 2008, the two shareholders of Huawei Brazil at the time – Skycom and a subsidiary of Huawei called Huawei Tech Investment Co Ltd – each appointed the same Chinese person to represent them at Huawei Brazil. The documents also show that Meng, then a member of the boards of directors of the two joint-stock companies, authorized the appointments.
Indeed, during Skycom’s decade as a shareholder of Huawei Brazil until 2012, Skycom was consistently represented in Brazilian society by people who also represented Huawei’s interests, the documents show.
“ MANY FALSE REPRESENTATIONS ”
The United States is trying to extradite Meng from Canada, where she was arrested at the behest of American authorities while changing planes in Vancouver in December 2018.
The US indictment alleges that Huawei and Meng participated in a fraudulent scheme to obtain banned US products and technologies for Huawei’s Iranian company through Skycom and transfer money out of Iran by deceiving a big bank. US authorities have identified the bank as HSBC Holdings PLC. Meng is accused of giving a PowerPoint presentation to an HSBC executive in 2013 which included “numerous false statements regarding Huawei’s ownership and control of Skycom”.
An HSBC spokesperson declined to comment.
Huawei and Meng have denied the U.S. criminal charges, which include bank fraud, wire fraud and other allegations. They argued in court documents in Canada that Meng did not cheat on HSBC. Skycom, which was incorporated in Hong Kong in 1998 and dissolved in 2017, is also a defendant.
The US indictment cites Reuters articles in 2012 and 2013 which detailed numerous financial and other ties between Skycom, Huawei and Meng and described an attempt by Skycom in 2010 to get US computer hardware under embargo in Iran. The 2013 article linked Meng directly to Skycom.
In June, Reuters reported that following its 2013 article, Huawei acted to cover up its relationship with Skycom in Iran, according to internal Huawei documents. Huawei declined to comment on the story.
Brazilian records show that Skycom became a small shareholder of Huawei Brazil in 2002 without injecting new funds into the company. Instead, the two shareholders of Huawei Brazil at the time – two companies affiliated with Huawei – transferred shares to Skycom.
When Skycom left Huawei Brazil in 2012, it transferred its shares to another Huawei entity, Huawei Technologies (Netherlands) BV, according to documents filed by Brazil.
Documents filed by the Hong Kong companies show that in 2005, Hu and Guo became directors of Hua Ying, the Huawei subsidiary, days after the unit was incorporated there that year. Hua Ying then played a key role in Huawei’s alleged sale of Skycom.
Skycom’s Hong Kong filings show that Hua Ying acquired all of Skycom’s shares in February 2007. Nine months later, Hua Ying transferred the shares to a company called Canicula Holdings Ltd, a holding company registered in Mauritius.
US officials say Huawei has never relinquished control of Skycom. In court documents filed in Canada, they allege that Huawei treated Canicula as a subsidiary and that Huawei loaned Canicula money to buy Skycom. The loan came from another subsidiary of Huawei, Huawei Tech Investment, they say. Huawei Tech Investment is the company that co-owned Huawei Brazil with Skycom.
Hu and Guo are now senior Huawei executives. At times, the two have played key public roles at the tech giant.
Shortly after Meng’s arrest in 2018, Hu held a press conference in China with international media, in part to address US allegations against Huawei. Asked about Huawei’s relationship with Skycom, he said he could not provide any information because the case was “under legal process.”
reporting by Steve Stecklow and Marcelo Rochabrun; edited by Peter Hirschberg