Swedish telecoms giant sets aside $220m for a potential fine, amid US investigation into Ericsson’s conduct in Iraq in 2019
Swedish telecommunications equipment giant Ericsson has pleased investors on Thursday, when it said it would book a 2.3 billion Swedish crown ($220 million) provision for an expected fine from the US Department of Justice (DoJ).
That surprisingly is good news for the firm, considering that it was back in December 2019 when Ericsson settled with the US DoJ and agreed to pay more than $1 billion (£760m) to settle a probe into alleged corruption including bribing public officials.
Ericsson in 2019 agreed to be under review for three years, and “admitted to a years-long campaign of corruption in five countries to solidify its grip on telecommunications business.”
The DoJ said at the time that Ericsson’s corrupt activities had extended from at least 2000 to 2016 in countries including Djibouti, China, Vietnam, Indonesia and Kuwait.
The 2019 settlement, believed to be one of the highest ever under the US’ Foreign Corrupt Practices Act (FCPA), included a $520m criminal penalty to the justice department and a payment of $540m to the Securities and Exchange Commission (SEC).
But Ericsson had failed to fully disclose results of an internal investigation about potential payments to the Islamic State militant group in Iraq, prompting the SEC to open an investigation into Ericsson in June 2022.
The Department of Justice (DoJ) had already begun its own investigation into the matter, after Ericsson’s own investigation earlier in the year found payments had been made to the Islamic State militant group in Iraq.
Now Ericsson on Thursday announced it is in “position to make a provision of SEK 2.3 billion (approx. $220 million) in relation to a potential resolution with the UW Department of Justice (DOJ) regarding previously announced, non-criminal, alleged breaches under its 2019 Deferred Prosecution Agreement (DPA).”
Ericsson said it has not reached a resolution with the DOJ regarding these alleged breaches and discussions are ongoing.
The company said believes that this provision is a sufficiently reliable estimate of the financial penalty associated with any potential breach resolution, and this provision also includes estimated expenses for the previously announced extended monitorship.
Ericsson said that its internal investigation and its co-operation with authorities in relation to the allegations in the 2019 Iraq-related internal investigation report remain open and ongoing.
And it said that since 2019, Ericsson has taken significant remedial measures, overseen by the Board of Directors.
Ericsson’s share price surged 7.7 percent in afternoon trading, as analysts had been worried Ericsson faced a potentially larger fine than its $1 billion settlement in 2019.