ZTE shares up in Hong Kong after $1.2 bn U.S. fine
Mar 10 2017
ZTE entered a $892 million settlement agreement on Tuesday ending allegations that it had violated USA sanctions on Iran and lied to investigators about it. David Laufman, chief of the counterintelligence and export control section at the DOJ's National Security Division, .
As a result of the conspiracy, ZTE, which makes smartphones and telecommunications infrastructure equipment, was able to obtain hundreds of millions of dollars in contracts with and sales from such Iranian entities.
White House spokesman Sean Spicer said the combined penalties levied against ZTE by the Commerce Department, Justice Department, and Treasury Department are the largest ever levied by the USA government in such a sanctions case. Should ZTE be trusted to work with US materials at this point?
The company said this agreement with USA authorities paves the way for future growth strategies. ZTE then lied to federal investigators, insisting that the shipments had stopped, the Justice Department said. He added that those flouting our sanctions and control laws for export will be punished and will suffer harsh consequences.
The Treasury Department said the settlement includes $101 million to settle potential civil liability for Iran sanction violations.
A five-year investigation found that between 2010 and 2016, the company incorporated U.S-made parts into equipment, which it then shipped - either directly or through a third party - to customers in Iran without obtaining the proper export licenses from the USA government.
The company buys about $2.6B worth of components per year from US companies, including Qualcomm, Microsoft and Intel.
In a prepared statement, ZTE CEO and chairman Zhao Xianming said that ZTE acknowledged its mistakes, takes responsibility and remained committed to change in a positive way within the company.
It must now pay a $892m (£740m) penalty as well as $300m which will be suspended for seven years depending on the firm meeting certain conditions.
Last March, U.S. Department of Commerce banned U.S companies selling components and products containing U.S. -made items to ZTE, because it violated U.S. sanctions on trade with Iran. The action marks OFAC's largest-ever settlement with a non-financial entity.
ZTEreported a 2.36 bilion yuan ($342 million) loss in 2016 due to the settlement fee.
"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.