The Justice Department is in talks with lawyers for a top Chinese tech executive under house arrest in Canada to resolve U.S. criminal fraud charges in a case that has strained Beijing’s relations with Ottawa and Washington.

The negotiations between Justice Department officials and lawyers for Meng Wanzhou, the chief financial officer for Huawei Technologies, the world’s largest communications equipment manufacturer, have been ongoing for months, according to people familiar with the matter, who spoke on the condition of anonymity because of the issue’s sensitivity.

Meng was arrested in December 2018 and charged with bank and wire fraud, and was accused of misleading banks about Huawei’s relationship with a firm in Iran called Skycom, which prosecutors allege is a Huawei subsidiary. Prosecutors alleged that Huawei and Meng deceived the banks into clearing millions of dollars in transactions with Skycom in violation of U.S. sanctions prohibiting business dealings with Iran.

[Justice Department charges Huawei and its CFO with fraud, ratcheting up tensions between Beijing and Washington]

Meng, the daughter of company founder Ren Zhengfei, has been sequestered in a multimillion-dollar mansion in Vancouver since then.

The talks, which were first reported by the Wall Street Journal, have not advanced to the point where an offer or deal is on the table, according to the people familiar with the matter.

The Justice Department declined to comment. Reid Weingarten, a lawyer for Meng, also declined to comment.

Meng was indicted along with Huawei and two affiliates after a long-running Justice Department investigation. The charges were announced in January 2019 as China and the United States were locked in an economic impasse over President Trump’s demands for a trade deal. They came, too, as Washington adopted a more confrontational tone with Beijing, which it sees as a competitor in economic and national security terms.

Huawei has long been accused of posing a national security risk, with both Republican and Democratic lawmakers alleging that the Chinese government could force it to use its telecommunications gear for espionage purposes. Huawei has denied the allegations. But the Trump administration has mounted a vigorous and increasingly successful effort to persuade European and other allies to forgo using Huawei gear in their advanced wireless networks.

Meng is in the midst of extradition proceedings that have also elevated tensions between Ottawa and Beijing.

[Huawei founder’s daughter faces extradition proceedings]

Ten days after Canada arrested Meng in Vancouver at the behest of U.S. officials seeking her extradition, China detained two Canadians, former diplomat Michael Kovrig and businessman Michael Spavor, and charged them with breaching state secrets laws in a move widely seen as retaliation. China also put two Canadians on death row and blocked some agricultural imports from Canada, including canola seed.

Canadian Prime Minister Justin Trudeau, who is caught between his country’s two largest trading partners, has faced calls, including from an ex-Supreme Court justice and several former foreign ministers, to drop the extradition case against Meng in hopes that it will spur China to release the two Canadians.

But he has rejected the calls, describing Meng’s extradition case as a law enforcement matter that will be settled by a justice system whose independence from political intervention is “deeply dear to Canadians.”

Meng lost her first legal bid to end the extradition process in May, when a Canadian court ruled that the offenses alleged in charges the United States has filed against her are also crimes in Canada — a key legal test under extradition law in Canada.

Her Canadian lawyers will next try to get the case dismissed in February, when they are expected to argue that her rights were violated when she was arrested at a Vancouver airport. They are expected also to allege that the case against her is politically motivated and that the U.S. Department of Justice has made “material misstatements and omissions” in its submissions to Canadian officials and the court about the evidence against her.

Coletta reported from Toronto.

© Jennifer Gauthier/Reuters/file
Huawei Technologies chief financial officer Meng Wanzhou leaves her home to attend a court hearing in Vancouver, British Columbia on May 27, 2020.

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