IELR Blog

Official Blog of the International Enforcement Law Reporter

Suriname Arrest Warrant Made for Missing Former Finance Minister on Corruption Charges

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On August 12, 2020, the police in Suriname issued an arrest warrant for Gillmore Hoefdraad, the former Finance Minister.  The warrant suspects him of 11 criminal offenses, including violations of the banking and anti-corruption laws, fraud and embezzlement.[1]

At the end of July the Suriname Attorney General Roy Baidjnath Panday forbade Hoefdraad from leaving the country.[2]

The investigation against Hoefdraad, 58 years of age, concern the irregularities at the Central Bank of Suriname (CBvS).  In February, Surinamese authorities arrested former CBvS Governor Robert van Trikt.  Suriname authorities discharged von Trikt for irregularities and misappropriations at the Central Bank. The alleged wrongdoing included the purchase of a custom-made $300,000 luxury Land Rover in the U.K., an armored Lexus vehicle, and his approval for the BvS to acquire several properties.[3]

Surinamese authorities suspect Hoefdraad’s participation in the alleged real estate swindle.  Investigators have discovered documents indicating that in June and September 2019, while Van Trikt was governor, Hoefdraad sold 17 buildings to CBvS for €105 million.  Surinamese authorities have also arrested Van Trikt’s business partner Ashween Angnoe and Faranaaz Alibaks Hausil, manager Legal, Compliance & International Affairs at the Central Bank.[4]  Prior to his appointment as Minister of Finance, Hoefdraad was the governor of the Central Bank of Suriname.

In May Attorney General Baidjnath-Panday asked the National Assembly’s permission to initiate a criminal prosecution against then Minister Hoefdraad.  However, the National Assembly did not grant the request due to ministerial immunity.[5]

The Surinamese media has reported Hoefdraad has brought summary proceedings against the Surinamese government because he thinks he is unfairly being prosecuted.  His counsel argue that, since the National Assembly’s permission was required and was not granted, the initiation of criminal charges constitutes double jeopardy.  After elections on May 25, 2020, the government has changed.

Improving anti-corruption and governance is a priority of the new administration of Chan Santokhi, a former chief of police.[6]

According to the Caribbean Financial Action Task Force 11th Report on the Mutual Evaluation Report of Suriname for the annual period on which it reported, Suriname made no extradition requests.  However, if Hoefdraad entered Guyana improperly, Guyana can deport or surrender him to Suriname without the need to extradite.  On August 9, 2020, Albert Ramchand Ramdin, the new Minister of Foreign Affairs in Suriname, held a joint press conference with his Guyanese counterpart Hugh Todd in Guyana.  They promised to cooperate a broad range of topics.  The two ministers are meeting in September to develop a strategic agenda for the next high-level meeting of the ministers, which is likely to be in Paramaribo.  The current issue of the IELR will have additional discussion of this matter.

 

[1]    Suriname issues arrest warrant for former Finance Minister on corruption charges, https://www.kaieteurnewsonline.com, Aug. 12, 2020.

[2]    Id.   Implicated ex-minister may be hiding in Guyana, The Daily Herald, July 28, 2020.

[3]   Implicated ex-minister may be hiding in Guyana, supra.

[4]   Id.

[5]   Id.

[6]   For additional background on anti-corruption and governance issues in Suriname, see Bruce Zagaris,  Legal aspects of helping Suriname achieve better anti-corruption and governance,   GlobalAmericans, September 2, 2020 https://theglobalamericans.org/2020/09/legal-aspects-of-helping-suriname-achieve-better-anti-corruption-and-governance/; see also Dr. Scott MacDonald, Suriname and the Need for Good Governance, March 10, 2020, CSIS, https://www.csis.org/analysis/suriname-and-need-good-governance.

 

 

 

 

Switzerland Freezes $900 Million from Former Head of Angolan Insurance Company

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On July 9, 2020, a Swiss criminal appellate court in the Canton of Geneva froze $900 million held in the accounts of Carlos Manuel de São Vicente, an Angolan businessman, as a result of a money laundering investigation.[1]

In December 2018, prosecutors froze $1.25 billion in accounts connected to São Vicente, his family and companies after they received on November 29, 2018 suspicious activity reports made by Swiss banks on a transfer of $212.9 million.[2]

São Vicente is a Portuguese-Angolan citizen who is the former chairman and CEO of AAA Seguros.  A 2001 presidential decree gave the company a monopoly to insure oil sector activity in Angola.  It continued until 2016.  In 2020, AAA Seguros was dissolved.[3]

Vicente is the spouse of Irene Alexandra da Silva Neto, a former member of parliament and vice-minister in the Jose Eduardo dos Santos administration.    The latter was President of Angola from 1979 to 2017.

Prosecutors contend that part of AAA Seguros’ funds transferred to Vicente’s account belonged to Sonangol, Angola’s state-owned oil company.  Sonangol owned 10% of AAA Seguros.[4]

Prosecutors became aware that Vicente was trying to transfer all of his personal account to Singapore.  Vicente says he ordered the transfer because he was dissatisfied with the bank’s management of his account.[5]

Vicente explained to Swiss authorities that the transfer of $213 million from AAA Seguros to him was a partial reimbursement for loans.[6]

In 2016, a presidential decree revoked AAA’s insurance role over the oil industry.  The decree explained AAA’s  “allegedly non-transparent management.”  Earlier this year the government revoked the company’s authorization to operate in Angola.[7]

In December 2018, Swiss public prosecutors froze seven accounts of Vicente and family members.  The court has  removed the freezing order on six of the accounts.[8]

The judgment illustrates the utility of suspicious transactions reports, since in this case it triggered action by the Swiss Financial Intelligence Unit and then the prosecutor.  The Swiss financial and judicial systems have been increasingly proactive in finding and taking action on apparent proceeds of crime, especially where corruption may be involved.

The Angolan administration of João Lourenço has prioritized combatting corruption.  On March 2020, the Swiss authorities received information and documentation in connection with the investigation.[9]

[1]    Carlos Manuel de São Vicente v. Le Ministère Public, Swiss criminal appellate court in the Canton of Geneva, Judgment, P/23676/2018; ACPR/480/2020, July 9, 2020 https://www.icij.org/investigations/luanda-leaks/switzerland-freezes-angolan-tycoons-900-million-fortune/

[2]    Id., paragr. b.e on p. 3.  See also Will Fitzgibbon, Switzerland freezes Angolan tycoon’s $900 million fortune, ICIJ, Aug. 28, 2020.

3]  Judgment, paragr. g.b. on p. 4 and Fitzgibbon, supra.

[4]  Fitzgibbon, supra.

[5]  Id. See Judgment, g.a on p. 4.

[6]  Fitzgibbon, supra.

[7]    Dmitry Zhdannikov and Noah Browning, Reuters, Switzerland Freezes $900M Belonging to Angolan Insurance Executive, https://www.insurancejournal.com/news/international/2020/09/03/581352.htm  Sept. 3, 2020.

[8]   Fitzgibbon, supra.

[9]   Judgment, parag.  l on pp. 6-7.

U.S. Treasury Implements Sanctions against ICC Chief Prosecutor and Head of Cooperation Unit

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On September 2, 2020, the United States Department of the Treasury added to the list of Specially Designated Nationals Fatou Bensouda, the Chief Prosecutor of the International Criminal Court (ICC), and Phakiso Mochochoko, the Head of the Jurisdiction, Complementarity and Cooperation Division.

The Treasury notice implements the executive order issued on June 11, 2020, by United States President Donald J. Trump imposing sanctions on “certain persons associated with the International Criminal Court.”

The Executive Order states the U.S. will impose tangible and significant consequences on those responsible for the ICC’s misconduct. They may include the suspension of entry into the U.S. of ICC officials, employees, and agents, as well as their immediate family members.

Even before the issuance of the Executive Order, the U.S. government had already revoked the visa of the ICC’s chief prosecutor, Fatou Bensouda. The Executive Order and sanctions may hinder the ICC’s recruitment of personnel.

The initial implementation selects the chief prosecutor and the individual in charge of enforcement cooperation.  A major weakness of the ICC is its lack of its own police force, so that it cannot actually arrest an individual.

It remains to be determined how broadly the executive branch will apply the sanctions.  This will be a major focus of persons interested in the court and in accountability for war crimes and crimes against humanity.  The imposition of sanctions is a setback to the effort to hold perpetrators of crimes meriting universal jurisdiction accountable.  The sanctions constitute an attack on international and national judicial independence.  It sets a bad example for the rest of the world at the very time when democracy is in jeopardy and the world community is struggling to bring accountability for war crimes and crimes against humanity in longstanding conflicts, such as those in Afghanistan, Syria, Libya, and Yemen.

The sanctions undermine longstanding U.S. foreign policy to emphasize the rule of law and bring peace and stability by holding alleged perpetrators of crimes of universal jurisdiction accountable as well as prioritize international human rights.  Especially when the sanctions are considered in the context of the U.S. still holding persons for twenty years in Guantanamo without trial, the sanctions will also hamper the ability of the U.S. to obtain international enforcement cooperation, especially from its allies.

During its annual meeting last month, the American Bar Association adopted Resolution 114, urging all national governments to “observe, respect, and protect the independence of the International Criminal Court.”  It also “condemns threats by governments to the International Criminal Court and its officers and personnel in the performance of their duties.”  Prior ABA policies and statements on the ICC  and a timeline of the US-ICC relationship show that the ABA has from the start supported the operation of the ICC and U.S. proactive participation in it.   The ABA ICC project’s board members, including former U.S. War Crime Ambassadors and a former Nuremberg prosecutor, have also written opinion pieces the Project’s board members wrote about the sanctions.

The implementation of the Executive Order against the ICC will further alienate U.S. relations with its closest allies, who are making contingency plans for the potential that Donald J. Trump may be re-elected.  On July 17, 2020, European Union High Representative/Vice-President Josep Borrell made a statement on United States sanctions.  He referred specifically to the U.S. unilateral sanctions against the ICC.  Borrell said sanctions against those involved in the work of the ICC, its staff, and their families, as well as persons associated with the ICC, are unacceptable and unprecedented in scope and content.

 

Good Governance and Corruption in the Caribbean

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The virtual event “Good Governance and Corruption in the Caribbean,” presented by Global Americans, the Embassy of the United States in Suriname, and the Youth Education and Leadership Foundation, will be taking place from July 30 to July 31, 2020.  Registration for the event is required at https://forms.gle/HnuiA1ep7xPeoDzPA.  Alternatively, listeners may RSVP with jgalindo@theglobalamericans.org.

The first part of the event “Good Governance and Corruption in Suriname and Guyana” takes place on July 30, 2020 from 10:AM to 11:15AM.  The second part “Corruption, Oil, and the role of External Agencies in the Caribbean” is scheduled for July 31, 2020 from 10:00 AM to 11:15 AM EDT.

EU Expresses Deep Concern Over Growing U.S. Unilateral Sanctions against EU Interests

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On July 17, 2020, European Union High Representative/Vice-President Josep Borrell made a statement on US sanctions.

Borrell Statement

He said  he was “deeply concerned at the growing use of sanctions, or the threat of sanctions, by the United States against European companies and interests.”

He said the EU has observed this developing trend in the cases of Iran, Cuba, the International Criminal Court and most recently the Nordstream 2 and Turkstream projects.

According to Mr. Borrell, “(a)s a matter of principle the European Union opposes the use of sanctions by third countries on European companies carrying out legitimate business. Moreover, it considers the extraterritorial application of sanctions to be contrary to international law.”

Borrell continued that Europe and not third countries should determine European policies.

Appropriately Borrell continued that, where countries share common foreign and security policy goals,  great value is realized in the coordination of targeted sanctions with partners.  The EU has experienced many positive examples of this.  The EU will continue to coordinate where it  can.

Perhaps, most importantly, Borrell underscored that “where policy differences exist, the European Union is always open to dialogue. But this cannot take place against the threat of sanctions.”

Analysis

The Borrell statement occurs against the background of friction over EU efforts to trade with Iran.  On August 28, 2019, the EU  announced that its INSTEX mechanism to facilitate trade with Iran was operational.  The EU informed participants that INSTEX was available to all EU member states.  The first transactions were being processed, said an EU statement.  The establishment of INSTEX  shows the EU is serious about alleviating the pain of sanctions on Iran in order to persuade Iran to remain in the 2015 Joint Comprehensive Plan of Action (JCPOA).  However, until now, it has facilitated very few transactions.

The Borrell announcement also comes on the heels of an 18-page proposed economic and security partnership between China and Iran that would clearly violate U.S. unilateral sanctions against Iran.

The current issue of the International Enforcement Law Reporter will discuss these and other implications of the statement in more detail.

EU Funds Research Project on Interconnections between Tax Crimes and Corruption

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VIRTEU (www.virteu.com), a project funded by the European Union under the HERCULE III Programme (Grant Agreement no: 878619), of which Professor Constantino, Assistant Professor of Law at Coventry University,  serves as the Principal Investigator.

VIRTEU is a high-profile legal research project, which aims at exploring the interconnections between tax crimes and corruption so to unravel the intimate relationships that exist between fraudulent and corrupt practices in the area of taxation (https://lnkd.in/gW9V7ZM).

VIRTEU Research Team operates within and is supported by the Centre for Financial and Corporate Integrity (CFCI), which is directed by Prof. Panagiotis Andrikopoulos. The team includes two academics, Dr. Constantino Grasso (Principal Investigator) and Dr. Lorenzo Pasculli (Co-Investigator), who teach at the Law School of Coventry University directed by Prof Stephen Hardy. The team includes also two Research Assistants, ENGIN Erken and Mairi Laird, who are doctoral students at the CFCI.

If you would like to receive any further information on the project or evaluate the opportunity of cooperating with the Research Team, feel free to contact us through the VIRTEU official website (www.virteu.com).

Vat fraud: Interdisciplinary Research on Tax crimes in the European Union

Grant Agreement no: 878619

Project Coordinator: Dr. Costantino Grasso

VIRTEU is an eighteen-month (April 2020 – September 2021) high-profile legal research project, which includes both comparative and interdisciplinary studies, funded by the European Union under the HERCULE III programme.

Commentary

One common connection between corruption and tax crime is that bribery recipients commit tax crimes because they cannot legitimately declare properly their income.  Bribery payors normally commit crimes when they pay bribes because they typically falsely declare on their books the payment (e.g., as a consultancy or marketing fee) and even sometimes try to obtain a deduction for the payment.  In the extractive industry international organizations and civil society have tried to bring transparency to government records in order to enable citizens and interested persons to ascertain what payments are legitimate, as opposed to illegitimate (e.g., bribes).  Other connected areas include money laundering, asset forfeiture, transnational organized crime, and fraud.

U.S. President Trump Issues Executive Order Imposing Sanctions against International Criminal Court

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On June 11, 2020, United States President Donald J. Trump issued an executive order imposing sanctions on “certain persons associated with the International Criminal Court.”

The Executive Order

The Executive Order cited as authority for the action the Constitution and the laws of the United States, including the International Emergency Economic Powers Act (IEEPA),[1] the National Emergencies Act (NEA),[2] section 212(f) of the Immigration and Nationality Act of 1952,[3]  and section 301 of title 3, United States Code.

President Trump in the E.O. finds that the efforts of the ICC threaten U.S. national security and foreign policy:

“The ICC Prosecutor’s investigation into actions allegedly committed by United States military, intelligence, and other personnel in or relating to Afghanistan, threatens to subject current and former United States Government and allied officials to harassment, abuse, and possible arrest.  These actions on the part of the ICC, in turn, threaten to infringe upon the sovereignty of the United States and imped the critical national security and foreign policy work of the United States Government and allied officials, and thereby threaten the national security and foreign policy of the United States.”

The Executive Order also refers to the enactment in 2002 of the American Service-Members’ Protection Act,[4] which “rejected the ICC’s overbroad, non-consensual assertions of jurisdiction.”[5]

According to the Executive Order, the U.S. will impose tangible and significant consequents on those responsible for the ICC’s misconduct.  They may include the suspension of entry into the U.S> of ICC officials, employees, and agents, as well as their immediate family members.

Justifications of the Executive Order and Imposition of Sanctions

National Security Advisor Robert O’Brien made a statement before press alongside Secretary of State Mike Pompeo, Secretary of Defense Mark Esper, and Attorney General Bill Barr. O’Brien said “The ICC’s effort to target American servicemen and women and other public servants are unfounded, illegitimate, and make a mockery of justice”.[6]

Barr stated “(w)e are concerned that foreign powers, like Russia, are also manipulating the ICC in pursuit of their own agenda.”  The Justice Department received “substantial, credible information that raises serious concerns about a long history of financial corruption and malfeasance at the highest levels of the office of the prosecutor.”[7]

The ICC investigation that triggered the Executive order will focus on possible crimes committed by the Taliban and other groups between 2003 and 2014, including alleged mass killings of civilians, as well as the alleged torture of prisoners by Afghan authorities and, to a lesser extent, by U.S. forces and the CIA.[8]

The ICC only investigates when national governments have not already investigated atrocities and crimes against humanity.

Human rights groups criticized the order as overly broad and vague and could subject human rights researchers at risk in countries allied with the U.S., such as the Philippines.[9]

Analysis

Although the Executive Order states that the ICC investigation into Afghanistan atrocities threatens to subject U.S. government and allied officials to potential arrest, U.S. allied officials are members of and support the ICC.

While the press conference talked of a “politically motivated court,” President Trump has intervened in several cases involving war-crimes accusations even though military justice experts and senior defense officials have opposed his intervention.[10]

The Trump Administration’s charge of political interference and corruption in the ICC will ring hollow. Three emoluments suits have been brought against the President.  The President has dismissed five inspector generals, including ones investigating improprieties at the defense and state departments.[11] Mr. Barr has been embroiled in a series of political interference allegations, including his whitewash of the Robert Mueller report,  his overriding the sentencing memorandum of DOJ attorneys for former Trump campaign adviser Roger Stone,[12] his effort to dismiss the plea of former Trump national security advisor Michael Flynn,[13]  the impeachment of Trump for his effort to have the Ukrainian head of state investigate the presumptive Democratic presidential candidate Joe Biden and his son, and his criticism and firing of his first Attorney General Jeff Sessions for recusing himself in the special counsel’s investigation.[14]

Already the U.S. has revoked the visa of the ICC’s chief prosecutor, Fatou Bensouda.[15]  The Executive Order and sanctions may hinder the ICC’s recruitment of personnel.

The imposition of sanctions is a setback to the effort to hold perpetrators of war crimes accountable and to the ability of the U.S. to obtain international enforcement cooperation, especially from its allies.

The current issue of the IELR will have a more comprehensive discussion of the sanctions.

 

[1]    50 U.S.C. § 1701 et seq.

[2]    50 U.S.C. § 1601 et seq.

[3]    8 U.S.C. §1182(f).

[4]    22 U.S.C. §7241 et seq.

[5]    For a discussion of the decision by the ICC Appeals Chamber authorizing the Afghanistan investigation, see Michael Plachta, ICC Appeals Chamber Authorizes the Prosecutor’s Request to Investigate War Crimes in Afghanistan, 36 Int’l Enforcement L. Rep. 104 (Mar. 2020).

[6]    Robbie Gramer and Jack Detsch, Trump Order Treats International Prosecutors Like War Criminals, Foreign Policy, June 11, 2020.

[7]    Id.

[8]    Karen DeYoung and Carol Morello, Trump authorizes sanctions against ‘corrupt’ International Criminal Court, Wash. Post, June 12, 2020.

[9]   Id.

[10]   Id.  See also Mikhaila Fogel, When Presidents Intervene on Behalf of War Criminals, Lawfareblog, May 27, 2019 https://www.lawfareblog.com/when-presidents-intervene-behalf-war-criminals (discussing President Trump’s preparation of pardons  for, among others, Special Operations Chief Edward Gallagher, a Navy SEAL accused of shooting unarmed civilians and stabbing an enemy prisoner to death; Maj. Mathew Golsteyn, who was accused of killing an unarmed Afghan man who had been connected to the Taliban; and a group of Marine Corps snipers charged in connection with urinating on the bodies of dead Taliban fighters).

 

[11]  Melissa Quinn, The internal watchdogs Trump has fired or replaced, May 19, 2020 https://www.cbsnews.com/news/trump-inspectors-general-internal-watchdogs-fired-list.

[12]    Andrew Prokop,   The fiasco at Bill Barr’s Justice Department, explained, Vox, Feb 13, 2020.

[13]     Roger Parloff ,The Shoddy History Behind a Key Precedent in the Flynn Case, Lawfareblog,  June 11, 2020 https://www.lawfareblog.com/shoddy-history-behind-key-precedent-flynn-case; Josh Gerstein and Kyle Cheney, Everything about this is irregular’: Ex-judge tapped to review Flynn case blasts Trump DOJ, Politico, June 10, 2020 https://www.politico.com/news/2020/06/10/gleeson-flynn-sullivan-barr-justice-department-311018.

[14]    Trump fires Attorney General Jeff Sessions, BBC, Nov. 18, 2018.

[15]    Naha Toosi and Natasha Bertrand, Trump authorizes sanctions against the International Criminal Court, Politico, June 11, 2020 https://www.politico.com/news/2020/06/11/white-house-international-criminal-court-sanctions-313070

 

EUROPOL Starts European Financial and Economic Crime Center

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On June 5, 2020, Europol started the new European Financial and Economic Crime Center (EFECC).  The European Union Anti-money Laundering Action Report mentioned the start of the EFECC, partly in response to the various anti-money laundering scandals in the European Union (e.g., Danske Bank and Swedbank).

EFECC’s Goals and Operation

The EFECC will work within the current organization structure of Europol, which are already quite active and playing important roles in the EU response to financial and economic crime.  It will be staffed with 65 international experts and analysts.

The Europol press release explains that money laundering and criminal finances serve as the engines of organized crime.  Without them criminals cannot utilize the illicit profits they generate with the various serious and organized crime activities they conduct in the EU.  Europol has reported that 98.9% of estimated criminal profits remain with criminals.

The COVID-19 pandemic in Europe has illustrated that criminals are quick to adapt their criminal schemes to changing conditions to take advantage of fears and vulnerabilities.  Criminals are targeting economic stimuli proposed in the wake of the COVID-19 pandemic to defraud public funding.  Law enforcement authorities must be able to follow the money trail as a regular part of their criminal investigations and seize criminal profits in order to effectively disrupt and deter criminals involved in serious organized crime.

According to Tim Adams, President and CEO of the Institute of International Finance, the industry has called for an intelligence-led approach to financial crime, and meaningful initiatives like EFECC are essential to improving outcomes.

Europol Strategic Report

On June 5, 2020, Europol published a strategic report .  It gives an overview of the most menacing phenomena in the area of economic and financial crime, including various types of fraud, the production and distribution of counterfeit goods, money laundering, and others.

Missing trader intra-community (MTIC) fraud is the most commonly encountered type of value added tax (VAT) fraud in the EU.  MTIC fraudsters often target countries with high VAT rates.  Based on studies and cases supported at the EU level, Europol estimates between €40 to € 60 billion are lost each year to MTIC fraud schemes in the EU.

An increased risk of financial crime is that 58% of customers banking in the EU now regularly employ digital online solutions such as websites or applications to conduct transactions.  Mobile banking alone had increased by 50% by the end of 2019.  These banking methods, albeit convenient, present risks.  Customers often lack technical knowledge and experience.  As a result, they are vulnerable to attacks by cybercriminals using phishing techniques and malware solutions in order to access online accounts.

Increasing digitalization and less direct interaction with customers can also weaken Know Your Customer procedures.  Weakened KYC procedures make financial services more vulnerable to use for various criminal activities, including online banking fraud.

Analysis

The start of the EFECC will increase financial intelligence for the EU and enable it to trace and seize money more often as well as uncover and investigate money laundering and financial crime schemes.

One thing to watch will be the interaction of EFECC with national law enforcement authorities, especially prosecutors.

The current issue of the IELR will have a more comprehensive story on the start of the EFECC and the strategic report behind its start.

Canadian Court Finds Huawei CFO Extraditable to the U.S. on Fraud Charges

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On May 28, 2020, in the case of United States v. Meng, 2020 BCSC 785, Associate Chief Justice Heather Holmes of the Supreme Court of British Columbia denied Wanzhou Meng’s request for an order discharging her from the extradition process on the basis that, as a matter of law, the “double criminality” requirement for extradition cannot be met.

Factual Background

The U.S. has requested her extradition for prosecution in the U.S.  District Court in the Eastern District of New York for conduct that the Minister of Justice for Canada says corresponds to fraud in violation of section 380(1) of the Criminal Code of Canada.

The allegations concern the banking relationship between Huawei, a China-based telecommunications company, and HSBC, an international bank.  Ms. Meng was and still is Huawei’s Chief Financial Officer, and the daughter of its founder, Ren Zhengfei.  She alleged made false statements to HSBC in 2013, significantly understating Huawei’s relationship with Skycom Tech co. Ltd., a company based in Iran.

In August 2013, HSBC coordinated a syndicated loan to Huawei in an amount equivalent to US $1.5 billion, and was one of the main lenders.  In April 2014, HSBC sent Huawei a signed letter describing negotiated provisions for a US $900 million credit facility.  HSBC was one of the banks that loaned Huawei $1.5 billion in July 2015.

During this time U.S. Iran sanctions regulations required banks to obtain authorization from the U.S. Department of the Treasury’s Office of Foreign Assets control before providing financial or credit services through the U.S. to entities in Iran.

Before the incidents with Ms. Meng, HSBC had violated the sanctions and in December 2012 entered into a deferred prosecution agreement (DPA) with the U.S.  Department of Justice, in which it agreed not to commit further sanctions violations, to undertake various remedial measures, and to undertake various remedial measures to pay forfeitures and penalties amount to well over a billion dollars.

In December 2012 and January 2013, Reuters published two articles associating Huawei with Skycom’s U.S.-related business dealings in Iran.  The articles reported various connections between Huawei and Skycom, including that Ms. Meng served on Skycom’s board from February 2008 to April 2009, and that in 2007 she was company secretary for a Huawei holding subsidiary that, in turn, owned 100% of Skycom’s stock.

When HSBC inquired of Huawei about the reports in the Reuters articles, Ms. Meng gave an in-person meeting with a senior HSBC executive and showed a PowerPoint presentation.  The U.S. indictment alleges that Meng made fraudulent statements to HSBC and that Huawei relied on the assurances provided by Ms. Meng at the August 2013 meeting in deciding to extend a proposed $900 million credit facility  and subsequently participated with other international banks in a $1.5 billion syndicated loan to Huawei.

Legal Issues

Justice Holmes disagreed with Ms. Meng that the conduct cannot amount to fraud because essentially the proposed prosecution is to enforce U.S. sanctions laws against Iran, measures that are not part of Canadian law and which Canada has expressly rejected.  Meng argues that it is an artificiality to characterize the case as one of fraud against a bank, because the U.S. can have no real interest in policing private dealings between a foreign bank and a private citizen.

Meng contends that for Canada to extradite for conduct that does not violate its own laws and standards would not meet the rule of law and principles of fundamental justice. This includes those that prevent punishment for conduct not clearly prohibited by law.

Justice Holmes disagreed with Ms. Meng that to refer to U.S. sanctions in order to understand the risk to HSBC is to allow the essence of the conduct to be defined by foreign law.  Canada’s laws determine whether the alleged conduct, in its essence, amounts to fraud.

According to Justice Holmes, Ms. Meng’s approach to the double criminality analysis would serious impair Canada’s ability to meet its international obligations in the extradition context for fraud and other economic crimes.  The offense of fraud has a large potential scope.  It may include a very wide scope of conduct, a large expanse of time, and acts, people, and consequences in multiple places of jurisdictions.  Justice Holmes explains that Ms. Meng’s approach to the double criminality principle would give fraud an artificially narrow scope in the extradition context.  It would entirely eliminate, in many cases, consideration of the reason for the alleged false statements and how such statements caused the victim(s) loss or risk of loss.

With respect to Ms. Meng’s concern that extraditing her would indirectly help to enforce laws based on policy offensive to Canadian values.  The opinion explains that economic sanctions laws as were in place in the U.S. at the time of the alleged offense are not part of Canadian law, but they are also not fundamentally contrary to Canadian values.  The opinion also notes that in the final phase of the extradition process the Minister of Justice must refuse a surrender order for extradition if such an order would be “unjust or oppressive” under  all the relevant circumstances.  The Minister’s decision will necessarily take account of whether prosecution according to the foreign laws could lead to an unjust or oppressive result according to Canadian values.

Justice Holmes concluded that, as a matter of law, the double criminality requirement for extradition is capable of being met in this case.  The effects of the U.S. sanctions may properly play a role in the double criminality analysis as part of the background or context against which the alleged conduct is examined.

Future Proceedings and Implications

It is not known if Meng’s lawyers plan to immediate appeal the extraditability decision or wait until a later stage of the extradition process.[1]

Meng and her lawyers are to appear in B.C. Supreme Court on June 3 for a case management conference, to schedule the next set of hearings.

Meng’s legal team plans to argue that her Charter rights were violated when she was arrested at YVR back in December 2018.[2]

After the ruling the Chinese Embassy in Ottawa characterized “the whole case” a “grave political incident.”[3]

Huawei expressed disappointment.  It said it expects that “Canada’s judicial system will ultimately prove Ms. Meng’s innocence.”[4]

After the ruling Meng will have to continue living under house arrest in Vancouver, where she owns two homes. While under a curfew and required to wear a GPS tracking device, she can still travel freely around the city.

The decision undoubtedly will further strain relations between Canada and China, which have deteriorated significantly since Meng’s arrest in December 2018.  Meng’s verdict occurs during increasing frustration in Canada over the continued detention of Michael Kovrig and Michael Spavor, two Canadians who were seized in China shortly after Meng’s arrest.[5]

A Chinese embassy spokesperson in Canada told the Canadian Broadcasting Company news: “The purpose of the United States is to bring down Huawei and other Chinese high-tech companies, and Canada has been acting in the process as an accomplice of the United States. The whole case is entirely a grave political incident.”[6]

The current issue of the IELR will discuss the decision and implications in more detail.

[1]    David Molko and Kendra Mangione, B.C. judge rules against Huawei’s Meng Wanzhou, extradition process continues, May 27, 2020 https://bc.ctvnews.ca/b-c-judge-rules-against-huawei-s-meng-wanzhou-extradition-process-continues-1.4956755.

[2]    Id.

[3]   Amanda Coletta, Canadian court says extradition case can proceed, Wash. Post, May 28, 2020, at A18, col. 3.

[4]   Id.

[5]    Leyland Cecco, Canada court ruling allows US extradition case of Huawei executive to proceed, The Guardian, May 27, 2020.

[6]    Id.

OU Launches Global Risks & Threats Leadership Forum June 6

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Please see here for more information and to sign up.

The University of Oklahoma is launching a four-part OU Global Risks & Threats Series on Saturday, June 6, with leaders from the intelligence, finance, law enforcement, corporate and cyber sectors. The other three virtual events will occur in late June, July and August.

The subject of the first of the four forums is The Pandemic Threat: Risks and Impacts of COVID-19, and will focus on the latest threats, trends and strategies on how to address the most critical issues of the pandemic. The forum is scheduled 10 a.m. to 2 p.m. Central Time (USA). There will be a break halfway through.

Over the four sessions, attendees will gain knowledge of real-world solutions, with valuable insights from decision makers in the public and private sectors about their experience handling today’s most complex global challenges. Because of the pandemic, the series will take place as easily accessible virtual forums, presented online via Zoom. Questions for the speakers can be sent in before the forums.

Registration for the first event is US$30. Additional information, including a full agenda and presenter bios, is available online at price.ou.edu/GRTS, and the registration website is price.ou.edu/GRTSregistration.

Adriana Sanford, J.D., dual LL.M, the founding director of OU GRTS, Senior Fellow at the OU Center for Intelligence and National Security, and Assistant Director of Executive Education Programs at the Gene Rainbolt Graduate School of Business, will be the lead-off speaker at the events and preside throughout the series.

The lineup for the COVID-19 virtual event on Saturday, June 6, is:

Special Guest Speaker

  • Honorable Eduardo Aninat, Former Finance Minister of Chile, former Chairman of the Board of Governors and member of the Development Committee of the World Bank and the IMF

Keynotes and Featured Speakers

  • Adriana Sanford, J.D., dual LL.M., Former Fortune 500 Senior Counsel, Global Threats Expert, and International Television Commentator
  • Lou Bladel, former Chief of the FBI’s Counterespionage Section and current Managing Director of Assurance Services at Ernst & Young
  • Tom Finan, former FBI Assistant General Counsel and current Cyber Growth Leader at Willis Towers Watson
  • Cheemin Bo-Linn, ED.D., former Vice President of IBM and current Board of Director Member and Global Risk and Recovery Expert
  • Bruce Zagaris, global anti-corruption and anti-money laundering expert
  • Ross S. Delston, former FDIC regulator and global AML pundit
  • Scott B. MacDonald, global economist and former OCC International Economic Adviser
  •  Jeff Schermerhorn, complex cyber risk expert at Willis Towers Watson

Future speakers include:

  • Spotify’s Head of Global Affairs and Chief Legal Officer and former Microsoft General Counsel and Corporate Vice President for Legal Affairs, Horacio Gutierrez
  • Chief Commercial Officer for Aon Intellectual Property Solutions, and former Chief Intellectual Property Officer at Philips and IBM Vice President of IP and Licensing, Brian Hinman
  • Former Drug Enforcement Administration Special Agent and CIA Operations Officer (Narco-Terrorism and Global Security Threats), Matt Addington
  • Group Chief Risk Officer for Coca-Cola HBC, Gerold Knight

OU GRTS is a collaborative effort between the Michael F. Price College of Business and the OU Center for Intelligence and National Security, consistent with the University’s initiative “to solve real-world problems in ways that both build human knowledge and improve the communities that we serve.”

“The OU Global Risks & Threats Series provides a unique opportunity to leverage the insights of a diverse, talented group of international experts to better understand the risks and opportunities created by the COVID-19 pandemic and other major global concerns,” said James L. Regens, Ph.D., Regents Professor and director of the Center for Intelligence and National Security – an Intelligence Community Center of Academic Excellence.

OU GRTS maintains a cross-industry speaker ecosystem of world-renowned experts, visionaries, strategic decision-makers, and industry leaders that provide guidance, direction and insights.

“We think it is important to share our work and our vision with the global community and to help shape the next generation of world leaders, decision-makers, senior executives and skilled students,” said Wayne Thomas, interim dean of the Price College of Business. “By bringing world experts together, we can better understand the threats that have political, economic and social implications on all of us, and we can advance real-world solutions and work together on a multilateral basis,” he added.

About the University of Oklahoma

Founded in 1890, the University of Oklahoma is a public research university located in Norman, Oklahoma. OU serves the educational, cultural, economic and health care needs of the state, region and nation. More information is online at www.ou.edu.

About the Michael F. Price College of Business

The Michael F. Price College of Business has experienced significant growth over the past five years in the number of faculty, staff and students and has become OU’s second-largest college, with more than 4,900 students. The College offers undergraduate, master’s, executive and doctoral programs across six academic divisions in Accounting, Entrepreneurship and Economic Development, Finance, Management and International Business, Management Information Systems, and Marketing and Supply Chain Management. The College’s Gene Rainbolt Graduate School of Business is a 27,000-square-foot facility located in the heart of Oklahoma City’s Innovation District and is home to the College’s full-time and professional MBA programs, as well as the Executive MBA in Aerospace and Defense and the Graduate Certificate in Aerospace and Defense.

The Price College of Business’s website is price.ou.edu and the Gene Rainbolt Graduate School of Business’s website is ou.edu/price/mba.

About the Center for Intelligence and National Security

As an Intelligence Community Center of Academic Excellence, the University of Oklahoma Center for Intelligence and National Security conducts interdisciplinary research on key intelligence and national security challenges. The Center also offers a robust academic program spanning science, technology, engineering and mathematics (STEM), the social and behavioral sciences, and critical languages. The academic program embraces experiential learning to build valuable foundational capacities in problem-solving, critical thinking and adaptability. Through its study abroad opportunities, OU CINS provides students pursuing undergraduate and graduate degrees a variety of cultural enrichment experiences.

The Center for Intelligence and National Security’s website is www.ou.edu/cins.

Disclaimer

Nothing in this blog constitutes or is intended to constitute legal advice. Neither transmission nor receipt of such materials creates an attorney-client relationship. Blog readers and subscribers should consult with an attorney. This blog may be considered attorney advertising under the rules of some states. The hiring of an attorney is an important decision that should not be based solely upon advertisements. Prior results do not guarantee similar outcomes.

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