Federal investigators from the FBI and Commerce Department have opened criminal investigations into allegations that Chinese telecom firm ZTE (Shenzhen: 000063.SZ) and its Texas subsidiary ZTE U.S.A. sold banned U.S. surveillance equipment to Iran. The probe was reported by the Washington Post, which cited an FBI affidavit uncovered by the website The Smoking Gun.
Federal investigators in March started looking into ZTE's alleged attempt to ship hardware and software components bought from U.S. technology firms to Iran. The investigation followed on the heels of a Reuters report that alleged that ZTE had shipped telecom equipment described as "a powerful surveillance system capable of monitoring landline, mobile and Internet communications." The shipment allegedly violated trade restrictions and embargoes.
After the Reuters story broke, Commerce served a subpoena on ZTE U.S.A. in Dallas seeking information on the type of equipment the firm had exported to Iran and the FBI assigned counterintelligence and counterespionage agents within its Dallas office to look into the matter.
The FBI affidavit, according to those who have seen it, says agents interviewed ZTE U.S.A.'s general counsel Ashley Kyle Yablon in May. Yablon, The Smoking Gun said, "previously worked as an in-house counsel for the Chinese telecom giant Huawei Technologies" and "has allowed the FBI to make a forensic copy of all files on his work computer."
Yablon, The Smoking Gun said, was contacted but "in a brief phone conversation … said he did not have time to speak with a reporter (and) did not respond to subsequent messages left at his office and on his cell phone." The Post said that Justice and Commerce officials declined to comment and "efforts to reach ZTE in Dallas were unsuccessful."
The investigations revolve around federal laws "banning the sale, export or re-export of goods or services to Iran" and making those who knowingly export goods to Iran "subject to criminal prosecution and those involved unwittingly … civil penalties," thePost story said.
On top of those charges, The Smoking Gun reported that the probe also uncovered evidence that ZTE officials are "'engaged in an ongoing attempt to corruptly obstruct and impede'" the Commerce investigation.