How was Huawei's director arrested in Canada?

When a Cathay Pacific flight departed from Hong Kong to Vancouver at noon on December 1, Huawei CFO Meng Wanzhou planned to stay in the city for 12 hours for a layover before continuing on to Mexico.

Vancouver, the largest city in British Columbia, Canada, holds a special place for Meng Wanzhou and many other Chinese "super-rich" because it is where they can buy a house, send their children to study abroad, and occasionally visit for a vacation or to relax, according toBloomberg.

Meng, 46, the chief financial officer of Huawei, a Chinese technology giant with branches in more than 170 countries, still takes a few weeks out of her busy schedule to visit Vancouver each year. She often visits the Canadian coastal city in the summer when her children, who are studying abroad, come to enjoy the clear waters and sun-drenched mountains.

She arrived in August, strolling and taking photos with her family in a local park. But four months later, the Vancouver getaway has become a prison for Huawei’s powerful chief financial officer.

As she got off the plane, Canadian police showed up and informed her that she was being arrested at the request of US authorities because she was suspected of violating US trade sanctions against Iran. She was being held pending extradition to the US.

Court records at a hearing on December 7 showed that the arrest warrant for Ms. Meng was issued by the US Eastern District Court of New York on August 22, after there were signs that Ms. Meng was involved in a conspiracy to defraud financial institutions to conduct transactions that violated Washington's embargo on Tehran, according toNYTimes.

A Canadian judge rushed to sign an arrest warrant for Meng on November 30, after Canadian authorities learned that she would be transiting in Vancouver on her flight from Hong Kong to Mexico the following day. Canadian prosecutors allege that from 2009 to 2014, Meng’s Huawei used Skycom Tech, a Hong Kong-based company, to conduct business with telecommunications companies in Iran, in direct violation of US sanctions.

AfterReutersAfter several banks published articles in 2013 that alleged that Skycom had violated sanctions by importing US-made computer equipment into Iran, Meng arranged a meeting with the head of one of those banks.

During the hearing on December 7, David Martin, Ms. Meng’s lawyer, confirmed that the bank was HSBC, a global financial institution headquartered in London with many branches in the U.S. After many troubles with U.S. authorities over anti-money laundering regulations, HSBC became cautious and decided to hire consulting firm Exiger to send experts to monitor compliance with U.S. law.

During her presentation to HSBC, Ms. Meng claimed that all of Huawei’s operations in Iran were in compliance with U.S. sanctions. She explained that Huawei’s relationship with Skycom was part of normal business operations and that Huawei had sold all of its shares in Skycom.

But it was Exiger’s supervisors at HSBC who discovered suspicious transactions involving Huawei to Iran and reported them to the US Justice Department, two people familiar with the matter said. The Justice Department is investigating Huawei, similar to the investigation into another Chinese tech giant, ZTE.

Between 2014 and 2016 and into early 2017, Ms. Meng frequently traveled to the United States, where her 16-year-old son was attending high school in Boston, Massachusetts. But by April 2017, when Huawei realized it was the subject of a U.S. investigation, Ms. Meng had stopped entering the country.

Canadian Justice Department prosecutor John Gibb-Carsley said Meng’s presentation to the bank representative constituted fraud against a financial institution, a crime that could see her imprisoned for up to 30 years if convicted. US and Canadian authorities say that, contrary to Meng’s claims, Huawei operated Skycom as an “informal subsidiary” and sought to conceal the connection.

The evidence they presented was that Skycom employees continued to use email addresses with Huawei domains, their employee badges and letterheads also had Huawei logos. Skycom documents showed that the company that bought Skycom in 2009 was also controlled by Huawei until at least 2014. Meng’s lawyers denied the allegations, saying that Meng’s presentation was prepared by Huawei’s legal team and that the evidence presented by the US side was not solid.

Bail battle

While the Canadian court has yet to issue a ruling, the battle for Meng’s bail is revolving around her ties to Vancouver. If the judge finds that she has close ties to the city, the Huawei CFO could be transferred from jail to house arrest.

Gibb-Carsley said Meng’s two-week annual vacations in Vancouver were not significant enough to warrant bail, and that if granted bail, she would likely use her resources and connections to fly back to China, which does not have an extradition treaty with the United States.

The US Justice Department also warned Canada that Ms. Meng had been issued at least seven passports in the past 11 years, including four Chinese passports and three Hong Kong passports, increasing the risk of flight if she were released on bail.

Without bail, Meng faces a lengthy jail term in Vancouver, as the extradition process from Canada to the United States could take years. Faced with that risk, her lawyers are mobilizing a series of witnesses, including security companies, to prove that she will not flee back to her home country.

People like Ms. Meng have long been blamed by Canadians for fueling Vancouver’s housing boom, which has made the city the most expensive in North America. Ms. Meng bought a six-bedroom condo in Vancouver in 2009, now worth about $4.2 million. In 2006, she bought a second mansion on a 22,000-square-foot plot of land for more than $12.2 million. Ms. Meng pledged to put up both homes as part of her bail agreement.

Although Meng and her husband, Xiaozong Liu, have two homes in Vancouver, they still live in Shenzhen with their 10-year-old daughter. Her lawyer assured the court that if released on bail, the family would move to Vancouver and that her son, who is studying in the United States, would come here to celebrate Christmas with her.

According to the lawyer, Ms. Meng’s connections to Vancouver are genuine and she will not flee because “she has a home here.” He proposed that the court impose house arrest, in which Ms. Meng must wear a GPS monitoring device and submit to random police checks.

This argument of the lawyer did not convince the prosecutor Gibb-Carsley. He said that Ms. Meng is the daughter of Ren Zhengfei, the chairman of Huawei, who has a fortune of up to 3.2 billion USD, so the 1 million USD bail is like "a grain of sand in the desert" for her and she can easily accept losing that amount of money to be free.

"I'm not saying that rich people can't post bail," Gibb-Carsley said. "But I think in terms of the value of the bail, we're in a different world."