Mike Blanchfield - The Two Michaels: Innocent Canadian Captives and High Stakes Espionage in the US-China Cyber War

THE TWO MICHAELS

Innocent Canadian Captives

and High Stakes Espionage in

the US-China Cyber War

MIKE BLANCHFIELD & FEN OSLER HAMPSON

Sutherland House

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Toronto, ON M4G 1C9

Copyright 2021 by Mike Blanchfield & Fen Osler Hampson

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First edition, November 2021

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Manufactured in Canada

Cover designed by Lena Yang

Book composed by Karl Hunt

Library and Archives Canada Cataloguing in Publication

Title: The two Michaels : innocent Canadian captives and high-stakes espionage in the US-China cyber war / Mike Blanchfield & Fen Osler Hampson.

Names: Blanchfield, Mike, 1964- author. | Hampson, Fen Osler, author.

Identifiers: Canadiana 2021032287X | ISBN 9781989555545 (softcover)

Subjects: LCSH: United StatesForeign relationsChina. |

LCSH: ChinaForeign relationsUnited

States. | LCSH: CyberterrorismUnited States. |

LCSH: CyberterrorismChina. | LCSH: Espionage,

AmericanChina. | LCSH: Espionage, ChineseUnited States. |

LCSH: Geopolitics.

Classification: LCC E183.8.C5 B48 2021 |

DDC 327.73051dc23

ISBN 978-1-989555-54-5

THE SURREY DETACHMENT OF the Royal Canadian Mounted Police was short staffed on Friday, November 30, 2018, when Const. Winston Yeps cellphone rang. His supervisor told him to get down to the Department of Justice to swear out a provisional arrest warrant for a female traveller due to arrive in Vancouver from Hong Kong in less than twenty-four hours. It was mid-day and Yep, a member of the RCMPs foreign and domestic liaison unit, was in the middle of only his second extradition case, but he dropped everything and headed out to begin the process of swearing out and signing the necessary affidavit.

Yep had never heard of Meng Wanzhou before that day. By the time hed finished dotting the Is and crossing the Ts on his affidavit, hed learned that Wanzhou Meng (Meng), also known as Cathy Meng, and Sabrina Meng, was a citizen of the Peoples Republic of China. She worked as a top executive of Huawei Technologies Co. Ltd., which bills itself as the worlds largest telecommunications equipment company. She was also the daughter of Huaweis legendary founder, Ren Zhengfei.

In addition to her role as chief financial officer, Meng served as Huaweis deputy chairwoman of the board, among other roles at Huawei subsidiaries and affiliates. She also sat on the board of Hong Kong-based Skycom Tech Co. Ltd. (Skycom) in or around 2008 and 2009. According to financial statements for Skycom for the years 2009 and 2010, the principal activities of Skycom were investment holding and acting as a contractor for undertakings in Iran.

Yeps affidavit and an appended summary of facts described how US authorities came to believe that Huawei was using Skycom as a backchannel to trade with Iran in violation of American trade sanctions. The US and Iran have been enemies since 1979, when a group of radical students in Tehran stormed the American embassy and took hostages in a siege that lasted 444 days. The US immediately imposed trade sanctions which have evolved over the decades in response to a variety of crises, including the international effort in this century to prevent Iran from enriching the uranium it needs to create a nuclear weapon. On November 2, 2018, weeks before the Meng extradition request reached Yep, the Trump administration slapped Tehran with its toughest sanctions yet, targeting its oil exportsthe cornerstone of Irans economyto punish it for support of militant groups.

According to Yeps documents, Huawei was running Skycom as an unofficial subsidiary to conduct business in Iran while concealing Skycoms link to Huawei. There was no real distinction between Skycom and Huawei. Skycom employees working in Iran were employed by Huawei. Whats more, wrote Yep:

Documents show that multiple Skycom bank accounts were controlled by Huawei employees, and Huawei employees were signatories on these accounts between 2007 and 2013;

Documents and email records show that persons listed as Managing Directors for Skycom were Huawei employees;

Skycom official documents, including several Memoranda of Understanding, bore the Huawei logo;

Email correspondence and other records show that all identified Skycom business was conducted using @huawei.com email addresses;

Documents show that a purportedly unrelated entity to which Skycom was supposedly sold in 2009 was actually also controlled by Huawei until at least in or about 2014.

Records obtained through the investigation show that Skycom was used to transact telecommunications business in Iran for major Iranian-based telecommunications companies.

Yeps affidavit was the culmination of months of work by American intelligence, which had long had Meng, as a senior official at Huawei, on its radar. The previous August 22, Magistrate Judge Roanne L. Mann of the Eastern District of New York had issued an arrest warrant for Meng to stand trial on criminal charges in the US. The full case against her was under seal while Yep was preparing his documents but it was later revealed that Meng was accused of bank fraud, wire fraud, and related conspiracy charges, while Huawei was formally accused of stealing telecommunications technology, trade secrets, and equipment from the American wireless company T-Mobile USA. If convicted as charged, Meng would face substantial prison time. Before anything could be done toward a conviction, however, she had to be brought into custody, which was no simple matter.

Huawei executives, Yep wrote, appear to have altered their travel plans to avoid the United States jurisdiction since becoming aware of the United States criminal investigation into Huawei in April 2017. Meng, who previously visited the United States multiple times in 2014, 2015, and 2016, has not made a trip to the United States since March 2017, prior to Huawei becoming aware of the criminal investigation. Thats where the Canadians came in.

American surveillance had learned that Cathay Pacific flight CX838, which Meng was scheduled to board that day in Hong Kong, was to land in Vancouver the following morning, December 1, at 11:30 a.m. After a brief stopover, Meng intended to carry on to Mexico City and Argentina. It was Yeps job to ensure that her journey ended in Vancouver. Meng is not ordinarily resident in Canada and appears to have no ties to Canada, he wrote in his affidavit, and she was likely to have access to large amounts of resources to escape the jurisdiction. She would also have a strong motivation to flee if not properly detained in Canada pending her extradition to the US to stand trial.

Before the day was over, Yep was successful in persuading British Columbia Supreme Court Justice Margot Fleming to issue a warrant for him to immediately arrest Meng and bring her before a judge within twenty-four hours. The definition of immediately would become the source of extensive legal arguments in the months ahead. Yep and his partner also made a trip to the Vancouver International Airport to get the lay of the land.