ZTE Is Now Being Investigated For Bribery

ZTE Logo China Flag Illustration AH March 14 2019
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ZTE is now being probed by the Justice Department for bribery. This is a new investigation and has not been reported before.

The investigation is about alleged bribes the company gave to foreign officials to get undue favors. The details about the transactions are not known.

ZTE’s code of conduct doesn’t allow employees to pay or accept bribes anywhere in the world. However, according to a recently filed lawsuit the company has been accused of corruption in over a dozen countries, including Liberia, Zimbabwe, Algeria, and Kenya.

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According to a WikiLeaks document, the company paid kickbacks to high-level officials in Kenya to win a landline telephone monitoring equipment contract in 2009. One of the officials apparently got $5,000 a month.

In 2016, the company was banned by Norway's giant government pension fund from the investment universe because of the risk of severe corruption. ZTE is one of around 150 firms whose shares the Norwegian fund will not buy.

According to a statement issued by ZTE, the company is committed to fulfilling legal and compliance obligations. It claims that its main priority is to make a name for itself as a trusted company in the global market place. The company is also proud of the progress it has made so far.

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It’s worth noting that the company didn’t specifically address the recent corruption allegations in its statement. However, it did say that it would not be appropriate for it to divulge more information.

ZTE is still not in the clear after all

The new investigation could not have come at a worse time for the Chinese giant. Three years ago, the company had admitted it evaded U.S. sanctions against North Korea and Iran.

Just recently, the corporate probation period imposed on it as part of the March 2017 plea deal with the Justice Department ended. ZTE had agreed to pay $1.19 billion under the agreement.

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As a part of the plea agreement, a monitor was also assigned to the company to assess compliance. However, none of the periodic reports have been made public.

The monitorship was supposed to end in 2020. However, it was extended after it was found out that ZTE violated probation.

According to the Commerce Department, the Chinese company lied about disciplining employees involved in shipping U.S.-made items to Iran illegally.

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Thus, the current monitor, James M. Stanton, will continue his role until 2022.

ZTE depends on the U.S. for making smartphones and networking equipment

ZTE is the second-largest telecommunications equipment maker in China. It uses American components for making smartphones and networking gear.

Although the company is headquartered in China, its U.S. subsidiary is in Texas. The manufacturer also has strong ties to China's Communist government.

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Quite recently, President Donald Trump barred carriers from using subsidies to buy networking equipment from ZTE. Huawei and other companies considered a national security threat were also on the list.

The U.S. Senate also recently approved the Secure and Trusted Telecommunications Networks Act, allowing small and rural telecommunication companies to rip and replace existing ZTE and Huawei hardware. A $1 billion fund has been established to help these companies replace the current equipment.