On June 9, 2022, Swedish telecommunications company Telefonaktiebolaget LM Ericsson announced that the US Securities and Exchange Commission had opened an investigation into the company’s conduct in Iraq. According to an Ericsson Form 6-K filing, the company is fully cooperating with the SEC, and it is too early to predict the outcome of the investigation.
Ericsson entered into a deferred prosecution agreement with the US Department of Justice in 2019 after admitting it paid bribes to officials in Djibouti, China, Indonesia, Kuwait, and Vietnam through the use of sham contracts with third party consultants in violation of the Foreign Corrupt Practices Act. Ericsson’s subsidiary in Egypt also pleaded guilty to conspiracy to violate the anti-bribery provision of the FCPA. Under the terms of the DPA, Ericsson paid more than $500 million in criminal penalties and agreed to retain an independent compliance monitor for three years. At the same time, Ericsson agreed to pay $540 million in disgorgement and prejudgment interest to the SEC to settle parallel charges involving violations of the anti-bribery, books and records, and internal controls provisions of the FCPA.
The latest announcement from Ericsson comes after several prior announcements related to Ericsson’s DPA. In October 2021, the DOJ warned Ericsson that it was not in compliance with the DPA for “failing to provide documents and factual information” as the DPA required. No other information as to the issue was publicly disclosed.
However, only a few months after that, the company publicly disclosed a prior internal investigation into conduct in Iraq. Specifically, in February 2022, Ericsson disclosed that in 2019 the company had conducted a year-long internal investigation into the conduct of its employees, vendors, and suppliers in Iraq. That investigation, which examined conduct from 2011 to 2019, uncovered “corruption-related misconduct” in Iraq. According to Ericsson, the misconduct included questionable monetary donations, payments to suppliers without proper documentation, the funding of inappropriate travel and expenses, and the use of suppliers to make cash payments. Ericsson also uncovered payments to “intermediaries and the use of alternative transportation routes” in order to circumvent Iraqi customs at a time when terrorists groups, including ISIS, controlled some of the transportation routes. Ericsson stated it could not determine the ultimate recipient of those payments to intermediaries. It further stated that it did not identify any employees who were directly involved in financing a terrorist organization. However, the above-described misconduct violated the company’s internal controls, failed to comply with tax laws, and increased the risk of money laundering.
Two weeks after the February 2022 press release, Ericsson announced that the DOJ had informed the company that its disclosures regarding the 2019 Iraq internal investigation were “insufficient,” which, according to the DOJ, constituted a breach of the company’s deferred prosecution agreement. Ericsson stated at the time that it was cooperating with the DOJ to resolve the matter.