Chinese telecom equipment maker ZTE Corp (中興) is nearing an agreement to plead guilty to US criminal charges and pay hundreds of millions of dollars in penalties over allegations it violated US laws that restrict sale of US technology to Iran, a person familiar with the matter said.
The company has not yet signed a deal with the US Department of Commerce, the US Department of Justice and the US Department of Treasury, cautioned the person, who declined to speak on the record because the negotiations have not been made not public.
Others noted that with a new US administration prompting changes in personnel at government departments, a final deal may be delayed or even scuttled.
ZTE is expected to plead guilty to conspiring to violate the International Emergency Economic Powers Act, among other charges, the source said, and pay penalties in the hundreds of millions.
A ZTE spokesman declined to comment, as did spokesmen for the Justice and Treasury departments. A spokesman for the Commerce department did not respond to requests for comment.
The Commerce Department’sinvestigation followed reports by Reuters in 2012 that the company had signed contracts to ship millions of dollars worth of hardware and software from some of the US’ best-known technology companies to Iran’s largest telecoms carrier.
An agreement would cap a year of uncertainty for the Shenzhen-based company, which was placed on a list of entities March last year that US suppliers could not work with without a license.
ZTE acted contrary to US national security or foreign policy interests, the Commerce Department said at the time.
One of the world’s biggest telecommunications gear makers and the No. 4 smartphone vendor in the US, ZTE sells handset devices to US mobile carriers AT&T Inc, T-Mobile US Inc and Sprint Corp. It relies on US companies including Qualcomm Inc, Microsoft Corp and Intel Corp for components.
The listing could have severely disrupted the company’s supply chain, but the Commerce Department granted ZTE a temporary license so US companies could continue to do business with the Chinese firm while it cooperated with the investigation.
The temporary license was extended several times, with the latest reprieve expiring on March 29.
The last extension, a ZTE spokesman said in an e-mail last week, was “a sign of the progress” made.
ZTE was working with the US government “toward permanent removal from the Entity List,” the company spokesman said at that time, and under new leadership was conducting business in a way that “meets and exceeds export compliance standards.”
The spokesman’s comments followed a Feb. 14 filing by ZTE to the Shenzhen Stock Exchange.
The ZTE filing said it was negotiating with the US government departments to conclude the investigation.
ZTE said that the outcome remained uncertain, but that it would likely have a material impact on its financials. ZTE has annual sales of more than US$15 billion.
The Commerce Department released alleged internal documents last year, showing senior ZTE executives instructing the company to carry out a project for dodging export controls in Iran, North Korea, Syria, Sudan and Cuba.
ZTE replaced the senior executives allegedly involved, including naming a new president, and also appointed a new, US-based chief export compliance officer.
The company has a US subsidiary in Richardson, Texas.
A settlement also would likely include the imposition of a compliance monitor, several experts have said.
The uncertainty has already weighed on ZTE’s business. In January, company sources said that the equipment maker was cutting about 3,000 jobs, or 5 percent of its 60,000 global workforce.
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