Case 5:16-cv-00179-RWS Document 287-19 Filed 08/07/18 Page 1 of 3 PageID #: 16850
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`Exhibit 16
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`China’s ZTE to Pay $1 Billion Fine in Settlement With U.S. - WSJ
`8/2/2018
`Case 5:16-cv-00179-RWS Document 287-19 Filed 08/07/18 Page 2 of 3 PageID #: 16851
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`https://www.wsj.com/articles/zte-pays-1-billion-fine-after-allegedly-violating-u-s-sanctions-1528374558
`
`BUSINESSChina’s ZTE to Pay $1 Billion Fine in
`Settlement With U.S.
`
`Under deal, U.S. enforcement oficers will be placed in the telecom company to monitor its actions
`
`ZTE has been eectively closed for business since a mid-April Commerce Department order restricting its trade
`with the U.S. PHOTO: GILLES SABRIEBLOOMBERG NEWS
`
`By Bob Davis, Dan Strumpf and Lingling Wei
`Updated June 7, 2018 1154 a.m. ET
`
`WASHINGTON—The U.S. and China reached a deal that will allow ZTE Corp. to get back
`to business, ending a nearly two-month shutdown of the Chinese telecommunication
`giant’s operations despite a backlash in Washington.
`
`The agreement requires ZTE to pay a $1 billion fine and allow U.S. enforcement officers
`inside the Chinese company to monitor its actions, Commerce Secretary Wilbur Ross
`said Thursday. In return, ZTE can resume buying components from U.S. suppliers that
`it needs to make smartphones and build telecoms networks.
`
`Speaking on CNBC, Mr. Ross said ZTE must change its management and its board, and
`put $400 million in escrow, which it will forfeit if it violates the agreement. In mid-
`April, the U.S. banned exports to ZTE as punishment for the Chinese company breaking
`the terms of a settlement to resolve its sanctions-busting sales to North Korea and Iran.
`“We still retain the power to shut them down again,” Mr. Ross said.
`
`A ZTE spokeswoman didn’t respond to a request for comment.
`
`Although Mr. Ross said that the ZTE deal was simply an enforcement action, it has a
`broader impact. The company’s fate has become wrapped up in negotiations over trade
`differences between the world’s two largest economies. It is far from clear that the
`agreement will forestall the U.S. from implementing tariffs on $50 billion of Chinese
`goods after June 15, as threatened.
`
`As ZTE’s fate hung in the balance, Chinese regulators had until recently held off
`approving the proposed acquisition by U.S. chip maker Qualcomm Inc. of Dutch
`company NXP Semiconductors . China will sign off on the deal soon, a person with
`knowledge of the situation said. In the past few days, Chinese regulators have been
`working with Qualcomm’s legal team on the “technical details” required for the
`approval, the person said.
`
`The ZTE deal is likely to inflame tensions in Congress, where a bipartisan group of
`lawmakers has strongly opposed any deal, with some questioning why the Trump
`administration is throwing a lifeline to a Chinese firm that violated U.S. sanctions.
`Others have criticized the administration for effectively turning ZTE into a bargaining
`chip in broader U.S.-China trade negotiations.
`
`Shortly after the deal was announced, Sen. Ron Wyden of Oregon, the top Democrat on
`the Senate Finance Committee, called the deal a “loser.”
`
`https://www.wsj.com/articles/zte-pays-1-billion-fine-after-allegedly-violating-u-s-sanctions-1528374558
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`China’s ZTE to Pay $1 Billion Fine in Settlement With U.S. - WSJ
`8/2/2018
`Case 5:16-cv-00179-RWS Document 287-19 Filed 08/07/18 Page 3 of 3 PageID #: 16852
`“The Trump administration is giving ZTE and China the green light to spy on
`Americans and sell our technology to North Korea and Iran, as long as it pays a fine that
`amounts to a tiny fraction of its revenue,” Mr. Wyden said.
`
`Despite the backlash, President Donald Trump intervened personally to save the
`Chinese firm, saying in a surprise tweet nearly four weeks ago that ZTE should
`stay in business. Later, Mr. Trump laid out in more precise terms what he expected in a
`deal, including a hefty fine and leadership changes.
`
`One surprise in the long-mooted deal is the requirement that a U.S. compliance team be
`embedded in ZTE. Mr. Ross said it would be staffed by Chinese-speaking U.S. agents
`and report to ZTE’s new management as well as the Commerce Department. The
`compliance team will stay with ZTE for 10 years. An outside compliance team is already
`in place at ZTE under the terms of its settlement last year.
`
`The deal revealed by Mr. Ross calls for a clean sweep of ZTE’s board of directors and
`senior leadership. While it is not clear how many executives ZTE will have to replace,
`the deal implies an ouster of ZTE’s chairman, Yin Yimin, who took on the role last year,
`as well as the rest of the company’s 14-member board.
`
`Thursday’s deal effectively brings ZTE back from the dead. The Chinese company has
`been closed for business since the Commerce Department order restricting its trade
`with the U.S.
`
`ZTE relies on an array of critical American components to build its smartphones and
`cellular equipment, including chips from Qualcomm and optical components from
`smaller firms such as Maynard, Mass.-based Acacia Communications Inc.
`
`The paralysis of ZTE’s operations has left customers around the world, including
`telecom operators in Europe, without access to network construction
`maintenance, and left smartphone customers without access to key services.
`
`Even with the sales ban lifted, ZTE is unlikely to go back to business-as-usual quickly.
`In recent weeks, the company has been facing a wave of demands for compensation
`from telecommunications customers around the world due to unfinished work. A
`number of operators have stopped carrying ZTE phones.
`
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`As ZTE Falters, Customers Fidget
`
`In addition, many smartphone
`customers of ZTE have been
`without access to key software
`updates and other services in
`the time that ZTE has been
`closed, and it faces a challenge
`in winning back their
`confidence. ZTE is the fourth-
`largest vendor of smartphones
`
`in the U.S.
`
`ZTE has been moving quickly to pave the way for a deal that would reverse its ban on
`buying American products. In recent months, the company has clawed back bonuses
`and issued letters of reprimand to 35 of the employees that it originally promised the
`U.S. it would discipline, according to a person familiar with the matter. It has also
`stripped responsibilities and job titles from a handful of senior employees at its
`Shenzhen headquarters, this person said.
`
`Write to Bob Davis at bob.davis@wsj.com, Dan Strumpf at daniel.strumpf@wsj.com
`and Lingling Wei at lingling.wei@wsj.com
`
`Copyright ©2017 Dow Jones & Company, Inc. All Rights Reserved
`
`This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit
`http://www.djreprints.com.
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