The federal investigation stems from a Reuters report in March that ZTE sold Iran’s state telecoms firm a surveillance system capable of monitoring landline, mobile and Internet communications, the Smoking Gun website reported.
The Reuters article also reported that ZTE’s 907-page “Packing List” for the $120 million contract, dated July 24, 2011, included hardware and software products from Microsoft Corp, Hewlett-Packard Co, Oracle Corp, Cisco Systems Inc and Dell Inc. Sales of equipment from US firms to Iran are prohibited by the US sanctions on Iran without a special Treasury Department license.
Smoking Gun reported that the FBI was also investigating ZTE’s alleged attempts to cover up the sale and obstruct a Department of Commerce probe, which, in many ways, is an even more serious charge than the sale.
Smoking Gun published on its website excerpts from a confidential FBI affidavit based on a May interview with Ashley Kyle Yablon, 39, the general counsel of ZTE’s US subsidiary in Texas.
According to the affidavit, Yablon told two FBI agents that ZTE officials had discussed shredding documents, altering the packing list and denying it was genuine in an effort to subvert a Department of Commerce investigation into ZTE’s sales of US equipment to Iran.
The US Commerce Department issued a subpoena to ZTE the day after the Reuters report, seeking the Iranian contract and the packing list, according to the affidavit.
The affidavit stated that Yablon told the FBI that a ZTE attorney had told him the company “was concerned about how the Reuters reporter obtained a copy of the packing list … because it could no longer ‘hide anything.’” Yablon said he told the attorney he “would not be involved in a cover-up”.
Yablon stated he later saw a copy of the Iranian contract that “essentially described how ZTE would evade the US embargo and obtain the US-manufactured components specified in the contract for delivery to” the Telecommunications Company of Iran, according to the affidavit.
Yablon also said he was told that ZTE owns “sub companies” that it uses to purchase US-made telecommunications equipment for sale to countries subject to embargoes, the affidavit states.
Late last year, Nokia Siemens Networks, a venture between Nokia and Siemens, said it would gradually reduce its business in Iran. The venture was a key supplier to Iranian telecoms operators along with Ericsson and China’s Huawei .
The FBI probe presents new troubles for ZTE in the United States, where it has been trying to expand its operations. In addition to the Commerce Department probe into its sales to Iran, ZTE is also under investigation by the US House of Representatives’ Intelligence Committee over whether its equipment represents a threat to national security.
ZTE is China’s second-largest telecoms equipment maker and the world’s fourth-largest mobile device maker with 4.2 percent global market share in the first quarter. It is publicly traded, but its largest shareholder is a Chinese state-owned enterprise.