Wednesday, September 7, 2011

Huawei Under Investigation For Fraudulent Bank Loans To Its Employees

According to this article in the Philippine Star, the China Audit Commission and the China Banking Regulatory Commission ordered four banks to withdraw their loans to Huawei employees after discovering that the company forced employees to take loans in order to buy Huawei shares. By doing this, Huawei's leadership was able to bypass laws requiring that such fund raising be publicly listed and supervised by the government. The benefit to Huawei was that this practice, rumored to have been going on for four years, would show the illusion of financial strength thus enabling it to secure larger credit lines with better terms. Larger credit lines also helps the company beat it's competitors by offering rock-bottom prices on its hardware that no one else can afford to match; the most recent example being the sale of Huawei-Symantec hardware to the University of Tennessee Sim Center.

This story was also covered in China Business Daily, which states that wrong-doing on the part of Huawei may include the fabrication of contracts. Earlier this year, Huawei was involved in a bribery scandal in Austria. In spite of the past government affiliations of two of two its senior leaders, and these allegations of financial wrong-doing, Huawei has managed to hire John Suffolk the former CIO for the British government and John Bellinger, former chief attorney at the U.S. State Department. Then there's  William Plummer - Huawei's mouthpiece on Capital Hill who claims that any ties between Huawei and the Chinese government are either invented by its critics or stem from a mistake in a 2001 Wall Street Journal Asia article.

Finally, and worst of all in my opinion, is the fact that Symantec's board of directors had approved forming a joint venture with Huawei in 2008 and remains eager to increase their profit margins with a possible IPO this year. How can anybody take Symantec seriously when it sells security solutions to companies being attacked by China (among other states) while at the same is in bed with a company so closely allied with the Chinese government?

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