ZTE is paying a huge price for breaking U.S. sanctions by shipping equipment made with U.S. components to Iran and for sending telecom equipment and software made in the U.S. to North Korea.
According to a statement from ZTE, the company will pay a criminal and civil penalty of $892 million and an additional penalty of $300 million to U.S. Commerce Department’s Bureau of Industry Security (BIS). The $300 million will be suspended during a seven-year probationary period on the condition the company complies with the agreement.
According to the U.S. Commerce Department, this fine is the largest ever imposed by the BIS, and the largest ever imposed by the U.S. government in an export control case.
Not only did ZTE break the embargo against Iran, the Commerce Department said in a statement that the company “conspired to evade” the embargo. Plus, it said that ZTE officials repeatedly lied and misled federal investigators.
“We are putting the world on notice: the games are over,” said Commerce Secretary Wilbur Ross in a statement. “Those who flout our economic sanctions and export control laws will not go unpunished – they will suffer the harshest of consequences.”
ZTE, for its part, said it is overhauling its compliance procedures to make sure this doesn’t happen again. “ZTE acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company,” said Zhao Xianming, chairman and CEO of ZTE, in a statement.
Xianming was named chairman and CEO of the company in April 2016 with a mandate to improve the company’s export compliance program. Since his appointment Xianming has installed a new compliance committee with the intention of overhauling the company’s compliance program. He also restructured ZTE’s legal department and separated it from the compliance department.
Xianming also named Matt Bell, a U.S. attorney, to oversee the company’s export compliance program.
Earlier this year, Reuters reported that ZTE was going to cut about 3,000 jobs or 5 percent of its 60,000 employees in the first quarter, according to unnamed sources.
These layoffs were expected because of the company’s expectations of these fines from the U.S. Department of Commerce, and also because it was experiencing what many other major telecom vendors are experiencing, which is a lag in sales for 4G equipment and the ramp-up to 5G.