Huawei Judge Debates Apt Bail for Chinese Billionaire's Daughter

(Bloomberg) -- A Canadian judge said Monday he wasn't satisfied with a bail proposal from the lawyers for jailed Huawei Technologies Co. Chief Financial Officer Meng Wanzhou, who faces a U.S. extradition request.

Justice William Ehrcke of the British Columbia Supreme Court voiced doubts that Meng's husband, Liu Xiaozong, could act as her "surety" -- that is, a type of guarantor or “community jailer" who would be responsible for ensuring she meets bail terms and who would lose a proposed C$15 million in cash and properties if she were to violate conditions.

The judge adjourned the case until Tuesday, saying he wouldn't give a decision until both sides better addressed "the necessity and/or strong desirability of a surety being a resident of the province." At issue is the fact that Liu doesn't have the legal immigration status to reside in Canada -- he arrived in Vancouver last week on a multiple-entry visitor visa that expires in February -- meaning there's no guarantee he would be physically present for an extradition proceeding that could potentially last years.

“Someone here on a visitor's visa is not a resident of B.C. It's as simple as that, isn't it?” the judge asked Meng's lawyer David Martin.

On the other hand, the judge also said it's impossible to completely eliminate flight risk -- as demanded by the prosecution -- and that doing so shouldn't be a condition of her bail.

The defense had two witnesses from private security companies testify how Meng could be tracked minute-to-minute by a GPS-equipped anklet and how her home could be put under 24-hour surveillance. Crown attorney John Gibb-Carsley argued neither company could completely eliminate the risk of escape.

The judge said such a guarantee "would be impossible and there'd be no point in setting up such a statutory scheme" for bail if that were a requirement. "It's a condition that could never be fulfilled, never," said Ehrcke.

"We will continue to follow the bail hearing tomorrow," Huawei said in an emailed statement. "We have every confidence that the Canadian and U.S. legal systems will reach a just conclusion."

The defense proposed to pledge bail of C$15 million ($11 million) -- C$1 million in cash and the remainder in equity in the couple's properties in Vancouver. They own two homes valued at more than C$20 million with a combined C$7.5 million in mortgages, according to property records and an affidavit from Meng.

Crown attorney Gibb-Carsley has argued against granting Meng bail because she's so wealthy that she will easily be able to pay whatever is required and then flee. But if bail were to be granted, he requested that the amount be half in cash and half home equity.

Meng would pay for the security costs of minimizing her flight risk if released, her defense has said. Today, it called executives from two companies -- Lions Gate Risk Management Group and Recovery Science Corp. -- to describe how Meng's whereabouts could be secured, including assigning two officers at a time to her home, a driver, a vehicle, and GPS trackers.

Still, Ehrcke circled back to the difficulty of even contemplating a release order without addressing the issue of surety, asking how Liu could possibly serve as his wife's “jailer" if he can't order Liu to remain in the country.

"It would be a frustrating and unfortunate exercise if I were to make an order and then you find that there is no suitable surety," the judge said. "If the conditions can't be fulfilled, she's held in custody so I'm thinking ahead to make sure that you don't find yourself potentially in that situation."

The high-profile case has transfixed investors on both sides of the Pacific as it stokes U.S.-China trade tensions. Meng followed the proceedings through an interpreter at the back of the Vancouver courtroom.

Read more on Huawei's troubled history with the U.S.: QuickTake

Meng was arrested Dec. 1 during a stopover in Vancouver on her way to Mexico. The 46-year-old mother of four is accused of guiding a global effort by the Chinese telecom equipment giant to mask violations of sanctions on sales to Iran. It's an unprecedented effort to hold accountable a senior executive who's considered part of China's inner circle -- the daughter of billionaire Huawei founder Ren Zhengfei.

Meng's lawyers have argued their client has no criminal record, cited high-profile character witnesses to vouch for her, and say she has substantive ties that ensure she would remain in Vancouver. They've also cited health issues, including daily medication, to argue for her release from a Vancouver-area detention center.

“She is a woman of character and dignity,” Martin told the court, describing her as a "national hero" in China who wouldn't sully her reputation by fleeing justice. “She would comply with your order.”

Meng's only two valid passports -- from China and Hong Kong -- have already been confiscated, preventing her from boarding any commercial flights. The only place she could flee to by land is the U.S., the very country that seeks her extradition, they argue.

The case has upended the relationship between Washington and Beijing as they scramble to avert higher tariffs on $200 billion of goods that could depress an already slowing Chinese economy -- with potentially grave global consequences. The move by the U.S. to reach across borders to arrest a prominent Chinese national comes as U.S. political leaders seek to contain the Asian country's rapid ascent, while holding it accountable to allegations of intellectual property theft and protectionism.

The hearing in Vancouver is the start of a long legal process in Canada that could end with Meng being sent to the U.S. to stand trial. Even though the North American neighbors have a longstanding treaty governing extradition, it can take months, even years, for a defendant to be handed over, if at all.

Should a judge agree to extradite Meng, she would have multiple chances to appeal the decision.

To contact the reporter on this story: Natalie Obiko Pearson in Vancouver at npearson7@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net, Tom Giles, Peter Elstrom

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