Ericsson squirms as US assesses extra penalty following Iraq report

Ericsson building sign

A wriggling Ericsson has responded to US government that it has breached an agreement to tell all about its conduct in Iraq

A wriggling Ericsson has responded to US government that it has breached an agreement to tell all about its conduct in Iraq.

The company is “in communication with” the US Department of Justice (DoJ), it said.

The DoJ this week responded to weekend allegations by the International Commission of Investigative Journalists (ICIJ), which posted on its site a number of articles about what it called “years of bribery and fraud” in Iraq by the Swedish equipment vendor.

The revelations, which Ericsson has not contested, indeed which it has admitted it already knew the truth of, indicate that the vendor left out information about Iraq when it negotiated a deferred prosecution agreement (DPA) with the DoJ.

Under that December 2019 deal, Ericsson had to pay a total of $1,060,570,432 in civil and criminal penalties.

Now Ericsson has admitted in a statement that “the disclosure made by the company … was insufficient” and that “the company breached the DPA by failing to make subsequent disclosure related to the investigation post-DPA”.

Under the terms of the agreement Ericsson should have informed the DoJ of any further details of wrong-doing – including in Iraq, which was not mentioned in the DPA.

The DoJ citation in December 2019 referred to offences by Ericsson and Ericsson Egypt from 2000 to 2016 involving “off-the-books slush funds in countries where it pursued contracts to conduct telecommunications business”.

It referred to bribes of $2.1 million in Djibouti between 2010 and 2014 “to high-ranking government officials in order to obtain a contract valued at approximately €20.3 million”.

It covered payments of “tens of millions of dollars” in China from 2000 to 2016 “to win business with Chinese state-owned customers”.

There was “$4.8 million in order to create off-the-books slush funds” in Vietnam, paid “to third parties who would not be able to pass Ericsson’s due diligence processes”.

The DoJ said in its DPA – the truth of which Ericsson accepted as part of the settlement – that the company used a subsidiary to pay “a consulting company approximately $45 million in order to create off-the-books slush funds” in Indonesia.

And “in Kuwait, from approximately 2011 to 2013, Ericsson, via a subsidiary, paid a consulting company approximately $450,000 at the request of a sales agent who had given Ericsson inside information about the bidding process for a lucrative contract with a state-owned telecommunications company”.

But Ericsson did not volunteer information about Iraq to the DoJ, so the DPA does not cover any penalties for what went on there.

The ICIJ revealed at the weekend that Ericsson had “sought permission from the terrorist group known as the Islamic State to work in an ISIS-controlled city [in Iraq] and paid to smuggle equipment into ISIS areas”.

The ICIJ said Ericsson “made tens of millions of dollars in suspicious payments over nearly a decade to sustain its business in Iraq, financing slush funds, trips abroad for defence officials and payoffs through middlemen to corporate executives and possibly terrorists”.

Ericsson was already aware of that, as it admitted in mid-February that a 2019 internal investigation had revealed “unusual expense claims in Iraq, dating back to 2018”. These covered “the conduct of Ericsson employees, vendors and suppliers in Iraq during the period 2011-2019”, said Ericsson in the February statement.

But it did not let on to the DoJ. Now Ericsson “is in communication with the DoJ regarding the facts and circumstances of the breach determination and is committed to co-operating with the DoJ to resolve the matter”, said the company.

The company added: “At this stage it is premature to predict the outcome of this matter.” However, that is likely to be a further penalty exceeding the $1.06 billion it has already paid.