Chinese company signed for Digicel upgrade faces fines of $1.2bn

ZTE agrees to pay up after inquiry into violation of US trade sanctions against Iran

Fined: ZTE’s stand at the Mobile World Congress in Barcelona.  Photograph: Lluis Gene/AFP/Getty

Fined: ZTE’s stand at the Mobile World Congress in Barcelona. Photograph: Lluis Gene/AFP/Getty

 

The Chinese telecoms group recently signed by Denis O’Brien’s Digicel to upgrade its network faces paying up to a record $1.2 billion (€1.14 billion) in penalties to the US authorities for breaking a trade embargo on Iran.

Digicel recently confirmed that it has hired Chinese group Zhongxing Telecommunication Equipment (ZTE) to upgrade the company’s networks. Mr O’Brien and the multinational’s chief executive, Xianming Zhao, signed the agreement last month.

Washington’s department of treasury said on Tuesday that ZTE has agreed to pay up to $1.192 billion in fines and penalties for supplying US-made equipment to Iran in breach of the trade sanctions imposed on the Middle Eastern country.

The treasury said that if a federal court approves ZTE’s “criminal plea”, its settlement would include paying $430.5 million in fines and forfeitures to the US department of justice and $661 million to the department of commerce, $300 million of which is suspended.

Collaboration

It will pay a further $100.9 million to the department of treasury’s office of foreign assets control (OFAC). Treasury secretary Steven Mnuchin pointed out that the settlement resulted from collaboration between a number of US agencies.

“Today’s settlement is OFAC’s largest-ever against a non-financial entity and sends a powerful message that treasury will aggressively pursue any company that wilfully violates US economic sanctions laws and obstructs federal investigations of such violations,” Mr Mnuchin said.

The agencies say that ZTE used third-party companies to sell US-originated goods to Iran in breach of laws banning the export of sensitive or controlled equipment to the country.

Between 2010 and 2016, according to the treasury statement, the Chinese group’s “highest-level management developed, approved and implemented a company-wide plan that utilised third-party companies to conceal and facilitate ZTE’s illegal business with Iran”.

The statement added that the company’s management knew the legal risks involved before signing contracts with Iranian customers.

“Essential to the performance of such contracts was ZTE’s procurement of, and delivery to Iran of, US-origin goods,” it said.

Doing business

US media reported that ZTE was doing business with Iran in 2012. Shortly afterwards, the group learned of the US government investigation and told authorities that it was “winding down” this activity.

“However, ZTE’s highest-level leadership decided to surreptitiously resume its Iran-related business in 2013, which it continued until last year,” the US treasury said.

Washington’s commerce department subsequently suspended the group’s export privileges.

The US has had longstanding sanctions on trade with Iran, dating back to the country’s Islamic revolution in 1979.

Digicel did not comment on its partner’s settlement yesterday. Mr O’Brien’s company announced its deal with ZTE last month when it also revealed that it was cutting more than 1,500 jobs in an effort to tackle its €6.2 billion debt.