Primer on Huawei’s “Incident 251”

This is a primer on the so-called “Incident 251” involving Huawei’s alleged treatment of a whistle-blowing employee in December 2019. Despite dominating Chinese headlines, it received relatively limited attention in the international press.

For context, Huawei is the world’s largest telecommunications-equipment manufacturer and second-largest smartphone manufacturer. It has recently stepped into the media limelight because of the Trump administration’s series of actions against Huawei: arresting Meng Wanzhou – Huawei’s CFO and daughter of founder Ren Zhengfei – on charges of violating sanctions against Iran, adding the company to the Entity List, pressuring allies to outlaw the purchase of Huawei’s 5G network equipment, and using Huawei as a bargaining chip in the long-drawn US-China trade war.

Despite this, Incident 251 received limited attention in the international press.

South China Morning Post has the key facts:

Li Hongyuan, 35, claimed that he was detained for 251 days from December last year and formally charged in January after he negotiated a severance package with the company.

Li, who worked for Huawei for 12 years, said his director decided not to renew his contract at the end of 2017, after he reported to company management about alleged fraud in his department in 2016, Shanghai-based Jiemian News reported on Monday.

Li said he negotiated a severance package of more than 331,000 yuan (US$47,000), and 300,000 yuan was transferred to his account through a secretary’s personal account in March 2018, according to the report.

He was taken into custody the following December and told by prosecutors in April that the charges related to “300,000 yuan extorted from Huawei”.

However, he was released in August because the prosecution concluded that “the criminal facts are unclear and the evidence is insufficient”, according to court documents Li posted online.

Most English-language reports did not delve into the bevy of dramatic details underlying Li Hongyuan’s claims:

  • After Ren Zhengfei sent a company-wide email commending a whistle-blower for uncovering fraud in his department, Li tried to whistle-blow fraud in his department by cornering Ren at a conference room. Ren was unsympathetic and asked him to go through the chain of command.
  • Li realized his unsuccessful whistle-blowing attempt meant his days at Huawei were numbered and he would likely suffer retribution. He surreptitiously recorded his conversations with HR, which ostensibly appeared cordial.
  • When he found out that his severance payment was suspiciously paid out of a personal account, he highlighted this to the Shenzhen tax authorities to make sure that Huawei had paid the proper taxes.
  • Nonetheless, Li’s savviness did not stop the Shenzhen police from arresting Li on December 12, 2018 and seizing his recording pen and personal computer that contained the exculpatory audio recordings.
  • The detention facility where he was held is adjacent to Huawei’s headquarters. It was revealed that new employees at Huawei are routinely brought to the facility to look at detained ex-employees as part of their orientation program.
  • The timeline of Li’s alleged crime never made sense. The fraud Li allegedly threatened to leak was publicized by Huawei itself on February 2, 2018, whereas the severance payment was made on March 8, 2018.
  • After 4 months of detention, Li finally met his lawyer and informed him of a backup copy of the recording on the office computer at his new workplace, another sign of Li’s savviness. This evidence was subsequently submitted to the Shenzhen procuratorate.
  • Li was ultimately released after 251 days of detention and awarded 107,522 yuan (approximately US$15,000) as compensation for wrongful detention. In the Chinese tradition of using numbers as a shorthand, Li’s story became known as the “Incident 251” and triggered an uproar across the Chinese Internet.

To be fair, many of these claims are difficult to verify and Li himself did not seek continued media attention after the initial round of publicity. Li’s careful collection and backup of evidence in his favor implied that he foresaw the subsequent retribution and was far from the only employee to be treated this way.

Notably, Incident 251 occurred in Shenzhen, a Special Economic Zone explicitly modelled after rule-of-law exemplars like Hong Kong and Singapore, and implicated Huawei, a national darling riding high on patriotic sentiments induced by the aforementioned US actions. Huawei’s retribution against a long-time employee acting in his employer’s best interests extinguished much of this goodwill, especially among a middle-class that saw Li as a stand-in for themselves.

Huawei further shot itself in the foot with its ill-considered reactions. Incident 251’s revelation coincided with the one-year anniversary of Meng Wanzhou’s arrest and Huawei’s fluff piece drew scorn from Chinese netizens, who contrasted Meng’s confinement to a $16 million house and enjoyment of Canadian due process with Li’s travails. Instead of apologizing, Huawei released an official statement that basically challenged Li to take the company to court. Richard Yu, CEO of Huawei’s Consumer Business Group, shared an article on Weibo that blamed a bizarre combination of the US government, other Chinese smartphone manufacturers, and private Chinese media platforms for orchestrating a conspiracy of negative publicity against Huawei.

This last point is most ironic. China is well-known for its sophisticated system of censorship, even on its private content platforms. But less well-known is the extent to which this private infrastructure has been co-opted to covertly promote or suppress content on a “pay-to-play” basis. As such, it is difficult to tell whether the blitz of content deletion following Incident 251 was motivated by the state’s public stability considerations or by payments from Huawei’s public relations departments.

Nonetheless, this author leans towards the latter view. First, more than two months after this issue first erupted into public consciousness, many of the most widely shared Chinese-language articles on Incident 251 are still available1. Second, while there are implications of collusion between Huawei and the Shenzhen police force, criticisms of local government and large Chinese companies are seen as less threatening compared to criticisms of the Party or the central government.2

It is too early to tell whether Incident 251 will have a long-term impact on Huawei’s domestic position. For those in the West, this seemingly internecine episode is both a glimpse into the complexities of China’s political economy and a cautionary tale of the dangers of fusing public and private powers.

  1. Update on May 2020: these articles are still available.[]
  2. A similar dynamic can also be found in the current discourse of the Wuhan/Hubei government’s handling of the coronavirus outbreak.[]