ZTE Corp (中興), the world’s fifth-biggest telecommunications equipment maker, could face steep fines and restrictions on its US operations if it is found to have illegally sold US computer products to Iran.
The FBI has opened a criminal investigation into the Chinese company’s sale of banned equipment, according to an FBI affidavit. Reuters reported in March that ZTE had a US$120 million contract in 2010 with Iran’s largest telecom firm, including supplying US computer equipment. Reuters later reported that ZTE had agreed last year to ship millions of dollars worth of additional embargoed US computer equipment to a unit of the consortium that controls the Iranian telecom.
The US Department of Commerce is also investigating.
The law authorizing US sanctions against Iran allows for a civil penalty up to twice the value of a transaction, which in ZTE’s case would translate to US$240 million or more.
Individuals, such as company employees, convicted under the law can be sentenced to 20 years in prison and companies in the most extreme cases can be cut off entirely from commerce with the US, legal experts said on Friday.
The FBI investigation will also look at alleged attempts by ZTE to cover up its sales to Iran and obstruct the Department of Commerce probe, the FBI affidavit indicates. Any finding of obstruction of justice carries its own wide-ranging and potentially heavy penalties under US law.
ZTE’s China-based spokesman David Shu said in response to questions about the investigations: “We’ve been actively engaging relevant US government departments and we’re cooperating with them on various matters.”
He said that the company’s US subsidiary’s main business is to deliver mobile devices to the US market. He denied it is involved in products for any other market, such as Iran, and said the company is confident in the US subsidiary’s prospects.
“ZTE is wholly committed to transparency and will cooperate in addressing any questions regarding our business,” Shu added.
He declined to comment when asked about allegations of a cover-up.
The US Department of Justice has declined comment.
The FBI investigation was first reported on Thursday by the Smoking Gun Web site.
The potential penalties are part of an extensive sanctions regime that US trade officials and prosecutors have increasingly brought to bear against corporations, even those that are outside US jurisdiction.
“It’s not surprising, though often wrong, to hear companies say, ‘How can that law apply to me? I’m not a US company,’” said J. Scott Maberry, a lawyer who specializes in helping companies comply.
He is not involved in ZTE’s case and was speaking generally.
The penalties fall under the International Emergency Economic Powers Act of 1977. The US Congress, concerned about US technology heading to countries such as Iran, raised the penalties in 2007.
Export violations “have been deemed to be priorities of US policy, and so enforcement capabilities of the agencies have been beefed up. They’re looking at and working on more cases,” said Edward Rubinoff, another lawyer who advises companies, but is not involved in ZTE’s case.
An array of corporations and individuals have found themselves subject to penalties.
Last month, Amsterdam-based ING Groep NV agreed to pay US$619 million for conspiring to violate US sanctions on Iran and Cuba by moving more than 20,000 transactions through the US financial system. Each transaction counted as a violation, raising the company’s exposure to penalties.
It can be difficult for the US government to claim jurisdiction over foreign companies, but US authorities do have some forms of leverage.
Arrest warrants for individuals would prevent them from traveling to the US or to countries where they would run the risk of extradition.
An indictment of a foreign company’s US unit would restrict or end that unit’s operations.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has appointed Rose Castanares, executive vice president of TSMC Arizona, as president of the subsidiary, which is responsible for carrying out massive investments by the Taiwanese tech giant in the US state, the company said in a statement yesterday. Castanares will succeed Brian Harrison as president of the Arizona subsidiary on Oct. 1 after the incumbent president steps down from the position with a transfer to the Arizona CEO office to serve as an advisor to TSMC Arizona’s chairman, the statement said. According to TSMC, Harrison is scheduled to retire on Dec. 31. Castanares joined TSMC in
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the