ZTE has for years faced probes by authorities around the world into alleged bribes to secure telecom contracts. — Reuters
SHENZHEN: Chinese telecommunications (telecom) equipment maker ZTE Corp may pay more than US$1bil to the United States government to resolve years-old allegations of foreign bribery, according to two sources.
ZTE, which already paid some US$2bil in penalties to US authorities over export violations during President Donald Trump’s first term, has for years faced probes by authorities around the world into alleged bribes to secure telecom contracts.
This year, the Justice Department has moved ahead with a US investigation into ZTE for allegedly violating the Foreign Corrupt Practices Act (FCPA) in South America and other regions, the sources said.
The act prohibits payments or anything of value to foreign officials to obtain business.
US officials, Reuters is reporting for the first time, are working on a resolution that could see ZTE pay more than US$1bil, the sources said, or possibly US$2bil or more, one said, based in part on alleged gains from corrupt contracts.
Yesterday, ZTE’s Hong Kong-listed shares tumbled more than 9%, while its Shenzhen shares fell by almost 8%.
In a statement to the Hong Kong stock exchange yesterday, ZTE said it is engaged in “ongoing communication” with the Justice Department on the investigation.
ZTE did not respond to requests for comment before publication.
In an August 2024 memo to ZTE employees, shareholders and business partners, the company said it had a “zero-tolerance attitude towards any form of corruption or bribery” and had established an anti-bribery compliance system.
A Justice Department spokeswoman declined to comment.
It remains unclear when a deal might be reached.
A settlement with the United States would require approval from the Chinese government, the sources said.
Liu Pengyu, a spokesman for the Chinese embassy in Washington, said he was not aware of the specifics of the ZTE matter, but added, “China has always required Chinese companies to operate legally abroad and abide by local laws and regulations.”
FCPA cases often surface years after the misconduct and the Justice Department investigation has found that with ZTE, the most recent bribery-related act occurred in 2018, one of the sources said.
The other source described potential charges as a criminal conspiracy to commit bribery.
Both sources said ZTE struck business deals in South America that the DOJ suspects involved bribery, with one of the sources pointing to Venezuela.
A Commerce Department agreement from around the same time complicates any potential settlement.
In 2017, the company pleaded guilty to illegally exporting American goods to Iran and paid an US$892mil penalty, a deal Reuters reported first.
In 2018, the Commerce Department accused it of making false statements about disciplining employees tied to the violations – and banned all US exports to the company.
That cut off a vital supply of chips, software, and components, forcing ZTE to halt major operations.
But Trump, who was negotiating a trade deal with China at the time, expressed support for the company and, after ZTE paid another US$1bil as part of a new Commerce Department agreement, the ban was lifted that summer.
Commerce is reviewing the same facts as the Justice Department and whether ZTE violated the 2018 agreement, which runs for 10 years, one of the sources said.
“The department does not comment on active enforcement matters, or confirm or deny the existence of any pending investigations,” a Commerce spokesperson said.
A hefty settlement could weaken ZTE’s finances-the company earned US$1.16bil in profit last year. — Reuters
