U.S. conducted secret surveillance of Huawei, prosecutors say

April 4, 2019

By Brendan Pierson and Karen Freifeld

NEW YORK (Reuters) – U.S. authorities gathered information about Huawei Technologies Co Ltd through secret surveillance they plan to use in their case charging the Chinese telecom company with violating sanctions against Iran, prosecutors said Thursday.

Assistant U.S. Attorney Alex Solomon said at a hearing in federal court in Brooklyn the evidence, obtained under the U.S. Foreign Intelligence Surveillance Act (FISA), would require classified handling. Information gathered under FISA is generally used in espionage cases.

The government notified Huawei in a court filing Thursday of its intent to use the information, saying it was “obtained or derived from electronic surveillance and physical search,” but gave no details.

The United States has been pressuring other countries to drop Huawei from their cellular networks, worried its equipment could be used by Beijing for spying. The company says the concerns are unfounded.

Brian Frey, a former federal prosecutor who is not involved in the Huawei case, said FISA surveillance, which requires a warrant from a special court. Information gathered under FISA is generally used in cases involving espionage or terrorism.

“The reason they typically would have gotten the surveillance through a FISA court is where we suspect someone may be spying on behalf of a foreign power,” Frey said. The U.S. government has been concerned about espionage by Huawei for years, he added.

In the Brooklyn case, Huawei and its chief financial officer, Meng Wanzhou, are accused of conspiring to defraud HSBC Holdings Plc and other banks by misrepresenting Huawei’s relationship with Skycom Tech Co Ltd, a suspected front company that operated in Iran.

Huawei did not immediately respond to a request for comment.

Huawei has said Skycom was a local business partner, but prosecutors said in their indictment against Huawei and Meng that it was an unofficial subsidiary used to conceal Huawei’s Iran business.

U.S. authorities claim Huawei used Skycom to obtain embargoed U.S. goods, technology and services in Iran, and to move money via the international banking system.

Meng was arrested in December in Canada after she was indicted, but the charges were not unsealed until January. She has said she is innocent of the charges and is fighting extradition.

Last month, Reuters detailed how U.S. authorities secretly tracked Huawei’s activities, including by collecting information copied from electronic devices carried by Chinese telecom executives traveling through airports.

It is not clear whether the FISA surveillance discussed at Thursday’s hearing included those activities.

(Reporting by Brendan Pierson and Karen Freifeld in New York; Editing by Jeffrey Benkoe)

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