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Ericsson agrees to pay over US$206 million after federal DPA violations

U.S. prosecutors announced on Thursday that Swedish telecommunications company Ericsson has agreed to plead guilty and pay over US$206 million for breaching a 2019 Deferred Prosecution Agreement (“DPA”) that Ericsson had entered into with the U.S. Attorney’s Office to resolve criminal charges of bribery, falsifying books and other corrupt practices in multiple countries.

The DPA stems from several violations of the Foreign Corrupt Practices Act (“FCPA”), which saw Ericsson employ third-party agents and consultants, from 2000 to 2016, to make bribe payments to government officials and manage off-the-books slush funds in Djibouti, China, Vietnam, Indonesia, and Kuwait.

As part of the DPA, Ericsson paid a criminal penalty of over US$520 million in 2019 and agreed to the imposition of an independent compliance monitor for three years.

“When the Department afforded Ericsson the opportunity to enter into a DPA to resolve an investigation into serious FCPA violations, the company agreed to comply with all provisions of that agreement,” said assistant attorney general Kenneth A. Polite, Jr.. “Instead of honouring that commitment, Ericsson repeatedly failed to fully cooperate and failed to disclose evidence and allegations of misconduct in breach of the agreement.”

Some of FCPA violations included:

– Paid $2.1 million in bribes to high-ranking government officials in Djibouti, concealed the bribes by approving fake invoices and entering into a sham contract with a consulting company. It also failed to disclose that the owner of the consulting company was married to a high ranking official in the Djibouti government.

– Ericsson’s subsidiaries paid third-party service providers in China approximately $31.5 million pursuant to sham contracts for services that were never performed.

– Paid consulting companies in Vietnam and Indonesia approximately $4.8 million and $45 million, respectively in order to create off-the-books slush funds.

– The International Consortium of Investigative Journalists (ICIJ) also reported in 2022 that Ericsson allegedly “sought permission” from and made payments to ISIS to continue work in Mosul, Iraq, which was controlled by the terrorist group at the time. Ericsson said that its internal investigation on the matter did not corroborate any such allegations.

“The company’s breach of its obligations under the DPA indicate that Ericsson did not learn its lesson, and it is now facing a steep price for its continued missteps,” said U.S. Attorney Damian Williams. “As Ericsson’s anticipated guilty plea makes abundantly clear, the Southern District of New York will hold to account companies that fail to live up to obligations to root out and voluntarily report their misconduct to the Department of Justice.”

But for Ericsson, the guilty plea is a “resolution” of its “non-criminal breaches” of the 2019 agreement, adding that it has not been charged with any new illegal conduct since the DPA and that the fine is merely a result of failing to provide documents and information to the DOJ in a timely manner.

“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,” said Börje Ekholm, chief executive officer of Ericsson.

The guilty plea, according to Ericsson puts an end to the DPA.

However, the DOJ said that as part of the penalty, Ericsson is also serving a term of probation through June 2024 and has agreed to a one-year extension of the independent compliance monitor.

The company said it has “significantly enhanced its compliance program and internal accounting controls” by taking several measures, including but not limited to hiring a new Chief Legal Officer and a new Head of Corporate and Government Investigations.

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