Shenzen, China-based telco ZTE Corp. (Shenzhen: 000063.SZ) may face an additional investigation from the U.S. Treasury Department, as several lawmakers sent a letter Friday urging Secretary Timothy Geitner to investigate the carrier's alleged sale of equipment and an surveillance system to Iran.
The letter adds to the pile of troubles sitting at ZTE's front door in the past few weeks: the telecom giant is already facing an investigation by the U.S. Commerce Department over the sale of U.S. computer equipment and "sophisticated monitoring" equipment to Telecommunication Company of Iran (TCI), Reuters reported.
ZTE, along with Huawei, is also being investigated by European Union officials over possible illegal subsidies from the Chinese government.
The Commerce investigation was sparked by Reuters articles published in March and April reporting on ZTE's alleged dealings with Iran.
Although a publicly traded company, ZTE's majority shareholder is a state-owned Chinese enterprise, Zhongxingxin Telecom Equipment Ltd.--a dynamic that has sparked concern among some U.S. lawmakers.
Already, the Republican-led House Intelligence Committee is looking into whether the Chinese carrier's equipment poses a theat to U.S. security. And, for its part, the FBI is probing whether the general counsel at ZTE's U.S. subsidiary attempted a cover-up after Reuters' first story was published.
However, it's a Treasury Department investigation could have "serious ramifications" for ZTE, nationally noted attorney Ted Frank of the Center for Legal Policy at the Manhattan Institute told FierceTelecom.
"Treasury has independent power to bar sanctions evaders from access to U.S. financial institutions and commerce," Frank said, citing Executive Order 13608, which President Obama signed May 1, prohibiting certain transactions with Iran and Syria by foreign persons intending to evade U.S. economic and financial sanctions.
Amid the diplomatic issues, rumors are swirling that the Chinese telco will lay off as many as 10,000 workers--a report ZTE denies. Its shares went sliding as much as 8 percent in early July over fears of an emerging trade war between China and the European Union.
- Reuters has this article
ZTE to grow U.S. investment 10% annually despite investigation
Researchers expose severe security flaws in Verizon hotspot from ZTE
Troubled ZTE denies it's going to cut jobs
China's Ministry of Commerce comments on ZTE probe
Feds boost probe into Chinese telecom ZTE