Published: Wed, March 08, 2017
Economy | By Melissa Porter

China's ZTE Settles US Sanctions Case for $1 Billion, Source Says

China's ZTE Settles US Sanctions Case for $1 Billion, Source Says

ZTE, one of the largest telecom equipment manufacturers in China, announced on Tuesday that it was entering into a global settlement with the U.S. government regarding its conduct relating to United States export control and sanctions. The company will pay $892 million, while another $300 million in penalties are suspended for seven years. The company will plead guilty to three charges: conspiracy to unlawfully export, obstruction of justice and making false statements to federal investigators, according to a plea agreement released by the Justice Department.

ZTE chairman and CEO Zhao Xianming said Tuesday the company "acknowledges the mistakes it made, takes responsibility for them and remains committed to positive change".

According to the settlement, ZTE knowingly shipped $32 million of US-made technology to Iran over a six-year period.

Officials from the departments described an elaborate scheme by the company to ship about $32 million worth of US -made equipment to Iran while lying to federal investigators.

Justice department officials said the company had illegally shipped sensitive US-made equipment to Iran.

"Those who flout our economic sanctions, our export control laws and any other trade regimes will not go unpunished", he said at a separate press conference. Under the extensions, US suppliers have been able to continue to supply ZTE with software, technology and components despite the Commerce restrictions.

To that end, ZTE's new Chief Export Compliance Officer, U.S. -based lawyer Matt Bell, added that the company is building a "global team" of compliance professionals, restructuring its legal department, and instituting new policies, training, and automated tools to keep current with ever-changing regulations.

As part of Tuesday's plea agreement, the Chinese company will continue to cooperate with USA authorities in investigations of any other violations of US export control laws. But the whole matter has tarred the Chinese company's reputation and risked denying it access to US tech suppliers, such as Qualcomm and Intel.

Three senior officials including Zhao's predecessor had stepped down in early April 2016 after the USA government first sanctioned ZTE in the case.

The five-year government investigation into ZTE's actions violating restrictions on exports to sanctioned countries involved the US Justice, Commerce and Treasury departments, and was first revealed in March 2016.

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