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Meng Wanzhou leaves the B.C. Supreme Court during a break from her extradition hearing in Vancouver on Aug. 18, 2021. The United States is seeking the extradition of the Huawei executive on a charge of fraud.DARRYL DYCK/The Canadian Press

Canada’s Attorney-General had one last chance on Wednesday to set out the allegations against Huawei executive Meng Wanzhou to a judge who has described them as unusual and poorly explained.

The United States is seeking the extradition of Ms. Meng, the chief financial officer of China’s biggest telecom company, Huawei Technologies Co. Ltd., on a charge of fraud. In a document laying out its case to Canadian authorities, the U.S. says Ms. Meng lied to the global bank HSBC, putting it at risk of violating sanctions against Iran.

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The RCMP’s arrest of Ms. Meng in Vancouver in December, 2018, at the request of the U.S., was quickly followed by China’s detention of two Canadians, Michael Kovrig and Michael Spavor. They have been held for nearly 1,000 days. Ms. Meng is free on bail.

Extradition involves a judicial phase and a political one, and the judicial phase, barring appeals, wrapped up its hearings on Wednesday. The case has forced the parties, plus the judge, to grapple with the complexities of U.S. sanctions law. Ms. Meng was not a U.S. citizen or resident, and Huawei was engaged in permissible activity in Iran, evidence has shown. But certain Iranian transactions, if made in U.S. dollars through a bank branch in the United States, are illegal.

The U.S. alleges Ms. Meng misrepresented Huawei’s relationship with another company doing business in Iran, Skycom Tech Co. Ltd. It says they were effectively one company, and that in a 2013 PowerPoint presentation to HSBC in Hong Kong, Ms. Meng falsely represented them as partners, and gave false assurances that both companies were complying with U.S. sanctions on Iran.

Photographs of Canadians Michael Spavor, left, and Michael Kovrig are shown on a video monitor as former U.S. Secretary of State Mike Pompeo speaks during a news conference on July 1, 2020, in Washington. Mr. Blinken demanded the immediate and unconditional release of the two Canadians.MANUEL BALCE CENATA/AFP/Getty Images

Associate Chief Justice Heather Holmes of the B.C. Supreme Court has called the U.S. arguments unusual for a fraud charge in that HSBC suffered no loss, and appeared to know the truth of the relationship at issue. She has said she was “troubled” by the lack of clarity in the U.S. charging document around permissible business in Iran – Ms. Meng was candid with the bank that Huawei and Skycom were doing business there – and how Huawei’s conduct brought it into conflict with sanctions.

On Wednesday, Robert Frater, a lawyer for the Canadian Attorney-General’s ministry, which is presenting the U.S. case, told the court Ms. Meng had given false assurances to HSBC: that Huawei subsidiaries in “sensitive” countries such as Iran would not open HSBC accounts; and that they would not have conducted business transactions with HSBC.

“We say the only sensible meaning ... is effectively that if you, HSBC, keep Huawei as a client, you are at no risk of sanctions violations respecting Iranian business,” Mr. Frater said.

Protesters hold signs outside the B.C. Supreme Court during Ms. Wanzhou's extradition hearing in Vancouver on Jan. 21, 2020.JENNIFER GAUTHIER/Reuters

He said that Frank Addario, a lawyer for Ms. Meng, had tried this week to explain away her false assurances, undertaking “the Herculean task of trying to persuade you that Skycom was not a subsidiary in order to give that statement some semblance of truth.” He said the U.S. had supplied evidence that showed the two companies were in effect one and the same.

Ms. Meng’s presentation was “blatantly misleading and dishonest,” he said.

A key point of contention is a transaction in which Skycom paid a British company, Networkers, millions of dollars for technology services in Iran. Skycom used a Chinese bank, and Networkers used a U.K. branch of HSBC. But HSBC put the transaction through a U.S. branch.

Referring to that transaction, Mr. Frater said Ms. Meng’s misrepresentations put the bank at risk: “HSBC is not alive to the truth of the Huawei-Skycom relationship and thinks that Skycom is operating in compliance with sanctions. ... She has distanced Huawei from Skycom, said that everyone is behaving legally and that subsidiaries in sensitive countries will not do business with HSBC in any event. So there is no reason to question that transaction on any level.”

Defence lawyers Mark Sandler, left, and Scott Fenton leave the B.C. Supreme Court during a break in Vancouver on Aug. 17, 2021.DARRYL DYCK/The Canadian Press

Mr. Frater disputed a contention from Mr. Addario that, even assuming Ms. Meng lied, there was no evidence that HSBC would have conducted its business any differently had she told the truth.

“As if that is something we have to prove,” Mr. Frater said, and accused Ms. Meng’s lawyers of blaming the victim, HSBC. Victims must be given the chance to act without being misled about material facts, he said.

The meeting between Ms. Meng and HSBC occurred after Reuters published articles in late 2012 and early 2013 saying Skycom tried to sell embargoed U.S.-manufactured equipment to Iran. Mr. Addario told the judge this week there was “zero” evidence from the U.S. that Skycom or Huawei had violated sanctions – and Mr. Frater acknowledged that Mr. Addario was correct.

“He’s right in the sense that the ROC [record of the case] does not follow up that allegation from Reuters about dealing in embargoed equipment with proof.”

Still, he said, Mr. Addario “is seeking to deflect your attention from the real point: that the fraud exists not because of any dealing in ... equipment but by misleading HSBC about the nature of the relationship with Skycom and the risk that Iran-based transactions will continue.”

The misrepresentations deprived HSBC of the opportunity to decide whether it wished to continue doing business with Huawei, he said.

Associate Chief Justice Holmes will likely take months to rule on the extradition request. It is ultimately up to the justice minister, if the judge allows extradition, to decide whether to go ahead with it.

Foreign Affairs Minister Marc Garneau promised on Aug. 11 that Canada will continue to fight for the release of Michael Spavor and other Canadians arbitrarily detained in China. Garneau said his government condemns 'in the strongest possible terms' a Chinese court's 11-year prison sentence for Spavor, which followed a closed-door trial in March in which the entrepreneur was found guilty of spying on China.

The Canadian Press

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