Risk & Compliance

Ericsson to Pay $1B in 2nd-Largest FCPA Case

“Through slush funds, bribes, gifts, and graft, Ericsson conducted telecom business with the guiding principle that ‘money talks.'"
Matthew HellerDecember 9, 2019

In one of the costliest corruption cases ever brought against a U.S.-listed company, telecom equipment maker Ericsson has been fined more than $1 billion for engaging in bribery and other illegal practices to win business in five countries.

As part of a settlement with the U.S. Department of Justice, Ericsson pleaded guilty to conspiring to violate the anti-bribery provisions of the Foreign Corrupt Practices Act and agreed to pay a criminal penalty of more than $520 million.

It will also pay about $540 million to resolve Securities and Exchange Commission allegations that it won or retained contracts valued at approximately $427 million by paying about $62 million in bribes to government officials through third parties in Djibouti, Saudi Arabia, and China.

The resolutions, which also cover Ericsson’s misconduct in Vietnam, Indonesia and Kuwait, are the second largest ever in an FCPA case, behind only the $1.78 billion in penalties imposed on Brazil’s Petrobras in 2018.

“Through slush funds, bribes, gifts, and graft, Ericsson conducted telecom business with the guiding principle that ‘money talks,’” Geoffrey Berman, U.S. Attorney for the Southern District of New York, said in a news release.

Ericsson said employees in some markets, some of whom were executives, entered into “transactions for illegitimate purposes and, together with people under their influence, used sophisticated schemes in order to hide their wrongdoing.”

“I am upset by these past failings,” CEO Börje Ekholm said. “Reaching a resolution with the U.S. authorities allows us to close this legacy chapter.”

The alleged misconduct included a bribery scheme in which, beginning in 2011, the head of Ericsson’s Middle East region authorized and directed the payment of bribes in Djibouti to obtain a contract from a state-owned telecom company.

To effect the scheme, Ericsson contracted with a consulting company that was owned by the wife of a senior Djibouti foreign official.

“The services contemplated in the contract were never intended to be performed,” the SEC said in a civil complaint. “In fact, the consulting agreement was a sham and was intended primarily to funnel bribes to the Djibouti foreign official.”