Remember the Myth of Arthur Andersen—that if you go to trial in a corruption case and lose, the company will be irreparably harmed and even destroyed. It was cited by almost every compliance practitioner, Justice Department lawyer, general counsel, and even chief executive as the reason never to go to trial in a corruption case: A loss could end your company. That myth was debunked in the book The Chickensh*t Club where Jesse Eisenger said it was a PR campaign developed by two consultants for the company. Arthur Andersen was on the verge of collapse for a whole host of business-related reasons, and the guilty verdict for destruction of documents had little or nothing to do with the company going under.
The ZTE sanctions case, however, is a prime example of a company being forced out of business through a regulatory sanction. In April, ZTE announced it was halting operations after the U.S. Department of Commerce assessed an additional penalty above the $1.2 billion fine levied on it in 2016. This additional penalty banned shipments of U.S. technology to ZTE for seven years for ZTE’s failure to follow the deferred prosecution agreement it was under, actively breaking it and then lying about it to regulators. This additional sanction essentially cutoff ZTE from its suppliers, and it could not make cell phones. It also (allegedly) put some 75,000 Chinese employees out of work.
