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Meng Wanzhou, chief financial officer of Huawei, leaves home to attend her extradition hearing at B.C. Supreme Court, in Vancouver, on Aug. 16, 2021.DARRYL DYCK/The Canadian Press

Lawyers fighting the extradition to the United States of Huawei executive Meng Wanzhou said they had looked through every known fraud case in Canadian legal history without finding a single one like hers.

In thousands of fraud cases, the victims have relied on an offender’s deceitful words to make choices that cause themselves harm, or that expose them to the risk of harm, Mark Sandler, a lawyer for Ms. Meng, said in the British Columbia Supreme Court on Monday.

But in Ms. Meng’s case, he said, not only was there no harm, and no real risk of harm, but the prosecution had shown no connection between her alleged misrepresentation and any relevant action by her purported victim: the global bank HSBC.

The U.S. alleges that Ms. Meng, the chief financial officer of China’s biggest telecom company, through her lies to HSBC during a PowerPoint presentation in Hong Kong in 2013, exposed the bank to a risk of being punished by the U.S. for violating sanctions on Iran.

“You have to ask what was it that Ms. Meng said that purportedly induced HSBC to violate U.S. sanctions laws,” Mr. Sandler said to Associate Chief Justice Heather Holmes.

The judicial phase of the extradition process is in its final week. If Ms. Meng’s lawyers can show that the U.S. case against her is “manifestly unreliable,” the judge would have to refuse to permit her to be sent to the United States for trial.

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The case has brought Canada into an open confrontation with China. The RCMP arrested Ms. Meng on Dec. 1, 2018, at the U.S.’s request. Soon after, China detained two Canadians, Michael Spavor and Michael Kovrig. It has now held them for nearly 1,000 days.

Weeks after seizing Mr. Spavor and Mr. Kovrig, China retried a third Canadian, Robert Schellenberg, and increased his prior drug trafficking sentence from 15 years in prison to the death penalty.

The U.S. charge against Ms. Meng is impossible to understand without some knowledge of U.S. sanctions on Iran. As the Canadian court has heard, some business in Iran is permissible, and Ms. Meng was open about her company, Huawei Technologies Co. Ltd., doing business there. Potential violations arise when U.S. dollars are put through U.S. bank branches in certain business involving Iran.

The U.S. alleges Ms. Meng lied to HSBC about Huawei’s connection to Skycom Tech Co. Ltd. She called Skycom a “controllable” partner; the U.S. says Skycom and Huawei were in fact the same company, and that she minimized Huawei’s control.

The U.S. alleges that Skycom paid a British company, Networkers, millions of dollars for technology services it provided in Iran. Skycom paid Networkers from a Chinese bank. Networkers was using HSBC in Britain, but the bank put the transaction through a branch in the U.S.

Mr. Sandler stressed that the U.S. had never explained how Ms. Meng’s alleged lies influenced the bank’s decision-making.

Even assuming there had been a misrepresentation, Ms. Meng’s PowerPoint made it no more likely that HSBC would handle the Networkers transaction in the manner it did, Mr. Sandler said.

“There’s no connection between the two. What’s interesting is, it’s actually contraindicated,” he said. “You would have thought there would be more comfort in closing the transaction if you thought Skycom was controlled by Huawei as opposed to this separate uncontrolled entity.”

He said the U.S. had supplied no evidence showing how Ms. Meng’s representations affected the bank’s decisions: “You have to ask yourself, where’s the evidence that they would have acted differently if the misrepresentation had not been made?”

Robert Frater, lawyer for the Canadian Attorney General, told the judge last week that there is nothing unusual or unprecedented about the case. The judge replied that the case is unusual in several respects – including that senior people at the bank apparently knew the truth, even as they were allegedly being lied to.

Mr. Sandler called it “an extraordinary case. It’s extraordinary that years after its commencement the theory of causation remains unclear.” By causation, he meant the idea that Ms. Meng’s alleged deceit caused HSBC to make decisions that put it at risk.

Ms. Meng’s legal team, in its second day of trying to undermine the U.S. evidence, hammered away at the prosecution’s approach to fraud – in particular, the notion that an unwitting victim of a fraud could be punished by a government. Criminal liability is legally impossible in such circumstances, and the risk of a civil punishment of an innocent victim is remote and hypothetical, Mr. Sandler said, citing evidence from a U.S. expert in sanctions law.

“We have turned fraud law on its head in this proceeding,” he said.

No fraud case in Canadian history has occurred in the absence of an economic loss, on the possibility that a government would prosecute a victim of an alleged fraud, he said. Not only was the judge being asked to go where no court has gone before, he added, “but you’re being asked to do it in circumstances where the courts in Canada have considered it and rejected it” as speculative and hypothetical.

The Canadian Attorney General will have a chance to reply in court before the hearing closes. Associate Chief Justice Holmes is expected to reserve her decision.

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