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Chabot Statement on ZTE’s $1 Billion Settlement

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Washington, March 7, 2017 | comments

Small Business Cybersecurity Hearing Set for TOMORROW

 

WASHINGTON – House Small Business Committee Chairman Steve Chabot (R-Ohio) made the following statement on the announcement that a Chinese cellphone equipment company will plead guilty to charges that it violated sanctions restricting technology sales to Iran. The announcement from the Departments of Commerce and Justice that the company, ZTE, will pay a $1 billion settlement to the U.S. government comes the day before the Small Business Committee is scheduled to hold a major hearing on improving the coordination of federal resources to protect small businesses from cyber threats.

“For years, our Committee has spotlighted the threat to American economic security and national security posed by the illegal trade practices of foreign companies like ZTE,” said Chairman Chabot. “Small businesses, including small contractors in the defense and telecommunications supply chain, are especially vulnerable to these types of threats. This episode reminds us why we must remain vigilant in guarding against bad foreign actors who sell malicious hardware and software to our small businesses. This settlement is a good first step because one of the worst offenders has finally been held to account, but more work remains to ensure this does not happen again. As tomorrow’s hearing will demonstrate, we must do all we can to protect small business owners, contractors, employees and customers from cyber threats, whether they are foreign or domestic in origin.”

Chairman Chabot, who also serves as a Senior Member of the House Judiciary and Foreign Affairs Committees, led several members of Congress in sending letters to then-Secretary of State John Kerry and then-Secretary of Commerce Penny Pritzker last year when reports first surfaced that ZTE may have been used to subvert U.S. sanctions against rogue regimes like Iran.

In one of those letters, Chabot and the lawmakers wrote:“We would further note that ZTE specifically built its sanctions-evading strategy on a company it called “F7” in an internal memo. It is clear that “F7” is in fact the Chinese government-influenced telecom company Huawei. Huawei may be the next large company to avoid consequences for its actions unless steps are taken now to prevent it from developing a critical mass of links to American companies and markets.”

Tomorrow’s hearing will be livestreamed on the Committee’s website homepage and full written testimony can be read on the hearing page.

BACKGROUND:

  • The House Small Business Committee held several major hearings throughout the 114th Congress on foreign cyber threats to U.S. small businesses where expert witnesses identified foreign telecommunications companies as a major area of concern.

 

  • The Government Accountability Office (GAO) noted in a 2012reportthat the FBI has determined that foreign state actors pose a serious cyber threat to the telecommunications supply chain.

 

  • The Office of the National Counter Intelligence Executive released areportin 2011 stating that tens of billions of dollars in trade secrets, intellectual property, and technology are being stolen each year from computer systems in the federal government, corporations, and academic institutions. They identified China and Russia as the two largest participants in cyber espionage.

 

  • According to areportfrom Verizon, 71 percent of cyberattacks occurred in businesses with fewer than 100 employees in 2012.

 

  • Cybersecurity is a key focus of the House GOP’s A Better Way to Keep Us Safe and Free. On page 23, it states: “The United States needs a more comprehensive approach to sharing information on cyber threats. Today, since most networks are interconnected, weaknesses in security can create significant vulnerabilities in both civilian and government infrastructure. Likewise, information that is valuable to one network defender is helpful to all network defenders—and must be shared. Although some private-sector actors may be reluctant to share cyber threat information, government and industry have a common goal: to prevent cyber criminals and cyber terrorists from disrupting commerce, disabling critical infrastructure, and weakening national defense.”

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