Chinese woman’s secret US arrest hints at wider sanctions probe

Amid Huawei and ZTE probes, an employee of another Chinese technology company pleaded guilty last year

Leaders across the world, including those of China and the United States, have been blamed for the way they have tackled the coronavirus pandemic. AP Photo

US authorities were sitting on a sensitive secret last autumn when Canada detained a top Huawei Technologies executive on alleged US sanctions violations.

Two months earlier, the US had arrested another Chinese national on similar suspicions and was holding her at a grim jail in Washington. An employee of an unidentified Chinese technology company, she had been nabbed on holiday in California.

The employee, Liu “Willow” Yang, 29, ultimately pleaded guilty and went back to China. But unlike the legal spectacle in Canada over the extradition and prosecution of Huawei’s chief technology officer, the Ms Yang's matter remains largely under wraps in the US.

Ms Yang had at least one co-conspirator, according to newly unsealed portions of the case and court transcripts reviewed by Bloomberg, suggesting that the US may be pursuing a wider crackdown on sanctions violations than was previously known.

The prosecution of Ms Yang is the third known instance of the US going after Chinese technology companies or their employees for trading with Iran and other countries blacklisted by the US on terrorism, national security or human rights grounds. Besides Huawei, ZTE was forced to pay $1.2 billion (Dh4.4bn) to US authorities to settle allegations that it violated US laws restricting sales to Iran and North Korea.

The Chinese technology company that employed Ms Yang was not disclosed in court records, and it was not accused of wrongdoing. It was unclear whether the US technology sold to Iran had a potential military application, which would heighten US ire.

“I’m sure there will be widespread publicity about this case,” Ms Yang's lawyer, Melissa Madrigal, said during her sentencing hearing. “I’m sure Your Honour has seen the Huawei case and the publicity that case has received.”

A representative of the Chinese embassy in Washington and a spokesman for the US attorney's office in the state declined to comment.

Typically, criminal investigations become public at the point when people are charged or after co-operators have pleaded guilty. The Yang case, by contrast, was fully sealed until April, and large portions are still hidden from public view, including basic court records such as the one outlining the evidence and allegations against Ms Yang and the record of her guilty plea.

In a Washington courtroom where US District Judge Tanya Chutkan sometimes covered the windows, Ms Yang admitted to helping ship more than $870,000 worth of American electronics to Iran over a six-year period.

The judge went easy on Ms Yang, sentencing her to time served. Ms Chutkan cited Ms Yang’s arrest while on vacation, the poor conditions at the jail and the impact on her family - including two young children, one of them an infant suffering from a brain tumour at the time of her detention.

The US sanctions investigations are unspooling at a time of heightened sensitivity in relations between the two world powers. Trade negotiations are hanging in the balance as the Trump administration continues to try to economically and politically isolate Iran, a top Chinese trading partner.

On Friday, US President Donald Trump raised tariffs on $200 billion in goods from China as he sought to extract concessions in trade negotiations taking place in Washington between US officials and China’s top trade envoy, Liu He.

As the US has sought to choke off a key source of Iranian state revenue - oil exports - China has resisted American demands to reduce purchases of oil from Iran, a major supplier for the country.

“Historically there’s been a real reluctance to pursue either penalty enforcement or sanctions designations against Chinese companies. Now I think you’re seeing a much greater willingness to do that,” said Carlton Greene, a Crowell & Morning partner who previously directed sanctions investigations at the Treasury Department’s Office of Foreign Assets Control.

In the highest-profile sanctions case, the chief technology officer of Huawei, Meng Wanzhou, was detained in Canada in December on a US warrant after authorities concluded she had played an intimate role in Huawei’s Iran business, including misleading banks and others about the extent of it.

The company, its US subsidiary and Ms Meng were indicted by federal prosecutors in Brooklyn in January, and the US has blocked government use of Huawei technology, saying it could provide a backdoor for Chinese espionage. Huawei has vigorously denied the accusations.

Ms Meng’s lawyers argued in court on Wednesday that her constitutional rights were violated when she was detained at the Vancouver airport before her arrest at the request of US authorities. They also plan to question whether the US bank-fraud charges against her constitute a crime in Canada.

As for Ms Yang, much about her activities remain unknown. After her arrest in California, she was quickly transferred to Washington, where she acknowledged her role in the scheme and agreed to plead guilty, according to court records.

The records indicate she began working with a co-conspirator whom she had met through her employment, and took on additional duties to make extra money. The duties involved organising transshipments - routing deliveries through intermediate destinations, a technique often used to hide the origin or destination of illicit transactions. Even after she became aware that the deals violated US sanctions laws, she continued to do it anyway, the filings say.

“Liu didn’t realise or appreciate the seriousness of her actions or the risk she was taking by facilitating these transactions,” Ms Yang’s lawyer Ms Chutkan said during her sentencing hearing. Ms Yang earned $25,000 from the trades over the course of the scheme, which she agreed to forfeit to US authorities.

Though she could have received five years in prison, federal prosecutors from the national security unit of the US attorney’s office in Washington recommended a lighter sentence because she “assisted authorities in the investigation and prosecution of this matter,” Ms Chutkan, the judge, said during her sentencing hearing.

Prosecutors and defense lawyers filed a joint motion seeking an order to have Ms Yang deported home as soon as her sentence was imposed, to which the judge agreed - saying Ms Yang was “not the mastermind of the conspiracy".