Washington: ZTE Corp., China’s second-largest telecommunications gear maker, has agreed to plead guilty and pay as much as $1.2 billion for violating US laws restricting sale of American technology to Iran.
The agreement calls for the company to pay $892 million in fines and forfeitures and be subject to an additional $300 million in penalties if it violates the terms of the settlement. It is the largest criminal fine for the Justice Department in an export control or sanctions case.
“ZTE Corporation not only violated export controls that keep sensitive American technology out of the hands of hostile regimes like Iran’s — they lied to federal investigators and even deceived their own counsel and internal investigators about their illegal acts,” Attorney General Jeff Sessions said in a statement. “This plea agreement holds them accountable, and makes clear that our government will use every tool we have to punish companies who would violate our laws.”
The company will plead guilty to three felonies: violations of export laws, making a material false statement and obstruction of justice. The agreement is subject to court approval. A criminal information was filed on Tuesday in federal court in the Northern District of Texas.
According to court documents, ZTE, either directly or indirectly through a third company, shipped approximately $32 million of US items to Iran between 2010 and 2016 without obtaining export licenses. In early 2010, ZTE began bidding on two different Iranian projects involving the installation of cellular and landline network infrastructure.
“ZTE engaged in an elaborate scheme to acquire US-origin items, send the items to Iran and mask its involvement in those exports,” Acting Assistant Attorney General Mary McCord said in a statement. “The plea agreement alleges that the highest levels of management within the company approved the scheme. ZTE then repeatedly lied to and misled federal investigators, its own attorneys and internal investigators. “
The commerce department blocked US exports to ZTE in March 2016 over allegations that the company re-sold goods to Iran, only to suspend that ban several times after both sides opened negotiations. ZTE, which said it was cooperating with the regulator, buys components from American companies including Qualcomm Inc. and Micron Technology Inc., according to data compiled by Bloomberg.
ZTE has encountered issues with the US government in the past, including accusations of aiding espionage. The company has denied the allegations. The flare-up last year provoked a response from China’s government, which urged the US to remove ZTE from its blacklist to avoid damaging economic and trade relations.
“The Department of Commerce is committed to ensuring US and foreign companies regardless of size or location comply with our trade laws,” Commerce Secretary Wilbur Ross told reporters. “They should have known better. These penalties are just the first example of the extraordinary powers Commerce will use.”
ZTE, based in Shenzhen, China, didn’t immediately respond to voice mails and emails seeking comment.
Since the March 2016 finding, the Commerce Department has issued a series of temporary reprieves for ZTE from the sanctions. In a final rule published 24 February, the department extended the company’s temporary general license until 29 March. Under the extensions, US suppliers have been able to continue to supply ZTE with software, technology and components despite the Commerce restrictions.
ZTE produces everything from the base stations that broadcast mobile signals to the smartphones that depend on them for connectivity. It also makes smartphones and sells its equipment throughout Europe, Asia and the Americas. Bloomberg