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ZTE pleads guilty in sanctions probe, may pay almost $1.2B

08 March 2017

Chinese telecom equipment maker ZTE Corp has agreed to pay $892 million and plead guilty to criminal charges for violating us laws that restrict the sale of American-made technology to Iran and North Korea.

It is the largest criminal penalty in U.S. history in an export control case, government officials said.

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.

ZTE pleaded guilty to three felonies and also settled charges with the Commerce and Treasury departments.

"ZTE acknowledges the mistakes it made, takes responsibility for them and remains committed to positive change in the company", said ZTE Chairman and CEO Zhao Xianming, who was promoted to the leadership positions in April 2016 with a promise to tighten the company's export control.

Between 2010 and 2016, according to the treasury statement, the Chinese group's "highest-level management developed, approved and implemented a company-wide plan that utilised third-party companies to hide and facilitate ZTE's illegal business with Iran".

The Commerce Department blocked US exports to ZTE in March 2016 over allegations that the company re-sold goods to Iran, only to suspend that ban several times after both sides opened negotiations.

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"Those who flout our economic sanctions and export controls will not go unpunished", Commerce Secretary Wilbur Ross said in a statement.

U.S. Attorney General Jeff Sessions said in a statement the company violated sanctions that are created to "keep sensitive American technology out of the hands of hostile regimes like Iran's".

"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.

Export privileges for ZTE - China's largest publicly traded telecom company, and the fourth largest in the world - are subject to denial for seven years "if any aspect of this deal is not met", the statement said.

The settlement ends a five-year federal investigation into ZTE. The action marks OFAC's largest-ever settlement with a nonfinancial entity.

The company buys about $2.6B worth of components per year from USA companies, including Qualcomm, Microsoft and Intel.

In 2012, the US began probing ZTE over the illegal sales.

ZTE pleads guilty in sanctions probe, may pay almost $1.2B