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February 16, 2011

Outrageous Chinese stealth acquisition of server technology company

By Steve McCann

The case of Huawei Technology's takeover of server technology company 3Leaf Corporation (see: The Chinese Force Obama's Hand) gets stranger as each day passes.  It now has been revealed that Committee on Foreign Investments in the United States (CIFUS) officials only found out about Huawei's acquisition last summer when they came across a puzzling find during a routine review of Huawei, as that company is prominent on the government's radar screen.

They stumbled across a Linkedln page for one of the founders of 3Leaf who was listed as a "Huawei consultant" according to the person's account. The discovery was the first indication for the Committee that Huawei had made an acquisition without informing the panel.

Per a report in the Financial Times:

It was especially confounding because Huawei officials had recently made assurances to the Department of Defense that it was embarking on a new era of transparency.  At the time, Huawei was pushing to win a large telecommunications contract with Sprint of the US, and the company's activities were being closely monitored.

A flurry of activity followed, including a move by CIFUS to force Huawei to file the deal, which had already closed.  There were tense exchanges between the company's attorneys and officials within the US Government which culminated in a virtually unprecedented move by Huawei Monday night.

The company decided to bypass the recommendation of CIFUS that it walk away from the deal and moved instead to seek a final judgment by President Barack Obama.  The decision stunned many Washington lawyers who specialize in cross-border deals.

"This is brinkmanship" said one veteran attorney who asked not to be named.  "To say 'We are going to appeal to the President over the recommendation of his national security advisors', which is what CIFUS is, is stunning."

This was yet another part of the long term pattern of obfuscation and dishonesty by Huawei as well as their close ties to the Chinese military.

This has now become a major political issue between China and the U.S., and if not approved by Obama there is a distinct possibility of a retaliatory move by Beijing against American companies.

The mere fact that the Chinese willfully, secretly and blatantly acquired the 3Leaf with no notification, which they knew was necessary, and now appeals the CIFUS decision to the President, reveals the mindset of the Chinese that the United States is their de facto puppet and must do whatever Beijing demands.  Mr. Obama by his obeisance to the Chinese leadership has fostered this mindset.  Politically the President will, in all likelihood, be forced to block the sale, particularly with Congress looking over his shoulder; however the damage caused by the image of a prostrate Unites States in its dealings with China is enormous.


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