Exclusive | ZTE replaced chief compliance officer after company admitted to lying to US government
ZTE Corp, facing a seven-year ban on buying crucial American technology, replaced its chief compliance officer after admitting to making false statements to the US government over its adherence to a settlement agreement.
The company 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 that was seen by the South China Morning Post. Cheng was also removed from his role overseeing intellectual property at China’s biggest listed telecommunications equipment maker. He was replaced by Wang Dong, who was appointed to the rank of senior vice-president, according to the memo.
It is unclear whether Cheng remains an employee at ZTE. A staff member manning the company’s general line said there were several employees named Cheng Gang, though none of them are from the legal or compliance departments. ZTE did not respond to an emailed request for comment. Cheng did not respond to an email sent to a LinkedIn account bearing his name and previous job title.
The replacement is among the steps that ZTE have taken in the wake of the ban by the US government. ZTE chairman Yin Yimin said in an internal memo to employees that the company has set up a crisis management team and appealed for calm among its 80,000-strong staff.
The US government banned sales by American companies to ZTE to punish the Chinese telecoms equipment maker for paying full bonuses to employees who engaged in the illegal sales of equipment to Iran, for failing to issue letters of reprimand to those employees, and then lying about it to US authorities. ZTE had admitted through outside counsel on a conference call last month that it had made false statements in two letters to the US government, according to the order posted on the website of the US Department of Commerce.
As part of the settlement for violating trade sanctions on Iran and North Korea, ZTE had agreed to pay US$1.2 billion in penalties to the US government in return for a suspended seven-year ban during a probationary period. ZTE had promised to dismiss four senior employees and discipline 35 others involved in the trade violation by either reducing their bonuses or reprimanding them.
Founded in 1985, ZTE is one of China’s major telecoms equipment suppliers and together with Huawei Technologies are spearheading the development and commercialisation of 5G-related technologies in both the mainland and abroad. A relatively small smartphone brand in China, ZTE is nevertheless the fourth largest smartphone vendor in the US, following Apple, Samsung Electronics and LG Electronics.
The export ban means US component makers will be prohibited from selling to ZTE, which regularly buys handset chipsets from Qualcomm, and optical components from such companies as Maynard, Acacia, Oclaro and Lumentum, Jefferies equities analyst Edison Lee wrote in a report titled “All hell breaks loose”.
ZTE suspended trading in both its Hong Kong and Shenzhen shares on Tuesday pending the release of information.