Ericsson to Pay $1 Billion to Settle FCPA/Bribery Charges

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■ ■ ■  December 17, 2019

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On December 6, 2019, telecom industry leader Ericsson agreed to pay criminal and civil penalties totaling more than $1 Billion to the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) over its participation in briberies and slush fund schemes in Asia, Africa, and the Middle East spanning a 17-year period.

 

The DOJ charged Ericsson with conspiracies to violate the anti-bribery, books and records, and internal controls provisions of the Foreign Corrupt Practices Act (FCPA). Assistant Attorney General Brian Benczkowski of the DOJ Criminal Division stated that Ericsson's corrupt conduct involved high-level executives, at least five countries and were done in a misguided effort to increase profits. Ericsson's illegal actions were carried out through third-party agents and consultants who made bribe payments to government officials and who managed off-the-books slush funds. Those agents were hired through fake contracts and paid under false invoices, and the payments made to them were not correctly reflected in the Ericsson books and records.

 

Ericsson settled with the DOJ by entering a deferred prosecution agreement in which they agreed to pay $520.65 million in criminal penalty, have an independent compliance monitor for a period of three years, continue to cooperate with the DOJ in any ongoing investigation and prosecution relating to the conduct, including of individuals, and continue to enhance its compliance program. Furthermore, Ericsson Egypt, an Ericsson subsidiary, pleaded guilty for violating the anti-bribery provisions of the FCPA.

 

The DOJ said it reached this settlement with Ericsson based on several factors, including the fact that the company failed to voluntarily disclose the conduct to the Department and the severity of the actions. As a result, Ericsson did not benefit from the discount available for full cooperation as a remediation credit, although some discount was applied for some cooperation.

 

Parallel to the DOJ case, the SEC filed a complaint against Ericsson which stated that it paid $62 million in bribes to obtain $427 million worth of business in Djibouti, Saudi Arabia, and China. The company agreed to pay the SEC around $540 million in disgorgement plus interest in a civil settlement. Ericsson President and CEO, Borje Ekholm, expressed he was upset with these past failures and vowed to work tirelessly to implement a robust compliance program. Xavier Dedullen, the company's Chief Legal Officer, shared that Ericsson will be focusing on leadership and culture; assessing its tone from the top; training and engagement; and making enhancements to its third-party risk management program.

 

With increasingly aggressive enforcement efforts and record-setting fines by the DOJ and SEC, MDO Partners encourages companies to establish strong Anti-Corruption Compliance Programs to mitigate the risk of FCPA violations. MDO Partners advises companies on global compliance programs. Our attorneys and advisors have extensive experience advising clients on the FCPA and effective Anti-Corruption Compliance Programs in over 30 countries.

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About MDO Partners

 

MDO Partners is a boutique law firm that focuses on Corporate, International, and Real Estate Law, as well as Global Compliance and Business Ethics. The firm is comprised of a solid team of attorneys and advisors with more than 100 years of combined experience who are committed to the business goals and best interests of their clients. The firm delivers value-added services of the highest caliber, and serves as a trusted advisor to its clients with a practical and business-savvy approach. For more information on MDO Partners, please visit www.mdopartners.com

 

If you have questions or comments regarding this Alert, please contact the attorney or advisor listed below.

 

Richard Montes de Oca

Managing Partner

305.704.8452

rmontes@mdopartners.com

 

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