China’s ZTE removed chief compliance officer before US sanction, says source

Visitors are seen at a booth of Chinese telecom equipment maker ZTE Corp at an expo in Beijing, China September 27, 2017. — Reuters picHONG KONG, April 19 — ZTE Corp's chief compliance and chief legal officer was removed from his posts more than a month before the Chinese telecom equipment maker was slapped with US sanctions this week, a company source with direct knowledge of the situation told Reuters.

The United States this week imposed a ban on American companies selling parts and software to ZTE for seven years, saying it had broken a settlement agreement with repeated false statements — a move that threatens to cut off the Chinese firm's supply chain.

Citing an internal memo dated March 8, the source said ZTE's chief compliance and chief legal officer, Cheng Gang, was “removed from his posts” although that the memo did not give a reason for the action.

“We had sensed something was wrong with Cheng's unexplained removal, but did not expect something so serious,” said the source, referring to the news of the US sanctions. The source added that employees now feared for their jobs.

It was not clear if Cheng was still with the company, according to the source, who declined to be identified as the information in the memo was confidential.

Cheng did not respond to an email and a LinkedIn message seeking comment. Reuters was unable to obtain a phone number for Cheng. ZTE did not respond to calls and emails seeking comment.

News of the memo was first reported by the South China Morning Post.

China's No. 2 telecoms equipment maker admitted in March 2017 to illegally shipping US technologies to banned countries including Iran and paid a record $890 million fine to settle the case.

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