Thursday, March 09, 2017

Settlement With ZTE

Settlement With ZTE

The Commerce, Justice and Treasury departments yesterday jointly announced that China’s Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Limited – long under surveillance by Commerce for illegally selling dual-use high technology products to Iran – has agreed to pay a combined civil and criminal penalty of $1.19 billion to settle the case (WTD, 8/18/16).

The case also involves illegal sales to North Korea.

As part of the settlement, ZTE has agreed to pay an export controls penalty of $661 million – with $300 million suspended during a seven-year probationary period to deter future violations, according to Commerce.  The civil penalty is the largest ever imposed by Commerce.  If the criminal plea is approved by a federal judge, the combined $1.19 billion in penalties from Commerce, Justice and Treasury would be the largest fine and forfeiture ever levied by the US government in an export control case.
Commerce Secretary Wilbur Ross made the announcement at the department. “We are putting the world on notice.  The games are over,” said Mr. Ross.  “Those who flout our economic sanctions and export control laws will not go unpunished – they will suffer the harshest of consequences.” ZTE also has agreed to audit and compliance requirements designed to prevent and detect future violations.
Starting in Januar y 2010 Starting in January 2010 and continuing through April 2016, ZTE conspired to evade the long-standing US embargo against Iran in order to obtain contracts with and related sales from Iranian entities – including entities affiliated with the Iranian government – to supply, build, operate and/or service large-scale telecommunications networks in the country with US-origin components and software. As a result of the conspiracy ZTE was able to obtain hundreds of millions of dollars in contracts with and sales from such Iranian entities, Commerce stated.  Additionally, ZTE undertook other actions involving 283 shipments of controlled items to North Korea with knowledge that the shipments violated US law.
In early March a year ago Commerce sanctioned ZTE by adding it to the department’s “entity list,” which created a license requirement to export, reexport or transfer in-country to ZTE any prohibited items.  The previous Administration waived the sanctions through a string of temporary general license exceptions.  The “general license” was contingent on the company cooperating with Commerce to improve its export controls regime and resolving the issue.
During the course of the investigation, ZTE made knowingly false and misleading representations and statements to Commerce and other US law enforcement agencies including that the company had previously stopped shipments to Iran as of March 2012 and was no longer violating US control laws, Commerce stated.  ZTE also engaged in an elaborate scheme to prevent disclosure to and affirmatively mislead the US government by deleting and concealing documents and information from the outside counsel and forensic accounting firm that ZTE had retained with regard to the investigation.
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