Ericsson pleads guilty in U.S. to federal bribery violations, agrees to pay $206 million penalty
Ericsson recently announced it is planning to cut 8,500 jobs as part of its cost-cutting measures.
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Swedish telecommunications giant Ericsson agreed to pay a $206 million penalty and pleaded guilty to violating the anti-bribery provisions of the Foreign Corrupt Practices Act, or FCPA, U.S. prosecutors announced Thursday evening.
Ericsson had already paid a $520.6 million penalty in 2019 over what New York federal prosecutors said was a “years-long campaign of corruption,” involving the bribery of government officials and the falsification of books and records in Djibouti, China, Vietnam, Indonesia, and Kuwait. Additionally, the company paid about $540 million to the Securities and Exchange Commission.
As a result of the 2019 settlement, the company entered into a deferred prosecution agreement (DPA) with the U.S. Attorney’s Office for the Southern District of New York. But Ericsson violated the agreement by failing to truthfully disclose “all factual information and evidence” involving the company’s schemes in Djibouti and China, the Justice Department said. The company also allegedly failed to disclose possible evidence of a similar scheme in Iraq.
Ericsson used outside consultants to pay bribes to government officials and manage off-the-books “slush funds” in all five countries, prosecutors said, using “sham contracts” and “false invoices” to obscure the nature of the funds, according to the violated deferred prosecution agreement.
Ericsson employees in China caused “tens of millions of dollars” to be paid out to agents and consultants, “at least a portion of which was used to provide things of value, including leisure travel and entertainment, to foreign officials,” including at a state-owned telecommunications company, the DOJ said.
In Djibouti, the Justice Department said an Ericsson employee paid over $2 million in bribes to high-ranking government officials in the country’s executive branch and in Djibouti’s state-owned telecommunications firm.
“When the Department afforded Ericsson the opportunity to enter into a DPA to resolve an investigation into serious FCPA violations, the company agreed to comply with all provisions of that agreement,” Assistant Attorney General Kenneth Polite said in a press release. “Instead of honoring that commitment, Ericsson repeatedly failed to fully cooperate and failed to disclose evidence and allegations of misconduct in breach of the agreement.”
Ericsson CEO Börje Ekholm said in a press release, that with the latest penalty and plea agreement, “the matter of the breaches is now resolved.”
“This allows us to focus on executing our strategy while driving continued cultural change across the company with integrity at the center of everything we do,” said Ekholm, who became CEO in 2017. “This resolution is a stark reminder of the historical misconduct that led to the DPA.”
The International Consortium of Investigative Journalists reported in 2022 that Ericsson allegedly “sought permission” from ISIS to continue work in Mosul, Iraq, which was controlled by the terrorist group at the time. The release from federal prosecutors did not directly refer to the ICIJ’s reporting on Ericsson’s alleged dealings with the so-called Islamic State, but noted that Ericsson “failed to promptly report and disclose evidence and allegations of conduct related to its business activities in Iraq that may constitute a violation of the FCPA.”
In a release, Ericsson said its own internal investigation “did not conclude that Ericsson made or was responsible for any payments to any terrorist organization.” A subsequent investigation from 2022 did not change that assessment, the company said.
An Ericsson spokesperson, when asked for comment, pointed CNBC to the company’s statement.