The latest news indicates that Chinese telecommunications equipment manufacturer ZTE Corp is negotiating a possible settlement with the US government, which could amount to over $1 billion and possibly up to $2 billion, to resolve its long-standing bribery allegations in South America and elsewhere, allegedly violating the Foreign Corrupt Practices Act (FCPA).
According to Reuters, the US Department of Justice has accelerated the investigation this year, focusing on ZTE’s alleged bribery of foreign officials to secure telecommunications contracts in multiple countries before 2018.
Multiple sources revealed that the Department of Justice has determined that ZTE was involved in bribery activities as late as 2018, with potential charges including “conspiracy to commit criminal conspiracy to violate the FCPA,” with Venezuela being confirmed as one of the countries involved.
ZTE’s legal disputes with the US government have been ongoing. In 2017, ZTE admitted to illegally exporting US products to Iran and paid a fine of $1.19 billion (including criminal and civil penalties). In 2018, due to misrepresenting the handling of employee sanctions to the US and causing the US Department of Commerce’s Bureau of Industry and Security (BIS) to initiate a “denial order,” prohibiting American companies from exporting crucial chips and software to ZTE, leading to a halt in ZTE’s operations for nearly three months.
At the time, amid sensitive US-China trade negotiations, then-US President Donald Trump intervened, and ZTE agreed to an additional $1 billion fine and a strict 10-year compliance agreement before the US lifted the ban that summer.
The agreement remains in effect, and the US Department of Commerce is currently assessing whether ZTE has violated regulations again.
If the current settlement negotiations fall through, ZTE may once again face an export ban from the US, jeopardizing its ability to import chips and crucial components from American companies such as Qualcomm, Intel, and AMD. Qualcomm’s Snapdragon chip remains a core component of ZTE’s high-end phones.
ZTE reported a net profit of $8.425 billion (approximately $1.16 billion) last year. If it ends up paying fines exceeding $1 billion or even higher, its financial position is bound to face significant pressure.
Regarding the ongoing investigation, the Department of Justice declined to comment on the enforcement actions in progress. ZTE did not respond to Reuters’ request for comment, but in an internal memo to employees, shareholders, and partners in August 2024, the company emphasized a “zero-tolerance policy towards any form of corruption or bribery” and stated that it had established a comprehensive anti-bribery compliance system.
Sources also indicated that any final settlement involving ZTE between the US and China would require approval from the Chinese authorities, making the agreement full of uncertainties in terms of reaching a resolution in the short term.
ZTE’s overseas bribery controversies have been ongoing for many years. As early as 2015, the Ethics Committee of Norway’s sovereign fund, the Government Pension Fund Global, pointed out that ZTE was suspected of serious bribery in at least 18 countries from 1998 to 2014, with investigations initiated in multiple countries, including Algeria, the Philippines, and Zambia.
The committee’s documents indicated that ZTE allegedly paid foreign public officials amounts ranging from millions to tens of millions of dollars in exchange for telecommunications infrastructure contracts, leading to recommendations to remove them from investment portfolios.
The US has long been investigating foreign bribery practices in the global telecommunications field, imposing hefty fines and settlement agreements on companies such as Ericsson, Russian MTS, and Venezuela’s state-owned telecommunications firm.
Currently, both the US and China, as well as ZTE, have not disclosed any progress or timelines regarding the investigation. Whether ZTE will avoid a new round of export bans will be a significant focus of international technology and geopolitical developments in the coming months.