Humbled ZTE to pay up to $1.2 billion for illegal exports

ZTE is set to pay a record fine to the US government over claims it exported telecoms equipment to Iran and North Korea.

The US Department of Commerce’s Bureau of Industry and Security (BIS) introduced export restrictions on the China-based vendor 12 months ago, after it accused ZTE of setting up shell companies to illicitly export goods to the two countries between 2010 and 2016.

The two parties this week settled on a combined civil and criminal penalty totalling $1.19 billion, made up of three parts.

ZTE will pay the BIS a civil penalty of $661 million, of which $300 million is suspended for a period of seven-years to deter future violations.

A further criminal fine of $430.5 million is dependent on the ruling of the US District Court for the Northern District of Texas, which will decide on the merits of the plea agreement.

ZTE has also agreed to pay the Department of Treasury’s Office of Foreign Assets Control a further $100.9 million pursuant to a settlement agreement.

In addition to the monetary penalties, ZTE has agreed to “active” audit and compliance requirements.

The Department of Commerce noted that ZTE made “knowingly false and misleading representations and statements” during the course of the investigation.

“Despite ZTE’s repeated attempts to thwart the investigation, the dogged determination of investigators uncovered damning evidence of an orchestrated, systematic scheme to violate US export controls by supplying equipment to sanctioned destinations,” said Douglas Hassebrock, Director of the BIS Office of Export Enforcement.

US Secretary of Commerce Wilbur L Ross Jr added: “The results of this investigation and the unprecedented penalty reflects ZTE’s egregious scheme to evade US law and systematically mislead investigators.

“We are putting the world on notice: the games are over.

“Those who flout our economic sanctions and export control laws will not go unpunished – they will suffer the harshest of consequences.

“Under President Trump’s leadership, we will be aggressively enforcing strong trade policies with the dual purpose of protecting American national security and protecting American workers.”

ZTE said it had made a number of changes in a bid “to create a strong compliance culture” following the settlement.

It cited the creation of a CEO-led Compliance Committee, the hiring of a new Chief Export Compliance Officer and training for 45,000 staff.

Zhao Xianming, Chairman and CEO of ZTE Corporation, said: “ZTE acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company.

“Instituting new compliance-focused procedures and making significant personnel changes has been a top priority for the company.

“We have learned many lessons from this experience and will continue on our path of becoming a model for export compliance and management excellence.

“We are committed to a new ZTE, compliant, healthy and trustworthy.”

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