China’s ZTE was built to spy and bribe, court documents allege
The Sydney Morning Herald · by · May 31, 2018
ZTE, the Chinese telecommunications company bidding for major contracts in Australia, and at the centre of Donald Trump’s trade war with Beijing, was established partly as a front for military intelligence and has been linked to corruption in 18 countries, according to explosive court documents filed in the US.
The previously unseen court filings, document how ZTE handed over “brown paper bags” of cash to win contracts in Africa, building on an earlier report by Fairfax Media showing institutionalised corruption within the Chinese company.
The ZTE building in Beijing, China.
Photo: APZTE has been shortlisted to build Telstra’s 5G mobile phone network in Australia and is one of two bidders vying to provide a new communications system for Perth’s rail network, despite long-held national security concerns about the company.
The new claims form part of an ongoing commercial litigation case filed in Texas, alleging that ZTE bribed Liberian officials, to unseat a US company which had won the right to upgrade the West African country’s telecommunications networks.
Contained in the Summary of Claims are allegations ZTE was formed partly with the aim of spying for Beijing.
“China’s Ministry of Aerospace founded ZTE as a front to send officers abroad under non-diplomatic covers such as scientists, businessmen and executives for the purpose of collecting intelligence,” the documents filed in the 191st District Court of Dallas reveal.
The claims go much further than a 2012 report on ZTE by the US House Intelligence Committee and have not been refuted as part of the court proceedings by the company. The allegations feed into long-held security concerns around ZTE, which is partly state-owned, and is banned from selling products to US government departments or the military.
In an email to Fairfax Media, ZTE denied the spying and corruption allegations and said as a global company, it “maintains a high standard of ethics and integrity in its business activities throughout the world”.
“ZTE has established, maintained and continually improved its anti-bribery management system as per applicable laws and regulations and in line with best practice in the industry,” a spokesman said.
ZTE has been at the centre of the Trump Administration’s efforts to push back against China’s growing trade dominance. In late April Washington banned US firms from doing business with ZTE for seven years, after it breached sanctions with Iran and North Korea, effectively crippling the company.
Trump has made ZTE a feature of his aggressive trade negotiations with China.
Photo: BloombergWhile Mr Trump has indicated he is open to lifting the ban in return for other trade concessions from Beijing, congressional leaders from both sides of the aisleare strongly opposed to any watering down of the measures.
Australia’s Home Affairs Department has also indicated it is considering imposing sanctions on ZTE, after the US ban and separate measures in Britain which effectively prevent UK companies from using ZTE equipment.
The new court documents, outlining the widespread corruption and alleged spying are likely to complicate any future decision on the fate of ZTE, which has shut its main manufacturing operations in southern China.
The court documents contain sworn testimony from two senior Liberian telecommunications executives claiming widespread corruption of government officials in their country by ZTE between 2005 and 2007.
This includes the paying of bribes to “President [Gyude] Bryant and many other Government officials … including judges”, according to the documents.
Former President Bryant died in 2014.
The new allegations add further weight to a May 14 report by Fairfax Media which documented institutionalised corruption within ZTE and detailed how the company had paid $US12.8 million in bribes to secure a contract in the West African country of Benin.
The primary court battle in Texas concerns allegations ZTE breached the terms of its non-disclosure agreement with US firm, Universal Telephone Exchange (UTE) Inc, and is therefore liable for damages.
The filings also provide the first sworn testimony of ZTE staff paying bribes to win contracts.
In statements under oath two senior executives of Liberia Telecommunications Corporation (LTC) said they were each offered 5 per cent of the contract’s value if ZTE was successful in removing UTE as the winning bidder.
One of the men, Alfred D. Bargor, a deputy managing director of LTC, said he received one payment of “$30,000 in cash in a ‘brown paper bag’ … at a hotel in Liberia,” according to the court documents.
The other man Amara M. Kromah, managing director of LTC, also testified of being offered the 5 per cent commission and said “he received at least two bribe payments in cash, also in “brown paper bags.”
“[Mr] Kromah additionally received from respondents an all-expenses paid trip to China, including an unlimited shopping spree and cash,” according to the court documents.
This is in addition to bribes paid to the late Liberian President and others in his administration.
The lawyer running the US case, Richard Faulkner, said the evidence showed ZTE engaged in a pattern of global corruption and bribery.
“They used bribery to disadvantage European, US and Australian businesses, they don’t fight fair they just buy contracts,” said the former judge via phone from the US.
The US court documents and investigation by Fairfax Media follow a damning report, released in 2015, by the Council on Ethics for the Norwegian Government Pension Fund Global.
The report by the Council, tendered as evidence during the Texas hearings, recommended the $US1 trillion sovereign wealth fund not invest in ZTE.
“The Council on Ethics considers that there is an unacceptable risk that ZTE has been involved in gross corruption and that the company may again become involved in similar practices in future,” the report said.
This recommendation was based on its research which linked ZTE to corruption in 18 countries over a 17 year period.
“Formal investigations into corruption in ZTE have been launched in 10 different countries,” the report said.
The council said it had commissioned three of its own studies into corruption at ZTE. It pointed to serious corruption allegations being made against ZTE in the Philippines, Myanmar, Nigeria and Liberia, while there were corruption findings against the company in Zambia and Kenya.
It did not mention the corruption in Benin, which only came to light after the Fairfax Media investigation.
“The size of the amounts suggests that ZTE’s management knew, or should have known, about the payments. In all of the cases which remain under investigation, the suspected bribes amount to several million US dollars and in some cases many tens of millions of US dollars.”
Nick McKenzie is a leading investigative journalist. He’s won Australia’s top journalism award, the Walkley, seven times and covers politics, business, foreign affairs and defence, human rights issues, the criminal justice system and social affairs. email@example.com or +61 401877402
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The Sydney Morning Herald · by · May 31, 2018