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Will Chinese giants defy US sanctions on Russia? We asked a ZTE whistleblower

If ZTE and other Chinese giants defy bans on selling American technology to Russia, it will be because they can’t help but chase the revenue, says Ashley Yablon, the whistleblower whose evidence led to ZTE being fined for willfully ignoring the US ban on exports to Iran.

Yablon is a lawyer who, after working in senior roles at Huawei USA, in late 2011 became general counsel at Chinese telco kit-maker ZTE’s US operations. Within months of starting the job, he encountered documentation detailing how ZTE sold its own and US-sourced technology to Iran in contravention of export bans.

ZTE asked him to defend the indefensible, and Yablon chose instead to blow the whistle. In May 2012 he told FBI agents of his experiences and let the bureau access his work laptop. The subsequent investigation led to ZTE being fined $900 million with another $300 million suspended – at the time the US government’s highest-ever penalty.

Chinese companies see their patent portfolios as a force field against IP theft claims

In conversation with The Register, Yablon said he fears ZTE and others may again choose to ignore US law, including sanctions that prohibit the selling of certain technology to Russia. There is no suggestion at this time of any wrongdoing by ZTE in this respect.

“I don’t think they can help themselves,” Yablon said. “The profit motive is too great.”

He pointed out that it’s not just Chinese execs who have previously resisted sales to forbidden clients, citing Swedish firm Ericsson and its admission it paid off ISIS terrorists to secure sales.

Yablon has penned a book about his experiences at ZTE. It details several instances when ZTE execs and lawyers stated that they saw laws as suggestions, not ironclad rules. He fears that mindset has not changed, and may be used to justify sales to Russia.

In addition, he feels that Chinese firms use their voluminous patent portfolios – a sign they’ve followed the rules – as “some kind of force field” against the many assertions that Chinese companies misappropriate and misuse other companies’ intellectual property.

He also feels America’s decision this month to end the probation imposed on ZTE for its Iran sales and other actions may embolden the company to commit further transgressions. Yablon thinks that decision – which came from the judiciary, not Washington – could therefore be a mistake.

Yablon’s book also alleges that ZTE kit has backdoors. But in conversation with The Register he added his belief that all networking kit, from all vendors – Chinese or otherwise – allows covert access, whether intended or not.

He expresses skepticism that the USA’s Secure And Trusted Communications Reimbursement Program – an effort that will see at least $1.9 billion spent replacing ZTE and Huawei kit used on US networks to reduce the risk of backdoors – will deliver cost-effective security improvements.

“Just how much do we spend and what level of security do we get compared to now?” he asked.

Yablon stayed in his role at ZTE after blowing the whistle and his book details a campaign of harassment against him and his family. He expects that someone blowing the whistle today would have a better experience, because more businesses have compliance teams and procedures for handling reporting of wrongdoing. He recommended that if Reg readers ever find themselves in such a position, internal reporting is the place to start – but if that route is not fruitful or sparks hostility, you’ll need to hire lawyers. Yablon’s legal bills quickly climbed into multiple six figure sums and became a major source of stress.

While Yablon declared he will never take a job with a Chinese company again, he advised folks not to avoid working for or with Chinese companies – because China’s increasing prominence in world and technological affairs would make such a policy foolish. But he advised entering such engagements with a good understanding of China’s business culture and what that might mean for your expectations of how to accomplish your goals. In his book he also all-but admits that he felt his CV was a little light to be hired as ZTE’s general counsel, and wondered if ZTE expected he would therefore feel he owed the company his loyalty.

The Register on Thursday evening sought comment from ZTE regarding its stance on selling equipment and software to Russia. We also asked Huawei, as an organization that has previously fallen under US sanctions, for comment. We have not heard back from either manufacturer at the time of publishing.

Yablon’s book, Standing Up To China, is an entertaining, terse, and very suspenseful account. It offers Yablon’s perspective that ZTE had little regard for US law, the pervasive surveillance of Iran’s citizens its efforts enabled, nor his well-being.

Your correspondent has read the book and suggests you could do a lot worse than pick up a copy after its April 5 debut. It will certainly enliven any time off you take at Easter – if only for its descriptions of how the FBI operates and was entirely untroubled by the need to bypass the security of Yablon’s ZTE-provided PC and other devices. And the bits about the corporate lawyers ZTE hired – and the conflicts of interest that created – are real eyebrow-raisers. ®