VANCOUVER, British Columbia (CN) — Huawei CFO Meng Wanzhou’s lawyers claim Canadian prosecutors are trying to expand the law of fraud in Canada to secure the tech executive’s extradition to the U.S.
On Friday in B.C. Supreme Court in Vancouver, Meng’s lawyer Eric Gottardi told Associate Chief Justice Heather Holmes that the U.S. case against Meng as set out by Canadian prosecutors presents a “theory of risk would significantly expand the ambit of the law of fraud in Canada.”
Gottardi said the prosecution in submissions earlier this week relied on “selective” portions of outdated case law and a 35-year-old text book on Canadian fraud law that have since been “superseded by a series of Supreme Court decisions."
“Those decisions, we say, make clear that a real risk of economic loss must be shown for the Crown to prove the deprivation element of fraud,” Gottardi told the court.
Providing an overview of defense submissions on committal, Gottardi detailed purported weaknesses and evidentiary gaps in the case against Meng. He said there are fatal flaws in the U.S.'s fraud allegations, in contrast to typical fraud cases involving fraud that are more cut and dry. The prosecution, Gottardi said, wrongly asserts that the case against Meng is not unique or exceptional.
“We say, of course, that it is an exceptional case both legally and factually,” he said. “Frauds are usually straight forward. A lie is told, the result of the lie, a victim is cheated out of money or at least put at risk of losing money.”
Gottardi said Meng’s purported fraud on HSBC, which she’s accused of misleading about Huawei’s true relationship with an Iran-based affiliate that potentially violated U.S. sanctions, is “ambiguous at best.” The risk of economic loss to HSBC, he said, is “wholly illusory.”
“One of the things that makes this case so unusual is the difficulty in pinning down exactly what risk is alleged by the requesting state to form the basis of the fraud,” Gottardi told the court, adding the U.S. case involves “vague and shifting theories of risk” that exemplify the weakness of the case against Meng.
While Meng is accused of putting HSBC at risk of violating sanctions on Iran, the bank was never actually penalized for clearing transactions through the U.S. involving Huawei’s Iranian affiliate Skycom. Skycom had paid a staffing firm known as Networkers from a Chinese bank, which was routed through HSBC UK, and later the bank’s U.S. subsidiary. Prosecutor Robert Frater earlier this week, Gottardi said, had described such a potential penalty for sanctions violations as “inevitable.”
“Here we are eight years later, no prosecution for HSBC, no civil penalty, no [deferred prosecution agreement] consequence, and this of course makes sense because on the requesting state’s own theory, HSBC was an innocent dupe,” he said. “There is also no evidence that Skycom actually violated the sanctions by sending the payments to Networkers. It is not an offense to send Iran-related payments from a bank in China to a bank in the U.K., which is all that Skycom did.”
He added: “It was HSBC’s choice how to clear the payments. And there isn’t a scintilla of evidence that anything said by Ms. Meng affected this choice.”
In written submissions, the defense claims the U.S. case against Meng rests on a “theory of liability is unprecedented in Canadian law.”
“In no prior case has an individual been found guilty of fraud for exposing another individual — much less a sophisticated multinational corporate entity — to the hypothetical risk of a separate and future enforcement proceeding,” Meng’s committal submissions state.
But Frater told Holmes on Thursday that fraud cases involve deprivation, and “deprivation exists where a victim is deprived of the opportunity to protect itself.”
In Meng’s case, Frater said, the bank was ill-informed about Huawei’s true relationship to Skycom and was robbed of the opportunity to block transactions involving the firm and its Iranian activities, or possibly end the banking relationship with the tech giant altogether. Fraud and the law of deprivation, Frater said, incentivizes honesty in commercial dealings. HSBC in this case, he said, was clearly at risk of both civil and criminal penalties even as an “innocent dupe” since it still faced a “risk of prejudice.”
“That’s really the very problem faced by HSBC,” Frater said Thursday. “Whether or not they are an innocent dupe, the fact that the Networkers transaction is illegal is going to get them in a pickle with the regulator.”
Moreover, Frater said Meng’s failure to disclose the true relationship between Huawei and Skycom to an HSBC executive in a now infamous PowerPoint presentation in Hong Kong in 2013 put the bank at real risk, rather than a speculative or remote risk.
“It was foreseeable that HSBC would continue to provide a full range of banking services. That was not a remote risk. It is exactly what Huawei wanted to happen,” Frater said, adding that it posed “an actual and real risk to HSBC of violating sanctions on Iran.”
Frater’s oral submissions Thursday focused on the Crown’s contention that Meng left out crucial information in the PowerPoint presentation given to HSBC’s representative, echoing the Attorney General of Canada’s written committal submissions.
“The PowerPoint presentation that Ms. Meng presented to HSBC Witness B addressed U.S. sanctions and trade compliance, reinforcing both her knowledge of the relevance of Huawei’s control of Skycom to HSBC’s risks, and her intention to overcome HSBC’s concerns about those risks by fraudulent misstatements,” the attorney general's committal submissions state.
“Huawei’s control of Skycom was information crucial to HSBC’s determination of whether to continue or to end its relationship with Huawei.”
The hearings continue Monday and are set to wrap up Aug. 20.
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