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Tuesday
Dec112018

Chinese exec's arrest comes at sensitive time, part of years-old clash with U.S. over tech giant

VCG/VCG via Getty Images(WASHINGTON) -- American and Chinese leaders are now in an international showdown over the U.S.-orchestrated arrest of a top executive at Huawei Technologies, the Chinese telecom giant that has become the world's biggest supplier of network equipment for phone and internet services.

The executive, Meng Wanzhou, was being detained in Canada after a court there delayed a decision Monday on a U.S. request that she be extradited.

But -- even as the standoff comes at a particularly sensitive time for U.S.-China relations with the two countries battling over trade –- the latest row is hardly the first time that U.S. government concerns over Huawei have pitted American officials against their Chinese counterparts.

And it's still unclear whether lingering concerns about Chinese espionage could have played a role in the U.S. government’s decision to file federal charges against the executive for financial-related crimes. A Justice Department spokesman declined to answer a question from ABC News about it, but top national security officials from Justice, the FBI and Department of Homeland Security are slated to testify Wednesday to the Senate Judiciary Committee about "China's non-traditional espionage against the United States," as the hearing is titled.

As far back as 2011, the House Intelligence Committee began investigating what it called "the counterintelligence and security threat posed" by Huawei and similar Chinese tech firms. At the time, the committee even sent a team of investigators to China to press Huawei executives about the matter.

“Based on available classified and unclassified information, Huawei ... cannot be trusted to be free of foreign state influence and thus pose[s] a security threat to the United States and to our systems,” the House panel wrote in its final report.

Huawei “was unwilling to explain its relationship with the Chinese government or Chinese Communist Party, while credible evidence exists that Huawei fails to comply with U.S. laws,” the report concluded.

In the years since, the FBI has kept close tabs on Huawei, according to law enforcement sources. And just four months ago, U.S. prosecutors in the Eastern District of New York secretly filed fraud charges against 46-year-old Meng, Huawei’s chief financial officer and the daughter of its founder.

At the U.S. government’s behest, she was arrested earlier this month while traveling through Canada, where court documents say she and others “repeatedly lied” to international banks about Huawei’s ties to businesses in Iran.

In particular, Huawei used a Hong Kong-based company, Skycom, as a front for Huawei’s “operating” in Iran despite U.S. sanctions, and Meng falsely claimed to “numerous multinational financial institutions” that Skycom was not connected to Huawei so that those institutions would carry out hundreds of millions of dollars in otherwise prohibited transactions, according to court documents released in Canada.

In the United States alone, one major bank ended up improperly approving $100 million in transactions based on the lies, the court documents allege.

But after news of Meng’s arrest became public last week, officials in China warned of “grave consequences” if she is not released, calling her detention “unreasonable, unconscionable, and vile in nature."

The official Xinhua News Agency said a top Chinese diplomat "lodged solemn representations and strong protests" with Canadian and U.S. authorities over the matter, demanding the United States drop the "extremely egregious” charges against Meng.

The Chinese government’s demands over Meng come as President Donald Trump and his administration are trying to hammer out a deal with China that would alleviate growing tensions over trade and possible tariffs. Those tensions have already rattled U.S. markets, contributing to a substantial drop in the stock markets last week.

On Sunday, the U.S. trade representative, Ambassador Robert Lighthizer, insisted the dispute over Meng’s arrest “shouldn’t really have much of an impact” on China’s willingness to negotiate a trade deal with the United States.

“I can understand from the Chinese perspective how they would see it that way,” but Meng’s arrest “is a criminal justice matter” that’s “unrelated” and “totally separate from” ongoing trade talks, Lighthizer told CBS News.

Nevertheless, Lighthizer added that any deal must include assurances from the Chinese government that it will stop trying to steal U.S. technology from American companies and others.

“China has a policy of theft of intellectual property from America,” he said. “It's extremely important that China [stops] that.”

According to U.S. officials, there is one tool in particular that Chinese authorities may be able to exploit to steal intellectual property: Huawei.

In fact, a top Homeland Security official, Jeanette Manfra, recently told a congressional panel the U.S. intelligence community is “concerned about” laws inside China that compel companies like Huawei to take certain actions. And a telecommunication company is “particularly problematic because [it] gives a government the capability to have access to communications that are global,” Michael Brown, the former CEO of global cyber-firm Symantec, said at a House Intelligence Committee hearing in July.

“So this represents a particular danger,” he added.

Meanwhile, a top member of the Senate Intelligence Committee, Sen. Tom Cotton, an Arkansas Republican, recently described Huawei and other Chinese telecom companies as “arms of the Chinese Communist Party.”

Now –- with the U.S. economy and U.S. national security at stake -- the Chinese government is demanding the release of Huawei’s chief financial officer.

The U.S. government, meanwhile, has yet to unseal the charges against Meng, which for four months left U.S. prosecutors waiting for Meng to travel internationally so she could be arrested.

“The only documents released thus far are from the Canadian courts,” and the U.S. government has yet to release any information about the case, a Justice Department spokesman noted to ABC News.

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