China's Huawei reportedly targeted in US criminal probe

Criminal probe is at and 'advanced stage'

Rishi Iyengar/CNN

(CNN) - US federal prosecutors are reportedly working on a criminal investigation into Chinese telecom equipment giant Huawei.

Investigators are looking into whether the firm stole trade secrets from US business partners, The Wall Street Journal reported Wednesday, citing unnamed sources.

The reported probe would complicate efforts by the US and Chinese governments to reach a deal to end the trade war that has shaken financial markets around the globe. Intellectual property theft is one of the issues at the heart of the dispute between the two economic superpowers, and Huawei has already come under pressure from the US government on other fronts.

The Journal reported that the investigation was spurred in part by civil litigation between Huawei, which makes phones and other telecom equipment, and T-Mobile. T-Mobile (TMUS) had accused Huawei of stealing information related to a robot used for testing mobile phones.

The Journal reported that the criminal probe is at an "advanced stage."

Huawei, the world's biggest maker of telecommunications equipment, declined to comment directly on the report. But it said in a statement that the disputes with T-Mobile were settled in 2017 "following a jury verdict finding neither damage, unjust enrichment nor willful and malicious conduct for T-Mobile's trade secret claim."

The Department of Justice did not immediately respond to a request for comment from CNN Business. It declined comment to The Wall Street Journal.

The report was published one day after the reclusive founder of Huawei, Ren Zhengfei, shrugged off allegations from Washington that Huawei is a threat to US national security.

He denied allegations from the Trump administration and US intelligence agencies that Beijing could use Huawei equipment to snoop on Americans. The company has also been prevented from supplying next-generation 5G equipment to Australia and New Zealand.

US lawmakers target Huawei

In another sign of the suspicion Huawei faces in Washington, a group of US lawmakers on Wednesday introduced legislation aimed at tightening the rules for Chinese telecommunications companies.

The proposed law, the Telecommunications Denial Order Enforcement Act, would ban the sale of US parts to any Chinese telecom firm that has violated US export control laws or sanctions.

Last year, the US government imposed such a ban on Huawei's smaller rival ZTE (ZTCOF) but lifted it a few months later after President Donald Trump intervened. Trump described the move as "a favor" to Chinese leader Xi Jinping.

The new legislation, introduced by a bipartisan group of lawmakers including Sen. Tom Cotton of Arkansas and Sen. Chris Van Hollen of Maryland, aims to prevent the penalties being withdrawn until the Chinese company in question has shown a pattern of compliance with US rules and cooperation with US investigations for one year.

"Huawei is effectively an intelligence-gathering arm of the Chinese Communist Party whose founder and CEO was an engineer for the People's Liberation Army," Cotton said in a statement. "It's imperative we take decisive action to protect US interests and enforce our laws."

China accuses US of 'hysteria'

The Chinese Foreign Ministry fired back on Thursday, describing the legislation as "hysteria."

"I think the behavior of these US senators is extremely arrogant and lacking in confidence," said Hua Chunying, a ministry spokeswoman. She accused the US government of using its state apparatus to suppress Chinese high-tech companies.

"This is not a normal country's normal action, and this is not what the No.1 world power should do," Hua said, calling on "certain people" in the United States to "adopt the correct attitude and stop this kind of action."

The US lawmakers' move follows the arrest of Huawei chief financial officer, Ren's daughter Meng Wanzhou, last month in Canada.

She's accused by the United States of helping Huawei cover up violations of sanctions on Iran, according to Canadian prosecutors. Meng was released on bail in mid-December, setting her up for a lengthy legal fight over extradition to the United States.

The Chinese Foreign Ministry called Meng's arrest "lawless, reasonless and ruthless." Huawei has said in a statement that the company has "every confidence that the Canadian and US legal systems will reach a just conclusion" in the case and said that the company follows all the laws and regulations where it operates.

—CNN Business' Jethro Mullen, Yong Xiong, Charles Riley and Julia Horowitz contributed to this report.

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