On December 6, 2019, Telefonaktiebolaget LM Ericsson, a multinational telecommunications company headquartered in Sweden, and one of the company’s subsidiaries, entered into settlements with the US Department of Justice and the US Securities and Exchange Commission, resolving an investigation of violations of the Foreign Corrupt Practices Act. Ericsson entered into a deferred prosecution agreement with the DOJ related to conspiracies to violate the anti-bribery, books and records, and internal controls provisions of the FCPA. Ericsson’s subsidiary, Ericsson Egypt Ltd., pleaded guilty in the US District Court for the Southern District of New York to conspiracy to violate the anti-bribery provisions of the FCPA. In a related action, Ericsson settled allegations by the SEC that Ericsson violated the anti-bribery, books and records and internal controls provisions of the FCPA.
According to admissions by the company, between 2000 and 2016, Ericsson engaged in schemes using third party agents and consultants to pay tens of millions of dollars of bribes in China, Vietnam, Indonesia, Kuwait and Djibouti, in order to help the company secure valuable contracts with state-owned companies. Ericsson hid the payments through sham contracts and fake invoices with these third parties, and also used these third parties to maintain “off-the-books slush funds,” according to the DPA. Ericsson failed to implement reasonable internal accounting controls, making it easier for Ericsson’s executives and employees to pay bribes and falsify the company’s books and records, as described in the DPA.
Pursuant to the DPA, Ericsson will pay a criminal penalty of $520,650,432, retain an independent compliance monitor for at least three years, enhance its compliance program, and continue to cooperate in the DOJ’s investigation. The company’s settlement with the SEC requires payment of nearly $540 million in disgorgement and prejudgment interest. In total, the company will pay a combined sum of over $1.06 billion.
In determining the penalty amount, the DOJ stated that it took into consideration the company’s failure to disclose the misconduct voluntarily, as well as the involvement of high-level Ericsson executives. According to the DOJ, Ericsson did receive credit for cooperating with the investigation, which included the company’s thorough internal investigation, regular presentations to the DOJ, disclosure of additional conduct unknown to the DOJ, the production of “extensive documentation,” and voluntarily making foreign-based employees available for interviews in the US. Nonetheless, the DOJ also criticized Ericsson for producing some documentation in “an untimely manner” and not taking “adequate disciplinary measures with respect to certain employees.” Given all these factors, the DOJ only awarded Ericsson “partial” cooperation and remediation credit, resulting in a discount of 15% off the bottom fine range of the US Sentencing Guidelines.
The resolution with Ericsson represents one of the largest FCPA resolutions ever obtained by US authorities.