Huawei ‘owned front companies’ to ship gear to Iran and Syria, claims Reuters

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Huawei controlled two front companies – Skycom of Hong Kong and Canicula of Mauritius – so that it could sell embargoed equipment to Iran and Syria, Reuters is alleging.

The international news agency says that Canicula was the route used by the Chinese company to sell equipment to MTN’s mobile operations in both countries.

Skycom has already featured in the reports of the arrest of Huawei CFO Meng Wanzhou in early December by Canadian authorities at the request of the US. The US has alleged that Meng, who is daughter of Huawei’s founder Ren Zhengfei, was a director of Skycom, a Hong Kong company that was secretly owned by Huawei.

Reuters says that Skycom was later sold to Canicula, a company that “had an office in Damascus and operated in Syria on behalf of Huawei”, according to the agency’s sources.

Meng is on bail in Vancouver, where she owns a house, and is due to appear in court on 6 February. The US wants to extradite her to face charges of using Skycom to sell Hewlett-Packard gear to Mobile Telecommunication Company of Iran, a subsidiary of the Telecommunication Company of Iran, in contravention of US trade sanctions, thought to be in 2010.

She faces another deadline before then: the US has 60 days from the date of her arrest on 1 December to submit its formal request for extradition – putting that deadline at the end of this month.

Huawei refused to comment to Reuters on the allegations. Capacity also approached a senior Huawei executive in Shenzhen. “We have no comment,” said the executive this morning.

According to Reuters, in a 1,400-word report, Meng “deceived international banks into clearing transactions with Iran by claiming the two companies were independent of Huawei, when in fact Huawei controlled them”.

The agency says it has discovered “corporate filings and other documents” in Iran and Syria that show Huawei “is more closely linked to” Skycom and Canicula “than previously known”.

According to the agency’s reporters, “a high-level Huawei executive appears to have been appointed Skycom’s Iran manager” and “at least three Chinese-named individuals had signing rights for both Huawei and Skycom bank accounts in Iran”.

Reporters at Reuters say they have found Hong Kong records that show that Huawei’s shares in Skycom were transferred in November 2007 to Canicula, a company that was registered in Mauritius in 2006.

Reuters has found a Skycom filing in Iran saying the manager of its branch in Iran was Shi Yaohong.

It has found a 2010 news release identifying an executive with the same name heading the Etisalat account at Etisalat, and has found a report that an executive called Shi Yaohong was Huawei’s president Middle East region in June 2012.

According to LinkedIn, checked by Capacity this morning, an executive who gives his name as “Ali Shi (Yaohong)” was president of the Middle East region for Huawei from June 2012 to June 2015, based in Bahrain. Shi then returned to head office in Shenzhen and is now president of the company’s software business unit.

Reuters phoned Shi for comment but he “hung up the phone when Reuters asked him about his relationship with Skycom”.

The key problem for Meng lies in the fact that Huawei allegedly used international banks to move money out of Iran – transactions that would have broken US sanctions against the country.  

Reuters says: “The previously unreported ties between Huawei and the two companies could bear on the US case against Meng … by further undermining Huawei’s claims that Skycom was merely an arms-length business partner. … As a result of the deception, US authorities say, banks unwittingly cleared hundreds of millions of dollars of transactions that potentially violated economic sanctions Washington had in place at the time against doing business with Iran.”

If the US succeeds in extraditing Meng, she is likely to face fraud charges with penalties of up to 30 years in prison.

However, Huawei’s high status in the Chinese economy inevitably means that the issue will continue to take the attention of Xi Jinping, president of China.