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ZTE is accused of preparing to shred piles of shipping orders to cover its support of Iranian censorship system

China's ZTE Corp. (SHE:000063) is at the center of troubling allegations and a probe by the U.S. Federal Bureau of Investigation.  The feature phone and smartphone manufacturer also is a player in the cellular networking industry.

It's the networking unit that's the source of the legal troubles for ZTE.

Last month news of a U.S. Department of Commerce inquiry into whether ZTE illegally sold embargoed equipment to Iran surfaced.  The equipment in question was manufactured and/or distributed from the U.S., and hence was subject to the U.S.'s restrictions on sales to Iran, despite ZTE's global headquarters being in China, a close trading partner of Iran.

A Texas-based attorney named Ashley Kyle Yablon was hired by ZTE and was working with them on the response to the Commerce Department, but he has since turned whistleblower, according to a document obtained by The Smoking Gun.  

His testimony has implicated ZTE in trying to cover-up its business with Iran and obstructing the federal inquiry.  That brought the FBI onboard, who is probing this second set of charges against the embattled Chinese phonemaker.

international shipping
China's ZTE is accused of shipping U.S. communications equipment to Iran.
[Image Source: Unknown]

The plan, according to Mr. Yablon was to shred a bundle of purchase orders that clearly indicated that equipment was shipped to Telecommunication Co. of Iran (TCI).  The equipment included resold units from Microsoft Corp. (MSFT), Dell, Inc. (DELL), Hewlett-Packard Comp. (HPQ), Oracle Corp. (ORCL), and other US companies.

TCI is partially owned by the Iranian government.  Disturbingly the system will reportedly be used to monitor citizens and suppress dissent.  Of course that might not be a big deal to a company based in China, a nation infamous for government monitoring and suppression of dissent.  To be fair, the U.S. federal government has been also eagerly looking into such possibilities of late.

Reuters reported that the system would be "far more capable of monitoring citizens" than any system Iran has had to date.

Relations between Iran and the U.S. have been strained by Iran's capture of a U.S. UAV flying in its airspace, and by surface reports that indicated the U.S. was infecting Iranian computers will malware in an effort to sabotage its economy/military [1][2]

Sources: The Smoking Gun, Reuters

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oh so surprised
By knutjb on 7/13/2012 3:21:37 PM , Rating: 5
Is anyone really surprised by this? They wouldn't be doing this without the Chinese government's ok. Just because they buy your bonds doesn't make them your friends.

Relations between Iran and the U.S. have been strained by Iran's capture of a U.S. UAV flying in its airspace, and by surface reports that indicated the U.S. was infecting Iranian computers will malware in an effort to sabotage its economy/military

Uh...they have been strained since Jimmy Carter.

RE: oh so surprised
By TSS on 7/13/2012 6:45:41 PM , Rating: 3
Well the politicians are absolutely shocked, obviously.

As for china, they are probably wondering how big the balls of these people must be who they are lending so much money to to then dictate who they can trade with. Especially since Iran is alot closer to china and russia then to the US.

You wanna support your allies, fine, they do as well. But to go as far as to tell the world what it can and cannot do.... well...

I'd worry much, much more about china's trade agreements in the recent years. They are preparing to ditch the dollar. They've already signed deals with the russians, japanese, indians, brazillians and recently chileans to trade in remnibi and local currencies. India is also still trading with iran in rupees and straight up gold.

They've also spent billions, even trillions of dollars in recent years on infrastructure and whatnot. People have been saying it's wastefull and no good due to corruption, but if you consider the posibility if that was the only time left to spend anything at all, it seems alot more sane. I know China has alot of dollar reserves, but i wonder how much of those aren't already spent, or "allocated" (no sense in buying concrete now if you need to in 3 years, but you can already make the deal for it).

Just saying if a under the table trade between china and iran is suprising now, prepare to shit rainbows in the future.

RE: oh so surprised
By Samus on 7/13/2012 11:48:41 PM , Rating: 1
It's like the Cuban missile crisis all over again...should be be surprised? Countries sucker enemies of the state into stupid shit all the time.

RE: oh so surprised
By NellyFromMA on 7/16/2012 12:53:03 PM , Rating: 2
Yeah, because China has never breached American corporate and government infrastructure and stolen state and corporate secrets over the passed decade.

Very stand up as far as I have heard.... lol

"Nowadays, security guys break the Mac every single day. Every single day, they come out with a total exploit, your machine can be taken over totally. I dare anybody to do that once a month on the Windows machine." -- Bill Gates

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