US companies stopped from selling to Chinese phone maker ZTE for Iran sanctions violations

Visitors pass in front of the Chinese telecoms equipment group ZTE Corp booth at the Mobile World Congress in Barcelona, Spain, on February 26, 2018. (REUTERS File Photo)
Updated 17 April 2018
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US companies stopped from selling to Chinese phone maker ZTE for Iran sanctions violations

LONDON/NEW YORK: The US Department of Commerce has banned American companies from selling components to Chinese telecom equipment maker ZTE Corp. for seven years after breaking an agreement reached after it was caught illegally shipping goods to Iran, US officials said on Monday.
The US action could be devastating to ZTE since American companies are estimated to provide 25 percent to 30 percent of the components used in ZTE’s equipment, which includes smartphones and gear to build telecommunications networks.
The ban is the result of ZTE’s failure to comply with an agreement with the US government after it pleaded guilty last year in federal court in Texas to conspiring to violate US sanctions by illegally shipping US goods and technology to Iran, the Commerce Department said.
The Chinese company, which sells smartphones in the United States, paid $890 million in fines and penalties, with an additional penalty of $300 million that could be imposed.
“If the company is not able to resolve it, they may very well be put out of business by this. Many banks and companies even outside the US are not going to want to deal with them,” said Eric Hirschhorn, a former US undersecretary of commerce who was heavily involved in the case.
As part of the agreement, Shenzhen-based ZTE Corp. promised to dismiss four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them, senior Commerce Department officials told Reuters. But the Chinese company admitted in March that while it had fired the four senior employees, it had not disciplined or reduced bonuses to the 35 others.
ZTE, whose Hong Kong and Shenzhen shares were suspended on Tuesday, said it was assessing the implications of the US decision and was communicating with “relevant parties.”
The Commerce Department order quoted a ZTE official’s letter admitting it “had not executed in full” some disciplinary measures and that there were “inaccuracies” in a 2017 letter. But, the Commerce order said, ZTE “argued that it would have been irrational for ZTE to knowingly or intentionally mislead the US government in light of the seriousness of the suspended sanctions.”
Under terms of the ban, US companies cannot export prohibited goods, such as chip sets, directly to ZTE or via another country, beginning immediately.
Shares of big US ZTE suppliers fell sharply on the Commerce ban. Optical networking equipment maker Acacia Communications Inc, which got 30 percent of its total 2017 revenue from ZTE, tumbled 35 percent, hitting a near two-year low. Acacia said it was suspending affected transactions and assessing the impact.
Shares of optical component companies including Lumentum Holdings Inc. fell 8.9 percent and Finisar Corp. dropped 4.0 percent. Oclaro Inc, which got 18 percent of its fiscal 2017 revenue from ZTE, lost 14.1 percent.
ZTE “provided information back to us basically admitting that they had made these false statements,” said a senior department official. “That was in response to the US asking for the information.”
The ban on supplying ZTE comes two months after two Republican senators introduced legislation to block the US government from buying or leasing telecommunications equipment from ZTE or its Chinese rival Huawei Technologies Co. Ltd. , citing concern the companies would use their access to spy on US officials.
“China does not play by our rules, and we must be vigilant against Chinese threats to both our economic security and national security,” said Republican Representative Robert Pittenger after the Commerce announcement. Pittenger is sponsoring legislation that would strengthen the US national security review process for foreign investments.
Meanwhile, Britain’s main cybersecurity agency said on Monday it has written to organizations in the UK’s telecommunications sector warning about using services or equipment from ZTE.

'Devastating'
Douglas Jacobson, an exports control lawyer who represents suppliers to ZTE, called the ban highly unusual and said it would severely affect the company. “This will be devastating to the company, given their reliance on US products and software,” said Jacobson. “It’s certainly going to make it very difficult for them to produce and will have a potentially significant short- and long-term negative impact on the company.”
ZTE has sold handset devices to US mobile carriers AT&T Inc, T-Mobile US Inc. and Sprint Corp. It has relied on US companies including Qualcomm Inc, Microsoft Corp. and Intel Corp. for some components.
Shares of Taiwan’s MediaTek Inc, which sells smartphone chips and competes with Qualcomm, were not trading when the announcement was made.
The US action against ZTE is likely to further exacerbate current tensions between Washington and Beijing over trade. After the US placed export restrictions on ZTE in 2016 for Iran sanctions violations, China’s Ministry of Commerce and Foreign Ministry criticized the decision.
A five-year federal investigation found last year that ZTE had conspired to evade US embargoes by buying US components, incorporating them into ZTE equipment and illegally shipping them to Iran.
ZTE, which devised elaborate schemes to hide the illegal activity, agreed to plead guilty after the Commerce Department took actions that threatened to cut off its global supply chain. The US government had allowed the company continued access to the US market under the 2017 agreement.
The new restrictions stem from a Jan. 16 report by a US monitor appointed by a federal judge in Texas who accepted the guilty plea in March 2017. Although Commerce Department officials would not discuss the report, they said the department followed up in February.
The US government’s investigation into sanctions violations by ZTE followed reports by Reuters in 2012 https://reut.rs/2H3p0Vl that the company had signed contracts to ship millions of dollars’ worth of hardware and software from some of the best known US technology companies to Iran’s largest telecoms carrier.


Saudi Arabia has lion’s share of regional philanthropy

Updated 27 April 2018
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Saudi Arabia has lion’s share of regional philanthropy

  • Kingdom is home to three quarters of region's foundations
  • Combined asets of global foundations is $1.5 trillion

Nearly three quarters of philanthropic foundations in the Middle East are concentrated in Saudi Arabia, according to a new report.

The study, conducted by researchers at Harvard Kennedy School’s Hauser Institute with funding from Swiss bank UBS, also found that resources were highly concentrated in certain areas with education the most popular area for investment globally.

That trend was best illustrated in the Kingdom, where education ranked first among the target areas of local foundations.

While the combined assets of the world’s foundations are estimated at close to $1.5 trillion, half have no paid staff and small budgets of under $1 million. In fact, 90 percent of identified foundations have assets of less than $10 million, according to the Global Philanthropy Report. 

Developed over three years with inputs from twenty research teams across nineteen countries and Hong Kong, the report highlights the magnitude of global philanthropic investment.

A rapidly growing number of philanthropists are establishing foundations and institutions to focus, practice, and amplify these investments, said the report.
In recent years, philanthropy has witnessed a major shift. Wealthy individuals, families, and corporations are looking to give more, to give more strategically, and to increase the impact of their social investments.

Organizations such as the Bill and Melinda Gates Foundation have become increasingly high profile — but at the same time, some governments, including India and China, have sought to limit the spread of cross-border philanthropy in certain sectors.

As the world is falling well short of raising the $ 5-7 trillion of annual investment needed to achieve the UN’s Sustainable Development Goals, UBS sees the report findings as a call for philanthropists to work together to scale their impact.
 

Understanding this need for collaboration, UBS has established a global community where philanthropists can work together to drive sustainable impact.

Established in 2015 and with over 400 members, the Global Philanthropists Community hosted by UBS is the world’s largest private network exclusively for philanthropists and social investors, facilitating collaboration and sharing of best practices.

Josef Stadler, head of ultra high net worth wealth, UBS Global Management, said: “This report takes a much-needed step toward understanding global philanthropy so that, collectively, we might shape a more strategic and collaborative future, with philanthropists leading the way toward solving the great challenges of our time.”

This week Saudi Arabia said it would provide an additional $100 million of humanitarian aid in Syria, through the King Salman Humanitarian Aid and Relief Center.

The UAE also this week said it had contributed $192 million to a housing project in Afghanistan through the Abu Dhabi Fund for Development.