China-only ZTE could pay more than $1 billion to U.S. over foreign bribery allegations, sources say

Dec 10 (Reuters) – Chinese telecommunications equipment maker ZTE Corp could pay more than $1 billion to the U.S. government to resolve years-old allegations of foreign bribery, according to two sources familiar with the matter.

ZTE, which has already paid some $2 billion in penalties to U.S. authorities for export violations during President Donald Trump’s first term, has for years been the subject of investigations by authorities around the world for alleged bribes to secure telecommunications contracts.

This year, the Justice Department launched a U.S. investigation into ZTE for alleged violations of the Foreign Corrupt Practices Act (FCPA) in South America and other regions, the sources said. The law prohibits payments or anything of value to foreign officials to obtain business.

U.S. officials, Reuters first reported, are working on a resolution that could see ZTE pay more than $1 billion, the sources said, or perhaps $2 billion or more, according to one, based in part on alleged gains from corrupt contracts.

ZTE did not respond to requests for comment. In an August 2024 memo to ZTE employees, shareholders and business partners, the company said it had a “zero-tolerance attitude towards any form of corruption” and had established an anti-corruption compliance system.

A Justice Department spokeswoman declined to comment.

It remains unclear when a deal could be reached. A deal with the United States would require Chinese government approval, the sources said.

Liu Pengyu, a spokesperson for the Chinese Embassy in Washington, said he was not aware of the details of the ZTE case, but added: “China has always required that Chinese companies operate legally abroad and comply with local laws and regulations.”

FCPA CASES CAN TAKE YEARS

FCPA cases often surface years after the misconduct and the Justice Department’s investigation found that with ZTE, the most recent corrupt act occurred in 2018, one of the sources said. The other source described the potential charges as criminal conspiracy to commit bribery.

Both sources said ZTE had business deals in South America that the DOJ suspects involved corruption, with one of the sources pointing the finger at Venezuela.

A Commerce Department agreement reached around the same time “complicates any potential settlement.”

In 2017, the company pleaded guilty to illegally exporting U.S. goods to Iran and paid an $892 million fine, a deal first reported by Reuters. In 2018, the Commerce Department accused him of making false statements about employee discipline related to the violations — and banned all U.S. exports to the company.

This disrupted a vital supply of chips, software and components, forcing ZTE to halt major operations.

But Trump, who was negotiating a trade deal with China at the time, expressed support for the company, and after ZTE paid an additional $1 billion under a new agreement with the Commerce Department, the ban was lifted that summer.

The Commerce Department is looking at the same facts as the Justice Department and asking whether ZTE violated the 2018 agreement, which lasts 10 years, one of the sources said.

“The Department does not comment on matters of active enforcement, nor does it confirm or deny the existence of ongoing investigations,” a Commerce spokesperson said.

A large settlement could weaken ZTE’s finances: the company made a profit of $1.16 billion last year. But without a deal, the United States could reinstate the trade ban targeting American suppliers such as Qualcomm, whose Snapdragon chips power ZTE’s high-end phones. ZTE still sources its phones, servers and networking equipment from Intel, AMD and other US companies.

The United States has long investigated foreign bribery in the telecommunications sector, announcing settlements and payouts in recent years for cases involving companies based in Sweden, Russia and Venezuela.

In 2015, the Norwegian Government Pension Fund said ZTE was linked to corruption allegations in 18 countries, with investigations in 10 countries, including Algeria, the Philippines and Zambia, spanning from 1998 to 2014.

“All concern the payment of bribes to public officials to secure the award of contracts,” the Ethics Council wrote, “recommending the exclusion of ZTE from the fund.” The alleged bribes ranged from several million to tens of millions of dollars.

(Reporting by Karen Freifeld in New York and Sarah N. Lynch in Washington; Editing by Chris Sanders and Nick Zieminski)