US judge rules in favour of China’s ZTE, ending probation

Ruling comes on the final day of the company’s probation for illegally shipping US technology to Iran and North Korea.

A United States judge on Tuesday ruled that China’s ZTE Corp, a leading manufacturer of telecommunications equipment, should be allowed to end its five-year probation from a 2017 guilty plea of illegally shipping US 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 US District Judge Ed Kinkeade in Texas.

The ruling came on the final day of the company’s probation, which ZTE had been accused of violating through 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 US 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, the judge held a hearing in Dallas last week on the fraud allegation as a possible violation of ZTE’s probation.

In his Tuesday ruling, Kinkeade found ZTE was legally responsible for the actions of the former ZTE director, but decided to not take any further action against ZTE.

ZTE had already reached the maximum term of probation and, the company argued, had already been fined the maximum as well. As part of its 2017 guilty plea, ZTE paid $892m to the US government.

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

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