VANCOUVER, British Columbia—The U.S. has alleged that Huawei Technologies Co. finance chief Meng Wanzhou lied to banks about the Chinese company’s ties to a subsidiary that did business in Iran, leading those banks to clear hundreds of millions of dollars in transactions that potentially violated international sanctions.
The allegations were laid out in court filings for a bail hearing for Ms. Meng on Friday in Vancouver, where Canadian authorities arrested her last Saturday.
U.S. authorities allege Ms. Meng was part of a conspiracy “perpetrated at Huawei’s highest levels” to defraud the financial institutions by claiming that Huawei wasn’t tied to a company called Skycom Tech that operated in Iran. In fact, the U.S. claims, Huawei ran Skycom as an unofficial subsidiary.
“This is the crux, I say, of the alleged fraud,” John Gibb-Carsley, a Canadian prosecutor arguing on behalf of the U.S., said at Friday’s hearing.
Ms. Meng, the daughter of Huawei founder Ren Zhengfei, was arrested at the request of the U.S. en route from Hong Kong to Mexico. She is facing extradition to the U.S. for the alleged violation of the country’s sanctions against Iran.
Ms. Meng, wearing a dark-green track suit, sat in the back of the courtroom on Friday with a translator.
David Martin, an attorney representing Ms. Meng at the hearing, told the court “there is no evidence” that the business, Skycom, was a subsidiary of Huawei during the period in question, in 2013 and 2014. He said it had been a subsidiary, but was sold in 2009. The idea that Ms. Meng engaged in fraud will be “hotly contested,” he said.
Later in the hearing, Mr. Martin clarified that Huawei was only a Skycom shareholder.
After the hearing, Joe Kelly, a spokesman for Huawei in Shenzhen, China, said: “We will continue to follow the bail hearing on Monday. We have every confidence that the Canadian and U.S. legal systems will reach the right conclusion.”
Ms. Meng’s arrest has shaken U.S.-China relations just as the two countries reached a detente in their intensifying trade battle. The episode has roiled global financial markets, sending U.S. stocks sharply lower again on Friday, as investors worry it could escalate tensions between the world’s two largest economies.
Mr. Gibb-Carsley on Friday pointed in particular to a 2013 presentation Ms. Meng gave to an international bank. In her presentation, she said Huawei and Skycom were unrelated, Mr. Gibb-Carsley said.
Mr. Martin identified the bank as HSBC Holdings PLC, and referring to Ms. Meng’s presentation, he said: “We contest in the strongest possible terms that there is anything in this document that is misrepresented.”
The U.S. said that Ms. Meng and other Huawei representatives misrepresented Huawei’s connections to Skycom and compliance with U.S. laws after a Reuters article in 2013 detailing Huawei’s control of Skycom prompted questions from banks. Ms. Meng, U.S. authorities said, told bank executives that Huawei’s engagement with Skycom was “normal business cooperation,” leading those institutions to clear transactions that potentially violated sanctions laws.
U.S. authorities allege that Huawei misled banks because it needed to move money out of countries subject to U.S. or European Union sanctions through the international banking system. American and Eurozone financial institutions are banned from doing business with Iran and other countries because of sanctions
The Wall Street Journal reported Thursday that a federally appointed overseer at HSBC flagged suspicious transactions in the accounts of Huawei to prosecutors seeking the extradition of the Chinese company’s finance chief. A monitor charged with evaluating HSBC’s anti-money-laundering and sanctions controls in recent years relayed information about the Huawei transactions to federal prosecutors in the Eastern District of New York, the Journal reported.
HSBC, one of several banks that did business with Huawei, is cooperating with investigators and isn’t a target in the Huawei probe, the Journal reported.
The Journal reported in April that the Justice Department had launched a criminal probe into Huawei’s dealings in Iran, following administrative subpoenas on sanctions-related issues from both the Commerce Department and the Treasury Department’s Office of Foreign Assets Control.
Ms. Meng served on the board of Skycom, a Hong Kong-based firm with business in Iran, from February 2008 to April 2009, Hong Kong corporate records show.
In 2011, The Wall Street Journal reported that Huawei sometimes worked through a Hong Kong-registered company with a different name—Skycom. A Huawei executive said at the time the two companies were closely affiliated but that Huawei didn’t have any investment in Skycom
Mr. Gibb-Carsley said Skycom employees had Huawei email addresses and company badges.
Huawei has said that it isn’t aware of any wrongdoing by Ms. Meng. A spokesman had no immediate comment on Friday as the hearing was taking place.
Mr. Gibb-Carsley said the warrant for Ms. Meng’s arrest was issued by a court in New York on Aug. 22 of this year.
Ms. Meng in the past traveled to the U.S. regularly, but the last visit she made was in February and March of 2017, just before Huawei became aware in April 2017 of the U.S. criminal investigation into the company, Mr. Gibb-Carsley said. Huawei executives have altered their travel plans since then, he said.
Mr. Kelly said some Huawei executives continue to travel to the U.S. Richard Yu, chief of Huawei’s consumer products group, visited the country twice, for an industry conference and a speaking engagement early in the year.
Mr. Gibb-Carsley said Ms. Meng would be a flight risk if granted bail, pointing to what he said was her father’s multibillion-dollar fortune and the seriousness of the fraud charges, each of which he said carries as much as 30 years in prison.
Mr. Martin, the attorney representing Ms. Meng, said she isn’t a flight risk, saying that she would never breach a court order. “You can rely on her personal dignity,” he told the court, adding that she also would not flee because it would “humiliate and embarrass” her father, “who she loves.”
and Paul Vieira
contributed to this article.
Write to Jay Greene at Jay.Greene@wsj.com
Appeared in the December 8, 2018, print edition as ‘U.S. Accuses Huawei Executive of Fraud.’