ZTE shares drop 23% amid US bribery claims

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ZTE share prices fell 23% on Hong Kong stock exchange as news that the company was being investigated by the US Department of Justice (DoJ) for bribery.

The news indicates shareholder uncertainty with many believing the investigation could lead to the company being sanctioned by the US as it was in 2018.

At the time, a statement by the US Department of Commerce (DoC) in April found that the vendor had not taken the action it promised to take against those executives implicated in smuggling equipment to Iran. ZTE agreed in 2017, in a settlement of an action by the DoC in 2016, to reprimand them and deprive them of their bonuses.

In punishment the DoC issued a denial order that outlaws US companies such as Cisco, Dell, Intel, Microsoft, Oracle, Qualcomm and Symantec to trade with ZTE for seven years. The decision will also affect ZTE’s growing handset business: its terminals use Qualcomm chips.

The dispute only resolved itself when ZTE agreed to work with embedded US overseers monitoring its every action for the next 10 years, as well as reached a settlement of $1.19 billion in penalties, $892 million in cash and $300 million suspended for seven years as a guarantee of future good behaviour.

These fresh claims allege that ZTE bribed foreign officials to advance its global operations – a direct violation of the US Foreign Corrupt Practices Act.

In response, ZTE issued a statement saying that the company “has not received notices from the relevant government departments of the United States in this regard” and it is “fully committed to meeting its legal and compliance obligations.”