China's ZTE may pay more than $1 billion to the US over foreign bribery allegations, sources say

Chinese telecom equipment maker ZTE Corp (00063.SZ) may pay more than $1 billion to the U.S. government to settle long-standing allegations of foreign bribery, according to sources familiar with the matter.

ZTE, which already paid roughly $2 billion in penalties to U.S. authorities over export violations during former President Donald Trump’s first term, has faced global probes into alleged bribes used to secure telecom contracts.

This year, the U.S. Department of Justice (DOJ) reportedly advanced an investigation into ZTE for potentially violating the Foreign Corrupt Practices Act (FCPA) in South America and other regions. The FCPA prohibits payments or anything of value to foreign officials to obtain business.

Reuters reports, for the first time, that U.S. officials are negotiating a resolution that could see ZTE pay more than $1 billion—or possibly $2 billion or more—based in part on alleged gains from corrupt contracts.

ZTE did not respond to requests for comment. In an August 2024 memo to employees, shareholders, and business partners, the company said it maintained a "zero-tolerance attitude towards any form of corruption or bribery" and had established an anti-bribery compliance system. A DOJ spokeswoman declined to comment.

It remains unclear when a settlement might be reached. Sources said any deal with the U.S. would require approval from the Chinese government. Liu Pengyu, spokesman for the Chinese embassy in Washington, said he was not aware of the specifics but added that "China has always required Chinese companies to operate legally abroad and abide by local laws and regulations."

FCPA Cases Can Take Years

FCPA investigations often surface years after alleged misconduct. According to one source, ZTE’s most recent bribery-related act occurred in 2018, with potential charges described as a criminal conspiracy to commit bribery.

Sources said ZTE struck business deals in South America that the DOJ suspects involved bribery, including in Venezuela.

A prior agreement with the U.S. Commerce Department complicates any potential settlement. In 2017, ZTE pleaded guilty to illegally exporting American goods to Iran and paid an $892 million penalty. In 2018, the Commerce Department accused the company of making false statements about disciplining employees tied to the violations and banned all U.S. exports to ZTE.

The ban cut off a critical supply of chips, software, and components, halting major operations. However, former President Trump, who was negotiating a trade deal with China at the time, supported the company. After ZTE paid another $1 billion under a new Commerce Department agreement, the ban was lifted that summer.

Commerce is reportedly reviewing whether ZTE violated the 2018 agreement, which runs for 10 years. “The Department does not comment on active enforcement matters or confirm or deny the existence of any pending investigations,” a Commerce spokesperson said.

Financial Impact and Industry Implications

A large settlement could strain ZTE’s finances—the company reported $1.16 billion in profit last year. Without a deal, the U.S. could reinstate the Commerce ban on American suppliers, including Qualcomm, whose Snapdragon chips power ZTE’s high-end phones. The company still sources components from Intel, AMD, and other U.S. firms for phones, servers, and networking equipment.

The U.S. has a history of investigating foreign bribery in telecom, with agreements and payouts in recent years involving companies from Sweden, Russia, and Venezuela.

In 2015, Norway’s Government Pension Fund Global noted ZTE was linked to corruption allegations in 18 countries, with investigations in 10—including Algeria, the Philippines, and Zambia—spanning 1998 to 2014. Most cases involved bribes paid to public officials to secure contracts, ranging from several million to tens of millions of dollars. -Karen Freifeld and Sarah N. Lynch/Reuters