ZTE spends big in fight against ban

Chinese telecom firm ZTE is spending big on K Street as it looks to save its business and remove restrictions on its ability to buy from U.S. suppliers.

The company is leaning heavily on three firms and representation that includes ex-lawmakers, former federal regulators and individuals with ties to President Trump. 

A report late Tuesday suggested the investment might be paying off. 

{mosads}Reuters reported ZTE, which largely suspended operations last month, had reached a preliminary deal with the Commerce Department that would allow it to get back in business in exchange for paying a $1 billion fine. 

A Commerce Department spokesman on Tuesday told Reuters that there is “no definitive agreement” between regulators and the company. According to the report, the deal in principle would also require ZTE to set aside $400 million for any future violations.

If the deal comes through, it would be a stunning reversal of fortune for the company.

In April, the Trump administration banned American companies from trading with ZTE over allegations the Chinese firm broke sanctions on Iran and North Korea. ZTE said the penalty would force it to stop all business operations.

In May, President Trump jumped in, directing the Commerce Department to resolve the matter.

The fight to save the company reached the highest levels, with Trump saying he was working with Chinese President Xi Jinping to get the company “back into business.”

But the company faced strong headwinds from lawmakers in both parties who questioned Trump’s outreach and raised national security concerns about ZTE.

ZTE was quick to enlist K Street in the fight.

In mid-April, the company hired Hogan Lovells, just as the Commerce Department imposed the restrictions.

At the firm, former Sen. Norm Coleman (R-Minn.) and former Republican leadership aide Aaron Cutler are working on “addressing national security concerns” tied to the Commerce ban.

Hogan Lovells farmed out some work to Mercury, a public affairs and lobbying firm, late last month, according to documents sent to the Justice Department.

It’s unclear how much Hogan Lovells is earning for its lobbying work, but the sub-contract with Mercury is worth $75,000 a month for three months.

The contract also has a Trump connection. Mercury confirmed that former Trump transition spokesman Bryan Lanza is on the account.

ZTE, though, is not listed as a client on his lobbying disclosures, and the contract does not specify the work Mercury is undertaking for the company.

Both Hogan Lovells and Mercury declined to comment to The Hill.

Since 2016, former GOP Rep. Jon Christensen (Neb.) has also been representing ZTE through his firm, Appo-G.

Christensen did not respond to an inquiry from The Hill about his work.

ZTE also has the help of Angela Simpson, the in-house lobbyist for the company’s U.S. subsidiary. Simpson previously worked as the deputy assistant secretary of the National Telecommunications and Information Administration within the Commerce Department. She left Commerce to work for ZTE last year.

Simpson did not respond to a request for comment about the company’s advocacy following the U.S. ban. Her disclosure forms say only that she is working on “U.S.-China relations.”

But on those forms, she has also listed lobbying against legislation that would have banned the federal government from buying any equipment that contained components made by ZTE or Huawei, another Chinese technology company that’s raised U.S. national security concerns. That bill has been stalled in the House Oversight and Government Reform Committee.

With the exception of Mercury, all of the firms — and the corporation’s in-house lobbyist — are registered through the Senate under the Lobbying Disclosure Act (LDA). Mercury, however, opted to file with the Justice Department under the Foreign Agents Registration Act (FARA), which has much stricter disclosure requirements.

Even though ZTE is a private company, lobbyists for foreign corporations or their subsidiaries can choose to abide by FARA’s tougher rules.

ZTE’s all-time high in lobbying spemding was in 2014, when it spent $1 million. Last year, it shelled out more than $500,000 for advocacy efforts.

During the first three months of 2018, it only spent $90,000 on lobbying.

But those numbers are likely to jump in the second quarter of the year with the company fighting for its life. The current Mercury contract alone is valued at $225,000.

Despite the Reuters report about a tentative deal, though, the company may still not in the clear.

There is a vocal chorus of critics on Capitol Hill, including both Republicans and Democrats, for ZTE to eventually deal with.

Trump shocked Washington when he first called for saving ZTE and said he was talking to China about a deal.

“President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost,” Trump tweeted in May. Trump later suggested changes, including ZTE shaking up its leadership so that the U.S. could “let it reopen.”

“It was flabbergasting, quite honestly,” said Adam Segal, the director of the Digital and Cyberspace Policy Program at the Council on Foreign Relations. “It goes against the warnings from the national security community and the intelligence community.

“If you’re worried about Chinese industrial policy and how it’s unfair to U.S. trade competitiveness, it doesn’t make sense to throw a lifeline to ZTE,” he added.

Senate Minority Leader Charles Schumer (D-N.Y.) and Sen. Marco Rubio (R-Fla.), among others, quickly pushed back.

Rubio said a deal could allow ZTE to overtake U.S. companies, and some lawmakers raised the prospect of legislation to counter Trump.

Rob Atkinson, who leads the Information Technology and Innovation Foundation, said it was likely a deal would emerge to roll back the U.S. penalties.

But he said the deal could expect some opposition from Capitol Hill.

“Congress is mad at the Trump administration for an enormous number of things. This is just one more of them,” he said.

But he added: “I don’t see the Trump administration caving on this.”

Until any deal is finalized, ZTE is also a high-stakes bargaining chip for both the U.S. and China as the countries embark on complicated trade talks.

Segal was less certain of a deal, noting the many complications ahead.

He said it was possible even the tentative deal could fall apart.

“With how things have gone with this [administration] so far? Sure.”