Chinese handset and infrastructure provider ZTE has agreed to plead guilty and pay fines totaling $892 million to the U.S. government following a probe in which the company was accused of illegally shipping U.S.-origin items to Iran.
According to the Department of Justice, ZTE will enter a guilty plea and pay $430.5 million for conspiring to violate export controls in place prohibiting the shipment of U.S.-origin products to Iran as part of two separate settlements with the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). Additional fines of $461.9 million will raise that total in the short term to the $892 million figure.
However, the company could pay up to $1.19 billion in total settlement fees if BIS levies an additional fine of $300 million. That sum is currently suspended, but ZTE will be forced to pay if it violates the terms of its settlement agreement with BIS.
“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,” Attorney General Jeff Sessions said in a statement. “This plea agreement holds them accountable, and makes clear that our government will use every tool we have to punish companies who would violate our laws, obstruct justice, and jeopardize our national security.”
Over the past six years, the Justice Department said ZTE obtained items made in the U.S. – including “controlled dual-use goods on the Department of Commerce’s Commerce Control List (CCL) – and incorporated those into ZTE equipment that was subsequently shipped to customers in Iran. Officials said ZTE continued this behavior despite knowing its actions were illegal. The company also lied to both federal investigators and its own counsel during the investigation, and even shipped “millions of dollars’ worth” of U.S. items to Iran while the probe was ongoing.
The Justice Department indicated ZTE then came up with an “elaborate scheme” to cover its tracks and hide data related to these transactions.
The total value of U.S.-origin goods shipped illegally between January 2010 and January 2016 was around $32 million. The items were used to fulfill contract projects ZTE had in Iran to install cellular and landline network infrastructure, the DOJ revealed.
“ZTE Corporation not only violated our export control laws but, once caught, shockingly resumed illegal shipments to Iran during the course of our investigation,” U.S. Attorney John R. Parker for the Northern District of Texas commented. “ZTE Corporation then went to great lengths to devise elaborate, corporate-wide schemes to hide its illegal conduct, including lying to its own lawyers.”
The investigation was a joint operation conducted by the DOJ’s National Security Division, the U.S. Attorney’s Office for the Northern District of Texas, the FBI, the BIS, and the Department of Homeland Security, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.
The plea agreement – which still requires court approval – would also subject ZTE to a three-year probation period, during which the company’s activities would be reviewed by an independent compliance monitor. ZTE also agreed to comply fully with any criminal investigation that might stem from the case.
That last bit is important given a criminal information was filed in federal court Tuesday in the Northern District of Texas charging ZTE with one count of knowingly and willfully conspiring to violate the IEEPA, one count of obstruction of justice, and one count of making a material false statement. The company is also seeking a plea agreement there that would see it pay a fine of $287 million and a criminal forfeiture of $143.5 million. The Justice Department said the criminal fine represents the largest ever in relation to IEEPA prosecution.
Filed Under: Telecommunications (Spectrum)