By Brendan Sasso - 10/08/12 06:56 PM EDT
"Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems," the lawmakers wrote.
At a press conference announcing the report's findings, Rep. Dutch Ruppersberger (D-Md.), the Intelligence Committee's top Democrat, noted that the Chinese government has the power to compel companies to turn over sensitive information and said China is already engaged in aggressive cyber espionage against the United States.
Ruppersberger said he fears China could force Huawei and ZTE to "hand over the personal information of Americans, or worse yet spy on them."
The Maryland Democrat rejected charges that the report is "trade protectionism masquerading as national security,” though the lawmakers said China’s subsidies to Huawei allow the company to offer "bargain-basement prices" to U.S. consumers.
With $32 billion in annual revenue, Huawei is now the world's largest telecom equipment maker, having recently overtaken Sweden's Ericsson. ZTE, meanwhile, is the fifth-largest telecom company.
Both companies have minimal presence in the U.S., but are looking to expand their operations.
The committee recommended that the Treasury Department's Committee on Foreign Investment in the United States block acquisitions, takeovers or mergers involving Huawei and ZTE. They said Congress should consider proposals to expand the agency's authority to block purchasing agreements as well.
They said the U.S. government should not use the companies' equipment and strongly recommended that American companies refrain from doing business with them.
Congressional investigators said they also found evidence that Huawei might have engaged in bribery, corruption and copyright infringement.
Intelligence Chairman Mike Rogers (R-Mich.) said evidence of criminal allegations will be forwarded to the FBI. He declined to discuss details, but he said it was a "clear case of bribery" of an American company and he is confident it will lead to a criminal investigation.
Plummer said he doesn't know what incident Rogers was referring to.
"It's hard to respond to specific allegations when there was no specifics," Plummer said.
He acknowledged there was a recent incident in Texas when a Huawei employee's laptop began transmitting confidential information over the Internet, but he said it was unintentional and independent investigators determined that the computer had been infected with a virus.
Plummer said he hopes the company will be able to put this "political distraction behind us" and focus on working with government officials to address industry-wide cybersecurity challenges.
"Huawei is a global company present in 150 different markets with over 500 customers… and the integrity and quality of our solutions are globally proven," Plummer said. "Those are facts. They were facts last week. They're facts next week. The report utterly ignores these facts."