ZTE is potentially facing another high-stakes battle with the United States government. As reported by Reuters, the Chinese equipment manufacturer might need to pay up to $1 billion, or potentially more, to settle charges of historical bribery related to contracts in South America, specifically Venezuela. This development is part of an ongoing probe by the U.S. Department of Justice (DoJ) under the Foreign Corrupt Practices Act.
The gravity of the situation is underscored by ZTE’s previous encounters with US trade regulations. In 2017, the company was fined $1.2 billion after pleading guilty to violating trade embargoes, namely exporting U.S. technology to Iran and North Korea. This sum included a $300 million suspension, conditional upon ZTE’s compliance with regulatory expectations.
Fast forward to 2018, and ZTE found itself scrutinized by the US Commerce Department for making false statements about disciplinary actions regarding the trade breaches. Consequently, the US imposed an export ban on the company, nearly crippling its operations until a $1.4 billion settlement lifted the embargo.
Now, according to two Reuters sources, the recent violations allegedly occurred during ZTE’s five-year monitoring period established post-Iran/North Korea scandal. This timing questions the effectiveness of previous compliance commitments and could significantly undermine corporate credibility. ZTE has consistently emphasized its dedication to an industry-leading compliance framework and zero tolerance toward corruption.
With its net profit sliding from $1.3 billion in 2023 to $1.19 billion in 2024 during a volatile market period, sustaining another substantial financial penalty could have dire outcomes for ZTE, teetering its financial stability. This financial strain is compounded by ongoing corporate attempts to navigate an already turbulent economic landscape.
