IMPACT
Embattled Ericsson discloses new fines from US ‘likely’ after Iraq corruption
The telecom giant said it couldn’t estimate just how big a penalty the Justice Department might levy following the company’s breach of a 2019 agreement.
Ericsson confirmed Thursday that it will likely face new fines for failing to fully disclose its corruption in Iraq, including dealings with the terrorist Islamic State group, to the U.S. Department of Justice.
In a statement included with the release of the company’s first-quarter earnings, Swedish telecom giant said it was in talks with the DOJ over its findings that the company had breached the terms of a 2019 criminal settlement of bribery and other corruption charges.
“We are currently engaging with the Department of Justice (DOJ) regarding the breach notices it issued relating to the Deferred Prosecution Agreement,” the company said. “The resolution of these matters could result in a range of actions by DOJ, and may likely include additional monetary payments, the magnitude of which cannot at this time be reliably estimated.”
The company also said it would take a $95 million writedown due to its suspension of operation in Russia following the war in Ukraine. “While mobile infrastructure is essential for communications in Russia, it has been clear from the start of the invasion that business in Russia would have to be reconsidered,” Ekholm said in a statement.
Ericsson shares were down about 7% in premarket Nasdaq Stock Market trading Thursday, adding to the stock’s losses since the International Consortium of Investigative Journalists and 30 media partners in February published the Ericsson List The investigation exposed tens of millions of dollars in suspicious payments from 2011-2019 to sustain its business in Iraq. Ericsson shares have tumbled around 30% since the company first disclosed possible payments to ISIS terrorists after ICIJl asked questions about it Iraq operations.
Over the past months, Ericsson has been under mounting pressure from investors, including a vote two weeks ago at the company’s annual meeting in which shareholders declined to release the chief executive and some board members from liability over their handling of the Iraq bribery scandal.
Some investors have been bracing for fines or prosecutions since U.S. prosecutors told the company on March 1 that it had breached the 2019 settlement – the second time in less than six months that the DOJ had told Ericsson it was in violation of the agreement.
As part of the agreement, Ericsson paid one of the largest fines ever for corporate bribery, $1 billion in criminal and civil penalties to avoid U.S. prosecution for corrupt schemes over a 17-year period from 2000-2016 in foreign markets from China to East Africa.
Based on leaked internal reports from Ericsson’s compliance department, ICIJ’s Ericsson List investigation – revealed that the company sought permission from Islamic State terrorists to work in an ISIS-controlled city and paid to smuggle equipment into ISIS areas on a route known as the “Speedway.”