On March 7, 2017, the U.S. Department of Treasury announced that the Office of Foreign Assets Control (OFAC) had reached a settlement with Zhongxing Telecommunications Equipment (ZTE) Corporation of $100,871,266. The settlement, which is a part of a total resolution between ZTE and the U.S. government of $1.192 billion, relates to the Chinese telecommunications giant’s multi-year effort to circumvent and subsequently conceal their circumvention of U.S. sanctions against Iran. The settlement is OFAC’s largest to date with a non-financial entity.
In the press release announcing the settlement, the Treasury Department described ZTE’s action as a “multi-year and systemic practice of utilizing third-party companies to surreptitiously supply Iran with a substantial volume of U.S.-origin goods, including controlled goods appearing on the Commerce Control List.” The Treasury Department states in the release that ZTE utilized third parties to actively conceal their involvement in selling goods to Iran, and that top-level executives not only approved this plan, but had full knowledge of the legal risks of doing so before entering into contracts that were contingent on their selling goods to Iran.
Additionally, when ZTE’s business with Iran became public knowledge in 2012, the company assured the United States that it intended to cease this activity. However, in 2013, the company decided to resume this clandestine program, and “under the direction of its leadership, ZTE deleted evidence and provided the U.S. government with altered information to hide the fact that it had resumed its unlawful business with Iran.”
If ZTE’s criminal plea is approved in federal court, the resolution would also include the imposition of $430,488,798 in combined criminal fines and forfeitures on ZTE as part of a plea agreement with the U.S. Department of Justice, and a $661,000,000 penalty – of which $300,000,000 is suspended during a seven-year probationary period – to the U.S. Department of Commerce.
In addition to the financial penalty, the settlement dictates that ZTE maintain policies and procedures that minimize the possibility that they subsequently engage in the circumvention of U.S. export control law or economic sanctions. The settlement requires oversight from an independent auditor for a period of three years.
The press release can be found here: https://www.treasury.gov/press-center/press-releases/Pages/sm0023.aspx.
The text of the settlement can be found here: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20170307_zte_settlement.pdf.