The defence of Huawei Technologies CFO Meng Wanzhou began this morning their final arguments in their bid to stave off extradition for the Chinese tech executive.
Defence lawyers Eric Gottardi and Frank Addario began Meng's final arguments in front of BC Supreme Court associate chief justice Heather Holmes, a day after Holmes challenged the Crown on many points in the Record of the Case (ROC) in the Meng case.
Addario and Gottardi's arguments appear to indicate a shift in the defence's strategy; instead of focusing on potential violation of Meng's rights during her search and arrest by the Canada Border Services Agency and the RCMP on Dec. 1, 2018 (and alleged U.S. involvement in coordinating the arrest), Gottardi's overview of Meng's defence arguments rests almost entirely with whether U.S. officials made a sufficient case of fraud against the Huawei executive.
Meng is charged with lying to HSBC at a 2013 meeting about Huawei's relationship with Skycom, a subsidiary doing business in Iran against U.S. sanctions. The United States is alleging that HSBC decided to continue its banking relationship with Huawei based on Meng's 2013 PowerPoint presentation - leading to its exposure to penalties for violating sanctions when proceeds from the Iran transactions were cleared through the U.S. financial system.
Gottardi, however, said what Meng said in 2013 and what HSBC decided to do afterwards were completely unrelated, absolving the Huawei executive of wrongdoing.
"The alleged deception is ambiguous at best, and the risk of economic loss to the victim – HSBC – is wholly delusory," Gottardi said, noting the United States decided that HSBC was a victim and therefore not at risk of penalties linked to violating sanctions. "The requesting states contended that the networkers' payments [money-clearing of transactions in the U.S.] put HSBC at risk for prosecution for sanction breaches, and that Ms. Meng should be criminally liable as a result... But all that HSBC needed to know was that Huawei and Skycom were doing business in Iran. Nothing said by Ms. Meng about that relationship was capable of giving rise to sanctions risk."
Gottardi also said that most fraud cases are eminently obvious in their subjects' dishonesty leading to a victim's loss. He noted most case precedents brought up by the Crown fall into this category, while the Meng case is completely different.
"The risk in such [preceding] cases is obvious, as is the connection to deprivation," he said. "In our case, however, even if some non-remote loan risk existed, the alleged misrepresentations were utterly unrelated."
Gottardi also asked Holmes to act as a judge rather than as a "rubber stamp," as case precedents require extradition judges to intervene in cases where the evidence provided by the state requesting extradition is fatally flawed.
This, Gottardi argued, is one of those cases.
In the afternoon, Addario took over his portion of the argument, emphasizing on a point brought up by Gottardi earlier: That Hauwei did sell Skycom in 2007 to a holding company (Canicula Holdings), that Meng did leave Skycom's board of directors at that point, and that Skycom and Huawei became separate legal entities.
That was one of several points of contention Addario brought up to not only the U.S. ROC, but also to a pair of Reuters reports in 2012 and 2013 that initially pointed to Skycom's activities in Iran and its links to Huawei. Addario noted that Crown and U.S. officials built its case on shaky ground because it was based on the Reuters reports that was not proven in court.
"The allegations that were made in the Reuters articles, Ms. Meng repudiated it on slide15 of the PowerPoint, and the requesting state [the United States] did not lead [or introduce] evidence to prove the allegations in the journalist's story," Addario said. "So in terms of what's happening in this litigation, there is no evidence that Skycom engaged in non-compliance about embargoed equipment – and there is no evidence that Ms. Meng's statements about compliance was false."
On the Crown's argument that Skycom was essentially Huawei because it was an unofficial subsidiary – and that the new owners of Skycom at Canicula were Huawei employees, Addario replied that it does not change the fact hat legally, Skycom and Huawei were separate.
In that sense, when Meng mentioned in her 2013 meeting with HSBC that Skycom was "controllable" was a reference to the two companies' working partnership - not of an official link.
"We distinguish between control - which we say Ms. Meng was transparent about - and legal subsidiary, which Skycom and Canicula were not," Addario said, furthering his stance when questioned by Holmes on the fact that two Canicula directors being Huawei employees complicates the ownership structure of Huawei/Skycom/Canicula.
"I'm purely making a submission about whether it's fair to gang up on the person sought [in extradition, Meng] about the term 'subsidiary' in one lie when in fact, 'subsidiary' has not been defined in these proceedings. And if it were, it was our understanding that [Skycom] is not a subsidiary," Addario added."... Huawei presumably controls through their employees Skycom, but that doesn't make it a legal subsidiary."
Addario also noted that relationship between Skycom and Huawei was "not clandestine," meaning HSBC knew of the situation. The fact that the bank continued to service both Huawei and Skycom after the Reuters reports demonstrated that the bank was not worried about U.S. sanctions, Addario added, but about the "public manifest of ownership" structure for Huawei/Skycom alleged in the Reuters reports.
"When presented by Ms. Meng with the information in 2013, a sophisticated banker [with HSBC] asked no questions," Addario concluded.
On Wednesday and Thursday, Holmes challenged the Crown position argued by Crown lawyer Robert Frater, including Frater’s contention that the case – which prosecutors say consists essentially of Meng lying to HSBC to maintain banking services for Huawei in 2013 – is straightforward and not unique.
That argument matters, legal experts say, because extradition cases typically result in committal in Canada, with only a tiny fraction stayed (which allows the accused to go free).
Holmes, however, challenged Frater’s argument numerous times in lengthy lines of questioning on Wednesday and Thursday, including arguing that HSBC did not suffer any material loss from its banking relationship with Huawei, and that some within the bank knew “the true state of affairs” between Huawei and subsidiary Skycom (which was selling embargoed telecom equipment in Iran against U.S. sanctions).
Holmes also went at length into questioning the Crown’s position that Meng’s 2013 comments led to fraud, noting that only money-clearing of Iranian transactions through the U.S. banking system would trigger violations of sanctions.
The judge asked Frater numerous times whether Meng would be expected to alert HSBC on money-clearing complexities – which would appear to be what triggered potential sanction violations (and the risk of penalties to be incurred by HSBC, which is the basis of the U.S. fraud charge against Meng).
Frater replied that Huawei officials made presentations to other banks similar to the one Meng made to HSBC, arguing that these presentations show a coordinated effort to assure banks of the legality of continuing banking relations with Huawei. The intent to be dishonest in order to secure credit - leading to HSBC being at risk of penalties - shows a “complete” case for fraud, Frater said.
The Meng defence continues its arguments next week – the final week of scheduled court dates in the marathon extradition case.
