I will wait a minute while you get off the floor because I know everyone is shocked and amazed that this happens. But in the recent ZTE case, which we will discuss, the client company lied several times to its in-house and outside counsel resulting in false representations to the US government.
To be sure, we often know that “little” omissions occur in the investigation and representation function when counsel interacts with the Justice Department. No defense counsel knows everything and often defense counsel is learning more about a client, and at a faster pace, then the government, at least that is what they should be doing to adequately represent their clients.
The ZTE case represents a brazen set of corporate lies and misconduct, probably the most egregious example of corporate lying to counsel and in turn to the government.
ZTE agreed to plead guilty and pay $430 million for conspiring to violate the Iran sanctions, obstructing justice and making a false statement. Simultaneously, ZTE reached agreements with the Department of Commerce’s Bureau of Industry and Security (BIS) and the Department of Treasury’s Office of Foreign Assets Control (OFAC). The total criminal and civil penalties was approximately $892 million. ZTE suspended an additional $300 million, which ZTE will pay if it violates its settlement agreement with the BIS.
ZTe’s criminal conduct spanned six years, and centered on the export of US-origin, dual-use items listed on the Commerce Departments Control List (CCL) which were incorporated into ZTE equipment and shipped to customers in Iran. ZTE knew the conduct ws illegal and went to great lengths to hide the conduct internally and from the government. Throughout the course of the investigation, ZTE knowingly lied to the government when it insisted, as represented by counsel that the conduct had stopped, when in fact the conduct was continuing. Indeed, ZTE shipped millions of dollars of equipment to Iran knowing that it represented to the contrary to the government.
ZTE’s cover up went beyond lying to the government and involved elaborate schemes to hide data related to the illegal shipments from forensic accounting firms hired to review the transactions, and knowing that the forensic accounting firm would represent to the government the status of possible illegal shipments. Eventually, ZTE informed its counsel of he scheme and permitted counsel to inform the government that it had been lying to the government (and counsel) for years.
As part of the overall concealment, ZTE employees were instructed to “sanitize the databases” of all information, related to the sales to Iran. These same individuals implemented an auto-delete function for all of their emails that resulted in the deletion of all of their emails each night in order to avoid detection by the forensic accounting firm.
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