As federal scrutiny grew, U slow to sever ties with Chinese telecom

By Mike Kaszuba

In 2018, Chinese telecom giant Huawei came under increasing scrutiny in the United States over allegations that it stole trade secrets and violated sanctions on Iran. At the University of Minnesota, officials watched as major schools across the country began distancing themselves from the company.

Internal university memos –– filed as the U.S. Justice Department indicted Huawei for fraud in January 2019 –– showed that Penn State had already “walked away” from the company. The University of Chicago had stopped accepting gifts from Huawei by November 2018, and did not renew an ongoing agreement with the company. The University of California-Berkeley was refusing new Huawei financial support. The University of Nebraska said that if Huawei offered financial support it was “doubtful” it would be approved.

But at the University of Minnesota, according to documents obtained by Public Record Media (PRM), a non-profit based in Saint Paul, the reaction was different: One month after both the University of Michigan and Purdue University also placed a moratorium on financial support with Huawei in August 2018, officials at the Twin Cities-based school were in discussions with Huawei on research support and planned to host a company representative on campus.

“Huawei is clearly a hot topic and I suspect scrutiny is likely to increase. Having said that, there is no barrier at the present time should you wish to take funding –– either as a gift or a sponsored project,” Pamela Webb, a university associate vice president for research, wrote in an Aug. 28 e-mail to the school’s dean of the College of Science and Engineering.

In September 2018, one month later, the message from another top school official was similar. “Good luck with Huawei tomorrow,” Bob Lewis, the executive director of the school’s Industrial Partnership for Research in Interfacial and Materials Engineering (IPRIME), wrote in a Sept. 24 e-mail as Huawei planned to meet with school officials. “If they show even a passing interest in IPRIME, please put them in touch with me,” wrote Lewis. “In spite of their persona-non-grata standing, we would love to have them as part of IPRIME.”

Hundreds of pages of university documents obtained by PRM show that in late 2018 and early 2019 school officials were slow –– and sometimes reluctant –– to sever ties with the Chinese company even as the Trump administration moved aggressively to label Huawei as a security threat.

The school’s discussions with Huawei continued up until a dramatic turn of events:
According to the documents, school officials were still debating a joint project with Huawei in January 2019 just days after federal prosecutors indicted the company for trying to steal trade secrets, obstruct a criminal investigation and evade Iran economic sanctions.

U official: “Huawei is pretty aggressive”

“Huawei is pretty aggressive,” Raechelle Drakeford, the director of Corporate and Foundation Relations at the school’s College of Science and Engineering, wrote just days after Huawei was indicted.

“They are ready to schedule a visit as soon as mid-February [2019]. I could envision scheduling a conference call to ‘talk’ about a joint lab but I suspect they will assertively try to move us toward a visit,” she added. “Given the tenuousness of establishing a joint lab, I think it’s best for me to tactfully and discretely compose an email to put any and all joint lab discussions on hold.”

The University of Minnesota suspended “further engagement” with Huawei on Feb. 14, 2019 –– two weeks after the indictments –– and a school official said in a March 2, 2019 e-mail that “many of our peer institutions across the nation have already adopted a similar posture.” The memo, written by Dan Gilchrist, the communications director for the school’s vice president for research, added however that “university researchers retain academic freedom to pursue individual lines of inquiry not covered by the suspended engagement outlined in the memo.”

A school spokesman told PRM in June 2021 that its stance toward Huawei had not changed.

In March of this year, in a sign that the company still faced problems in the U.S. two years after the indictments, the Biden administration added new limits on Huawei’s suppliers.

Before its legal troubles in the U.S., Huawei had courted the nation’s –– and the world’s –– top schools. In 2019, the British weekly scientific journal Nature reported that Huawei spent $13.3 billion on research and development in 2017 –– including partnerships “with dozens of universities across the world.” The journal also reported that more than 600 scholarly articles and conference papers in 2018 acknowledged a Huawei funding source, a dramatic rise over recent years.

Documents show scope of U’s relationship with Huawei

The documents obtained by PRM show that school officials had, up until the indictments, sought ways to continue working with Huawei. And through 2018 and into 2019, school officials at times took a critical view as the federal government and other universities paused their relationships with Huawei.

One University of Minnesota official noted that other schools attending a November 2018 meeting had announced they had already moved away from Huawei. He compared what was happening to the anti-Communist feelings in the U.S. during the 1950s as then-U.S. Senator Joseph McCarthy led a high-profile investigation into alleged Communist infiltration into the U.S. government. In an e-mail the university official, Chris Cramer, the school’s vice president for research, wrote that “I noted the McCarthy-esque look of such behavior, but was a minority of one.”

He added that “Every school there [besides us] was refusing Huawei money.”

In February 2018, nine months before the meeting Cramer cited, FBI director Chris Wray said he was “deeply concerned” about Huawei and ZTE, another large Chinese telecom company, having undue influence over the U.S. telecommunications infrastructure because they were “beholden” to a foreign government. In May 2018, the Pentagon banned the sale of Huawei and ZTE phones on military bases.

As the university delayed taking a firm stance against Huawei, the Trump administration’s focus on the company continued. In December 2018, Huawei chief financial officer Meng Wanzhou was arrested in Canada at the request of the U.S, allegedly over Iran sanction violations.

Meanwhile, at a briefing for higher-education officials in November 2018, according to an internal University of Minnesota memo, a FBI presenter “talked about the potential risks of partnering with Chinese companies, especially Huawei, which many in the US law enforcement/intelligence community consider essentially a government[-]run enterprise that cannot be trusted to place customer privacy above its obligations to Beijing.”

However, the university memo added: “No specific recommendations or instructions; more of a cautionary briefing.”

Two months later, the Justice Department announced a 13-count indictment against Huawei. Federal prosecutors said that when Huawei first became aware of the U.S. investigation in 2017, Huawei’s American affiliate tried to move witnesses with knowledge of the company’s Iran-based business back to China, where FBI officials could not interview them.

“The criminal activity in this indictment goes back at least 10 years and goes all the way to the top of the company,” Matthew Whitaker, the acting U.S. Attorney General, said at the time of the indictment.

Wray added that firms like Huawei “pose a dual threat to both our economic and national security, and the magnitude of these charges make clear just how seriously the FBI takes this threat.”

Huawei presses U for joint lab

On the same day of the indictment, university officials were still busy discussing a partnership with Huawei.

“Huawei has reached out to us to inquire about our appetite to explore a joint lab,” Drakeford wrote in a Jan. 28, 2019 e-mail.

“Huawei’s motivation [in establishing] joint labs are to learn from faculty and potentially collaborate on new and innovative research,” she explained. “In a joint lab partnership, Huawei offers $1.1MM per year for three years to the university to establish the lab. $1MM goes toward projects and $100,000 goes toward administration. The partnership is renewable after three years.

“Huawei is open to a gift or sponsored or other type of funding arrangement,” Drakeford added. “They let the University lead the preferred financial agreement. Steering committees are set up in joint labs that consist of faculty and Huawei researchers.”

Still, the federal indictment against Huawei later that day caused school officials to quickly reassess things.

“Just a few minutes before your email reached us, I received news that federal criminal charges against Huawei will likely be announced this afternoon,” wrote J. Patrick Briscoe, the school’s Export Controls and International Projects Officer.

He added: “It’s safe to say that what was already a complicated situation is getting even more so.”

Huawei’s indictments are “game changers”

Three days later, Briscoe reiterated that the indictments were a major development –– but added that school officials might still continue talking to Huawei about the joint lab.

“These indictments are game changers, in my opinion,” he said in a Jan. 31 e-mail. “They’re not convictions, to be sure, but they nevertheless present a credible and problematic narrative. [Huawei] is now alleged to have deliberately prioritized and rewarded the theft of proprietary US technology, obstructed justice, and misled the FBI and US banks about commercial dealings with Iran (a sanctioned country and one of four designated state sponsors of terrorism).”

Briscoe, though, had one more point to add.

“Now, is there any real harm in merely talking to Huawei about a joint lab?” he wrote. “Probably not, but I wouldn’t want participants [to] have high expectations and put undue effort [into] exploring an endeavor that, when all is said and done, might not be tenable.”

Documents indicate that two weeks after the Huawei indictments, school officials continued to define how to move forward with the company. “We’re a public institution, so they can come visit anytime they want — indeed, if faculty want to work with them on topics of joint interest, that’s fine too,” Cramer, the school’s vice-president for research, wrote in a Feb. 14, 2019 e-mail.

“But we won’t take money from them in any form, or enter into other contractual agreements on the part of the University,” Cramer added.

For the University of Minnesota, Huawei’s indictment led the school to wrestle with its existing ties with the Chinese telecommunications giant.

In a June 2018 e-mail Mostafa Kaveh, the dean of the school’s College of Science and Engineering, outlined some of those ties. “We have had several CSE faculty members who have had funding from Huawei’s US labs,” Kaveh wrote. “These have usually come as research gifts.

“Together with [Professor] Tom Luo, I spent a day at Huawei’s main campus in Shenzhen last June (my second visit there over the past several years) for discussions and a presentation by Tom Luo on his wireless communications research,” he added.

While Briscoe had in July 2018 called Huawei’s research relationship with the school “relatively minimal”, the school’s ties to the company were notable, according to documents obtained by PRM. In November 2016, the school and Huawei signed an agreement for a cooperative center for research in intelligent storage. The agreement stated that “the University environment can be used to perform research on storage devices, storage systems architectures, file systems, I/O architecture, and storage applications.”

And though the agreement gave the school the right to publish the center’s research in scientific journals, it gave Huawei the ability to have a “confidential review” of the research before publication and stated that Huawei could have the research’s publication delayed by up to 3 months for proprietary reasons.

Huawei partners with U researchers

There were other ties between Huawei and the school.

In August 2017, the company gave a $60,000 “unrestricted, charitable gift” to the University of Minnesota Foundation for work “in the field of future content distribution networks and related research” being done by Zhi-Li Zhang, a professor at the school’s Department of Computer Science and Engineering.

Less than two years before, in December 2015, Huawei had given the school’s foundation $275,000 – also for work being done by Zhang.

“Huawei makes no claims on the basis of this gift to any ownership or other beneficial interest in any work product resulting from this gift,” a letter from Huawei’s Lin Haibo to the school’s head of the Department of Computer Science and Engineering stated.

“Nonetheless, we would appreciate being kept abreast of the progress of the research and request that you provide us with annual progress reports or as is otherwise appropriate,” the letter added. “It is our hope that any researcher(s) who benefit from this gift will consider releasing any code or data from their project under an open source permissive license.”

School officials, according to the documents, maintained that the university “does not assign ownership of IP to industry sponsors under our research agreements”. But the school did “provide access to IP (Innovation Partnerships) through licensing options. The sponsor can choose one of three options under our MN-IP Create program.”

In November 2014, Huawei again pledged $200,000 to the school’s foundation for work being done by Zhang in mobile search modeling. And in October 2016, in another example of Huawei giving money to the school, the company gave $100,000 to the school’s foundation for work being done by Nikos Sidiropoulos, a professor at the school, in the field of 5G wireless networks.

Huawei’s work with Sidiropoulos indicated how complicated negotiations over innovation partnerships could become –– and how much the company was interested in obtaining certain rights.

In an e-mail to the company in May 2016, the school’s Eric Olson wrote that “some of Huawei’s requests deviate significantly from our standard terms. We are, however, willing to make concessions in order to facilitate a relationship between the University and Huawei.”

Regarding “running royalties”, Olson wrote that “given the complexity of these products, which also include other IP, the University is willing to make concessions with regard to the 1% royalty on net sales when annual sales exceed $20MM.”

The school, in the e-mail, proposed two options. One option, according to the e-mail, stated that the “the 1% royalty rate would be replaced by a 0.05% royalty rate on net sales, presumably on base stations or a significant component of base stations. This is based on net sales when annual sales using the IP [exceed] $20MM with a royalty cap of $5MM.”

The e-mails do not clearly outline what resulted.

In a June 2016 e-mail, Huawei’s Fan Bingyan told the school the company felt as many as four separate scientific breakthroughs could come out of the research. “We would pay about 10 K$ for each IP ownership. It’s much higher than our experience in Europe,” Bingyan wrote.

As Huawei faced legal scrutiny in late 2018 and early 2019, school officials tried to provide assurances that while it was monitoring warnings regarding the company school researchers pursuing relationships with Huawei could continue to do so.

As controversy swirls, no fixed U policy

One professor at the school, Georgios Giannakas, wrote in a September 2018 e-mail that he was poised to receive an unrestricted gift from Huawei and asked the university what he should do. “There has been no [fixed] University policy on such projects/gifts with Huawei,” he wrote. Giannakas was the director of the Digital Technology Center at the university.

“We have checked at the [University of Minnesota’s] institutional level whether there was any intent to halt interactions with Huawei, and the message we got was clear that decisions would be left, at least for now, to individual colleges,” Cramer, the school’s vice-president for research, replied in a Sept. 21, 2018 e-mail.

“While we see sponsored research as possibly being meriting further scrutiny,” Cramer added, “we consider unrestricted gifts not to raise any concerns, so no need to worry about continuing to move forward.”

But Cramer’s e-mail on Sept. 21, 2018 came just a week after he had alerted colleagues about a “kick-off call” in regards to mounting federal concerns about using Huawei equipment.

Cramer’s Sept. 14 e-mail, coming after Congress banned U.S. agencies from buying Huawei equipment, said officials would discuss “how the U of M should implement a new prohibition on the use of certain Chinese-manufactured telecom and surveillance equipment in our systems.”

Huawei’s interest in partnering with Giannakas, meanwhile, also showed how the company pressured the school to act.

“Professor Giannakis called me this afternoon and relayed that he had been told by Huawei that if they did not have an update about moving ahead by the end of the day today that they were going to cancel the $115k project,” Andrea Nadel-Tikh, a charitable grants administrator at the University of Minnesota Foundation, wrote in an October 2018 e-mail.

Replied Webb, the school’s associate vice-president for research: “If they are talking about ‘cancelling a $115K project’ it doesn’t sound like the intent is donative”, or that the money is a gift, as had been promised.

Still the possibility of severing ties with Huawei continued to alarm some school officials.

“Oh my goodness! Are we too, going to cease receiving gifts from Huawei?” Drakeford, the director of Corporate and Foundation Relations at the school’s College of Science and Engineering, wrote in an August 2018 e-mail. “Has [Professor] Zhi-Li Zhang been talked with? He received ~$350K from them in the last year.”