China's ZTE pleads guilty, settles U.S. sanctions case for nearly $900 million
By Karen Freifeld and Sijia Jiang
NEW YORK/HONG KONG (Reuters) - Chinese telecom equipment maker ZTE Corp has agreed to plead guilty and pay nearly $900 million in a U.S. sanctions case, drawing a line under a damaging scandal that had threatened its cut off its supply chain.
While the fine was larger than expected, ZTE, also a major smartphone maker, reported robust underlying earnings for 2016 and was upbeat in estimates for the first quarter. That and the resolution of the case helped its Hong Kong-listed shares surge 6 percent.
A five-year investigation found ZTE conspired to evade U.S. embargoes by buying U.S. components, incorporating them into ZTE equipment and illegally shipping them to Iran.
In addition, it was charged in connection with 283 shipments of telecommunications equipment to North Korea.
"ZTE Corporation not only violated export controls that keep sensitive American technology out of the hands of hostile regimes like Iran's, they lied ... about their illegal acts," U.S. Attorney General Jeff Sessions said in a statement.
ZTE relies on U.S. suppliers for 25 percent to 30 percent of its components, many of which are key to its goods. It purchases about $2.6 billion worth of components a year from U.S. firms, according to a company spokesman. Qualcomm, Microsoft and Intel are among its suppliers.
"ZTE acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company," ZTE Chief Executive Zhao Xianming said in a statement.
The company agreed to a seven-year suspended denial of export privileges, which could be activated if there are further violations, as well as three years of probation, a compliance and ethics program, and a corporate monitor. Continued...