According to people familiar with the matter, Chinese telecom equipment maker ZTE Corp might pay the U.S. government more than $1 billion to clear longstanding charges of foreign bribery.
ZTE, which has paid approximately $2 billion in penalties to U.S. authorities on export violations in the first term of President Donald Trump, has long been under investigation by officials across the globe regarding alleged bribes to gain access to telecommunication contracts.
The sources said that this year, the Justice Department proceeded with a U.S. probe into ZTE on allegations of breaching the Foreign Corrupt Practices Act (FCPA) in South America and elsewhere. The act prevents payment or anything of value to foreign officials to secure business.
The sources stated that the U.S. officials reported to Reuters that, for the first time, they are working on a resolution that would result in ZTE paying more than $1 billion, or $2 billion or more, relying on alleged gains from corrupt contracts.
Therefore, ZTE did not respond to requests for comment. In a memo to the employees of ZTE in August 2024, shareholders and business partners, the firm said that it had a “zero-tolerance attitude towards any form of corruption or bribery” and had implemented an anti-bribery compliance policy.
Meanwhile, it is not clear how soon a deal can be achieved. The sources said that a settlement with the U.S would have to be approved by the Chinese government.
A spokesman for the Chinese embassy in Washington, Liu Pengyu, stated that he did not know of the specifics of the ZTE issue, but he added that “China has always required Chinese companies to operate legally abroad and abide by local laws and regulations.”
The sources indicated that FCPA cases often surface years following the misconduct, and the Justice Department investigation has discovered that, in the case of ZTE, the recent bribery-related act took place in 2018. The other source outlined possible criminal charges as conspiracy to commit bribery.
According to both sources, ZTE has made business agreements in South America that the DOJ suspects may have been involved with the help of bribery, and one of the sources mentioned Venezuela.
An agreement of the Commerce Department of about the same period confounds any possible settlement. The company was found guilty of exporting American products to Iran illegally in 2017 and paid a $892 million penalty, which was initially reported by Reuters.
The Commerce Department alleged in 2018 that it made fraudulent claims that it disciplined employees who were related to the violations and prohibited all U.S. exports to the company.
The reduction of several significant supplies of chips and components is forcing ZTE to halt major operations. However, Trump, who was negotiating a trade agreement with China during that time, defended the company, and ZTE paid another $1 billion as a component of a new Commerce Department deal; the ban was eased that summer.
One of the sources stated that Commerce is examining the identical facts as the Justice Department and whether ZTE breached the 10-year agreement that was agreed upon in 2018.
A spokesperson of Commerce said that “The Department does not comment on active enforcement matters, or confirm or deny the existence of any pending investigations.”
Such a heavy payment would strain ZTE financially. The company made a profit of $1.16 billion last year. Hence, without an agreement, the U.S. can reimpose the Commerce ban on American supplies like Qualcomm, whose Snapdragon chips power ZTE’s high-end phones.
ZTE continues to use Intel, AMD, and other American companies in its phones, servers, and networking equipment. The U.S. has had a history of probing foreign bribery in telecoms, which announced agreements and payouts on cases involving companies based in Sweden, Russia, and Venezuela in recent years.
The Government Pension Fund Global of Norway claimed that ZTE was associated with corruption claims in 18 countries in 2015, with 10 of them, including Algeria, the Philippines, and Zambia, investigated between 1998 and 2014.
The Council on Ethics wrote, suggesting ZTE’s exclusion from the fund, that “All relate to the payment of bribes to public officials to secure the award of contracts.” Thus, suspected bribes reached several million and tens of millions of dollars.
