After years of intentionally violating US export control laws by selling its products and services in Iran and North Korea, Chinese telecom company ZTE on Tuesday agreed to pay a record civil and criminal penalty of $1.19 billion.
Continue Reading Below
ZTE admitted to systematically evading export control laws from 2010 to 2016, and misleading US authorities who were investigating the company, according to the Department of Commerce. The company obtained contracts worth hundreds of millions of dollars from Iranian entities to build telecommunications networks in the country. Most of the equipment and software to be used in those networks was American-made.
ZTE also shipped hundreds of items to North Korea that were banned by US export control laws, including routers, microprocessors, and servers, the Department of Commerce said. When authorities first learned of the violations in 2012 and started investigating, the company took numerous steps to cover its tracks, including concealing information from its own forensic accounting firm.
The Department of Commerce announced the penalty on Tuesday, which still must be approved by the courts. Assuming the entire amount is approved, it would be the largest that the federal government has ever levied in an export control case. The bulk of it—$661 million—would go to the Department of Commerce to settle the civil case, with the remainder going to the courts as criminal fines and forfeitures.
"The results of this investigation and the unprecedented penalty reflects ZTE's egregious scheme to evade US law and systematically mislead investigators," Secretary of Commerce Wilbur Ross said in a statement. "This penalty is an example of the extraordinary powers the Department of Commerce will use to vigorously protect the interests of the United States."
ZTE is best known in the US for its line of Android-powered smartphones, including the relatively cheap but powerful Axon 7 (pictured above). In a statement on Tuesday, the company acknowledged that it had committed export violations and said it had taken measures to prevent further illegal contracts and product shipments, including appointing a new CEO and restructuring its legal and compliance departments.
"ZTE acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company," ZTE CEO Zhao Xianming said in a statement.