An Apology to Stecklow: Huawei Dissembled About Skycom, to All of Us

Two years ago, after being laid off by Huawei for questionable reasons, I published a book about my experiences with the company: Huidu - Inside Huawei.  I still stand by most of the content in the book.  

I stand by my arguments that Huawei has been treated unfairly by the U.S. Government, in some cases for duplicitous cause. I stand by my assertions that, despite its global success, Huawei is remarkably internally dysfunctional, as well as prejudiced in terms of its treatment of and general lack of respect for non-Chinese, whether employees or otherwise. 

But, I would like to extend an apology for a section of one chapter in the book, a chapter which re-captures a January 2013 blog post in which I lambast one-time Wall Street Journal, current Reuters investigative journalist Steve Stecklow. The blog post focused on Stecklow’s reporting on Huawei’s alleged circumvention of U.S. sanctions on Iran, specifically Huawei’s relationship with a Hong-Kong company called Skycom.

<Aside: I'm a tad torn on this. Not because I have come to believe that I was misled by my employer and am now in part recanting past positions, but, rather, because Stecklow gave a January 2019 presentation to an Asia Society audience in he which dedicated a snarky half-hour to deriding the blog-post section of the chapter referenced above and yet simultaneously used it to frame his self-congratulatory review of his reporting on Huawei and Skycom>.

Stecklow and I had multiple and substantive conversations related to his reporting on the Huawei-Skycom-Iran topic back in 2011-2012.  To the extent that he quoted me in his reporting, it was in the context of for-the-record guidance either developed or approved at Huawei HQ in Shenzhen, including the boilerplate statement that Skycom was an independent company with which Huawei had a normal arms-length business relationship.

The same applies to representations the Huawei D.C. Office may have made to relevant government agencies or office in the Congress.  We did not deliver such messaging blithely.  Indeed, over my eight-year tenure with Huawei, the Americans in the Washington Office took Iran and export control-related matters very seriously, and we pushed hard to have Legal and Trade Compliance leadership at HQ provide us with proof of Huawei compliance with U.S., EU, UN or other relevant sanctions.

We were skeptical, even deeply so, for instance when we learned that Huawei’s CFO had been a Board Member of Skycom in the late 2000’s. But HQ seemed to have legitimate answers to our questions and genuine in their reactions to our probes, and, well, we could not imagine that Huawei leadership would dissemble about matters as critically important to Huawei’s global business – it’s sustainability writ large – as U.S. export control and sanctions policies. 

Neither Stecklow nor the U.S. Government has yet produced – publicly - any evidence that Huawei was indeed selling or has indeed sold sensitive, sanctioned or export-controlled technology to Iran or elsewhere, directly or indirectly. If the U.S. Government had such a smoking gun, given the pattern of their behavior in all matters Huawei-related, they’d have long ago crucified the company

<Notably, Stecklow’s early reporting on Huawei providing network equipment with integrated law enforcement interfaces (not export-controlled at that time) to Iran being somehow uniquely nefarious was silly: As explained to him at the time, global network standards as approved by carriers and governments require vendors to incorporate such interfaces, for instance under the U.S. CALEA law>.

But, Stecklow’s 2011-2012 - and since - reporting on Huawei’s tangled relationships with Skycom seems to have a pretty strong basis in fact, notwithstanding Huawei’s historical denials and attestations that such entities were independent.  Indeed, his reporting has been cited as evidence in Iran sanctions-related Canadian and U.S. legal cases against Huawei’s CFO, now two-years detained in Canada pending extradition to the U.S., as well as related and broader U.S. charges against Huawei writ large.

Grossly simplified, the U.S. believes that Huawei leveraged a controlling relationship with Skycom to circumvent U.S. sanctions on Iran.  That said, the focus of U.S. criminal charges is that Huawei’s CFO and other executives pursued a conscious scheme to mislead banks about the company’s relationship with Skycom, and based on those misrepresentations, HSBC for one may have inadvertently violated sanctions or export controls by clearing funds related to illegal transactions out of Iran.

Huawei maintains that it sold its interest in Skycom in 2007 and denies any wrongdoing, including in the context of presentations or representations to banks or otherwise.

I have grown to believe that the U.S. may have a strong case.

Today, September 16, 2020, Stecklow and Reuters colleagues ran a piece titled Top Huawei executives had close ties to company at center of U.S. criminal case, prompting this blog post and my apology to Steve for my January 2013 blog post and its re-purposing in a section of a chapter in my 2018 book.

It seems that Stecklow and company have discovered that the Huawei-Skycom relationship that Huawei maintains was severed in 2007 remained alive and well in Brasil from 2007 to at least 2012. 

While Skycom was sold off to Canicula Holdings – a holding company registered in Mauritius in 2007 which the U.S. Government has suggested is another Huawei-funded shell – Stecklow reports that previously unknown Skycom shares in Huawei Brasil, dating back to 2002, were not sold until 2012 (and that was to Netherlands-registered Huawei Technologies BV).

The nugget in their reporting that stood out to me was the fact that two of Huawei’s three current CEOs – Ken Hu and Guo Ping – were directors of Huawei affiliate Hua Ying Management Co Ltd that bought 100% of Skycom in February 2007 and transferred those shares to Canicula nine months later.  Oh, of note, Huawei’s CFO now under house arrest was Hua Ying’s corporate secretary back in 2007 as well.

What bothered me when reading the article wasn’t that Huawei may or may not (I now lean towards “may") have maintained control of Skycom well beyond 2007 and, related, indirectly contributed to violations of U.S. sanctions whether through Skycom or in the context of the more convoluted path of briefings to banks.  No, my concern was much more parochial.

Over my years with the company, particularly in my early years, I had a number of opportunities to interact with both Ken and Guo, one-on-one (separately), whether on their visits to the U.S. or over lunch or coffee during my visits to Shenzhen.  Given the importance of the U.S. market, the political environment, and U.S.-China relations more broadly, such meetings were not unusual.

The thing is, I recall – perhaps incorrectly - raising Stecklow/Skycom concerns with one or another or both of them at some point in the 2011-2012 time frame.  Iran-related concerns were a big deal for us in the D.C. Office.  American emotions related to Iran are always high and any perception of Huawei wrongdoings could have been devastating.

I had no idea at the time that they had both been intimately involved with Skycom, as Reuters has now uncovered. 

And yet, I have no recollection of either of them in any way acknowledging having ever heard of Skycom when the topic was raised.  Had we in the Washington Office had access to the full Skycom and Iran histories as early as 2011-2012, we could have adjusted our posture in D.C.  At the very least, we might have avoided potentially making fools of ourselves briefing U.S. Government officials with details they may well have known to be, at best, “incomplete.”

Sadly, this pattern of behavior – compartmentalization of information essentially based on nationality – is, in my experience, the Huawei norm, not the exception.

Is it any wonder Huawei has always been and remains trust-challenged in D.C.?