Hillicon Valley: US hits Huawei with new charges | Judge orders Pentagon to halt ‘war cloud’ work amid Amazon challenge | IRS removes guidance on Fortnite game currency

Welcome to Hillicon Valley, The Hill’s newsletter detailing all you need to know about the tech and cyber news from Capitol Hill to Silicon Valley. If you don’t already, be sure to sign up for our newsletter with this LINK.

Welcome! Follow the cyber team, Maggie Miller (@magmill95), and the tech team, Emily Birnbaum (@birnbaum_e) and Chris Mills Rodrigo (@chrisismills).

 

NEW HUAWEI CHARGES: U.S. prosecutors have brought two new charges against embattled Chinese telecommunications giant Huawei, according to an indictment unsealed Thursday.

The indictment in the Eastern District Court of New York alleges that Huawei conspired to steal trade secrets and U.S. technology. It also charges Huawei and two America-based subsidiaries of Huawei with conspiracy to commit racketeering. Those follow previous charges of stealing intellectual property, wire fraud and obstruction of justice.

Huawei Devices, Huawei USA, Futurewei, Skycom and Huawei chief financial officer Meng Wangzhou are also listed as defendants.

Much of the addition to last year’s indictment centers around allegations that Huawei USA and Futurewei — which were both located in the U.S. at the time of the alleged Racketeer Influenced and Corrupt Organizations Act violations — misappropriated the technology of six U.S. companies by entering into confidentiality agreements and then breaking them. They allegedly recruited employees of the American companies and offered incentives for those employees to provide confidential information to Huawei.

The new charges stem from what prosecutors described as a “decades-long effort” by Huawei and its affiliates to steal U.S. intellectual property, including source codes, internet routers and antenna technology, to grow its business.

The indictment claims that Huawei was broadly successful in these efforts, allowing the world’s largest telecom equipment company to increase its margins.

Response: Huawei denied the allegations Thursday.

“This new indictment is part of the Justice Department’s attempt to irrevocably damage Huawei’s reputation and its business for reasons related to competition rather than law enforcement,” a spokesperson for the company told The Hill in a statement.

Big picture: The indictment comes amid rising scrutiny over the company from U.S. lawmakers and agencies after warnings from the intelligence community that Huawei poses a threat to national security.

Read more on the new charges here.

 

BUT US COMPANIES GET A REPRIEVE: The Trump administration is delaying a deadline for U.S. businesses to cut ties with Chinese telecommunications giant Huawei for the fourth time, the Department of Commerce announced Thursday.

Huawei was granted a temporary license to keep working with American companies for 45 days.

Thursday marked the fourth time the administration has extended the deadline since Huawei was added to the Commerce Department’s “entity list” in May 2019. American companies are banned from doing business with companies on the list, effectively blacklisting groups included.

Huawei was originally added to the list – which is seen a death sentence for foreign companies – because the U.S. government deemed it a national security risk.

The Commerce Department said it gave Huawei a fourth temporary license “as a measure to prevent interruption of existing network communication systems in rural U.S. regions and permit global network security measures.”

The agency suggested that American companies should not acquire new technology from Huawei during the 45 day extension.

Huawei declined to comment on the extension at the time of publication.

Read more on the decision here.

 

JEDI COURT TRICK: A federal judge on Thursday ordered the Pentagon to halt its work on a controversial cloud-computing contract amid a court challenge by Amazon, notching a major win for the tech giant as it seeks to prove that President Trump improperly interfered to keep the $10 billion contract away from Amazon. 

The Court of Federal Claims is granting Amazon’s request to stop the Pentagon from forging ahead with the cloud-computing project until the lawsuit is settled. The Department of Defense was planning to work with Microsoft, the company that received the contract over Amazon last year, to implement a sweeping cloud infrastructure across the entire department despite Amazon’s legal challenge. 

Microsoft, which has said little publicly about Amazon’s court challenge, said in a statement Thursday it is “disappointed” by the judge’s decision to delay the contract implementation but believes the facts are on its side. 

“While we are disappointed with the additional delay, we believe that we will ultimately be able to move forward with the work to make sure those who serve our country can access the new technology they urgently require,” Frank Shaw, Microsoft’s corporate vice president of communications, said.  

“We have confidence in the Department of Defense, and we believe the facts will show they ran a detailed, thorough and fair process in determining the needs of the warfighter were best met by Microsoft,” Shaw said. 

Amazon and the Department of Defense did not immediately respond to a request for comment.

Read more on the order here.

 

A NEW DATA AGENCY?: Sen. Kirsten Gillibrand (D-N.Y.) wants to create an entirely new federal agency dedicated to protecting online privacy, she said in a proposal released Thursday morning. 

In her first major policy proposal since dropping out of the 2020 presidential race, Gillibrand is calling for the creation of a “Data Protection Agency” tasked with creating new rules around how tech companies are allowed to collect and use personal information about their users. Gillibrand’s legislation would empower the agency to investigate, subpoena and go after companies accused of violating online privacy. 

The agency would take tech oversight away from the Federal Trade Commission (FTC), the century-old federal agency currently tasked with overseeing privacy and antitrust issues. Gillibrand’s proposal says the FTC has “failed” to act on some of the most pressing privacy issues of the day, including online marketing to children. 

“As the data privacy crisis looms larger over the everyday lives of Americans, the government has a responsibility to step forward and give Americans meaningful protection over their data and how it’s being used,” Gillibrand said in a statement. “The U.S. needs a new approach to privacy and data protection.

“We cannot allow our freedoms to be trampled over by private companies that value profits over people,” she continued, “and the Data Protection Agency would do that with expertise and resources to create and meaningfully enforce data protection rules and digital rights.”

The U.S. is virtually the only developed nation without an independent privacy watchdog.  

Gillibrand’s proposal is unlikely to move forward in the Senate, where a group of key Republicans and Democrats have been locked in tense negotiations over the country’s first comprehensive online privacy law for over a year. The lawmakers have largely shot down the idea of creating an entirely new agency, instead proposing more resources for the FTC.

Read more on her proposal here.

 

A VULNERABLE VOTING APP: Voatz, a voting app used in multiple states during the 2018 midterms elections to allow for more accessible voting, has cyber vulnerabilities that could allow for votes to be changed or exposed, researchers at the Massachusetts Institute of Technology (MIT) found. 

In a paper published Thursday, three MIT researchers found that Voatz had vulnerabilities that “allow different kinds of adversaries to alter, stop, or expose a user’s vote” and that the app also had several privacy issues due to the use of third-party services to ensure the app functioned. 

The researchers found that if an individual were able to gain remote access to the device used to vote on the Voatz app, vulnerabilities could have allowed that person to discover and change the votes cast. 

The researchers described their findings as being part of the first “public security analysis of Voatz” and noted that they used reverse engineering of the Android Voatz app to come to their conclusions.

The Voatz app was used during the 2018 midterms in some municipal, state or federal elections in West Virginia, Colorado, Oregon and Utah. The company allows voters to cast their votes via an app and was rolled out in West Virginia as a way for overseas military personnel and other voters unable to physically go to the polls to cast their votes.

It was also used during the 2016 Massachusetts Democratic Convention and the 2016 Utah Republican Convention. The Voatz app was not used during the recent Iowa caucuses, which were thrown into chaos when a separate app used by the Iowa Democratic Party for vote tabulation suffered a “coding issue” that slowed down the count. 

Before going public with their findings, the MIT researchers contacted the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency in order to work with election officials impacted by the findings to address the vulnerabilities. 

Voatz pushed back strongly against the findings, describing the research as “untested claims” and “bad faith recommendations.”

Read more here.

 

MEANWHILE IN NEVADA…: The Nevada State Democratic Party plans to use a Google calculator uploaded to iPads to help tally voting results in the upcoming Nevada caucuses, a top party official announced Thursday. 

Party Executive Director Alana Mounce pushed out a memo explaining that the calculator will be loaded onto 2,000 iPads purchased by the Nevada State Democratic Party, with the iPads then distributed to precinct chairs.

Mounce wrote that the party “consulted with a team of independent security and technical experts to create a simple, user-friendly calculator,” and that the calculator will only be used by “trained precinct chairs and accessed through a secure Google web form.”

Each precinct will also separately record voters and award delegates on paper backup sheets to ensure the results of the caucus are accurate in case something goes wrong with the calculator.

Mounce emphasized that the party had invited testing from security experts, volunteers, and community leaders to ensure the process was user-friendly.

“We understand just how important it is that we get this right and protect the integrity of Nevadans’ votes,” Mounce wrote. “We are confident in our backup plans and redundancies.”

The announcement comes after the party made the decision to not use a vote tabulator app built by Shadow, Inc. that malfunctioned due to a “coding issue” during the Iowa caucuses and caused a backup in tallying results.

Read more on the Nevada move here.

 

SAY ‘NO’ TO RUSSIAN PROPAGANDA: A group of House Democrats criticized the Federal Communications Commission (FCC) on Thursday for not taking action to curb Russian propaganda aired on U.S. radio stations, and urged the agency to take steps to remedy this ahead of the 2020 elections.

In a letter to FCC Chairman Ajit Pai, the House members led by Reps. Anna Eshoo (D-Calif.) and Michael Doyle (D-Pa.) pointed to concerns around WZHF, known as Radio Sputnik, which is based in the Washington, D.C., metro area and airs Russian propaganda without informing listeners that the information is propaganda.

A federal judge ruled last year that the station had to register as a Russian foreign agent due to the station continuously airing Sputnik International news from Moscow. 

The FCC opened an inquiry into the station in 2018 to rule on whether the station was complying with an agency rule that requires stations to fully disclose the identity of sponsors of programs. 

The Democratic members – who also included Reps. Jerry McNerney (Calif.), Jimmy Panetta (Calif.), David Cicilline (R.I.), Sharice Davids (Kan.), and Del. Eleanor Holmes Norton (D.C.) – noted that they were told by the FCC in December that the investigation is ongoing, with the members writing that they found the lengthy investigation “shameful.”

“The FCC has failed to enforce its own rules as they apply to registered foreign agents, allowing hostile Russian propagandists to attack our democracy as another election is upon us,” the members wrote. “The FCC’s continued inaction, after receiving many Congressional letters from us about this critically important issue, is a stunning abdication of its responsibility to protect American airwaves.”

Read more here.

 

FORTNITE RULEZ: The IRS has removed guidance from its website that said in-game virtual currency in video games such as Fortnite could be subject to a new reporting requirement on federal tax returns.

IRS Chief Counsel Michael Desmond said the video game currencies should not have been included in the guidance alongside bitcoin, according to a report by Bloomberg Tax. 

He described their inclusion as a mistake, but provided little clarity on how the error occurred.

“It was corrected and that was done quickly — as soon as it was brought to our attention,” the counsel told reporters Thursday at a Tax Council Policy Institute conference in Washington, according to Bloomberg Tax.

The language had identified V-bucks, the currency used in Fortnite, as an example of a convertible virtual currency.

Bloomberg Tax had asked the IRS if gamers who purchased the currencies would have to disclose the information on their tax forms, and the language was removed from the IRS’s website shortly after Bloomberg Tax inquired to the agency.

Read more.

 

A LIGHTER CLICK: Long Chile

 

AN OP-ED TO CHEW ON: What happens if a President Warren breaks up ‘Big Tech’?

 

NOTABLE LINKS FROM AROUND THE WEB:

The Influencer Election Is Here (Kate Knibbs / Wired)

A 14-year-old in Atlanta created one of the biggest dances on the internet. But nobody really knows that. (The New York Times / Taylor Lorenz)

Copyright could be the next way for Congress to take on Big Tech (Verge / Adi Robertson)

What we know (and don’t know) about the Nevada caucus “tool” (Recode / Sara Morrison)