The decision comes after the Swedish company violated a 2019 deferred prosecution agreement (DPA) with the US Department of Justice (DoJ). The company was found to have withheld evidence involving misconduct in several foreign states and failed to provide prompt and sufficient information regarding misconduct in Iraq that could have violated the Foreign Corrupt Practices Act (FCPA).
Ericsson had previously settled with the DoJ in 2019 after admitting that it had bribed officials in China, Djibouti, Indonesia, Kuwait, and Vietnam between 2000 and 2016 in violation of the FCPA.
The company paid a penalty of $520 million and entered into the DPA, agreeing to allow an independent compliance monitor to check its activities for three years.
There will be continued scrutiny
The company paid government officials tens of millions of dollars through consulting firms and third-party agents to win lucrative contracts. It covered up the actions by falsifying records and intentionally keeping poor accounts of certain international operations.
Money was funnelled into slush funds and spent on expensive trips for officials. In addition to the fine, Ericsson will lose its right to cooperation credit with the DoJ and must serve a probationary term until June 2024. The independent compliance monitor will now check the company’s activities for another year.
Ericsson CEO Börje Ekholm stated that the company is committed to the continued transformation of its board and culture, with integrity at the center of everything it does.
The guilty plea is a reminder of the historical misconduct that led to the DPA
The guilty plea comes amid allegations that Ericsson paid the Islamic State as part of a broader bribery scheme in Iraq. A senior vice president at Ericsson resigned in April 2022 amidst these allegations, and shareholders quelled a motion to release the company’s board members from liability for the events.
Ericsson stated that it would continue to investigate the facts surrounding its conduct in Iraq alongside the DoJ and Securities and Exchange Commission (SEC) and denies the allegations.
While Ericsson has faced significant penalties for its actions, the guilty plea and continued investigation demonstrate the importance of corporate governance and the need for companies to conduct themselves with integrity in all aspects of their business.
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