VANCOUVER, British Columbia—Canadian authorities arrested Huawei Technologies Co. finance chief Meng Wanzhou because of U.S. allegations that she fraudulently covered up Huawei’s control of a company called Skycom that was doing business in Iran, a Canadian prosecutor said Friday.
At a bail hearing for Ms. Meng in a Canadian court in Vancouver, John Gibb-Carsley, the Canadian prosecutor, said Ms. Meng misled financial institutions about the connection between Huawei and Skycom at a time when there were sanctions against Iran, saying there was no relationship. In fact, he said, Huawei and Skycom were the same company. “This is the crux, I say, of the alleged fraud,” Mr. Gibb-Carsley said.
Ms. Meng served on the board of Skycom, a Hong Kong-based firm with business in Iran, from February 2008 to April 2009, Hong Kong corporate records show.
Ms. Meng, the daughter of Huawei founder Ren Zhengfei, was arrested by Canadian authorities Saturday in Vancouver at the request of the U.S., as she was en route from Hong Kong to Mexico. She is facing extradition to the U.S. for an alleged violation of the country’s sanctions against Iran.
David Martin, an attorney representing Ms. Meng at the hearing, told the court “there is no evidence” that Skycom was a subsidiary of Huawei during the period in question. He said it had been a subsidiary, but was sold in 2009. The idea that Ms. Meng engaged in fraud will be “hotly contested,” he said.
In 2011, The Wall Street Journal reported that Huawei sometimes worked through a Hong Kong-registered company with a different name—Skycom. A Huawei executive said at the time the two companies were closely affiliated but that Huawei didn’t have any investment in Skycom
Huawei has said that it isn’t aware of any wrongdoing by Ms. Meng. A spokesman had no immediate comment on Friday as the hearing was taking place.
Mr. Gibb-Carsley said the warrant for Ms. Meng’s arrest was issued by a court in New York on Aug. 22 of this year.
Ms. Meng in the past traveled to the U.S. regularly, but the last trip she made was in February and March of 2017, just before Huawei became aware in April 2017 of the U.S. criminal investigation into the company, Mr. Gibb-Carsley said. Huawei executives have altered their travel plans since then, he said.
Joe Kelly, a spokesman for Huawei in Shenzhen, said some executives continue to travel to the U.S. Richard Yu, chief of Huawei’s consumer products group, visited the country twice, for an industry conference and a speaking engagement early in the year.
Mr. Gibb-Carsley said Ms. Meng would be a flight risk if granted bail, pointing to what he said was her father’s multibillion-dollar fortune and the seriousness of the fraud charges, each of which he said carries as much as 30 years in prison.
Mr. Martin, the attorney representing Ms. Meng, said she isn’t a flight risk, saying that she would never breach a court order.
“You can rely on her personal dignity,” he told the court, adding that she also would not flee because it would “humiliate and embarrass” her father, “who she loves.”
Write to Jay Greene at Jay.Greene@wsj.com
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