U.S. judge disqualifies Huawei lawyer from fraud, sanctions case

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By Karen Freifeld

(Reuters) - A U.S. judge on Tuesday disqualified James Cole, a Washington lawyer for China's Huawei, from defending the telecommunications equipment maker against charges of bank fraud and sanctions violations.

Judge Ann Donnelly of U.S. District Court in Brooklyn, New York, issued her order after federal prosecutors argued that Cole's prior work at the Department of Justice created conflicts of interest.

Cole served as the deputy attorney general, the No. 2 official, at the Justice Department between 2011 and 2015.

"There is a 'substantial risk' that Cole could use 'confidential factual information' obtained while serving as DAG to 'materially advance' Huawei's current defense strategy," the U.S. prosecutors said in a May court filing.

Cole, a partner at the law firm Sidley Austin, said he had no recollection of matters referenced as the basis for his disqualification. He did not immediately respond to a request for comment on the judge's decision.

"We are disappointed in the court's decision, which we believe violates Huawei's Sixth Amendment right to counsel of its choice," Huawei spokesman Joe Kelly said in a statement. "We reserve our right to appeal this decision when appropriate."

In the May court filing, the government argued that, as deputy attorney general, Cole "personally supervised and participated in aspects of" a related investigation, but said the details were classified.

A redacted version of Donnelly's decision to disqualify Cole will be made public by Jan. 10, the judge said in her order.

The criminal case against Huawei accuses the company of conspiring to defraud HSBC Holdings Plc (LON:HSBA) and other banks by misrepresenting its relationship with a company that operated in Iran. Prosecutors said Huawei put the banks at risk of penalties for processing transactions that violated U.S. sanctions.

Cole entered a not guilty plea on behalf of Huawei and its U.S. subsidiary in March.

The company's chief financial officer, Meng Wanzhou, daughter of Huawei's founder, is fighting extradition from Canada, where she was arrested last December for her role in the alleged fraud. Meng has said she is innocent.

Michael Levy, another lawyer for the company, argued in court in September that the effort to stop Cole from representing Huawei was another tactical step in a broader U.S. government campaign against the Chinese company.