By Jim McShane, Export Solutions

No, Huawei is not the Godfather and Huawei with its subsidiaries do not constitute an Organized Crime Family, but the Department of Justice (DOJ) (Eastern District of New York) released a superseding indictment in its federal case against Huawei Technologies Co., Ltd. (“Huawei”). The superseding indictment consolidated and expanded upon earlier charges of bank and wire fraud, sanctions violations, trade secret theft, and obstruction issues against Huawei and its subsidiaries that had previously been filed in the Eastern District of New York and the Western District of Washington.

The superseding indictment added a new charge for a number of corporate defendants - Racketeer Influenced and Corrupt Organizations Act (“RICO”).

What is RICO?

RICO was originally enacted as Title IX of the Organized Crime Control Act of 1970 and its primarily focus was prosecution of Organized Crime. The use of RICO as a criminal charge has since expanded. Under RICO, a person (entity) who has committed "at least two acts of racketeering activity" drawn from a list of 35 crimes can be charged with RICO. In the case of Huawei, charges of bank and wire fraud are among those that qualify. To prove RICO charges, the Department of Justice must demonstrate that Huawei and its subsidiaries engaged in a pattern of racketeering activities.

In charging under the RICO statute, DOJ is able to charge connected crimes alleged against different parties together under the unified characterization of “racketeering” by a criminal enterprise, or in this case, Huawei.

For general interest, some of the more famous (or infamous) cases where RICO was utilized in prosecutions have been:

  • Hells Angels Motorcycle Club
  • Michael Milken
  • The Gambino, Lucchese and Bonanno crime families
  • FIFA
  • Major League Baseball

The China Initiative

This latest development is a further demonstration of Department of Justice’s determination to bolster legal actions as outlined in the Attorney General’s "China Initiative" which has as some of its goals:

  • Identify priority trade secret theft cases, ensure that investigations are adequately resourced; and work to bring them to fruition in a timely manner and according to the facts and applicable law;
  • Develop an enforcement strategy concerning non-traditional collectors (e.g., researchers in labs, universities, and the defense industrial base) that are being co-opted into transferring technology contrary to U.S. interests;
  • Educate colleges and universities about potential threats to academic freedom and open discourse from influence efforts on campus;
  • Apply the Foreign Agents Registration Act to unregistered agents seeking to advance China’s political agenda, bringing enforcement actions when appropriate;
  • Equip the nation’s U.S. Attorneys with intelligence and materials they can use to raise awareness of these threats within their Districts and support their outreach efforts;
  • Implement the Foreign Investment Risk Review Modernization Act (FIRMA) for DOJ (including by working with Treasury to develop regulations under the statute and prepare for increased workflow);
  • Identify opportunities to better address supply chain threats, especially ones impacting the telecommunications sector, prior to the transition to 5G networks;
  • Identify Foreign Corrupt Practices Act (FCPA) cases involving Chinese companies that compete with American businesses;
  • Increase efforts to improve Chinese responses to requests under the Mutual Legal Assistance Agreement (MLAA) with the United States; and
  • Evaluate whether additional legislative and administrative authorities are required to protect our national assets from foreign economic aggression.

DOJ’s "China Initiative" has resulted in the filing of over 20 criminal cases pertaining to economic espionage, trade secret, and export controls since 2019 and the impetus for the "China Initiative" by DOJ’s claim that: “The Peoples Republic of China is implicated in more than 80-percent of all economic espionage charges brought by the U.S. Department of Justice (DOJ) since 2012 and there is a nexus to China in more than 60-percent of all trade secret theft cases that the DOJ has charged.”

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Jim McShane is a Sr. Consultant, Trade Compliance for Export Solutions -- a full-service consulting firm specializing in ITAR and EAR regulations.