Huawei’s Chief Financial Officer, Meng Wanzhou, and former HSBC executive Alan Thomas were at the center of attention this week in the trial involving Huawei’s alleged violations of U.S. sanctions against Iran and bank fraud. Thomas testified on Wednesday that Meng had described the Hong Kong-based company Skycom, which was involved in Huawei’s Iran business, as a third-party partner, leading the bank to inadvertently provide financial services to Huawei’s Iran operations in violation of U.S. sanctions.
The origins of the case can be traced back to 2013 when Reuters revealed Huawei’s close ties with Skycom, a Hong Kong company that had attempted to sell U.S.-banned computer equipment to Iran, causing HSBC to be concerned about compliance and sanction risks.
To address these concerns, Meng met with Thomas, who was then the Deputy Global Banking Head of HSBC Asia, in Hong Kong on August 22, 2013. Thomas testified that during the meeting, Meng assured him through an interpreter that Skycom was just a “third-party commercial partner” and a subject of “normal business cooperation” for Huawei in Iran, not a subsidiary. Meng claimed that although Huawei had previously held shares in Skycom to monitor its compliance, they had “sold all their shares.”
Meng also told Thomas that Huawei strictly complied with applicable laws, regulations, and sanctions in Iran, ensuring both Huawei and its partners did not violate export control regulations.
Thomas mentioned that as Huawei’s annual revenue was approximately $40 billion at the time, with a small percentage coming from Iran operations, the risk exposure in Iran was minimal. He believed Meng, as the CFO of a top client, would not lie, and hence, he “accepted [her statement] at face value,” feeling relieved afterwards and believing that Huawei had not concealed anything.
However, based on Meng Wanzhou’s deferred prosecution agreement reached with the U.S. Department of Justice in 2021, the facts stated in the agreement she signed and the evidence presented by the prosecution contradict the above statements.
Huawei merely transferred the shares of Skycom to another entity controlled by Huawei (Canicula Holdings), a transfer that was essentially a “shell game,” with Huawei still effectively controlling both companies. The managers and employees of Skycom in Iran essentially served Huawei. By concealing their control over Skycom, Huawei facilitated around $100 million in related transactions through HSBC and cleared through the U.S. financial system, leading HSBC to inadvertently provide prohibited services.
During the cross-examination in court, Huawei’s lawyers attempted to prove that HSBC had prior knowledge of the situation. The defense presented internal documents, such as records of a €1.5 million transfer from Skycom Europe to Skycom Iran, showing Huawei Technologies as the applicant with contact information, asserting that HSBC staff had a higher understanding of their relationship than claimed by the prosecution.
Huawei’s lawyer pointed out that Thomas, during the meeting with Meng, did not raise any questions, take notes, or write a meeting report. Thomas admitted that HSBC was likely Huawei’s largest international financial business partner at the time and maintaining this significant client was part of his job. HSBC had participated in providing Huawei with approximately $1.5 billion in syndicated loans, earning about $15 million in fees. Despite the concerns that arose, HSBC continued to provide funding.
However, the prosecutors subsequently redirected the jury’s focus on the flaws left by Huawei’s lawyers. When asked if any of the internal documents shown by the defense indicated that Huawei was still secretly operating in Iran, Thomas simply answered, “No.”
The trial, which has been ongoing for over three months, has entered its third week, with last week’s focus still on allegations of intellectual property infringement. An investigative agent’s work permit pointed out that a Huawei engineer had acquired proprietary technology for improving mobile signal reception during negotiations with Quintel in 2009 and signed a confidentiality agreement, later using it in Huawei’s own patent applications.
In addition, witness testimony from the Cisco case and historical legal documents demonstrated Huawei’s alleged copying of router operating system source code, user manuals, and software vulnerabilities. After targeting Cisco engineers, Huawei recruited or pressured them to provide confidential technical specifications from within Cisco. Former FutureWei employee David Chen testified last Thursday that Huawei often deliberately set up offices near major U.S. technology companies to facilitate poaching.
The prosecution is vehemently trying to link the dispersed technical disputes, employee behavior, and financial transactions over 20 years into a legally significant “company’s ongoing criminal pattern.” Huawei, on the other hand, contends that the events are isolated incidents or individual employee actions. The final legal judgment remains in the hands of the jury.