ZTE claws back bonuses, reprimands 35 staff over Iran sanctions breach to meet US pledge

Chinese telecoms company is taking the steps as it continues to negotiate a deal with the US government that would allow it to resume its business

PUBLISHED : Wednesday, 06 June, 2018, 11:01am
UPDATED : Thursday, 07 June, 2018, 11:16am

ZTE, the Chinese telecommunications company trying to resolve a seven-year US export ban, has sent out reprimand letters to 35 current and former employees involved in illegal sales to Iran and is seeking to claw back bonuses from those who have left the company, according to people familiar with the matter.

The reprimand and forfeiture of bonuses were part of the original settlement that ZTE had reached with the US government. ZTE’s failure to comply with these terms triggered the suspended denial order that prohibits American companies from doing business with the Shenzhen-based company, plunging it into crisis. ZTE has also been replacing some of its top executives in a bid to make good on its pledge, the South China Morning Post previously reported.

Of the 35, those still with the company have had their bonuses deducted while ZTE is sending legal letters to those who have left seeking to claw back payments, according to the people, who asked not to be named as the information is private. ZTE declined to comment.

ZTE is taking the steps as it negotiates a deal with the US government that would allow it to resume its business. The company has signed an agreement in principle that would lift the ban on buying components from US suppliers, paving the way for it to resume operations, Reuters reported overnight, citing people it did not identify. A US Commerce Department spokesman said on Tuesday that no definitive agreement has been signed.

ZTE to pay US$1.4 billion to US in order to lift sanctions

ZTE has reached a preliminary consensus with the US commerce department on how to resolve the ban, though nothing definitive has been signed and both parties still have to go through the terms of any settlement item-by-item, a person close to ZTE told the Post, asking not to be identified as the information is private.

The company has closed major operations since early May and the ban has featured prominently in bilateral trade talks between China and the US.

In November 2016, ZTE pledged to dismiss four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them as part of the original deal with the US Commerce Department. The company also paid US$892 million in fines and penalties, with a suspended additional penalty of US$300 million in case of future violations. The Chinese company said in June 2017 that it had fulfilled its promise, but later admitted in March 2018 that while it had fired the four senior employees, it had not disciplined or reduced bonuses for the 35 others.

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The list of 35 employees has not been made public by either ZTE or the US government. The Post understands that among the 35 are executives who oversaw operations, legal affairs, financing and compliance during 2011 and 2012, the period when the Iran sanctions breach took place.