U.S. judge rules in favor of China’s ZTE, ending probation

FILE PHOTO: People walk past a building of China's ZTE Corp in Beijing
FILE PHOTO: People walk past a building of China’s ZTE Corp in Beijing, China, August 29, 2018. REUTERS/Thomas Peter

March 23, 2022

By Karen Freifeld

WASHINGTON (Reuters) -A U.S. judge on Tuesday ruled that China’s ZTE Corp, a top telecommunications equipment maker, should be allowed to end its five-year probation from a 2017 guilty plea.

The ruling came on the final day of the company’s probation for illegally shipping U.S. technology to Iran and North Korea.

Trading in ZTE shares was suspended before markets opened in Shenzhen and Hong Kong after news of the decision by U.S. District Judge Ed Kinkeade in Texas.

ZTE had been accused of violating probation over an alleged conspiracy to bring Chinese nationals to the United States to conduct research at ZTE through visa fraud.

According to an indictment unsealed last March, a former ZTE research director and a Georgia Institute of Technology professor allegedly conspired to bring Chinese nationals to the U.S. to conduct research at ZTE from at least 2014 through 2018 while on J-1 visas sponsored by the university.

While ZTE has not been charged in the visa case, which is pending in Atlanta, Georgia, Kinkeade held a hearing in Dallas last week on the fraud allegation as a possible violation of ZTE’s probation.

In his Tuesday ruling, the judge found ZTE was legally responsible for the actions of the former ZTE director.

But he decided to not take any further action against ZTE, which had already reached the maximum term of probation and, ZTE argued, had already been fined the maximum as well.

As part of its 2017 guilty plea, ZTE paid the U.S. $892 million.

There was an “open question about legal tools left for the court,” the judge wrote.

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

(Reporting by Karen Freifeld; Editing by Edwina Gibbs and Christopher Cushing)

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