U.S. conducted secret surveillance of China's Huawei, prosecutors say

NEW YORK: U.S. authorities gathered information about Huawei Technologies Co Ltd through secret surveillance that they plan to use in a case accusing the Chinese telecom equipment maker of sanctions-busting and bank fraud, prosecutors said on Thursday.

Assistant U.S. Attorney Alex Solomon said at a hearing in federal court in Brooklyn that the evidence, obtained under the U.S. Foreign Intelligence Surveillance Act (FISA), would require classified handling.

The government notified Huawei in a court filing on 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, is generally sought in connection with suspected espionage.

“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 last month pleaded not guilty to the 13-count indictment. It did not immediately respond to a request for comment on the FISA surveillance.

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. The charges against the company include violating U.S. sanctions on Iran.

Meng was arrested in Canada in December at the request of the United States to face the charges of bank and wire fraud laid out in the indictment, which was 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 by collecting information copied from electronic devices carried by Chinese telecom executives traveling through airports.