Ericsson to pay over US$1 billion to resolve US corruption probe

Daniel Fowler
December 10, 2019

One of the company's subsidiaries, Ericsson Egypt Ltd, pleaded guilty in the Southern District of NY to a charge of conspiracy to violate the anti-bribery provisions of the FCPA.

The SEC said Ericsson agreed to pay more than $539 million in disgorgement and prejudgment interest to settle the charges.

They said Ericsson's corrupt activities had extended from at least 2000 to 2016 in countries including Djibouti, China, Vietnam, Indonesia and Kuwait.

"Through slush funds, bribes, gifts, and graft, Ericsson conducted telecom business with the guiding principle that 'money talks, '" Geoffrey Berman, U.S. Attorney for the Southern District of NY, said in a news release. Total cost including criminal penalties in excess of $ 520 million, plus $ 540 million that will be paid to the US Securities and Exchange Commission (SEC) in a related matter. Consultants were retained to create slush funds and transfer money to third parties, according to one of the complaints.

'The remedial measures required by our settlement, including the appointment of an independent compliance monitor, reflect the commission's commitment to preventing these serious violations of our laws'. The cases investigated by the SEC and DoJ were related, but were reviewed independently of each other.

Together, the fines of the Department of Justice and the SEC are valued at around $ 1.06 billion.

"I am upset by these past failings".

The department reached this resolution with Ericsson based on a number of factors, including the Company's failure to voluntarily disclose the conduct to the department and the nature and seriousness of the offense, which included FCPA violations in five countries and the involvement of high-level executives at the Company.

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Since the active cases of corruption were done from the past years, Ericsson CEO Borje Ekholm- that only took his position in Jan 2017- said that he was disappointed to his employees involved in the said corruption, which are mostly executives on the company. The settlement with the SEC and DoJ shows that we have not always met our standards in doing business the right way. This episode shows the importance of fact-based decision making and a culture that supports speaking up and confronting issues. We have worked tirelessly. implement a solid compliance program. "This work will never stop", added Ekholm.

It has said previously it was cooperating with USA authorities and that it would make a $1.2 billion provision in relation to the probes.

The company confirmed the payments were fully covered by this provision and would not affect the company's financial targets.

For the third quarter of 2019, Ericsson recorded a net loss of 6.9 billion Swedish kronor, dragged by restructuring costs and the impact of 11.5 billion crowns to resolve the dispute with the USA authorities.

In spite of the losses, revenue for the company grew 6% year on year to 57 billion krona, while revenue for the nine months to the end of September increased by 14 billion krona to 161 billion krona.

Ericsson estimates an impact of SEK12 billion to solve U.S. probes.

Its first set of commercial 5G services are expected to go live in March 2020.

Ericsson is Telstra's technology partner for its mobile network.

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