She is accused of conspiring to defraud HSBC and other banks by misrepresenting Huawei's relationship with the suspected front company, Skycom Tech Co Ltd. Huawei has said Skycom was a local business partner in Iran, while the United States maintains it was an unofficial subsidiary used to conceal Huawei's Iran business. Huawei and Skycom are also defendants in the U.S. case, accused of bank and wire fraud, as well as violating U.S. sanctions on Iran.
U.S. authorities allege Huawei used Skycom to obtain embargoed U.S. goods and technology in Iran and to move money out of the country via the international banking system. As a result of Huawei's deception, U.S. authorities allege, HSBC and other banks cleared more than $100 million of transactions related to Skycom through the United States that potentially violated economic sanctions Washington had in place at the time against doing business with Iran.
Huawei declined to comment for this story. The company has denied the charges in the case.
Robert Sherman, a spokesman for HSBC, said, "Information provided by HSBC to the Justice Department was provided pursuant to formal demand, including grand jury subpoena or other obligation to provide information pursuant to a Deferred Prosecution Agreement or similar legal obligation."
He added, "The U.S. Department of Justice has confirmed that HSBC is not under investigation in this case."
A Justice Department spokesman declined to comment.
Meng, the daughter of Huawei's founder, was arrested in Vancouver in December. She remains free on bail while the U.S. government tries to have her extradited to face bank and wire fraud charges. The case comes at a time of heightened trade tensions between Washington and Beijing, and amid concerns by the United States that Huawei's equipment could be used for Chinese espionage. The Shenzhen-based company, the world's largest maker of telecommunications networking equipment, has repeatedly denied such claims.
Meng has maintained she is innocent of the allegations made against her.
Reuters reported in December that HSBC – which is referred to in the indictment only as "Financial Institution 1" – figured prominently in the Huawei case. HSBC's internal probe of Huawei is reported here for the first time.
The HSBC documents contain new financial details about Huawei's relationship with Skycom and the company that Huawei claims it sold Skycom to in 2007, Canicula Holdings Ltd. All three firms previously had bank accounts at HSBC, with the Skycom and Canicula accounts part of what the bank internally called the "Huawei Mastergroup."
The HSBC probe found numerous ties between the three firms that suggested Huawei controlled both Skycom and Canicula long after the purported sale, the documents show. For example, Canicula's address was "c/o Huawei Technologies."
The probe also found that Huawei financed Canicula's purchase of Skycom, lending Canicula about 14 million euros in a deal the documents show didn't close until December 2009. Canicula repaid Huawei a year later using funds from Skycom.
After HSBC asked Huawei in 2013 to close the Skycom and Canicula accounts, Huawei employees assisted the bank. At Huawei's request, the remaining funds in the Skycom account were transferred to a Huawei bank account, according to the documents.
HSBC's move to close the accounts followed stories by Reuters in 2012 and 2013 about Huawei, Skycom, Canicula and Meng. The articles – which are cited in the HSBC documents as well as the indictment – reported that Skycom had offered to sell at least 1.3 million euros worth of embargoed Hewlett-Packard computer equipment to Iran's largest mobile-phone operator in 2010. Reuters also reported that Meng had served on Skycom's board of directors between February 2008 and April 2009.
The indictment alleges that banks in part relied on Huawei's false statements in the Reuters stories – that it hadn't violated sanctions on Iran and that Skycom was a local partner – to continue doing business with Huawei and Skycom.
HSBC had its own sanctions issues. In 2012, it paid $1.92 billion and entered into a five-year deferred prosecution agreement with the Justice Department for disregarding rules designed to prevent money laundering and processing transactions that violated sanctions.
Under the deal, HSBC agreed to strengthen its sanctions and anti-money laundering programs and to cooperate with the Justice Department in any investigations. To conduct its probe of Huawei, it hired the law firm Latham & Watkins.
The law firm did not respond to requests for comment.
According to the HSBC documents, investigators conducted more than 100 interviews, reviewed more than 292,000 emails and analyzed years of financial transactions. At least four presentations were made to the Justice Department between February and July 2017. The criminal charges against the bank were dismissed in December 2017.
The bank's Huawei probe found that in August 2013, at Huawei's request, HSBC's then deputy head of global banking for the Asia Pacific region, Alan Thomas, met with Meng. According to the HSBC documents, Meng later provided Thomas with a PowerPoint presentation in English that stated that Huawei had sold its shares in Skycom and that she was no longer on its board. The presentation described Skycom as a Huawei "business partner" in Iran. That presentation – which the United States alleges contained "numerous misrepresentations" – plays a central role in the U.S. case against Meng.
Thomas, who retired in 2017, declined to comment.
In the months after the meeting with Meng, HSBC considered whether to retain Huawei as a customer, the documents show. The bank initially concluded the reputational risks were acceptable and kept on Huawei. But, according to the indictment, HSBC told Huawei around 2017 that it was terminating the relationship.
The HSBC probe also uncovered financial transactions by Canicula that referenced Syria or involved a Syrian bank. Reuters reported last month that until 2017 Canicula operated in Syria, where it was connected to Huawei. Like Iran, Syria has been subject to U.S. sanctions.
Two people familiar with Canicula's operations in Syria have since told Reuters that Huawei used the company to circumvent sanctions there.
HSBC also told the Justice Department that it was aware of another company linked to Skycom in Iran. In August 2016, the HSBC documents say, the bank was notified by a British engineering recruitment company, Matchtech Group Ltd, that a Matchtech subsidiary had provided contractors to support telecommunications projects in Iran from 2010 to 2016.
The subsidiary, Networkers International Ltd, had contracted with Skycom and Huawei, and had received payments in U.S. dollars from Skycom, the HSBC documents state. The payments totalled about $7.6 million, the documents show. Networkers terminated its Iran-related contract with Skycom in October 2016, Matchtech told HSBC.
Matchtech is now known as Gattaca plc. A spokesman for Gattaca declined to comment.
(Reporting by Karen Freifeld in New York and Steve Stecklow in London. Additional reporting by James Pomfret in Hong Kong and Babak Dehghanpisheh in Geneva. Editing by Michael Williams and Richard Woods) ((firstname.lastname@example.org))