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Wednesday
Apr182018

Report: ZTE removes compliance chief after admitting lies to U.S. authorities

ZTE replaced its chief compliance officer after it admitted to the U.S. government in March that it made false statements about meeting the requirements of a settlement agreement.

The South China Morning Post said Wednesday that ZTE removed Cheng Gang, a senior vice-president, from his roles as chief compliance officer and chief legal officer, "according to an internal human resources notice dated March 8."

ZTE -- China’s biggest listed telecommunications equipment maker -- was hit Monday with a seven-year "denial of export privileges" by the U.S. Department of Commerce for failing to comply with settlement terms in an earlier sanctions case.

The export denial means American companies are banned from selling components to ZTE and ZTE Kangxun Telecommunications Ltd. Both are based in Shenzhen, China.

Before the ban, ZTE depended on American companies to supply components used in its networking gear and smartphones.

In 2017, ZTE paid $1.19 billion to settle U.S. criminal and civil charges for illegally shipping telecommunications equipment to Iran and North Korea. ZTE was also accused of making false statements and obstruction for lying to U.S. authorities and destroying export records.

In the 2017 settlement, ZTE promised to fire four senior employees and discipline 35 others by reducing their bonuses or reprimanding them.

ZTE admitted in March that it fired the four senior employees but didn't take action against the others.

Cheng Gang, the former compliance chief, was replaced by Wang Dong, "who was appointed to the rank of senior vice-president, according to the memo," the SCMP said.

"It is unclear whether Cheng remains an employee at ZTE," the paper said.

The Commerce Department said Monday "that ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand."

On Tuesday, ZTE suspended trading of its Hong Kong and Shenzhen shares.

The company has 80,000 employees.

ZTE admitted last month that two letters it sent to the U.S. government about its compliance with the terms of the 2017 settlement contained false statements.

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Richard L. Cassin is the publisher and editor of the FCPA Blog.