Lying to Bank Is Fraud in Canada, Prosecutors Say of Huawei Exec Facing Extradition

VANCOUVER, British Columbia (CN) – Canadian prosecutors said Wednesday that fraud, not U.S. sanctions, is at the heart of the extradition case against Huawei CFO Meng Wanzhou, urging a judge to only consider the potential “Canadian criminality” of the offense when determining if she should be handed over to the United States.

Robert Frater, chief general counsel at the Department of Justice, opened the third day of a hearing into the “double criminality” element of the United States’ extradition bid for the Huawei executive, offering an analysis of the role of judges in such cases that sharply contrasted arguments by Meng’s defense teams this week.

Huawei chief financial officer Meng Wanzhou, who is out on bail and remains under partial house arrest after she was detained last year at the behest of American authorities, leaves her home in Vancouver, British Columbia, on Jan. 17, 2020. (Jonathan Hayward/The Canadian Press via AP, File)

Meng is accused by the federal authorities in the United States of misrepresenting Huawei’s ownership of an Iranian subsidiary known as Skycom. The U.S. claims she was dispatched to a meeting with a HSBC bank representative in Hong Kong in 2013 to allay fears of regulatory and reputational risk posed by the company’s dealings in Iran while under American sanctions.

Frater said case law prevents judges from going “knee deep” into the foreign indictments of extradition targets, while also avoiding a focus on technical differences between the laws of requesting and requested states. In addition, he said fraud charges in Canada need not include actual loss or deprivation, but simply the risk of deprivation.

While the defense relied upon potential “regulatory risk” posed to HSBC, which they argued only arose from U.S. sanctions, Frater said the potential “reputational risk” to the bank was real and severe when considering doing business with Iran, with “huge sums of money involved” in loans and credit facilities granted to Huawei. Even if the bank didn’t lose money on loans extended to the company, Frater said, “the bank is entitled to honesty in being able to assess whether it is going to be at risk.”

Frater likened a loan granted based on a lie to “rolling loaded dice” after being “enticed into a gamble.” He said the risk to the bank’s reputation posed by doing business in violation of sanctions was high, especially given HSBC’s past unlawful dealings in countries such as Libya and Sudan for which it was under a deferred prosecution agreement.

“Every business has to be concerned about its reputation,” Frater told Associate Chief Justice Heather Holmes. “Particularly one that’s already on a deferred prosecution agreement for dealing with countries like Libya, Sudan and Burma. You have to be in a position to know who you’re dealing with because you’re already behind the eight-ball reputation-wise from having entered into that deferred prosecution agreement.”

He added: “I’m not using sanctions as foreign law. It’s simply a fact that is a contextual piece of background that you’re entitled to look at.”

However, Holmes questioned if there was evidence that a misrepresentation about Huawei and Skycom’s relationship would have even mattered to the bank’s reputation. Frater said the bank had obvious concerns when that relationship was detailed in a Reuters news story, prompting the fateful meeting in Hong Kong between the HSBC representative and Meng. But, Frater said, “anytime you’re giving out money based on a misrepresentation, you’re at risk.”

Moreover, even though there are no past extradition cases “exactly like this one,” Frater said. “Lying to a bank is fraud.”

The prosecution’s arguments wrapped up just before lunch and Holmes agreed to adjourn the case until Thursday morning.

 

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