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Huawei CFO Meng Wanzhou, who was arrested on an extradition warrant, appears at her B.C. Supreme Court bail hearing in a drawing in Vancouver, B.C., on Dec. 7, 2018.

STRINGER/Reuters

The United States government is alleging the chief financial officer of China’s Huawei Technologies committed fraud in 2013, when she misled American financial institutions about her company’s links to a Hong Kong firm doing business in Iran, opening the banks to risk of violating U.S. sanctions.

Meng Wanzhou’s lawyers told a B.C. Supreme Court on Friday that the American allegations are built on faulty evidence, noting Huawei did own Skycom from 2008 to 2009, but the telecom giant had divested fully and she had left the other firm’s board.

As a gallery full of international media and concerned locals sat rapt in downtown Vancouver’s largest courtroom, a legal argument over whether Ms. Meng should be awarded bail while facing extradition to the United States began delving into the details of a saga that has drawn Canada into a global power struggle between the United States and China, which has called for her release.

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The judge heard from federal Crown counsel that Ms. Meng’s pattern of avoiding travel to the United States in recent years as well as her extraordinary wealth and international connections made her an extreme flight risk. Her legal team countered that Ms. Meng would never “lose face” by embarrassing the company founded by her father and that she was willing to give up both her Chinese and Hong Kong passports as well as submit to high-level surveillance. If freed, her lead lawyer said, she plans to live in one of her two Vancouver properties with her husband and two school-aged children, who lived in the city from 2009 to 2012 while her husband pursued a master’s degree at a local university.

Ms. Meng, 46, began her career with the company as a receptionist in 1993 before entering into the accounting department and moving up the corporate ranks, the court heard.

The U.S. allegations, detailed in a provisional arrest warrant granted last August by a New York judge, hinge on a 2013 presentation Ms. Meng gave to HSBC and its American affiliate. The financial institution asked for the meeting after media reports stated her company had a much closer relationship to Skycom than was previously known.

The U.S. provisional warrant, granted on Aug. 22 in the Eastern District of New York, alleges Ms. Meng made a number of misrepresentations, including that “Huawei operates in Iran in strict compliance with applicable laws, regulations and sanctions of UN, U.S. and EU,” although Skycom was using the U.S. financial system to conduct prohibited Iran-related transactions. Several of HSBC’s risk committees relied, at least in part, on this presentation and continued servicing Huawei, according to court documents.

David Martin, Ms. Meng’s lead counsel asked why HSBC did not seek redress through any legal action if the fraud was committed. He also said no criminal charges have been levied against Huawei, unlike fellow Chinese telecom giant ZTE, which agreed to pay up to US$1.4-billion in penalties this summer after breaking the trade embargo with Iran.

“The U.S. government doesn’t hesitate to charge large entities,” Mr. Martin noted.

None of the allegations against Ms. Meng has been proven in court and the bail hearing resumes on Monday, when security experts are expected to detail plans to ensure she stays in Vancouver if she is granted bail.

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Ms. Meng’s arrest at Vancouver International Airport last weekend came on the same day U.S. President Donald Trump and Chinese President Xi Jinping agreed to a temporary trade-war truce at the Group of 20 summit in Argentina, which Prime Minister Justin Trudeau also attended. Mr. Trudeau and U.S. national-security adviser John Bolton have said they both knew of the arrest plans in advance.

Ms. Meng walked into the high-security Vancouver courtroom on Friday morning upbeat and smiling, and clad in a green prison sweatsuit. Before the judge entered the chambers, she shared a handshake with Mr. Martin and then sat in a bulletproof defendant’s box, where she asked for a pen and a notepad.

Near the end of her hearing, Ms. Meng asked for some tissue paper to dab her eyes as her lead lawyer spoke of the many people who offered up character references in support of his client.

Frank Xu was one of dozens of residents to attend the hearing. Mr. Xu, who attended Huazhong University of Science and Technology in China, where Ms. Meng graduated, said he paid a lot of attention to this case because of that connection, but also because he is a Huawei cellphone user.

“[If] those allegations are proven true, she will be in jail for 30 years. That number, I remember it very clearly," he said outside the courthouse.

With reports from Robert Fife and Steven Chase in Ottawa and Wendy Stueck and Ian Bailey in Vancouver

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