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ZTE to testify in U.S. probe of alleged China telecom threat

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US House Intelligence Committee is investigating ZTE, Huawei; Panel could hold hearing as early as second week of September; Panel exploring companies' relationships with Chinese authorities

August 30, 2012 11:00 by



China’s ZTE Corp said it would take part in a projected U.S. congressional hearing next month linked to an investigation of alleged Chinese espionage threats to U.S. telecommunications infrastructure.

The House of Representatives Permanent Select Committee on Intelligence has invited the chairman of ZTE, Hou Weigui, and deputy chairman of Huawei Technologies Co, Ken Hu, to testify at a hearing that would explore their companies’ relationships with the Chinese authorities, among other things.

“ZTE intends to participate in the upcoming congressional hearing,” Mitchell Peterson, a vice president of ZTE’s U.S. arm, said in a statement to Reuters on Wednesday.

Shenzhen-headquartered ZTE is in the world’s fifth-biggest telecommunications equipment maker. Huawei, also based in Shenzhen, is the second-biggest, after Sweden’s Ericsson . Huawei had no immediate comment on whether any of its executives would testify.

The House panel, in companion letters dated June 12, asked the companies to provide details of their interaction over the past five years with the Chinese authorities, including the Communist Party, ministry of defense and ministry of state security.

Committee Chairman Mike Rogers, a Republican, and C.A. Dutch Ruppersberger, the panel’s top Democrat, said in the letters that the panel was investigating “the threat posed to our critical infrastructure and counter-intelligence posture by companies with potential ties to the Chinese government.”

The hearing could come as early as the second week of September if the committee decides to go ahead with it. Negotiations appear to be continuing over the level of executives who would testify.

Neither ZTE’s Hou nor Cheng Lixin, chief executive of its U.S. unit, is likely to attend, said a company source who declined to be identified because he was not authorized to speak on the record.

Instead the company more likely would send a fairly senior executive responsible for overseas markets, this person said.

COMMITTEE MUM

Susan Phalen, the committee’s spokeswoman, declined to comment on plans for such a hearing until the committee was ready to make any announcement.

ZTE describes itself as supplying telecommunications equipment to 500 network operators in 140 countries. It said it had submitted a series of detailed factual responses as part of its voluntary cooperation with the committee.

“ZTE is the most independent, transparent, globally focused publicly traded company in China’s telecom sector,” the statement said. “In most respects, ZTE is similar to multi-national tech companies that have emerged in Silicon Valley.”

The company in its planned testimony will demonstrate its “unique ability” to help provide solutions to cyber security issues facing the U.S. Congress and the executive branch, Peterson said in the statement.

Huawei said in a statement to Reuters earlier this month that it has appreciated the opportunity to engage in “good faith, fact-based and responsive interaction” with the intelligence committee over the previous eight months.

The panel began its investigation last November and stepped it up in June. Its report is now expected by early October.

“We are committed to continuing to be responsibly open and transparent and look forward to further dialogue,” William Plummer, a Huawei spokesman in Washington, said in an Aug. 2 reply.

Former U.S. Commerce Secretary John Bryson dealt Huawei a blow in March 20 testimony to the House Appropriations Commerce-Justice-Science subcommittee.

“It appears that Huawei has capabilities that we may not fully detect to divert information,” Bryson said. “It’s a challenge to our country.”

It was unclear whether alleged ZTE violations of sanctions against Iran would come up in the projected House intelligence committee hearing.

The FBI has opened a criminal investigation into ZTE over its sale of banned U.S. computer equipment to Iran and its alleged subsequent attempts to conceal this and obstruct a Department of Commerceprobe, according to documents posted on the Smoking Gun website last month.

The federal investigations stem from a Reuters report in March that ZTE had sold Iran’s largest telecom firm a powerful surveillance system capable of monitoring landline, mobile and Internet communications, according to interviews and contract documents.

ZTE’s largest shareholder is a Chinese state-owned enterprise, Zhongzingzin, with about 30 percent of the shares, according to the House Intelligence Committee letter to ZTE.



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