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Kash’s Corner: A Three Way Deal?—One Huawei CFO, Two Americans, and Two Canadians

“She basically bought her way out of the U.S. criminal justice system, even though she admitted to committing all the egregious conduct in the indictment,” says Kash Patel.

Huawei chief financial officer Meng Wanzhou was recently given a deferred prosecution agreement and allowed to return to China. And almost immediately after, the “two Michaels” imprisoned in China—Canadians Michael Kovrig and Michael Spavor—were released on bail for “medical reasons.”

And lesser-known are two American siblings—blocked from leaving China since 2018—who were also recently allowed to return to the United States.

In this episode of Kash’s Corner, we discuss what many are describing as “hostage diplomacy.”

What exactly was Huawei doing in Iran in the first place, and how is Huawei part of the Chinese Communist Party’s broader ambitions to control key infrastructure nodes around the globe?

Kash Patel: Hey everybody, and welcome back to Kash’s Corner.

Jan Jekielek: So Kash, Huawei CFO Meng Wanzhou is on a plane back to China to great fanfare. And the two Canadians, the two Michaels, Michael Spavor and Michael Kovrig, are basically back to Canada almost immediately. And basically, the US Department of Justice is saying it’s reached a deferred prosecution agreement. I’m going to get you to tell me all about that.

Let me quickly read the statement of US attorney Boeckman about what actually happened. And she says, you know, talking about Meng Wanzhou: “Her admissions in the statement of facts confirmed that, while acting as the chief financial officer for Huawei, Meng made multiple material misrepresentations to a Senior Executive of a financial institution, that would be HSBC, regarding Huawei’s business operations in Iran, in an effort to preserve Huawei’s banking relationship with the financial institution.” So can you break this down for me?

Mr. Patel: Okay. So yeah, so a deferred prosecution: one, I completely disagree with the Department of Justice’s decision to give Meng a deferred prosecution agreement, in this instance. The charges came under the Trump Department of Justice, and it was a case that was going on for years, but we can get to that. The deferred prosecution agreement is basically, “I’m going to temporarily plead guilty to the conduct and the indictment, and then I’m going to get a get out of jail free card in six months time, in a year’s time, normally”.

And so that’s basically what she did. She basically told them what the Department of Justice wanted to hear, which was the truth in this case. She broke multiple federal statutes regarding wire fraud and bank fraud relating to Huawei’s conduct with the banking institutions in Iran and Europe, which is a major, major felony and goes against US policy towards Iran in general. And then they basically said, “If you tell us this, we’ll let you go home.” And after an investigation in a case that has been going on for some three, four, five years and that’s the gist of it.

But normally what happens under a deferred prosecution agreement from the Department of Justice, at least when I was a federal prosecutor, is that person is monitored in the US by the Department of Justice, the FBI, and a whole host of other federal agencies to make sure that person is not committing more crimes, complying by the agreement, and not moving around and unavailable to government authorities.

In this instance, you have the CFO of one of the world’s largest telecom providers or telecom companies, who just left, and went to China, which guarantees we will never see her again. So I don’t understand how this Department of Justice expects to have her uphold the deferred prosecution agreement because they have no way of getting in contact with her in China.

Mr. Jekielek: Okay. So let’s start here. How strong was the case against her?

Mr. Patel: So from all the public information that was alleged in the indictment and in the media in the last couple of years, you have to remember she was arrested in December of 2018 in Vancouver, Canada on a US request to arrest her, and an indictment followed within a month thereafter. She was charged with bank fraud and wire fraud and a host of other crimes. What does that basically mean?

To simplify, it’s basically saying she and Huawei used the US financial banking system illegally, and that’s where bank fraud comes in with specific banking institutions, and wire fraud is just fancy speak for using international banking institutions that serve as the conduits of these transactions. Pretty major stuff, because they’re talking tens and hundreds of millions, if not billions, of dollars worth of transactions. Her specific crime had to do with sanctions the US government had against Iran.

What’s one of the countries we had, at least under President Trump, the stiffest sanctions under. We withdrew out of the JCPOA, and I think rightfully so. And we did not want American banking institutions allowing money to flow through Iran. That was generally the gist of, what are these things called? IEPA, International Economic Powers Act sanctions. And so it prevented banks that touch American currency from conducting transactions that benefit Iran.

The indictment basically says that Huawei had a shadow company in Iran. I think it was called SkyCam. And what this lady did, Meng and Huawei, when the US investigators asked her about this Huawei subsidiary, Huawei said “We have no idea. We have no affiliation with them. We actually broke ties and had some other company buy SkyCam in Iran.”

In reality, the other company that bought SkyCam was another Huawei affiliated company. So they just moved it from a to b, still a Huawei affiliate. So that was one of the lies that she and Huawei told, per the indictment.

The other and bigger problem was they knowingly used that company in Iran as a Huawei subsidiary to funnel money into and out of Iran while using US banking systems, using United States dollar backed currency denominations. And that’s where you get the gist of the wire and bank fraud. Every time a transaction occurs with that company and they have to process the money, Iran has to reach out to the world.

And that’s where we have our most effect economically against Iran, because they don’t have an international banking system. They need the rest of the world to produce and process financial transactions, which is where the United States comes in, because most of the world’s financial transactions are backed by the US dollar, which means they have to hit some US banking system somewhere. And then that triggers American law.

Mr. Jekielek: So, based on the statement that I read at the beginning, it kind of sounds like she confessed. And you explained that that doesn’t necessarily mean that. So can you kind of give a bit of nuance here?

Mr. Patel: Sure. In a normal federal criminal case, a guilty plea is the defendant pleading to the facts and the indictment and saying, “Yes, I committed these crimes.” She did the same thing, the exact same thing.

She, through her lawyers, submitted an admission of guilt to the crimes and statements alleged in the indictment, but she did it knowing that she was going to get a deferred prosecution agreement, meaning it was only temporary. If she agrees to what this Biden DOJ wanted to hear, they would allow her to basically have this entire case erased from her record and from the international record.

That’s what a deferred prosecution agreement means. A lot of times, and this is one of the most frustrating things for Americans and I agree with them, is large US financial institutions: banks, big banks, pick your name, commit some sort of securities fraud or bank fraud or wire fraud. And they enter into, and you can just go on the internet and type in X institution and deferred prosecution agreements, and you’ll probably see the most popular ones you can think of. And they end up paying fines of one, two, three billion.

Then they are regulated and monitored under extra scrutiny by the US government for a period of one, two, three years and then they basically have their record expunged or deleted, for lack of a better word. So they’re under watch for a little bit, pay a huge fine, and then they’re good to go. I’m against those agreements against financial institutions to begin with. And they did the same thing here with this lady who was a CFO at Huawei. She basically bought her way out of the US criminal justice system, even though she admitted to committing all the egregious conduct in the indictment.

Mr. Jekielek: Okay. So, two things. Let me get this straight. Whenever you hear deferred prosecution agreement, you’re basically saying that means that there is not going to be any prosecution. That’s what you’re saying.

Mr. Patel: Yeah, to defer is literally the U S government saying..

Mr. Jekielek: It doesn’t mean it’ll happen later, it just means it’s not going to happen.

Mr. Patel: It could, right, if the person under the deferred prosecution agreement breaks one of the rules, ie commits a new crime, or doesn’t do what the agreement said it was due. You have to do a, b, c, and d and you don’t do them all, then the government can revoke that deferred prosecution agreement and go and back and actually prosecute you for the indictment, meaning you are now facing these charges and you do not have a chance to have it expunged from your record. But that generally doesn’t happen because people under those agreements, when they’re lucky enough to get them, don’t screw those up because it’s a get out of jail free card.

Mr. Jekielek: Fascinating. Well, okay, so let’s get to the second part. You’re saying that she bought her way out. What does that mean?

Mr. Patel: Well, I’m sure like any of these large financial institutions, there’s a fine, you know, a monetary amount that had to be paid into the US Treasury or through the Department of Justice for the conduct that occurred via Iran and this SkyCam company that they had over there that was using the financial banking system of America to process transactions for Huawei.

And they were doing all of that in the interest of Iran and against American interests, not just against our laws. So there’s probably a hefty fine, which I’m sure was nothing to Huawei, and they cut a check and off she goes.

Mr. Jekielek: Well, so let’s talk about the returning Canadians now. And there are actually returning Americans also, and I want to talk about that because that’s not generally known, but let’s start with the Canadians. You know, first of all, the two Michaels as they’re called, they were sent back immediately basically to Canada, which of course is fantastic to hear for them. There’s a lot of headlines, a lot of people saying hostage diplomacy. So what do you make of this whole their, you know, basically immediate return?

Mr. Patel: Well, from everything I’ve read in The Public on this case and in the two Michael’s cases in Canada is these cases are inextricably intertwined, as we say. The Canadians that you referred to were arrested within a week or so after we, the United States, asked for Meng’s extradition and she was arrested in Canada.

So maybe you can just set that one thing aside and call that a coincidence that the Chinese government arrested these two Canadian citizens right after the CFO of Huawei was asked by the United States to be detained in Canada.

Mr. Jekielek: Oh, and just for the record, the CCP is saying that they were released on medical parole, essentially for medical reasons.

Mr. Patel: Right after a thousand days

Mr. Jekielek: But please continue.

Mr. Patel: And so maybe that was a coincidence that they both got arrested around the same week to 10 days. Sure, that could be a coincidence. Now, fast forward almost a thousand days, three plus years down the road. And this past week, or once this episode airs it’ll be the last week, Meng gets the deferred prosecution agreement and gets a free ride back to China.

And upon her touching down, or before she even got to China, the two Michaels, the Canadians, are released on, as you said, some medical parole but they were in Chinese detention in prisons and had been convicted of so-called crimes, which couldn’t be substantiated by the international community.

And they got sent back all of a sudden, once the Canadian government agreed by way of the US government, to let this CFO back. I think those are entirely too much, too many coincidences in one place for it to actually be a coincidence. And I think the world knows that the Canadians came back, and I’m glad they’re back, but they did so because Meng was let go and let back to China.

Mr. Jekielek: You know, at the same time, again curiously or not so curiously, there’s this much, much lower profile case of the Liu siblings actually coming back to the US, which is again fascinating. And maybe you can kind of dig into this a little bit, because this is something that you’ve been looking at for some years.

Mr. Patel: Yeah. So the Liu siblings, a brother and sister, are Chinese Americans: American citizens, Chinese background, who, you know, and this was a matter I worked on extensively at the White House. So I want to be careful about some of the underlying facts that aren’t public, but based on some of the media reporting, these two individuals had a father in China that they were trying to get back with or trying to unite. And this person was of interest to the CCP, not for anything good.

One of the siblings went over first to China and then thereafter, the other sibling went and they were detained immediately by the Chinese government. And over the process of years, we, like we did, one of President Trump’s priorities was to return American nationals, whether they’re being held hostage or unlawfully detained in places like China.

We worked extensively behind the scenes to try and return these American citizens to the US. And I’m very glad to hear that just this past week, these two siblings, American citizens, were in fact returned from a very specious detention in China to America. So I’m glad that that worked out, but I can imagine that these three countries talked at higher levels to get this sort of arrangement to occur.

Mr. Jekielek: And it’s interesting that, you know, Iran is also kind of involved in all of this, right? And of course, we know that the current administration is interested in kind of rekindling some variant of the Iran deal or the JCPOA. How do you figure this might factor into this whole question?

Mr. Patel: Well, this is one of the reasons why I entirely disagree with this administration’s approach to the Meng Huawei situation versus what we did under President Trump. Iran basically had a Chinese entity lying to the US government, conducting banking transactions for Iran to expand its 5G telecom network in Iran, against the interest of the United States. Then that company lied to America about it and continued to process transactions for the benefit of Iran and China, and not for the benefit of America.

And mind you, we still have American citizens detained illegally in Iran. So I couldn’t disagree more with the way this matter regarding Huawei and Meng was handled, because we didn’t get anyone back from Iran, any of the Americans that are detained. They got to use America’s banking system, and I haven’t seen anything in the press to say that that banking system was shut down in Iran.

So I don’t know if it’s still up, but I haven’t seen anything from these agreements to say that China and Huawei and its subsidiaries would stop conducting business in Iran. In fact, I’m willing to bet that that’s not going to happen.

And so Iran is going to further benefit from this against the interest of America, and the Chinese are going to continue to make money somehow by installing 5G and Huawei technology in Iran.

Mr. Jekielek: So, you know, the CCP, of course, says that Huawei is a completely independent company. What do you think about that?

Mr. Patel: I mean, you know, I don’t even know what the right analogy for absurd that that is, but from all of the publicly available information on Huawei and 5G, you know, this Meng situation specifically points to it, that Meng and her family are tied directly into the CCP. Her family’s extremely wealthy and Huawei has direct contacts with CCP leadership.

And so if that’s not telling enough, then the fact that the CCP and the Chinese government made such a strong, hard play to get her back should be another reason to say, “Well, are they doing that for Chinese nationals, the world over?” They’re not. Period.

There’s Chinese nationals detained all over the world, and this is the most high profile person I’ve seen to date return to China. And Huawei is technology that the Chinese government, maybe they fund indirectly or directly, but it’s hosted in China. And what they’re doing is they’re taking that technology and putting it around the world, all over the world. And, from my understanding of public reporting, that technology is something that the Chinese government has direct access to.

Mr. Jekielek: So, that’s you and me both. I think everybody and their dog should know that Huawei and the Chinese Communist Party are not independent, and indeed Huawei’s kind of the tip of the spear, almost, of Chinese influence operations, because it can basically dig so deeply into the infrastructure of companies of countries where Huawei operates.

Before we kind of go into actually Huawei’s activities around the world, which I know you’ve been kind of, you were looking into while you were in government. I want to do a little bit of a sidebar and just about this whole kind of process of extradition. It’s actually quite interesting. How common is it for, you know, the US to basically pick someone up in a third country like Canada, and how long does it typically take? Like, what would have happened if this deal hadn’t been reached?

Mr. Patel: Sure. So the US Department of Justice executes what we call extradition requests all the time. And what that simply means is individual X, in this case Huawei CFO Meng, was charged by the United States Department of Justice, and they were not within the territorial boundaries of the United States.

So we have to go to the Canadian government and say, “We have a rightful indictment in place against this individual.” It’s irrelevant whether they’re a citizen or not of another country, the United States is seeking them as a defendant.

But when you’re in a foreign country, that individual legally and rightfully so has a right under that holding countries law to challenge the extradition. That is to challenge the request that the US government is saying that I should be sent to America for prosecution. So we do this all over the world, but where you do have an extradition treaty, those countries have agreed under the law to cooperate with each other.

And it goes both ways. Canadians will request extradition of people in America that are charged by Canadian authorities. And unfortunately, it’s a system that takes years to process. So as you noted earlier, Meng was, she’s been detained in Canada for a couple of years now, working the extradition process because she had challenged the extradition process.

Mr. Jekielek: I guess everybody must, right?

Mr. Patel: Most people do, because they’re saying we don’t want to come to America to be prosecuted. And the home country, in this case Canada’s highest court, has to adjudicate the matter. And so the case has to go through the Canadian court system before they return a decision that says, “Yes, you, Meng, need to go to Canada.” And I imagine that’s where we were going, because we were two plus years down the road on this one, almost three.

And she’d probably exhausted, as we say, all of our extradition rights. And the Canadian government was getting ready to say, “Okay, America, we’re going to give her to you.” And that’s probably part of the reason this deal was done at this time.

Mr. Jekielek: And so let’s talk a little bit about Huawei and how it was. Because I know we were talking earlier about this while you were in government, in the House Intel Committee. While you were working there, you traveled to multiple countries where the CCP was basically making deep financial inroads and using Huawei. Tell me about this, it’s fascinating.

Mr. Patel: Yeah, no, absolutely. So one of the focus areas for Chairman Devin Nunez then, in the House Intel Committee, was one of his biggest concerns was Chinese influence around the world and what it would do to American national security interests. And he’d been talking about it for years and years and years. And part of my role there on House Intel, while also running the Russiagate investigation, was to look at Chinese influence over the world.

So the best way to do that is to go and see for yourself where this Chinese influence is going down. And we’ll hit pause on that for a second, just to hit on: what is Huawei and 5G? And I’m not a tech expert, but just think of an entire telecommunication system that a government exports to other countries like China, who doesn’t abide by the same rules, as say, a US company would. And basically pays the whole way for company or country X to have that service in country. Do you think the Chinese government isn’t going to have access to that company’s database and that technology once they’ve paid for it in country?

Mr. Jekielek: You mean like, that country’s database?

Mr. Patel: The countries data and information of everyone using that backbone architecture, as we call it, to make phone calls, send text messages, email, internet access, everything. So just think of all the information they can get. So instead of just reading about it, Chairman Nunez asked me to go to a lot of places to investigate it. So I went all over Africa. I went to Mauritania. I went to Namibia, to Djibouti on the South East, or excuse me, on the Cape of Africa, on the horn of Africa. And I went as far East as Burma. What did all these places have in common?

Just talk about generally. So the Chinese government were engaged in what we call dead equity swaps. So the Chinese government was literally building huge infrastructure. Billions, not millions, billions of dollars of deals from deep water ports to roads.

Actually I forgot, I went to Madagascar to look at the Chinese development, the road infrastructure system there. To roads, to telecommunications equipment, and most, if not all, of these governments and countries, they’re not wealthy. They don’t have the funds to build a 10 billion dollar port, or put in a 5 billion dollar telecommunication system.

So what does China do? They go to these countries that I’ve talked about and they pay to have them built for that country. Basically, they tell countries like Mauritania, or Namibia, or Madagascar, or Djibouti: “Here’s all the money you need to build a port. We, China, are going to also provide all the workforce.”

So the labor is Chinese labor. They go and move to that country, and they live there and they build this entire infrastructure. Then these countries, who don’t have a large national economic powerhouse to earn revenue and payback China for this billions of billions of dollars of loans, basically the Chinese government will come in and say, “You can’t afford to pay back the debt. So we, China, are just going to assume ownership of what we built.”

Mr. Jekielek: And that’s kind of written into the contract and it’s actually, arguably, part of the original plan.

Mr. Patel: Yeah. I mean, from the Chinese perspective, from my opinion, that’s the original plan.

Mr. Jekielek: Yeah.

Mr. Patel: They might come to the table and say, “No, no, no. We really wanted the Mauritanians to have entire ownership of this huge deep water port and this other, you know, base for Naval ships, but they couldn’t afford to pay it. So we came in and took it.” But in reality, who’s going to stop the Chinese government from doing that and those countries, right? Even if legally the Chinese are in the wrong, what are those governments going to do?

They are relying on that money and that technology to help better their nation, either from telecom perspective, from a trade perspective, from shipping perspectives, or just container shipment perspective. And they basically are saying, “well, thanks, but we don’t have a mechanism to call out China and say, no, no, no. You can’t take our property that we’ve developed through you.”

They just don’t have that. And so China now owns these, or will own these key infrastructure nodes, from one side of Africa to the other and all the way over into Burma. And people are probably saying, “Who cares? What’s the big deal?” But that’s how the Chinese government executes a global infiltration process, and Americans cross through these areas.

And they pick up on our telecommunications equipment, because now what are we doing when we use phone calls over there, when we use computers, internet access, merchants, paying things, shipping, trade, what have you? It all crosses this Chinese architecture that China built out.

And it’s no surprise that China wants to collect against Americans wherever we are. And I’ve seen it firsthand all over the world. And Chairman Nunez tried to highlight that risk to the United States government. But quite frankly, I just don’t think it’s something the government, ours, has put sufficient focus on to counteract.

Mr. Jekielek: A couple of comments. One is, you know, Djibouti. That deep water port, right, in Djibouti. It’s in Africa technically, but it’s basically in the Middle East, right?

Mr. Patel: Yeah. I mean, that’s a great point. Djibouti, or DJ as we say for short, is in the Gulf of Aden. It’s the closest piece of land to Yemen, to Saudi, to Oman. And who uses these waterways? The Middle Eastern countries, Iran, terrorist groups who want to hurt American interest and carry out terrorist attacks in Africa, in the Middle East, and even over to America. So geo strategically, it’s a critical infrastructure node that we have there, and we have Camp Lemonnier there.

We, the US, have a massive military base there because of its importance. But now China has come in and just built their own right next door. And they are not doing it for the advancements of Djibouti. They are doing it to counteract anything we do in the area, and collect on our interest there.

Mr. Jekielek: Well, and the second part, and maybe, you know, kind of as we finish up, we can talk. This is a whole big, I guess, kettle of fish, so to speak. You know, the Chinese regime, there’s lots of credible reporting that the Chinese regime is actually, you know, developing detailed intelligence profiles on every single American.

And it’s hard to, you know, it’s frankly hard for a lot of Americans to imagine. Like why, why would they care? Right? But something in the realm of like, you know, the sorts of information that Facebook would have on every user that it has, which is extremely detailed information.

Mr. Patel: China has made it a priority to collect against America period. Whether it’s American companies, American individuals, or the American government. They won’t just do that in America. They know they can do it around the world at a greater efficacy than we ever will, because they, the Chinese, don’t abide by the global standards and rules of law that we, America, does.

So they just go into other countries like we’ve talked about and say, “Well, American interests are here, Americans are here, American military is here, Bases are here. We’re going to go over there, and we’re just going to start collecting on every bit of American information we can get their hands on.”

And what do they do with all that information? I believe they take it back home and send it to the CCP, and then they use it for whatever diplomacy or foreign policy actions they want to take. And they have in their holdings a well of information against American interest, American citizens, and American government that they can use.

They don’t have to use it in immediacy. I don’t think that’s their goal. They’re going to use it for when something comes up that they do need to use it against us. Maybe in the South China Sea, when they’re building the Spratly Islands, maybe they’re doing something there. Maybe they’re doing something specifically in the Middle East, or Africa, or who knows what. But the collection is what concerns me. And then their use is what the Chinese are going to do with it when they feel it’s the right time.

Mr. Jekielek: Well, and I think maybe in a future episode, we can kind of, you know, develop this all quite a bit more, because it’s a big question and obviously incredibly important. So I think it’s time for a shout out.

Mr. Patel: It is indeed. And so this week’s shout out goes to Michael Stinson. We appreciate your comments from Kash’s Corner, and we hope you guys continue watching. And a reminder to everybody else, please send us your comments. Jan and I read them all every week, and we look forward to giving you some future shout outs. And we’ll see you next week.

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