Huawei Indictments Raise New Questions About T-Mobile-Sprint

A nonprofit organization says the U.S. Department of Justice’s indictments charging Huawei with theft of trade secrets, wire fraud and obstruction of justice shed new light on national security concerns associated with the proposed T-Mobile/Sprint merger.

A 10-count indictment includes charges of theft of trade-secrets conspiracy, attempted theft of trade secrets, seven counts of wire fraud, and one count of obstruction of justice. It details Huawei’s efforts to steal trade secrets from T-Mobile USA and then obstruct justice when T-Mobile threatened to sue Huawei in U.S. District Court in Seattle.

T-Mobile couldn’t be reached for comment.

The alleged conduct described in the indictment occurred from 2012-2014, and includes an internal Huawei announcement that the company was offering bonuses to employees who succeeded in stealing confidential information from other companies, according to the Justice Department.

“Today we are announcing that we are bringing criminal charges against telecommunications giant Huawei and its associates for nearly two-dozen alleged crimes,” said Acting Attorney General Matthew Whitaker. “As I told Chinese officials in August, China must hold its citizens and Chinese companies accountable for complying with the law. I’d like to thank the many dedicated criminal investigators from several different federal agencies who contributed to this investigation and the Department of Justice attorneys who are moving the prosecution efforts forward. They are helping us uphold the rule of law with integrity.”

In addition, a 13-count indictment charged four defendants, including Huawei and chief financial officer Meng Wanzhou, with financial fraud. The indicted defendants also include affiliates Huawei USA and Skycom.

Huawei and Skycom are charged with bank fraud and conspiracy to commit bank fraud; wire fraud and conspiracy to commit wire fraud; violations of the International Emergency Economic Powers Act (IEEPA) and conspiracy to violate IEEPA; and conspiracy to commit money laundering. Huawei and Huawei USA are charged with conspiracy to obstruct justice related to the grand jury investigation in the Eastern District of New York. Meng is charged with bank fraud, wire fraud and conspiracies to commit bank and wire fraud.

According to the 10-count indictment, Huawei in 2012 launched a “concerted effort” to steal information on a T-Mobile phone-testing robot dubbed “Tappy.” In an effort to build its own robot to test phones before they were shipped to T-Mobile and other wireless carriers, Huawei engineers alleged violated confidentiality and nondisclosure agreements with T-Mobile by secretly taking photos of Tappy, taking measurements of parts of the robot, and in one instance, stealing a piece of Tappy so that the Huawei engineers in China could try to replicate it.

After T-Mobile discovered and interrupted these criminal activities, and then threatened to sue, Huawei “produced a report falsely claiming that the theft was the work of rogue actors within the company and not a concerted effort by Huawei corporate entities in the United States and China,” according to the Justice Department. As emails obtained in the course of the investigation reveal, the conspiracy to steal secrets from T-Mobile was a companywide effort involving …

… many engineers and employees within the two charged companies, it said.

Huawei Technologies tweeted that “the company denies that it or its subsidiary or affiliate have committed any of the asserted violations of U.S. law set forth in each of the indictments, is not aware of any wrongdoing by Ms. Meng and believes the U.S. courts will ultimately reach the same conclusion.”

Nonprofit group Protect America’s Wireless said the indictments charge Huawei with “serious crimes and demand a fresh look at the national security concerns at the center of the proposed T-Mobile/Sprint mega-merger.”

“Clearly, America’s path to 5G cannot be paved by Huawei and yet today’s news reminds us how entangled T-Mobile and Sprint have been for so long with Huawei,” it said. “The case appears to originate with the theft of T-Mobile’s intellectual property. Yet despite being a victim of Huawei’s deceit, T-Mobile and Deutsche Telekom continue to partner with them on 5G deployments around the globe.”

Sprint and T-Mobile’s parent companies have “even deeper relationships” with the Chinese telecom giant with a “long history of hacking and spying on foreign networks,” the organization said. Yet none of these companies has provided evidence or verifiable commitments that they have stopped and will refrain from using Huawei components, it said.

“Our national security is at stake — we cannot allow Huawei to control our digital future,” it said. “Deutsche Telekom and T-Mobile know better than anyone that we can’t trust Huawei and should enthusiastically support a boycott of their products around the globe. Sprint, T-Mobile, Deutsche Telekom, and SoftBank must abandon the use of Huawei equipment in the United States and around the world. This issue demands much greater scrutiny, and we need it now.”