US extends watch over ZTE violation

Business | Agencies and Gary Poon 5 Oct 2018

A US judge has issued an order finding that China's ZTE Corp (0763) violated probation imposed in March 2017 when the company pleaded guilty for conspiring to evade United States sanctions by illegally shipping US goods and technology to Iran.

In his order, US District Judge Ed Kinkeade in Dallas extended until 2022 the term of a monitor he appointed to assess ZTE's compliance with US export control laws.

The monitorship originally was scheduled to end in 2020.

However, the news did not affect its shares, as ZTE rose marginally by 0.12 percent to HK$14.2 in Hong Kong yesterday, with a trade volume of HK$6.89 million.

The probation violation cited by the judge involves the same conduct the US Department of Commerce penalized in April by imposing a ban on U.S. companies selling goods to ZTE.

The Commerce Department said ZTE made false statements about disciplining 35 employees involved in the illegal shipping of U.S.-origin goods to Iran.

The ban was lifted in July after ZTE reached a settlement with the Commerce Department. As part of that settlement, ZTE agreed to another monitor to who will report directly to the Commerce Department for 10 years.

In addition to extending the monitor's term, it noted that the company must provide the court-appointed monitor with the same access as the Commerce Department monitor.

ZTE ceased major operations after the ban was ordered in April. The company got back into business in July after paying a US$1 billion (HK$7.8 billion) penalty, putting US$400 million in escrow, installing a new board and senior management, and agreeing to the new monitor for a 10-year term.

The US$1 billion came on top of US$892 million in penalties ZTE paid the United States last year in connection with its 2017 settlement and guilty plea.

ZTE announced the probation modifications in Asia yesterday on the Hong Kong Stock Exchange.

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