Let’s Take a Closer Look at That Huawei Arrest
(Bloomberg Opinion) -- When you grow up in the U.S., and then devote your career to writing about domestic corporations, you don’t spend a lot of time thinking about the rule of law, or why it matters. It’s like the air you breathe — you just assume it’s always going to be there.
Yes, the U.S. legal system has plenty of flaws, but you could always count on companies accused of wrongdoing getting their day in court. The government might try to block a merger, but the rationale was invariably based on its interpretation of antitrust law, not on a president’s disapproval. When a corporate executive was accused of a crime, it was because prosecutors had legitimate reasons to believe the executive did something illegal.
The rule of law provides the assurance that so long as you abide by the law, no one is going to arrest you arbitrarily, or take your company away for an illegitimate reason. Investors know they can safely invest their money.
I stopped taking the rule of law for granted in 2010, when I began writing about Mikhail Khodorkovsky. You may recall him as the original oligarch, Russia’s richest man in the early 2000s. By the time I started to focus on him, he had long since been stripped of his company, Yukos, and had spent seven years in a Siberian prison. Indeed, he was then on trial for a new set of “crimes”; if found guilty — hardly in doubt — his sentence would likely be extended by at least a decade.
Khodorkovsky was no saint. It is quite likely he committed crimes, as all the oligarchs did, in originally assembling Yukos. But that’s not why he was in prison. He had begun to back political parties that opposed Russian President Vladimir Putin, and that was intolerable. After Khodorkovsky’s arrest, the other oligarchs realized they had to either curry favor with Putin or flee Russia, leaving their companies behind.
At the end of his trial, Khodorkovsky was allowed to make a statement. It is the most eloquent defense of the rule of law I’ve ever read. “Millions of eyes throughout Russia and the world are watching this trial,” he said.
They are watching with the hope that Russia will still become a country of freedom, and law is above the bureaucrat. Where supporting opposition parties is not a cause for reprisals. Where special services protect the people and the law, and not the bureaucracy from the people and the law. Where human rights no longer depend on the mood of the czar, good or evil.
Every time I wrote about Khodorkovsky, I would get emails and reader comments saying that he deserved to be in prison because of the crimes he had committed building Yukos. To which my reply was: If Russia wanted to punish him for that, it should have tried him for that. That’s how the rule of law works. Jailing someone on trumped-up tax charges because they oppose the president is about as corrosive a thing a government can do in causing people to lose faith in the certainty of law over the whims of autocrats.
Which brings me to the American president, Donald Trump. Ever since he took office, pundits have been writing about how he has caused the erosion of important democratic norms. As a business journalist, I’ve been equally horrified by his undermining of the rule of law as it applies to business.
Trump wants the U.S. Postal Service to raise the rate it charges Amazon.com Inc. to deliver packages purely to punish its chief executive Jeff Bezos, who owns the Washington Post. His constant criticism of CNN may have influenced the Justice Department to oppose AT&T’s merger with Time Warner, which owns the cable network. Just last week, Trump called for General Motors Co. — and General Motors alone — to be stripped of a federal subsidy for electric cars because he is angry it is closing some factories in the Midwest. (The government later said he wanted to end the subsidy for all companies.)
And then there is the arrest of Meng Wanzhou, the chief financial officer of the Chinese telecom giant Huawei Technologies Ltd. Although the arrest took place in Vancouver, it was ginned up by the Trump administration, which now wants Canada to extradite her to the U.S. The purported rationale is that Huawei is being investigated by the Justice Department for violating the sanctions the U.S. imposed in Iran after Trump pulled out of the nuclear accord earlier this year.
Huawei is a company that arouses a lot of suspicion in the West. Many officials think its telecom equipment, which is banned in the U.S., also serves as spyware for the Chinese government. (Huawei has always denied the allegation.)
After the news of Meng’s Dec. 1 arrest became public a few days ago, leaks to the news media suggested she was being held as part of the sanctions investigation. In an earlier version of this article, I incorrectly suggested that Huawei had no obligation to abide by U.S.-imposed sanctions. That would have been true if Huawei didn't use U.S. technology in its routers and other products, but it does, so it is expected to abide by the sanctions. At a bail hearing on Friday, the Canadian prosecutor revealed that Meng had hidden the fact that a company doing business with Iran was actually a Huawei subsidiary. A number of news organizations, including the New York Times, said that Meng's arrest was a means for the administration to serve a “warning shot” in the growing trade war with China. That may well turn out to be the case, but we don’t know for sure.
China is furious, accusing the U.S. of “resorting to despicable hooliganism” and demanding Meng’s release. That’s to be expected. What I didn’t expect was the absence of any outcry in the U.S. Commentators have focused on the arrest’s effect on tech stocks, and on its potential to further damage U.S.-China relations. But no one seems outraged at the possibility that the U.S. nabbed a top Chinese executive as a proxy for a company it may want to punish.
Khodorkovsky was indeed convicted and sentenced to an additional 13½ years. In 2013, Putin gave him a surprise pardon, and Khodorkovsky left Russia. He had spent a total of 10 years in prison.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. He is co-author of “Indentured: The Inside Story of the Rebellion Against the NCAA.”
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