US court allows ZTE to exit probation despite visa fraud

But judge encourages government to pursue criminal or civil charges against the company

Chinese telecoms kit maker ZTE is being allowed to end its five-year probation period in the US that resulted from its admission to violating trade sanctions in 2017.

This is despite the court order [PDF] stating that there was evidence that ZTE was involved in a visa fraud in bringing employees into the country.

The order, handed down by Texas district judge Ed Kinkeade on March 22, was in response to allegations that a former ZTE employee stateside had been involved in bringing Chinese nationals into the US illegally. This could potentially have led to a ruling that the firm had breached the terms of its probation and an imposition of further penalties. The court summons was covered by The Register earlier this month.

Instead, the US district court in Texas ruled that ZTE should be allowed to continue with its five-year probation, but as that period ended on the same day, ZTE has now effectively completed its probation period.

That probation period was imposed in 2017 after ZTE pleaded guilty to breaking trade sanctions against Iran by shipping various US-made components for routers, switches, servers, and mobile phone network equipment to Iran through various China-based subsidiaries. The company has also been through a roller-coaster ride of various bans and fines imposed by the US authorities since then, but was allowed to do business with US companies again in 2018.

The judge declined to revoke ZTE's probation despite stating in the order that he found the allegations of conspiracy to commit visa fraud to be "true", writing that a former ZTE director was "acting in the scope of his employment at all relevant times and thus finds that ZTE was legally responsible for the actions... that contributed to this scheme to defraud."

This relates to the indictment last year of a former ZTE employee, Jianjun Yu, who is accused of involvement in a conspiracy to fraudulently obtain J-1 Visas for Chinese nationals to come to the US to conduct research at the company. The visas were sponsored by the Georgia Institute of Technology where the other person indicted in the case, Professor Gee-Kung Chang, was employed.

The judge said the court had balanced "prior mitigation evidence [and] the work of the [court-appointed compliance] Monitor Team" to come to its conclusion.

Despite the favorable ruling, the judge encouraged the government to pursue any reasonable charges and criminal or civil penalties against the company.

In an announcement [PDF] posted on its website, ZTE said it had temporarily halted trading of some of its company shares on the Hong Kong stock exchange pending the revocation of probation hearing, but later resumed trading after the favorable court ruling.

"On 22 March 2022 (US time), the Company received an order from the Court declining to revoke probation or impose any penalties upon ZTE, and confirming that the term of probation and the term of the Monitor will end as scheduled on 22 March 2022 (US time)," ZTE said in the statement.

ZTE also said that it is now working to ensure full compliance with regulations wherever it operates, stating: "The Company is committed to building a world-class compliance enterprise, making compliance the cornerstone of its strategic development and the bottom line of operations, complying with the applicable laws and regulations of the countries in which it operates, and building a comprehensive compliance system." ®