ZTE, a Chinese telecom company, is in dispute with the U.S. government over sanctions and trade restrictions imposed on the company. The case has been ongoing for years and will likely continue to be until one side or the other is successful in court.
The what does zte stand for is a dispute between the Chinese telecom giant ZTE and the U.S. Court. ZTE has been accused of violating sanctions by selling equipment to Iran and North Korea.
WASHINGTON— When China’s ZTE Corp. ZTCOY 1.54 percent pled guilty to Justice Department charges of unlawfully transferring key US technology to Iran and lying to authorities, it agreed to be overseen by an independent monitor.
According to individuals familiar with the situation, that monitor, a Dallas lawyer, is now trying to extend his own term beyond its expiry in March and threatening the Chinese telecoms firm if it refuses to comply, much to the chagrin of Justice Department officials.
The court-appointed monitor, James Stanton, has made threats, including threatening to use his relationship with the judge supervising the case, according to the individuals. Mr. Stanton, who had previously certified Shenzhen-based ZTE’s compliance with the settlement deal on a yearly basis, pushed for the extension in June, claiming that he had proof that the firm had breached the conditions of its probation without giving further specifics, they said.
Mr. Stanton has informed individuals engaged in the monitorship that he is “close personal friends” with the judge who appointed him, U.S. District Judge Ed Kinkeade, and that the two of them would do “whatever is necessary” to ensure ZTE followed the Justice Department’s settlement. According to individuals familiar with the situation, company attorneys and Justice Department officials thought the wording was improper and possibly unethical.
Mr. Stanton claimed The Wall Street Journal’s story included “significant errors” and refused to speak more since the issue was under seal. “No one speaks for me except me,” Judge Kinkeade remarked, refusing to elaborate. A spokesperson for the Justice Department refused to comment. ZTE’s spokesperson did not reply to queries for comment.
In September 2013, James Stanton sat in the library of his Texas law firm.
The Wall Street Journal’s Brandon Thibodeaux took this photo.
According to individuals familiar with the situation, ZTE has claimed that there is no legal basis for extending Mr. Stanton’s monitorship beyond the present probationary term, and prosecutors have decided not to challenge the company’s stance. Prosecutors would usually make such a judgment, with the business given the opportunity to react.
According to the individuals, Mr. Stanton’s company makes tens of millions of dollars a year from the monitorship, and his expenses have increased in recent months as the dispute over the term has heated up.
The issue puts the Biden administration in a difficult position of potentially supporting with a Chinese business accused of unlawfully transferring key US technology to Iran in 2017, while simultaneously maintaining a strong US government stance against Chinese telecom companies over possible espionage concerns.
Chinese telecom companies, notably ZTE and its bigger competitor, Huawei Technologies Co., have long been accused by US authorities of posing a threat to US national security due to their close ties with the Chinese government and the possible backdoor access they may offer to its telecom networks.
Although both ZTE and Huawei have said that their equipment is not used for spying, the two Chinese firms have adopted opposing approaches to US regulatory involvement. While ZTE has made agreements and subjected to supervision in order to keep its ability to export devices that include U.S. technology, Huawei has resisted the Justice Department’s penalties and charges, claiming they are politically motivated, and is still subject to broad restrictions on critical components.
Unlike ZTE, Huawei has battled the Justice Department’s penalties and accusations head-on, claiming they are politically motivated.
Qilai Shen/Bloomberg News photo
Despite its more accommodating approach, ZTE remains behind Huawei in terms of competitiveness. In the worldwide market for smartphones and telecoms gear, ZTE has long lagged Huawei, its major Chinese competitor. ZTE was formerly a top-five smartphone provider in the United States, but it is now a small player in the worldwide smartphone market.
Mr. Stanton’s monitorship comes from a $900 million settlement reached in 2017, in which the company confessed to organizing a six-year scheme to get US technology, transfer it to Iran, and hide its participation via a network of front businesses.
Although most Justice Department settlements with businesses do not involve a monitor, prosecutors do so in certain instances to verify that the conditions of the agreement are followed. Monitorships may be expensive, and once agreed to, businesses have little influence over the actions of the person selected to supervise them.
In most instances, Justice Department regulation mandates that a monitor be selected in cooperation with the business in question, with the company nominating three applicants and prosecutors choosing the most qualified of the three.
Judge Kinkeade took the extraordinary step of revising the plea deal in the ZTE case in 2017 to enable him to select and supervise Mr. Stanton, who had no previous expertise in sanctions law. Judge Kinkeade had previously appointed Mr. Stanton as a special master in a medical-device product-liability case, and he identified the judge as his mentor in the dedication of a book he authored.
David Laufman, the former Justice Department officer in charge of ZTE’s plea deal, slammed the unusual arrangement.
He stated following the original publication of this story on Friday, “This train disaster has been a long time coming.” “While it was perfectly proper for ZTE to submit to a rigorous monitorship, it is equally critical that the process for selecting monitors be above reproach and that monitorships be handled in a responsible and accountable way.” A request for comment from the Justice Department was not immediately returned.
In 2018, the Trump government accused ZTE of breaking the conditions of its 2017 agreement, and as a result, U.S. businesses were barred from selling to the company. Following that, the Commerce Department reached an agreement with ZTE that required the company to pay an additional $1 billion fine, replace its board of directors and senior leadership, and fund a separate team of lawyers to monitor the company for ten years under the Commerce Department’s supervision.
Mr. Stanton, the criminal monitor, had his tenure scheduled to expire in 2020, but Judge Kinkeade decided to prolong it by two years.
Mr. Stanton said the company wouldn’t be able to “unscramble the egg” and demanded that ZTE turn over more than 150 sets of documents and make dozens of employees available for depositions within 30 days after ZTE refused to voluntarily extend his monitorship earlier this year, according to people familiar with the matter. According to the individuals, Mr. Stanton’s document and deposition requests prompted a frantic rush at three separate legal firms representing ZTE to fulfill his demands.
According to individuals familiar with the situation, federal prosecutors are continuing to pursue two separate investigations targeting ZTE: a foreign bribery probe and a visa fraud investigation, both of which the firm is cooperating with.
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Mr. Stanton has insisted on looking into such problems personally, despite the fact that they are unrelated to export difficulties and the Justice Department is already looking into them, according to individuals familiar with the situation.
In recent months, the Biden administration has increased pressure on Beijing’s 5G aspirations abroad, providing financial incentives and other enticements to nations willing to forego Huawei and ZTE equipment as they develop next-generation cellular networks.
After reaching a deferred prosecution deal with Huawei’s top financial officer last month, it has continued to pursue a criminal case against the company, accusing it of breaching US sanctions on Iran, stealing trade secrets, and other offenses.
Former prosecutors said the disagreement over ZTE’s monitorship may make it more difficult for the Justice Department to impose a monitor in Huawei’s case or others involving Chinese firms.
“If Chinese businesses want to do business in the United States, they need to be brought along in terms of compliance,” said Ryan Fayhee, a former national-security prosecutor who now works at the law firm Hughes Hubbard & Reed. “Because of ZTE’s experience, situations that really warrant a monitor will be much, much more difficult to resolve.”
This essay was written with the help of Byron Tau.
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The zte products is a Chinese telecom giant that has been in dispute with the U.S. court due to allegations of spying on American companies and officials.
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