Chi­nese firm signed for Dig­i­cel up­grade pleads guilty in Texas case

The Star (St. Lucia) - - BUSINESS MATTERS -

A Chi­nese tele­coms group re­cently signed by Denis O’Brien’s Dig­i­cel to up­grade its net­work has pleaded guilty in a fed­eral court in Texas for con­spir­ing to vi­o­late US sanc­tions by il­le­gally shipping US goods and tech­nol­ogy to Iran.

The guilty plea was part of an agree­ment that Zhongx­ing Telecom­mu­ni­ca­tion Equip­ment (ZTE) reached ear­lier this month with US au­thor­i­ties. The deal also called for nearly $900 mil­lion in fines and other penal­ties.

In Dal­las, a US dis­trict judge ac­cepted ZTE’s plea to three charges: con­spir­ing to ex­port Amer­i­can-made items to Iran with­out a li­cense, ob­struct­ing jus­tice, and mak­ing a ma­te­rial false state­ment.

Shen­zhen-based ZTE has a US sub­sidiary in Richard­son, Texas.

A five-year in­ves­ti­ga­tion found that ZTE con­spired to evade US em­bar­goes by buy­ing com­po­nents, in­cor­po­rat­ing them into ZTE equip­ment, and il­le­gally shipping them to Iran. ZTE, which de­vised elab­o­rate schemes to hide the il­le­gal ac­tiv­ity, agreed to the guilty plea af­ter the US com­merce depart­ment took ac­tions that threat­ened to cut off the gear maker’s global sup­ply chain.

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

The US in­ves­ti­ga­tion fol­lowed re­ports by Reuters in 2012 that ZTE had signed con­tracts to ship mil­lions of dol­lars’ worth of hard­ware and soft­ware from some of the best-known US tech­nol­ogy com­pa­nies to Iran’s largest tele­coms car­rier.

As part of the court deal, ZTE will be un­der pro­ba­tion for three years and agrees to co­op­er­ate with au­thor­i­ties in any fu­ture in­ves­ti­ga­tions. A for­mer Texas judge was ap­pointed to mon­i­tor com­pli­ance.

In ad­di­tion to $892 mil­lion that ZTE agreed to pay in fines and penal­ties, an ad­di­tional penalty of $300 mil­lion could be im­posed if it does not com­ply with its agree­ment over the next seven years.

ZTE, one of the world’s big­gest telecom­mu­ni­ca­tions gear mak­ers, purchases some $2.6 bil­lion worth of com­po­nents from US firms ev­ery year, ac­cord­ing to a com­pany spokesman. Qual­comm, Mi­crosoft and In­tel are among its sup­pli­ers.

It also sells hand­set de­vices to US mo­bile car­ri­ers AT&T, T-Mo­bile and Sprint.

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