On March 7, 2017, China`s Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Limited, as well as its subsidiaries and subsidiaries (ZTE group), entered into a historic $1.19 billion comparison with the U.S. government. The transaction regulates export controls and sanctions related to deliveries of U.S. equipment to Iran and North Korea. The company pleaded guilty to criminal charges, including obstruction of justice, and made comparisons with the U.S. Treasury Department for The Control of Foreign Assets (OFAC), the U.S. Department of Commerce`s Bureau of Industry and Security (BIS) and the U.S. Department of Justice (DOJ), ending a lengthy U.S. government investigation into ZTE. The investigation resulted in the inclusion of ZTE companies in the BIS entity list (which we had previously discussed), which was remarkable due to ZTE`s size and commercial presence internationally.
ZTE is one of the world`s largest telecommunications equipment manufacturers, with branches in 160 countries and significant business relationships with large U.S. companies. Because of their inclusion on the entity list, a licence to export, re-export or transfer (in the country) of items submitted to the Export Administration Regulations (EAR) to the listed ZTE units was required. A license was also required for any transaction in which one of these companies „acts as a buyer, intermediate recipient, end recipient or end user of objects submitted to the EAR.“ However, the BIS has repeatedly granted a temporary general licence for ZTE, while settlement negotiations have taken place (on which we have already written). The U.S. government has used the list entity`s designations as well as the temporary general license as an additional lever to gain the company`s cooperation in resolving the issues under consideration. Comparisons The $1.19 billion fine includes $661 million, US$100.9 million for OFAC and $430.5 million in fines and cashing to the DOJ ($287 million in fines and $143.5 million). The sentence is the largest ever imposed by the BIS, the largest ever imposed by OFAC on a non-financial unit, and the heaviest sentence ever imposed by the DOJ for prosecution under the International Emergency Economic Powers Act.
The ACCORD settlement agreement also requires ZTE: „ZTE Corporation has not only violated export controls, which removes sensitive U.S. technology from the hands of hostile regimes like Iran – they lied to federal investigators and even misled their own lawyers and internal investigators about their illegal acts,“ said Attorney General Sessions. These arguments hold them to account and make it clear that our government will use all the tools at our disposal to punish companies that violate our laws, obstruct justice and endanger our national security. I thank the National Security Division of the Department of Justice, the U.S. Attorney`s Office for The North Texas Neighborhood and the FBI for their excellent work on this investigation. The record fine imposed in this case was in part due to the nature of the underlying facts. As noted above, ZTE`s violations were found to be the result of a deliberate system designed by public servants at the highest levels of the company. The U.S. government also found that ZTE deliberately misled investigators for years and renewed its illegal transactions, even after the start of an initial investigation.