Smartphone Maker to Pay $890M for Iran Deals

DALLAS (CN) – Chinese telecommunications equipment giant ZTE Corporation agreed Tuesday to pay over $890 million to settle claims it illegally sold U.S. technology to Iran.

Shenzhen-based ZTE pleaded guilty to one count of conspiracy to unlawfully export, one count of obstruction of justice and one count of making false statements to federal investigators, according to the plea agreement filed in Dallas federal court.

ZTE, which makes smartphones and sells related telecommunications equipment in Europe, Asia and the Americas, will pay the federal government over $892 million and agreed to pay an additional $300 million if it violates the terms of the settlement. The company will also submit to three years of probation, during which an independent corporate compliance monitor will report on its export compliance efforts.

Federal prosecutors accuse ZTE of shipping American “servers, switches, routers” and other cellular network equipment through China to Iran without obtaining the required export licenses from U.S. authorities. They claim over $32 million in sales occurred over a six-year period.

According to a five-page criminal information charging document, ZTE tried to hide data regarding the illegal sales from 2013 to 2016 and then made false statements to the FBI that it was in compliance with federal law.

U.S Attorney General Jeff Sessions said the plea agreement holds ZTE accountable.

“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,” Sessions said at a press conference.

Commerce Secretary Wilbur Ross told reporters the action is meant to “put the world on notice that improper trade games are over with.”

“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. “They will suffer the harshest of consequences. This case is just the beginning. Under President [Donald] Trump’s leadership, we will be aggressively enforcing strong trade policies with the dual purpose of protecting American national security and protecting American workers.”

The settlement ends a five-year federal investigation into ZTE.

John Parker, U.S. Attorney for the Northern District of Texas, said ZTE “shockingly resumed” the illegal shipments to Iran during the investigation.

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.”

“Instituting new compliance-focused procedures and making significant personnel changes has been a top priority for the company,” he said in a statement. “We have learned many lessons from this experience and will continue on our path of becoming a model for export compliance and management excellence.”

Xianming said ZTE is committed to being “complaint, healthy and trustworthy.”

Under the settlement, ZTE agreed to create a CEO-led compliance committee with authority to change policy and procedures. It will also remove compliance responsibilities from its legal department to create a separate compliance department and will name American lawyer Matt Bell as new chief export compliance officer.