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2023/03/06 10:37:03

Corruption at Ericsson

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Main article: Ericsson

2023

Ericsson agreed to pay another $206 million for bribing officials

In early March 2023, it became known that a settlement agreement had been reached between the US Department of Justice and Ericsson in a bribery case abroad. The company agreed to pay another $206 million for bribing officials

Earlier, the Swedish telecommunications equipment manufacturer has already reached an agreement to resolve the bribery investigation, which was carried out from 2000 to 2016, paying more than $1 billion, including a criminal fine. The company's illegal activities included work in, Indonesia,, and China Vietnam. Kuwait Djibouti Ericsson was forced to hire a compliance watchdog for three years and assist with relevant investigations as part of a deferred prosecution deal.

Ericsson flouted Foreign Corrupt Practices Act

According to The Wall Street Journal, Ericsson did not disclose factual data and evidence in 2019 related to schemes and actions related to Djibouti, China and Iraq that would violate the Anti-Corruption Law abroad. The US Department of Justice was unable to indict specific people because of these errors. Ericsson committed serious violations of the FCPA and reached an agreement with the United States Department of Justice to correct its mistakes, according to U.S. Attorney for the Southern District of New York Damian Williams.

According to the US Attorney's Office, concluding the DPA, Ericsson agreed to full cooperation with US law enforcement agencies, but did not provide all the necessary evidence in full. However, according to the head of Ericsson, Borje Ekholm, after the last fine and plea agreement, "the issue of violations has now been resolved" and this will serve as a strong reminder of the historical misconduct that led to the conclusion of the DPA.[1]

Ericsson will pay $220.7 million in the case of bribes for government contracts in different countries

Ericsson announced the allocation of 2.3 billion Swedish crowns (approximately $220.7 million at the exchange rate as of January 31, 2023) in the case of bribes for government contracts in various regions.

As they say, the funds are intended to "possibly resolve the charges" in accordance with a violation of the terms of the $1 billion agreement as part of a process with the US authorities. We are talking about the proceedings, the decision on which was made in 2019. Ericsson stated that its internal investigation and cooperation with the American authorities regarding problems related to Iraq remain open and ongoing.

Ericsson allocated $220.7 million for fines in corruption cases
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Since 2019, Ericsson has taken significant remedial action under the control of the board. These include improving the group-wide approach to risk management and strengthening the compliance and internal control program, the company notes.
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Ericsson believes the estimate of SEK 2.3 billion is high enough to pay off fines related to any potential violations that could be brought by the US Department of Justice (DOJ). The measures taken also include the estimated costs of the previously announced extended monitoring.

It is said that in December 2022, the company agreed to extend its independent control over compliance with US authorities until June 2024 in order to continue efforts to implement best-in-class regulatory compliance, risk management and internal control practices throughout the organization.

As announced in October 2021 and March 2022, DOJ notified Ericsson that the company did not provide documents and information in a timely manner and did not properly disclose certain information regarding the internal investigation related to Iraq in 2019.[2]

2022: Ericsson admits paying terrorists in Iraq to supply equipment bypassing customs

On February 16, 2022, Ericsson CEO Borje Ekholm said in an interview with the Swedish newspaper Dagens Industry that the company made payments to the Islamic State of Iraq and the Levant (ISIS/ISIS) terrorist organization banned in Russia for its activities in Iraq for using alternative transport routes and bypassing customs.

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We see that people pay for road transport through areas controlled by terrorist organizations, including ISIS, "said Borye Ekholm." With the funds we have, we have not been able to identify the ultimate recipients of these payments.
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Ericsson admitted paying terrorists in Iraq to supply equipment bypassing customs

Ekholm's comments came hours after the company issued a statement admitting "serious violations of the company's compliance rules and code of conduct" against Ericsson's employees, sellers and suppliers in Iraq between 2011 and 2019.

An internal investigation in 2019 found "evidence of corruption-related misconduct," the statement said.

These actions included "a cash donation without an explicit recipient; payment to the supplier of works without a certain amount and documentation; Using vendors to pay in cash Financing of untargeted travel and expenses; and improper use of sales agents and consultants. "

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The investigation also revealed payments to intermediaries and the use of alternative transport routes bypassing Iraqi customs during a period when some routes were controlled by terrorist organizations, including IS, the press release said.
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In addition, violations of Ericsson's internal financial controls, conflicts of interest, non-compliance with tax laws and obstruction of the investigation were identified.

Ericsson said payment schemes and cash transactions that "potentially posed a money laundering risk were also identified," but "the investigation failed to establish that any of Ericsson's employees were directly involved in the financing of terrorist organisations."

As a result of the investigation, several employees resigned from the company "and numerous other disciplinary and other remedial measures were taken," Ericsson said in a statement.

The company said it had decided to disclose details of the two-year investigation in connection with "detailed media inquiries from Swedish and international news agencies."

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It is a shame to be in such a situation. You find yourself with an echo, a shadow of the past. At the same time, it's fair to say we're on track to change culture. One element of this journey is working with the past.
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He added that Ericsson did not disclose an internal investigation in 2019 because it was unable to establish who the recipient of the payments was or whether they were terrorist organisations or not.

After Ericsson's statements about bribes to terrorists, the company's shares on the stock exchange Stockholm in February 16, 2022 fell by 14%, depositary receipts at preliminary trading New York in fell by 13%.[3]

2021: Ericsson manager gives officials millions in bribes for government contracts

On September 8, 2021, information appeared that one of the managers of Ericsson gave officials large bribes for government contracts. We are talking about a 53-year-old citizen of Ethiopia and SwedenAfwerka Bereket. He, as established by the investigation, helped pay bribes in the amount of $2.1 million to officials of the executive branch of Djibouti and the state telecommunications company in order to receive a contract worth €20.3 million ($24 million). Read more here.

2019

How Ericsson bribed officials around the world and will now pay $1 billion

In early December 2019, the exact amount that Ericsson will pay to withdraw corruption charges that were previously brought by the US Department of Justice and the Securities and Exchange Commission (SEC) became known.

Under the terms of the agreement, Ericsson will pay $520.6 million in favor of the Ministry of Justice, $458.4 million from the SEC, as well as $81.5 million in interest for a pre-trial settlement.

Ericsson to pay more than $1 billion fine in bribery case in several countries

As a result of the investigation, it turned out that Ericsson's representative offices in several countries, including Saudi Arabia, China, Vietnam, Indonesia, Kuwait and the Republic of Djibouti, attracted so-called consultants who were supposed to negotiate with officials over the conclusion of favorable government contracts and transfer bribes to them.

Civil servants, as well as their families, were paid for expensive tickets and entertainment, they were given bribes in cash and given expensive gifts in exchange for Ericsson's victory in tenders for the supply of telecommunications solutions. Due to such unfair practice, the company earned $427 million from 2011 to 2017.

Chief executive Borje Ekholm said corruption was "completely unacceptable" and offences were committed on their own by individual managers on the ground. The company has taken measures to monitor the work of executives in order to prevent a repeat of the situation in the future, he said. Ericsson will have to independently monitor compliance for at least three years.

As a result, the US authorities fined Ericsson $1 billion. This punishment was the largest in history for telecommunications companies that violated the Foreign Corrupt Practices Act (FCPA). US Attorney for the Southern District of New York Jeffrey Berman claims that Ericsson began using corruption schemes back in 2000.[4]

Ericsson agreed to pay $1.2 billion for bribes

On September 26, 2019, Ericsson announced the allocation of 12 billion Swedish crowns (about $1.2 billion) to resolve the proceedings over the company's allegations of corruption.

According to Ericsson, cash recovery will account for about $1 billion of expenses reserved for the fourth quarter of 2019. In addition, additional costs of $200 million will be required to stop the investigations that the US Securities and Exchange Commission and the US Department of Justice have been conducting since 2013 and 2015, respectively. Authorities suspect the telecommunications equipment manufacturer of violating the U.S. Foreign Corrupt Practices Act (FCPA).

Ericsson CEO Borje Ekholm apologises for corruption schemes that were implemented by the company before he took charge of the manufacturer

The investigations, which relate to the period up to the first quarter of 2017, focus on violations of the Code of Business Ethics committed by Ericsson in six countries: China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam.

Ericsson did not specify what violations it was fined for. Bloomberg reports that the investigation involved a payment system used for contracting in the 1990s. Heads and managers of various regional divisions of Ericsson bribed officials and top managers of large companies in exchange for concluding contracts.

The media published a "global fee payment scheme," which was implemented through offshore companies operating from Cyprus, Liechtenstein and Switzerland

According to one former Ericsson employee, the company authorized the use of funds from a special "secret fund" to pay officials and other responsible persons in order to obtain new contracts. 

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We are forced to admit that the company has failed in the past, "says Ericsson CEO Borje Ekholm. - Now I can assure you that every day we make efforts to ensure that ethics and compliance are the basis of our business. Despite these severe financial sanctions that are imposed on us, they were an important step for our company to agree with the US authorities on these issues.
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According to the head of Ericsson, by the end of September 2019, the company continues to negotiate with the American authorities, but they have already reached a point where the costs can be calculated.

The company admits that what happened will strike not only at the financial situation, but also at the reputation, and this can have a "significant" negative impact on the business.

Ericsson says that violations of anti-corruption laws are committed for several reasons, including the company's inability to respond to warnings and shortcomings of internal management.

Ericsson will pay $1.2 billion for bribes in exchange for contracts

There will definitely be scammers in a company with a staff of 100 thousand people, but Ericsson now has a program that allows you to identify any violations and quickly take action, said Borye Ekholm.

Ericsson said the investigation took disciplinary action against 65 staff, 49 of whom were dismissed.

On the day Ericsson announced the payment of a fine for paying bribes, the company's shares fell in price.

Handelsbanken analyst Daniel Djurberg believes that the $1 billion recovery meets market expectations. According to the expert, Ericsson quotes will not continue to decline if this fine is final.[5]

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While the hefty fine is clearly unwelcome and will affect the company's cash position, this situation also draws a line in this lengthy investigation, Liberum analysts said in a note to investors.
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2018:50 employees fired for bribes

On October 18, 2018, Ericsson announced the dismissal of 50 employees involved in corruption schemes when concluding contracts. Due to bribes, the Swedish telecommunications equipment manufacturer may be fined.

The company has fired 50 people since launching its own investigation in 2013, Reuters news agency reported, citing a spokesman for Ericsson. The reduction affected several regional missions, he added without providing additional information.

Ericsson fires 50 employees involved in corruption

According to the Swedish newspaper Svenska Dagbladet, in 2017, the  Securities and Exchange Commission (SEC) and the US Department of Justice launched an investigation on suspicion that top managers of the company paid bribes in exchange for concluding contracts in Asia, Europe, the Middle East and Africa (EMEA). Then it was reported that law enforcement agencies interrogated about 20 Ericsson employees.

In 2016, the authorities requested information about business transactions made by a division of Microwave Systems. Also under suspicion was the head of the Asia-Pacific office of Ericsson Mats Olsson.

Ericsson CEO Borje Ekholm in October 2018 said that this investigation is likely to lead to monetary fines and "other significant measures, the scale of which cannot yet be estimated."

Reuters clarifies that the US authorities impose heavy fines on companies that have violated the law on the fight against corruption in foreign economic activity (U.S. Foreign Corrupt Practices Act, FCPA).

In 2013, Ericsson was suspected of bribing Romanian ministers. The management of the company allegedly paid the Minister of Telecommunications of Romania Sorin Pantish 7 million euros for lobbying interests during the selection of the contractor of the contract to work with the national emergency emergency number 112. The company itself denied the fact of giving bribes.[6]

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