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<span class="articleLocation”>Chinese telecom equipment maker ZTE Corp is nearing an agreement to plead guilty to
U.S. criminal charges and pay hundreds of millions of dollars in
penalties over allegations it violated U.S. laws that restrict
sale of U.S. technology to Iran, a person familiar with the
The company has not yet signed a deal with the Department of
Commerce, the Department of Justice and the Department of
Treasury, cautioned the person, who declined to speak on the
record because the negotiations are not public.
Others noted that with a new U.S. administration prompting
changes in personnel at government departments, a final deal may
be delayed or even scuttled.
But ZTE is expected to plead guilty to conspiring to violate
the International Emergency Economic Powers Act, among other
charges, the source said, and pay penalties in the hundreds of
A ZTE spokesman did not respond to requests for comment. Nor
did a spokesman for the U.S. Department of Commerce. Spokesmen
for the U.S. Department of Justice and U.S. Department of
Treasury declined to comment.
An agreement would cap a year of uncertainty for the
Shenzhen-based company, which was placed on a list of entities
March 2016 that U.S. suppliers could not work with without a
license. ZTE acted contrary to U.S. national security or foreign
policy interests, the Commerce Department said at the time.
One of the world’s biggest telecommunications gear makers
and the No. 4 smartphone vendor in the United States, ZTE sells
handset devices to U.S. mobile carriers AT&T Inc, T-Mobile
US Inc and Sprint Corp. It relies on U.S.
companies including Qualcomm, Microsoft and
Intel for components.
The listing could have severely disrupted the company’s
supply chain, but the Commerce Department granted ZTE a
temporary license so U.S. companies could continue to do
business with the Chinese firm while it cooperated with the
The temporary license was extended several times, with the
latest reprieve expiring on March 29.
The last extension, a ZTE spokesman told Reuters in an email
last week, was “a sign of the progress” made.
ZTE was working with the U.S. government “toward permanent
removal from the Entity List,” the company spokesman said at
that time, and under new leadership was conducting business in a
way that “meets and exceeds export compliance standards.”
The spokesman’s comments followed a Feb. 14 filing by ZTE to
the Shenzhen Stock Exchange. The ZTE filing said it was
negotiating with the U.S. Commerce, Treasury and Justice
departments to conclude the investigation.
ZTE said that the outcome remained uncertain, but that it
would likely have a material impact on its financials. ZTE has
annual sales of more than $15 billion.
SCRUTINY CAN MEAN COMFORT
The implications of a guilty plea are unclear. Experts said
it can result in a denial order, which imposes a complete bar on
the receipt of U.S. origin goods and technology. But, as part of
a settlement, the order could be suspended for years.
Typically, the reputational taint of a guilty plea on U.S.
suppliers or customers would be limited in duration, according
to Washington attorney Douglas Jacobson, an export controls and
“In fact, a company that has faced the type of scrutiny that
ZTE has … actually gives U.S. suppliers and customers a
greater degree of comfort that they will be a compliant company
in the future,” said Jacobson, who represents some U.S.
suppliers to ZTE.
The Commerce Department released alleged internal documents
last year, showing senior ZTE executives instructing the company
to carry out a project for dodging export controls in Iran,
North Korea, Syria, Sudan and Cuba.
ZTE replaced the senior executives allegedly involved,
including naming a new president, and also appointed a new,
U.S.-based chief export compliance officer. The Shenzhen-based
company has a U.S. subsidiary in Richardson, Texas.
A settlement also would likely include the imposition of a
compliance monitor, experts have told Reuters.
The uncertainty has already weighed on ZTE’s business. In
January, company sources told Reuters that the equipment maker
was cutting about 3,000 jobs, or 5 percent of its 60,000 global
The Commerce Department investigation followed reports by
Reuters in 2012 that the company had signed contracts to ship
millions of dollars worth of hardware and software from some of
America’s best-known technology companies to Iran’s largest
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