Ericsson AB will pay $206.7 million for violating the terms of a 2019 settlement with US authorities regarding payments of bribes abroad, putting an end to a major corruption case facing the Swedish telecommunications giant.
(Bloomberg) — Ericsson AB will pay $206.7 million for violating the terms of a 2019 settlement with US authorities regarding payments of bribes abroad, putting an end to a major corruption case facing the Swedish telecommunications giant.
The 5G equipment maker will plead guilty to two deferred charges after breaching an agreement over allegations it paid bribes in Djibouti, China, Vietnam, Indonesia and Kuwait between 2000 and 2016, the Justice Department said in a statement Thursday.
Ericcson’s expected guilty plea and stiffer fine resolves one of the company’s biggest legal issues in the US, where it faced investigations over violations of the Foreign Corrupt Practices Act. The company will remain under a compliance monitor for another year, until June 2024.
On Friday, a top Justice Department official highlighted the Ericsson case as an example of the “enormous gulf between the benefits associated with doing the right thing, and the punishment associated with not.”
Ericsson “failed to timely disclose requested, and highly relevant, documents, prejudicing the government’s ability to charge certain individuals, and also failed to fully and timely disclose information related to extremely problematic conduct in Iraq,” Assistant Attorney General Kenneth Polite Jr. said in a Miami speech.
In January, Ericsson said it booked a 2.3 billion kronor ($220 million) provision in its fourth-quarter results to cover the penalty. Shares rose as much as 4.5% to 60.40 kronor in Stockholm on Friday.
“Taking this step today means that the matter of the breaches is now resolved,” Chief Executive Officer Borje Ekholm said in a statement Thursday.
Under a deferred prosecution agreement, prosecutors agree to drop charges after a period if the company follows certain conditions. The Justice Department can unilaterally reject the deal, although such a move rarely happens.
The company breached its obligations under the 2019 deal, in which it agreed to pay more than $1 billion, by not disclosing all the information related to its schemes in Djibouti and China, the Justice Department said. It also didn’t promptly report evidence related to a separate investigation into potential violations in Iraq, according to the statement.
Ericsson had promised to “clean up its act” after the original agreement, Damian Williams, US Attorney for the Southern District of New York, said in the statement. “It is now facing a steep price for its continued missteps,” he said.
In a court filing on Thursday, prosecutors asked US District Judge Laura Taylor Swain to schedule a guilty plea in Manhattan federal court.
Investor AB, Ericsson’s largest shareholder, called the final agreement positive.
“The company can now fully focus on delivering on its strategy,” Investor spokesperson Viveka Hirdman-Ryrberg said in an emailed comment. “We stand fully behind the Board and CEO, the strategy, as well as the actions they have taken.”
Separately, Ericsson announced this week compliance chief Laurie Waddy, who joined the company in 2019, was leaving.
Ericsson is still facing a probe in the US over its operations in Iraq and is contending with a fresh round of allegations that emerged in Swedish media a year ago. The company at the time said it may have paid the ISIS terror organization to gain access to transport routes.
“Ultimately, things will not move totally back to normal before the Iraq matter is resolved, which could take a long time,” Handelsbanken analyst Daniel Djurberg said in a note Friday. Still, the resolution of the deferred prosecution case “marks a clear step up,” he said.
–With assistance from Jonas Cho Walsgard.
(Updates with Justice Department officials comments.)
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