ZTE pleads guilty to violating Iran trade sanctions

The penalties by the Department of Justice, BIS and OFAC were among the largest those departments have ever imposed on a non-banking company for export violations, according to a report by Ropes & Gray.

The criminal information filed against ZTE along with a statement of facts show that four corporate executives, including its general counsel in China, conspired to secretly sell U.S. equipment to Iran, and to hide it from the U.S. government. The four executives no longer work at ZTE.

One Iran deal was exposed in a March 2012 Reuters article. The conspiracy to proceed with other deals through January 2016 was exposed by Ashley Yablon, then the general counsel of ZTE's American subsidiary in Dallas, according to court documents. Yablon no longer works at ZTE.

ZTE was represented by Wendy Wysong of Clifford Chance. Wysong did not immediately return a message seeking comment, and has declined to comment in the past.

Zhao Xianming, ZTE's former chairman and CEO, who resigned earlier this month as chair and now serves as president and executive director, said in an earlier statement, “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.”

Zhao was named CEO in April 2016, when the company finally admitted its ongoing illegal trade deals with Iran and an earlier one with North Korea. The company recently separated the CEO and chairman roles, according to an investors' notice.

As part of the deal, the company agreed to hire an independent compliance monitor acceptable to the government for the three years it is on probation.

It also agreed to establish a new compliance office separate from its legal department. The company named Houston lawyer Matt Bell as chief export compliance officer last fall to create a global compliance program, according to the company's statement.

By Sue Reisinger, The National Law Journal

Chinese telecom giant ZTE Corp. pleaded guilty Wednesday to illegally shipping communications and surveillance equipment to Iran in violation of U.S. export controls, and agreed to pay record penalties that could reach $1.2 billion.

The company, based in Shenzhen, China, with a subsidiary headquartered in Richardson, Texas, pleaded guilty to three counts in the U.S. District Court for the Northern District of Texas in Dallas. The counts included conspiring to violate the International Emergency Economic Powers Act, obstructing justice and making a material false statement to federal investigators.

As previously reported, ZTE simultaneously reached settlement agreements with the 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). The company agreed to pay a combined $1.2 billion penalty, but BIS agreed to suspend $300 million of it contingent on ZTE fulfilling the terms of its deal.

The penalties by the Department of Justice, BIS and OFAC were among the largest those departments have ever imposed on a non-banking company for export violations, according to a report by Ropes & Gray.

The criminal information filed against ZTE along with a statement of facts show that four corporate executives, including its general counsel in China, conspired to secretly sell U.S. equipment to Iran, and to hide it from the U.S. government. The four executives no longer work at ZTE.

One Iran deal was exposed in a March 2012 Reuters article. The conspiracy to proceed with other deals through January 2016 was exposed by Ashley Yablon, then the general counsel of ZTE's American subsidiary in Dallas, according to court documents. Yablon no longer works at ZTE.

ZTE was represented by Wendy Wysong of Clifford Chance. Wysong did not immediately return a message seeking comment, and has declined to comment in the past.

Zhao Xianming, ZTE's former chairman and CEO, who resigned earlier this month as chair and now serves as president and executive director, said in an earlier statement, “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.”

Zhao was named CEO in April 2016, when the company finally admitted its ongoing illegal trade deals with Iran and an earlier one with North Korea. The company recently separated the CEO and chairman roles, according to an investors' notice.

As part of the deal, the company agreed to hire an independent compliance monitor acceptable to the government for the three years it is on probation.

It also agreed to establish a new compliance office separate from its legal department. The company named Houston lawyer Matt Bell as chief export compliance officer last fall to create a global compliance program, according to the company's statement.