Tuesday, September 21, 2010

U.S. Lawmakers Wary of Chinese Telecom Firm

Defense News


U.S. Lawmakers Wary of Chinese Telecom Firm


TAIPEI — If China’s Huawei Technologies is allowed to provide gear to U.S. telecom giant Sprint Nextel, it could threaten the United States, eight Republican senators say.

In an Aug. 18 letter to various U.S. government agencies, the senators demanded closer inspection of the Chinese firm’s ties to Iran, the Taliban and the People’s Liberation Army (PLA).

China’s largest networking and telecommunications equipment provider, Huawei is looking to bid for subcontracts offered by Sprint Nextel, a supplier to the Pentagon and U.S. law enforcement agencies. The Chinese firm’s effort is being spearheaded by Amerilink Telecom, a Kansas-based company whose chairman is retired U.S. Navy Adm. William Owens. The former vice chief of the Joint Chiefs of Staff warned in his 2000 book about a rising military threat from Beijing, but more recently has developed business ties with Chinese firms.

If Huawei wins, it could “present a case of a company, acting at the direction of and funded by the Chinese military, taking a critical place in the supply chain of the U.S. military, law enforcement, and private sector,” the letter says. “We are concerned that Huawei’s position as a supplier of Sprint Nextel could create substantial risk for U.S. companies and possibly undermine U.S. national security.”

The letter, which was sent to the Treasury Department, Commerce Department, Office of National Intelligence and General Services Administration, asks that investigations be conducted into Huawei’s activities in the United States, looking particularly at whether any of its U.S. employees hold security clearances and whether it holds any U.S. military contracts.

The letter lists several concerns, saying the Chinese company has: 

■ A “concerning history,” in the Middle East. “The Iraq Survey Group reported that Huawei sold communications technology to Saddam Hussein’s regime in possible violation of U.N. sanctions, and it also supplied the Taliban before its fall. Some reports indicate that this communications technology included fiber optic equipment used in Saddam Hussein’s air defense network, which routinely fired on U.S. military aircraft.” 

■ Ties to Iran. According to news releases issued by the Embassy of the People’s Republic of China in Iran, the company has “gained the trust and alliance of major [Iranian] governmental and private entities within a short period,” including military industries and the Islamic Revolutionary Guard Corps.

■ Committed intellectual property rights violations against U.S. companies. In 2003, the letter says, “Cisco sued the company in a U.S. court for copying its computer codes.” 

■ Been accused of involvement in cyber warfare. “According to reports, British, French, Australian and Indian intelligence agencies have either investigated Huawei or expressed concern that its products could facilitate remote hacking and thereby compromise the integrity of the telecommunications networks in their countries,” the letter said. 

■ Ties to the PLA, starting with its founder and CEO, Ren Zhengfei, who was a member of the PLA before starting the company.

The 2009 and 2010 editions of the annual Pentagon report to the U.S. Congress on the PLA’s military modernization say Huawei has “close ties to the PLA and collaborate on R&D.”

Huawei has offices throughout the world, including in the United States. In their letter, the senators said that “lawyers retained by the company are currently working with the Treasury Department to allow it to operate in the United States” to supply equipment indirectly to the U.S. government.

Neither Amerilink nor Huawei responded to requests to comment on the letter and its allegations.

Sprint spokesman Scott Sloat said, “Sprint has no comment on the letter or on possible bidders.”

The Former Admiral

Owens, who retired from the Navy in 1996, has served as CEO or a board member for several telecommunications and high-tech companies, including Nortel Networks, SAIC and satellite builder Teledesic.

In his 2000 book, “Lifting the Fog of War,” the retired admiral warned of a rising Chinese military threat.

But Owens has in recent years become better known for criticizing U.S. arms sales to Taiwan and promoting U.S.-Chinese military ties. He argued in a 2009 Financial Times opinion piece that the United States should stop supporting the self-governing island, and has called for revising the 2000 National Defense Authorization Act that restricts military cooperation with China.

A former naval colleague said Owens changed after arriving in Hong Kong in 2006 to work as managing director of AEA Holdings Asia, a private U.S.-based equity investment firm. The next year, Owens gave a speech on leadership at Huawei University, the internal educational institute of the telecom firm. Soon after, Huawei’s website praised him and his “love of his work and for his fellow man.” That same year, Owens directed AEA to bid to buy Huawei’s mobile devices unit, according to Reuters. The bid was unsuccessful.

In 2008, Owens helped found the Sanya Initiative to improve ties between the Chinese and U.S. militaries. The group held its first conference that year on China’s Hainan Island; its second took place last year in Honolulu.

Critics call the organization “Red Sanya;” one of the leaders of its Chinese delegation is retired PLA Lt. Gen. Xiong Guangkai, a former director of the PLA’s General Staff who spent most of his career as an intelligence officer.

Owens has denied Sanya has any connection to the Chinese or U.S. governments.

The former U.S. defense official said Owens appears sincere in “wanting to bridge a gap in understanding between the two defense establishments,” but he suggested the former admiral was being used. “In the beginning, however, it seems the U.S. participants [in Sanya] underestimated the sophistication of Chinese influence operations,” the official said. “Admiral Owens appeared overly eager to become ‘friends’ with a group [retired PLA officials] that defines a friend in a particular way.” The official also said, “It’s also hard to avoid drawing a linkage between the business interests of his company, AEA Investors, and his enthusiasm for engaging the PLA.”

In 2009, Owens became chairman of Amerlink; he retained his AEA job. Owens was unavailable to comment, said AEA’s Charles Donohoe. But in a June interview, Owens denied AEA was connected to Sanya, that there was anything nefarious about Sanya, and that he was being used.

“I’ve been around a long time. I’m not a dumb guy. I think I know when I am being manipulated. I’ve been around the military for 30 years, and I’ve been manipulated before and I’ve learned those lessons along the way.”