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U.S. Charges China's Telecom Giant Huawei With Fraud And Other Counts

RACHEL MARTIN, HOST:

There's another development from the frontlines of the U.S.-China trade war. The Trump administration has filed criminal charges against Chinese telecommunications giant Huawei for stealing trade secrets from T-Mobile and then covering it up. The indictment alleges Huawei management offered its employees bonuses for stealing technology from other companies. The company's CFO Meng Wanzhou was detained in Canada and faces an extradition hearing this week. NPR's Rob Schmitz is following all this closely and joins us now.

Good morning, Rob.

ROB SCHMITZ, BYLINE: Good morning, Rachel.

MARTIN: So the Department of Justice unsealed two indictments related to Huawei yesterday, the first involving the CFO, Meng Wanzhou. Let's start there. What's the U.S. alleging?

SCHMITZ: It alleges that Meng lied about a Huawei affiliate company, called Skycom, telling U.S. banks it was not part of Huawei when it actually was. And not only was it part of Huawei, but it was allegedly helping Huawei get around U.S. sanctions on Iran. What's new here is that this indictment alleges that Huawei founder Ren Zhengfei, who's the father of Meng, misled FBI agents in 2007 about all of this.

MARTIN: OK. That's the first one. And the second one, this involves a robot. What can you tell us here?

SCHMITZ: That's right. The second indictment stems from a civil suit that T-Mobile won four years ago against Huawei for stealing T-Mobile's technology. And that lawsuit resulted in Huawei paying T-Mobile millions of dollars in damages. But now the Department of Justice is filing criminal charges against Huawei for this, and the details laid out here are pretty fascinating. It involves this robot named Tappy that was created by T-Mobile to test phones. And at the time - this is seven years ago - Tappy was cutting-edge. No other cellphone maker had a robot like this. Huawei, at the time, was a much smaller company and its phones were not that great.

So Huawei entered into this business agreement with T-Mobile that allowed its engineers to use Tappy at T-Mobile's factory. And according to what is at times a pretty comical email trail, Huawei engineers bungle their way through trying to figure out how Tappy works. They take illegal photos of Tappy. They email measurements of the robot back to managers in China. They ask so many questions about Tappy that T-Mobile tells them to stop or they'll be thrown out of the factory. And at one point, one Huawei engineer dismembers Tappy to steal its arm and bring it home in a bag.

MARTIN: Wow. They were very intent on figuring out how - what made Tappy tick.

SCHMITZ: That's right.

MARTIN: So do we know if this is just, like, an isolated incident with this particular robot? Or is it indicative of something bigger?

SCHMITZ: Well, that brings us to the most damning part of this indictment. It alleges that around the time Huawei was caught stealing T-Mobile's technology, Huawei headquarters in China launched a company-wide policy establishing a bonus program that rewarded employees who stole technology from competitors.

MARTIN: Wow.

SCHMITZ: So if that's true, then it's possible there are more Tappies out there.

MARTIN: How is China responding to this?

SCHMITZ: Well, a Huawei spokeswoman, she said that she denied all the charges, said it reached out to the Department of Justice to talk about Meng Wanzhou but did not receive a reply. Beijing responded by saying the U.S. was violating the rights of Meng Wanzhou. We're going to find out how all of this plays out later this week when Chinese Vice Premier Liu He meets with the Trump administration to continue those trade talks. Huawei is too big of a Chinese company to not be part of these talks. And it's a good bet these new criminal charges against the company are going to come up.

MARTIN: All right. Rob Schmitz, joining us from Shanghai this morning to talk about all this.

Rob, thanks. We appreciate it.

SCHMITZ: Thank you. Transcript provided by NPR, Copyright NPR.


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