ZTE agreed earlier this year to pay a nearly $900 million penalty and open its books to a U.S. monitor as part of a guilty plea for illegally shipping goods to Iran and North Korea.
Guidepost Solutions and Larkin Trade International were hired in June by Texas lawyer James Stanton to help assess the company’s compliance with US export control and sanctions laws, and reduce its risk of future misconduct.
In late August, the two firms parted ways with the monitor after clashing over his approach to the job.
Reuters could not work out the exact reasons for the departure, but it seems Stanton initially restricted the consultants’ access to ZTE documents and officials, hindering their ability to help monitor the company, one of the people said.
It thinks some of the problems with efforts to monitor ZTE, unreported to date, are rooted in how a US judge set up the policing programme in March.
US District Judge Ed Kinkeade presided over the ZTE sanctions case because the Justice Department filed the plea agreement between the United States and ZTE in his court in Texas, where the company’s headquarters are located.
Kinkeade took the unusual step of having the agreement rewritten to put Stanton, a civil and personal injury lawyer, in charge of monitoring ZTE’s compliance with US export controls.
Stanton had little experience in US trade controls. The order naming him was sealed, leaving additional logic for the judge’s decision unclear.
ZTE and the Justice Department felt compelled to agree to Kinkeade’s choice and the changes to the monitorship agreement. This was because the plea had already been negotiated and filed in the judge’s court and a temporary license allowing ZTE to obtain the U.S. made goods - crucial for the company’s output - was about to expire.
Stanton has to issue three reports, the first of which is due in January, on ZTE’s compliance with US trade rules. The reports will help determine whether the company is liable for an additional fine of $300 million or, worse, should lose its access to the US market.
