Ericsson says: ‘Yes, we lied,’ and pays new $206m fine

Ericsson says: ‘Yes, we lied,’ and pays new $206m fine

Börje Ekholm Ericsson.jpg

Ericsson lied to US authorities when it tried to settle a corruption case in 2019 and has paid a further fine of more than US$206 million.

The earlier fine, for corrupt practices in China, Djibouti, Egypt, Kuwait and Vietnam, was of $1,060,570,432. Now it has to pay an extra $206,728,848.

US Department of Justice (DoJ) assistant attorney general Kenneth Polite said: “Companies should be on notice that we will closely scrutinise their compliance with all terms of corporate resolution agreements and that there will be serious consequences for those that fail to honour their commitments.”

Börje Ekholm (pictured), CEO of Ericsson, said: “To be a true industry leader, we must be a market and technology leader while also being a leader in how we conduct our business.”

Conveniently for Ericsson, the DoJ and Ericsson announced the deferred prosecution agreement (DPA) last night at 23:35 Swedish – and Spanish – time, hours after the last of 88,500 visitors had left Mobile World Congress (MWC) in Barcelona. Ericsson thus avoided awkward questions from the many people on its giant stand.

What Ericsson did wrong was fail, back in 2019, to confess to all its misdeeds that led to that original DPA. As the DoJ said last night: “Following the 2019 resolution, Ericsson breached the DPA by failing to truthfully disclose all factual information and evidence related to the Djibouti scheme, the China scheme, and other potential violations of the FCPA’s anti-bribery or accounting provisions.”

Perhaps worse was that there was a whole new territory of corruption, in Iraq. In mid-February 2022 the International Commission of Investigative Journalists (ICIJ) posted on its site a number of articles about what it called “years of bribery and fraud” in Iraq.

In summary, said the ICIJ in February 2022, “Ericsson 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, a US-based non-profit organisation, is a consortium of a large number of international media, including Asahi Shimbun (Japan); the New York Times and the Washington Post of the US; Süddeutsche Zeitung of Germany; Kyiv Post of Ukraine; and the Guardian of the UK.

This Iraqi scandal was going on exactly when US authorities were accusing Chinese vendors Huawei and ZTE of selling kit to the legal government of neighbouring Iran – not working with a rebel organisation in Iraq.

In 2018 the US Department of Commerce (DoC) imposed a fine of US$1.4 billion on ZTE and appointed a lawyer to monitor it, to ensure it was not smuggling to Iran and other embargoed countries.

During the ZTE investigation, the US leaked documents that seemed to show Huawei had been doing similar things, via a holding company called Skycom to sell kit to Iran.

That culminated in the arrest in 2018 of Huawei’s CFO Meng Wanzhou at Vancouver airport in Canada. The US wanted to extradite her to face charges, which she denied vigorously, that she lied to the HSBC bank in Hong Kong over her relationship with Skycom. Meng was finally released in 2021 after an out-of-court settlement.

Now, it seems, by Ericsson’s own admission, that its agents at the very same time were involved with ISIS, also known as the Islamic State, ISIL or Daesh, a group that at one time held about 40% of Iraq.

The DoJ said last night: “Ericsson also 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 [Foreign Corrupt Practises Act]. These disclosure failures prevented the United States from bringing charges against certain individuals and taking key investigative steps.”

According to the DoJ, the “penalty against Ericsson underscores the significant consequences that result when a DPA is breached”, said James Lee of the Inland Revenue Service’s criminal investigation unit.

Ericsson’s total penalties, from 2019 and 2023, add up to $1,267,299,280.

“Ericsson’s multiple cooperation and disclosure failures led to this breach, resulting in the company having to plead guilty and pay additional penalties,” said the DoJ.

Ericsson will now be required to serve a term of probation until June 2024 and has agreed to a one-year extension of the independent compliance monitor set up in 2019.

Ekholm became CEO in 2016, before Ericsson negotiated the 2019 DPA but after the offences were committed, which the DoJ says began in 2000 and continued until 2016. However Ekholm was already on the board of Ericsson, representing one of its main shareholders.

He said last night: “Taking this step today means that 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 centre of everything we do. This resolution is a stark reminder of the historical misconduct that led to the DPA.”

The person in charge of Ericsson until July 2015 was Hans Vestberg, who was ousted as CEO because of the company’s poor financial performance. Vestberg is now CEO of Verizon in the US.

Ekholm said: “We are a very different company today and have made important changes since 2017 and over 2022.”

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