Evasions over illicit cash persuasions
Top telco equipment maker Ericsson must pay a $207 million fine for breaching a deal with US authorities by failing to disclose an internal investigation into suspected bribes to the Islamic State group in Iraq.
Now Swedish prosecutors have also opened an inquiry into the alleged payments to the militia group which controls access to the country’s business community. It’s a case that has forced the company to vow an overhaul of its compliance oversight after the claims emerged last year, reports Digital Journal.
US prosecutors had already imposed $1 billion in penalties in 2019 to close corruption cases in Djibouti, China, Vietnam, Indonesia and Kuwait, after Ericsson agreed to a so-called deferred prosecution agreement (DPA).
Last year an investigation coordinated by the International Consortium of Investigative Journalists (ICIJ) revealed that an internal inquiry at Ericsson had also found suspected payments to IS jihadists in Iraq between 2011 and 2019 — a period covered by US prosecution deal.
Guilty plea
In a statement late Thursday, Ericsson said it had entered “a guilty plea regarding previously deferred charges relating to conduct prior to 2017,” for not disclosing its inquiry to the US authorities. “The entry of the plea agreement will bring the 2019 DPA to an end,” said Ericsson. The company had warned of the likely fine in January, setting aside 2.3 billion kronor ($220 million) in its fourth-quarter accounts to cover the cost.
On Thursday Ericsson said that since its deal with the US Department of Justice (DOJ), prosecutors had “not alleged or charged” the company with any new criminal conduct, saying the new fine related only to a failure to disclose documents to the DOJ in a timely manner.
“This resolution is a stark reminder of the historical misconduct that led to the DPA,” Ericsson’s CEO Borje Ekholm said in the statement. “We have learned from that and we are on an important journey to transform our culture.”
Broken promises
In a separate statement, the DOJ said Ericsson had breached the DPA by violating the agreement’s cooperation and disclosure provisions. Ericsson repeatedly failed to fully cooperate and failed to disclose evidence and allegations of misconduct in breach of the agreement, according to assistant attorney General Kenneth A. Polite, Jr.
“As a result of these broken promises, Ericsson must plead guilty to two criminal offenses and pay an additional fine,” said Polite Junior.
The resolution of the issue was received positively by investors, with Ericsson shares rising more than 3% in early trading on the Stockholm Stock Exchange. The telecom giant had already posted a 17% drop in net profit to 19.1 billion kronor ($1.8 billion) for 2022 but these disappointing earnings came as operators slow spending on 5G networks due to the global economic slowdown and rising inflation.
Ericsson, which had a total of 105,000 employees at the end of 2022, also announced last week that it would slash 8,500 jobs worldwide as part of a cost-cutting programme.