VANCOUVER, British Columbia – The reasons why the United States has asked the Canadian authorities to arrest a top manager of Chinese technology company Huawei last week were puzzled out in a Canadian courtroom.
Canadian public prosecutors were charged with fraud at a hearing against Meng Wanzhou, Huawei's chief financial officer and daughter of the company's founder in Vancouver. The core of the charges related to how Ms. Meng personally participated in a program that induced US financial institutions to conduct transactions that violated United States sanctions against Iran.
The hearing highlighted an incident that shook relations between the United States and China. When Ms. Meng changed planes in Vancouver on December 1, she was arrested at the instigation of the United States, which for years has been investigating possible ties between Huawei and the Chinese government or the Communist Party.
Their arrest took place under the name of United States and China are close to negotiation to end a brutal trade war. Due to Ms. Meng's position as a leader and part of her elite in China, news of her arrest has spread throughout the country.
With Mrs. Meng, 46, sitting in a glass cabinet at the Supreme Court of British Columbia Gibb-Carsley explained what had led to her arrest. He said that between 2009 and 2014, Huawei used a Hong Kong-based company called Skycom Tech for transactions in Iran and business with telecommunications companies there, which violates American sanctions against Iran. Banks in the United States released financial transactions for Huawei and inadvertently did business with Skycom.
The banks have been "victims" of Ms. Meng's fraud, Gibb-Carsley said.
In 2013 Reuters articles claimed that Huawei was using Skycom for business in Iran and was trying to import American computer equipment into the country in violation of sanctions. Several financial institutions asked Huawei if the allegations were accurate, Gibb-Carsley said.
At that time, Ms. Meng arranged a meeting with an executive of one of the financial institutions, he said. During the meeting, she spoke through an English interpreter and presented PowerPoint slides in Chinese. Huawei committed itself in Iran in strict compliance with United States sanctions. Ms. Meng said that Huawei's involvement with Skycom was part of normal business operations and that Huawei had once held shares in Skycom, but had since sold them.
However, there was no difference between Skycom and Huawei, Gibb-Carsley said. Huawei operated Skycom as an unofficial subsidiary, trying to keep the connection between companies secret.
Skycom employees used Huawei e-mail addresses and had badges and letterheads with the Huawei logo, he said. Skycom's records indicate that a unit to which the company was sold in 2009 was also controlled by Huawei at least until 2014. This is clear from an affidavit that was read in court. Mr. Gibb-Carsley presented his presentation to the unnamed financial institution as a fraud.
An arrest warrant for Ms. Meng was issued on August 22 in the eastern district of New York, he added. A Canadian judiciary issued an arrest warrant for Ms. Meng on November 30, after it became known that she would change planes in Vancouver on her way from Hong Kong to Mexico.
Marc Raimondi, a spokesman for the US Department of Justice, declined to comment on the allegations made on Friday.
The allegations against Ms. Meng and Huawei are similar to those made by the United States government in 2016 against ZTE, another major Chinese technology company. In this case, American officials released internal ZTE documents in which executives described setting up "cut-off companies" that did business with Iran, North Korea, and other nations that were criminalized by the US government ,
Mr. Gibb-Carsley argued against the bail for Ms. Meng. He said that she had no close ties in Canada and huge financial resources, and that China had no extradition treaties with the United States or Canada.
A lawyer for Ms. Meng, David Martin, offered two properties in Vancouver and one in cash to secure their bail. Ms. Meng would not violate a court order, Martin said. He would "humiliate and embarrass the father she loves" and embarrass the thousands of Huawei employees. Ms. Meng's father is Ren Zhengfei, founder of Huawei.
"It would not embarrass China itself," Mr. Martin said.
The judge in the case is to decide later on Friday about the bail application.  Each delivery process can take weeks or months, depending on the country where the suspect is arrested and whether the suspect rejects the extradition request. The US Department of Justice must now present evidence to the Canadian court to support his request and to make a full extradition request 60 days after the arrest.