ZTE OFAC Settlement: $100.9M (2017)

From on or about January 2010 to on or about March 2016, ZTE engaged in: (i) the exportation, sale, or supply, directly or indirectly, from the United States of goods to Iran or the Government of Iran; (ii) the reexportation of controlled U.S.-origin goods subject to the Export Administration Regulations from a third-country with knowledge that the goods were intended specifically for Iran or the Government of Iran; and (iii) activity that evaded or avoided, attempted and/or conspired to violate, and/or caused violations of the prohibitions set forth in the ITSR. ZTE appears to have engaged in 251 transactions in apparent violation of §§ 560.203, 560.204, and/or 560.205 of the ITSR. The total value of the transactions constituting the apparent violations was $39,622,972.

ZTE's highest-level management developed, approved, and implemented a company-wide plan that utilized third-party companies to conceal and facilitate ZTE's illegal business with Iran. ZTE's highest-level management was specifically aware of and considered the legal risks of engaging in such activities prior to signing contracts with Iranian customers and supplying U.S.-origin goods to Iran. Essential to the performance of such contracts was ZTE's procurement of and delivery to Iran of U.S.-origin goods, including goods controlled for anti-terrorism, national security, regional stability, and encryption item purposes. Pursuant to its contracts with Iranian customers, ZTE was required to and did in fact enhance the law enforcement surveillance capabilities and features of Iran's telecommunications facilities and infrastructure.

ZTE's unlawful business activities with Iran were publicly disclosed in a media report in 2012. Shortly thereafter, ZTE learned of the U.S. government's investigation into the company's business activities with Iran. ZTE subsequently communicated to the U.S. government that it had wound down and ceased its Iran-related activities. However, ZTE's highest-level leadership decided to surreptitiously resume its Iran-related business in 2013, which it continued until 2016, when the Department of Commerce suspended the company's export privileges by adding it to the Entity List. Under the direction of its leadership, ZTE deleted evidence and provided the U.S. government with altered information to hide the fact that it had resumed its unlawful business with Iran.

OFAC determined that ZTE did not voluntarily self-disclose the apparent violations to OFAC and that the apparent violations constitute an egregious case. Both the base civil monetary penalty and statutory maximum civil monetary penalty amounts for the apparent violations was $106,180,280. The settlement amount of $100,871,266 reflects OFAC's consideration of the facts and circumstances pursuant to the General Factors under OFAC's Enforcement Guidelines.

ZTE's settlement with OFAC is concurrent with a settlement agreement between ZTE and the Department of Commerce's Bureau of Industry and Security, and ZTE's plea agreement (pending court approval) with the Department of Justice's National Security Division and U.S. Attorney's Office for the Northern District of Texas.

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