Ericsson forks out over $1B in fines to settle U.S. bribery charges

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Ericsson agrees to pay more than $1 billion in fines to settle bribery cases with the SEC and U.S. Department of Justice. (Monica Alleven/FierceWireless)

Ericsson announced late Friday afternoon that it had agreed to pay $1.06 billion in fines to U.S. regulators after pleading guilty to bribery charges.

From 2000 to 2016, Ericsson doled out tens of millions of dollars to bribe government officials in Africa and the Middle East, as well as to customers in China. As part of the settlement announced on Friday, Ericsson entered into a three-year agreement with the U.S. Department of Justice (DoJ) to resolve chargers of violating the anti-bribery, books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA.)

As part of the settlement, the DoJ agreed to defer criminal charges and have them dismissed after the three-year period ends in exchange for Ericsson paying a fine of close to $521 million. As part of the resolution with the DoJ, Ericsson's Egyptian subsidiary has entered a guilty plea to the bribery charge in Djibouti.

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In China, from approximately 2000 to 2016, Ericsson, via subsidiaries, paid various agents, consultants, and service providers tens of millions of dollars, a portion of which was used to fund an expense account that covered gifts, travel, and entertainment for foreign officials.

In Vietnam, from  2012 to 2015, Ericsson and its subsidiaries paid a consulting company approximately $4.8 million in order to create off-the-books slush funds. The slush funds were then used to make payments to third parties who would not be able to pass Ericsson's due diligence processes. 

Separately, Stockholm-based Ericsson agreed to a settlement of almost $540 million with the Securities and Exchange Commission (SEC) that related to the same allegations that it had violated the bribery and accounting provisions of FCPA. The SEC's investigation covered a six-year period that ended in the first quarter of 2017.

On Thursday, Ericsson put out a statement that it expected the fine to be $1.2 billion, which it had previously announced on Sept. 26.

“Today Swedish telecom giant Ericsson has admitted to a years-long campaign of corruption in five countries to solidify its grip on telecommunications business," said U.S. Attorney Geoffrey S. Berman, in a statement. "Through slush funds, bribes, gifts, and graft, Ericsson conducted telecom business with the guiding principle that ‘money talks.’ Today’s guilty plea and surrender of over a billion dollars in combined penalties should communicate clearly to all corporate actors that doing business this way will not be tolerated.”

The SEC started its investigation into Ericsson in 2013, and the DoJ became involved two years later. The cases investigated by the SEC and DoJ were related, but were reviewed independently of each other.

RELATED: China investigates Ericsson over patent licensing complaints

Pleading guilty to the bribery charges is a black eye for Ericsson as it attempts to win more 5G contracts. While the investigations in the U.S. have come to a close, Ericsson could face similar repercussions in the other countries.

“I am upset by these past failings," said Ericsson CEO and President Börje Ekholm, in a statement. "Reaching a resolution with the US authorities allows us to close this legacy chapter. We can now move forward and build a stronger company."

While Ekholm has been CEO since January of 2017, he could face some blow back. since he has been on Ericsson's board of directors since 2006, according to his company profile.  

RELATED: Ericsson says it’s doubling down on IoT during Q3 2019 earnings

In October, Ericsson reported sales growth of 6% during its third quarter 2019 compared to the same quarter in 2018, driven by strong growth in North America and Northeast Asia. Its total sales for the quarter were $5.8 billion.

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