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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight and analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud,

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Speaker 1: and on Bloomberg dot com slash podcasts. The Justice Department

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Speaker 1: has ratchet up tensions between the world's two largest economies

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Speaker 1: with two indictments against Huawei Technologies, China's largest technology company,

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Speaker 1: alleging it stole trade secrets from T Mobile and committed

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Speaker 1: bank fraud by violating sanctions against doing business with Iran.

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Speaker 1: At a news conference to announce the charges, FBI Director

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Speaker 1: Christopher Ray said the threat went beyond economic damage. The

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Speaker 1: prosperity the drives are. Economic security is inherently linked to

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Speaker 1: our national security, and the immense influence that the Chinese

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Speaker 1: government holds over Chinese corporations like Huawei represents a threat

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Speaker 1: to both. Whahwei issued a statement saying it had done

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Speaker 1: nothing wrong in either case. Joining me is Peter Henning,

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Speaker 1: a professor at Wayne State University Law School. So, Peter,

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Speaker 1: this was a sort of coast to coast Justice Department action,

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Speaker 1: with one indictment in Brooklyn and the other in Seattle

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Speaker 1: tell us more about it. Well, the Seattle indictment is

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Speaker 1: really tied in with a civil case that was filed

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Speaker 1: by T Mobile related to how they claimed that Huawei

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Speaker 1: stole information trade secrets about a robot that they had

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Speaker 1: for testing their cell phones. And the indictment goes into

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Speaker 1: a great deal of detail about different sub refugeons used

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Speaker 1: by Whahwei, and then even to make it sound even worse,

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Speaker 1: the company instituted a bonus program to reward employees who

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Speaker 1: stole confidential information. The Justice Department is really putting the

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Speaker 1: focus here on, like Mr Ray said, on the theft

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Speaker 1: of trade secrets and how that was all. And the

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Speaker 1: indictment in Brooklyn is focused much more on the violation

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Speaker 1: of the American Economic Sanctions Law, which prohibits dealing with

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Speaker 1: companies in Iran. But it's also broader there too because

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Speaker 1: it includes bank fraud counts and even a conspiracy to

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Speaker 1: commit money laundering. So they have come out, if you will,

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Speaker 1: guns blazing in this case, really putting the pressure on Hahwei.

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Speaker 1: What effect does adding an obstruction of justice charge have here?

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Speaker 1: It's an interesting question because I think what the Justice

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Speaker 1: Department really wants to do is to show that not

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Speaker 1: only was Huawei uncooperative, but that it actively tried to

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Speaker 1: thwart the Justice Department's investigations, the grand jury investigation in

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Speaker 1: Seattle and also in Brooklyn. And I wonder whether this

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Speaker 1: might be a precursor to saying that the company itself

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Speaker 1: is operating essentially as a criminal enterprise, that it has

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Speaker 1: gone so far to protect itself that really we have

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Speaker 1: to look at the organization as essentially criminal, which would

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Speaker 1: be a basis to try to seek to revoke perhaps

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Speaker 1: it's charters in the United States for its American subsidiary,

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Speaker 1: or ask a court to impose very very healty penalties

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Speaker 1: to essentially try to wipe it out in the United States.

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Speaker 1: That'll be interesting to see how far the Justice Department

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Speaker 1: wants to push this. So the Justice Department is sending

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Speaker 1: a strong message here, oh, certainly, and you know, because

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Speaker 1: we're trying to or the United States government is trying

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Speaker 1: to extradite Wahway's chief financial officer, who is also the

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Speaker 1: daughter of the company founder. The Justice Department is not

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Speaker 1: backing away from this. And typically in these types of cases,

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Speaker 1: we see only the company being charged, but now we

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Speaker 1: see an individual being charged, and I think the Justice

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Speaker 1: Department wants to push this hard. They're trying to send

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Speaker 1: a message to Chinese companies that if you try to

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Speaker 1: steal trade secrets or violate our economic sanctions law, we

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Speaker 1: are going to hit back. Now, the interesting question is,

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Speaker 1: well the Chinese companies here that message, and I wonder

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Speaker 1: whether they will. The indictment doesn't explicitly state that Huawei

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Speaker 1: is operating at the behest of the Chinese government, but

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Speaker 1: are there implications there. I think there certainly are, and

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Speaker 1: certainly in the in the press conferences that were held,

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Speaker 1: for example, the Acting Attorney General Whittaker pointed out that

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Speaker 1: these are companies with very close ties to the Chinese government,

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Speaker 1: and you cannot operate without the blessing of the Chinese government.

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Speaker 1: And so I think they want to send a message

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Speaker 1: to the Chinese government. Now, this comes at a very

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Speaker 1: fraught point in the relationship between the US and China.

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Speaker 1: How much of an impact will this have. The Chinese

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Speaker 1: have demanded the release of Waways CFO, but I don't

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Speaker 1: see any move in that direction at the moment, And

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Speaker 1: certainly the Canadians have been very cooperative with the United States,

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Speaker 1: it wouldn't surprise me if she was extradited to the

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Speaker 1: United States to face the charges. Shortly after her arrest,

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Speaker 1: President Trump suggested that he'd be willing to make a

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Speaker 1: deal for her release if he could cut a trade

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Speaker 1: agreement with China, but Justice officials were asked if that

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Speaker 1: remained a possibility, and Acting Attorney General Whittaker said, the U.

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Speaker 1: S Department of Justice does its investigations and charging decisions

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Speaker 1: independent from the White House. Is that an answer of no.

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Speaker 1: I think that's an answer of no, or at least

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Speaker 1: it's a bit of a warning shot that we're not

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Speaker 1: going to use these indictments as pawns in trade negotiations.

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Speaker 1: That if there's a violation of US law, the Justice

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Speaker 1: Department wants to see its position vindicated. And so it's

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Speaker 1: not just going to trade a potential defendant for some

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Speaker 1: type of benefit in a trade deal, because that that

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Speaker 1: sends a message that to the Chinese government perhaps that Okay,

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Speaker 1: all you need to do is come up with some

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Speaker 1: kind of deal and that will work everything out. I

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Speaker 1: think the Justice Department wants to see this case through

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Speaker 1: to the end and extract some substantial penalties from Huawei,

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Speaker 1: So the arrayment for Huawei in Seattle is set for February.

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Speaker 1: Is the company likely to appear in court and defend

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Speaker 1: itself or challenge the US jurisdiction? And the second part

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Speaker 1: of that question is if it challenges the jurisdiction, is

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Speaker 1: that even possible when it's already appeared to defend a

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Speaker 1: civil suit in that court? That's right, and it does

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Speaker 1: have an American subsidiary, so the American subsidiary cannot duck

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Speaker 1: out on it. Now could the parent company avoid appearing?

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Speaker 1: The answer to that is yes, although you run a

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Speaker 1: risk in that situation that if you don't enter the appearance,

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Speaker 1: then if there's a conviction, then the judge can impose

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Speaker 1: penalties and prosecutors can try to seek to have assets

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Speaker 1: of the company seized in friendly jurisdictions. So there is

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Speaker 1: real risk here for Hahwei if it wants to continue

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Speaker 1: to do business around the globe, which it has been doing.

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Speaker 1: And so it would not surprise me if they sent

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Speaker 1: their attorneys in Thanks for listening to the Bloomberg Law Podcast.

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Speaker 1: You can subscribe and listen to the show on Apple Podcasts, SoundCloud,

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Speaker 1: and on Bloomberg dot com. Slash Podcast. I'm June Brasso.

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Speaker 1: This is Bloomberg