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U.S. says Huawei lawyer's prior work at Justice Department poses conflict

By Karen Freifeld
FILE PHOTO: A man walks past a sign board of Huawei at CES (Consumer Electronics Show) Asia 2018 in Shanghai, China June 14, 2018. REUTERS/Aly Song/File Photo

By Karen Freifeld

(Reuters) - Huawei Technologies Co Ltd lawyer James Cole's prior work at the U.S. Department of Justice created a conflict of interest that should disqualify him from defending the Chinese company in a case of alleged bank fraud and sanctions violations, U.S. prosecutors said in a filing on Friday.

Last week, the prosecutors filed a motion to disqualify Cole, who served as deputy attorney general, the No. 2 official at the Justice Department, between 2011 and 2015. That motion was sealed and classified, and prosecutors did not make public the reasons behind the move.

"There is a 'substantial risk' that Cole could use 'confidential factual information' obtained while serving as DAG to 'materially advance' Huawei's current defense strategy," the prosecutors said, according to a redacted copy of the U.S. motion filed on Friday in U.S. District Court in Brooklyn, New York.

Neither Cole nor Huawei immediately responded to requests for comment. Last week, Huawei said it would "vigorously oppose" Cole's removal from the case.

The case against Huawei, the world's largest telecommunications equipment maker, has ratcheted up tensions between Beijing and Washington as the world's top two economic powers try to negotiate a trade deal.

The company's chief financial officer, Meng Wanzhou, daughter of Huawei's founder, was arrested in Canada in December at the behest of U.S. authorities for her role in the alleged fraud. Meng has said she is innocent and is fighting extradition.

In Friday's filing, U.S. prosecutors said Cole's representation of Huawei poses "irresolvable conflicts of interest."

As deputy attorney general, Cole "personally supervised and participated in aspects of" an investigation that caused the conflict, the prosecutors said in the filing. Details of that probe were redacted.

The prosecutors said Cole possessed information from his time at the Justice Department that related to his Huawei representation that he could not reveal. Because the nature of the conflict is classified, the prosecutors said, Cole also cannot give Huawei enough information for them to waive any conflict.

The case against Huawei and Meng accuses them of conspiring to defraud HSBC Holdings Plc and other banks by misrepresenting Huawei’s relationship with Skycom Tech Co Ltd, a company that operated in Iran, putting the banks at risk of fines for violations of U.S. sanctions.

Huawei has said Skycom was a local business partner. The United States maintains it was an unofficial subsidiary used to conceal Huawei’s Iran business.

U.S. authorities claim Huawei used Skycom to obtain embargoed U.S. goods, technology and services in Iran, and to move money via the international banking system.

Last month, prosecutors said they planned to use information about Huawei obtained through secret surveillance.

Cole entered a not guilty plea on behalf of Huawei and its U.S. subsidiary in Brooklyn on March 14.

(Reporting by Karen Freifeld; additional reporting by Brendan Pierson; editing by Bill Rigby and Leslie Adler)