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“The Ericsson List”

EricssonList

As highlighted in this prior post, in December 2019 Swedish telecom company Ericsson (a company with American Depositary Shares traded in the U.S.) resolved a net $1.06 billion Foreign Corrupt Practices Act enforcement action – the largest of all-time – concerning conduct in Djibouti, China, Vietnam, Kuwait, Indonesia, and Saudi Arabia.

The DOJ prong of the enforcement action involved a one count criminal information against Ericsson subsidiary Ericsson Egypt Ltd. charging conspiracy to violate the FCPA’s anti-bribery provisions resolved through a plea agreement and a criminal information against Ericsson charging conspiracies to violate the FCPA’s anti-bribery, books and records, and internal controls provisions resolved through a deferred prosecution agreement.

In October 2021, the DOJ accused Ericsson of breaching its DPA obligations. (See here).

In perhaps a casual connection, this recent post highlighted reporting suggesting that:

“Ericsson may have made payments to the ISIS terror organization to gain access to certain transport routes in Iraq, in a shock admission following years of regulatory investigations. Shares in the Stockholm-based company were down almost 14.5% around lunchtime on Wednesday, its biggest drop in a day since July 2017.

In an interview with newspaper Dagens Industri, chief executive officer Borje Ekholm said that Ericsson had identified “unusual expenses dating back to 2018” but the company hasn’t yet determined who the final recipient of the money was. “What we are seeing is that transport routes have been purchased through areas that have been controlled by terrorist organizations, including ISIS,” Ekholm added.

Ekholm’s comments follow a statement by the telecommunications equipment manufacturer late on Tuesday, in which the company said that it continues to “invest significantly” into a probe regarding compliance concerns in its Iraq-based operations.”

Shortly thereafter, the International Consortium of Investigative Journalists released this statement:

“Ericsson today released a public statement in response to questions from the International Consortium of Investigative Journalists and partners, including SVT in Sweden. The statement by the Swedish company addressed wrongdoing uncovered by ICIJ and its partners as part of a global investigation. The company said it was working with internal employees and external counsel to review misconduct raised to it by ICIJ. Despite the statement from Ericsson, the company has not addressed specific questions put to it by our journalists in relation to a wide range of corrupt behavior in connection to its business in Iraq and elsewhere. ICIJ and its partners will publish our findings soon.”

Recently, the International Consortium of Investigative Journalists released its findings under the title “The Ericsson List” – see here.

Reporting does not establish legal violations or equate to an enforcement action. Nevertheless, the findings assert:

“Telecom giant Ericsson sought permission from the terrorist group known as the Islamic State to work in an ISIS-controlled city and paid to smuggle equipment into ISIS areas on a route known as the “Speedway,” according to a leaked internal investigation report obtained by the International Consortium of Investigative Journalists.

The report reveals that the Swedish-based firm made tens of millions of dollars in suspicious payments over nearly a decade to sustain its business in Iraq, financing slush funds, trips abroad for defense officials and payoffs through middlemen to corporate executives and possibly terrorists.

The internal investigation describes a pattern of bribery and corruption so widespread, and company oversight so weak, that millions of dollars in payments couldn’t be accounted for – all while Ericsson worked to maintain and expand vital cellular networks in one of the most corrupt countries in the world. The review, which has not been made public, covers the years 2011 to 2019.

Ericsson’s business in Iraq relied on politically connected fixers and unvetted subcontractors. It was marked by sham contracts, inflated invoices, falsified financial statements and payments to “consultants” with nebulous job descriptions. In one instance, a member of a powerful Kurdish family, the Barzanis, collected $1.2 million for “facilitation to the chairman” of a mobile phone operator — also a Barzani, the report says.

Most of the corrupt conduct came after Ericsson, a key actor in the West’s battle with China over the future of global communications, acknowledged in 2013 that it was cooperating with U.S. authorities investigating bribery allegations elsewhere. The U.S. probe resulted in a $1 billion bribery settlement in 2019 with the U.S. Justice Department and the Securities and Exchange Commission.  The settlement does not mention Iraq.

ICIJ shared the leaked records with The Washington Post, SVT in Sweden and 28 other media partners in 22 countries as part of a project known as the Ericsson List. ICIJ and its partners verified the records’ authenticity and spent months examining other documents and interviewing ex-employees, government officials, contractors and other industry insiders in Iraq, London, Washington, Jordan, Lebanon and elsewhere.

The leaked documents include 73 pages of a 79-page report on Ericsson’s Iraq business, including summaries of 28 witness interviews and 22.5 million emails.

ICIJ and partnering news organizations sent detailed questions to Ericsson about the secret internal review. Instead of answering, Ericsson issued a public statement on Feb. 15 acknowledging “corruption-related misconduct” in Iraq and possible payments to ISIS.

Ericsson CEO Börje Ekholm also granted interviews to news outlets not in possession of the leaked documents. He said that Ericsson may have made illicit payments, but that the company had often struggled to identify the final beneficiary.

“We can’t determine where money sometimes really goes, but we can see that it has disappeared,” Ekholm told a Swedish newspaper.

Ericsson cited its “commitment to transparency” in its recent disclosures. But the company made no mention of other internal probes described in the leaked documents.

The records show that besides Iraq, the company examined alleged misconduct in Lebanon, Spain, Portugal and Egypt. In addition, a spreadsheet lists company probes into possible bribery, money laundering and embezzlement by employees in Angola, Azerbaijan, Bahrain, Brazil, China, Croatia, Libya, Morocco, the United States and South Africa.  These probes have not been previously disclosed.”

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