The company is facing criminal charges of corruption, including the bribing of government officials which took place over many years in countries including China, Vietnam and Djibouti. The entire charges include a criminal penalty of more than $520m, including $540m which would be paid to the US Securities and Exchange Commission (SEC).
The company admitted guilt in all the charges.
Between 2010 and 2016, the Swedish mobile firm admitted to conspiring with others to violate the Foreign Corrupt Practices Act (FCPA). It admitted to giving bribes, falsifying books and record, and failing to implement reasonable internal accounting controls, the Justice Department said in a statement.
To secure contracts and keep business moving, Ericsson had used third party agents. According to one of the complaints, the company retained consultants to create slush funds and transfer money to third parties.
“Certain employees in some markets, some of whom were executives in those markets, acted in bad faith and knowingly failed to implement sufficient controls. I view what has happened as a completely unacceptable and hugely upsetting chapter of our history,” Ericsson CEO Borje Ekholm said in a conference call on Saturday.
One of the company’s subsidiaries in Egypt pleaded guilty in the Southern District of New York to a charge of conspiracy to violate the anti-bribery provisions of the FCPA.
Many companies would normally decline to plead guilty even though they would concede to paying fines. This is because pleading guilty attracts more severe sanctions, including the revoking of licenses. However, the company can always negotiate the sanctions to ensure they continue to operate.
Pleading guilty means it is accountable for its crimes and Ericsson said it had reviewed its corruption program and taken steps to improve its ethics, even though the case “completely unacceptable,” pointing that the people involved in the crime were executives (who should be fighting corruption).
To this effect, the company made a provision of $1.2b to the US authorities in relation to the investigations. The financial officer, Carl Mellander said the amount covers the provision the company had made in the quarter.
“While the amount for the settlement today is significant, I can confirm that we will be able to manage the associated cash outflow with available funds,” he told the conference call.
This settlement leaves Ericsson largely free of criminal convictions that could have translated to other stiff penalties.
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