In an anticipated settlement, the Justice Department announced today a settlement of a massive, multi-decades long, multiple country corruption scheme with the Swedish telecom entity, Telefonaktiebolaget LM Ericsson (Ericsson). The breadth and depth of Ericsson’s bribery efforts were simply stunning. From 2000 to 2016 the company engaged in a wide range of corruption schemes in the following countries: Vietnam, China, Djibouti and Kuwait. Ericsson paid tens of millions of dollars of bribes in those countries to secure hundreds of million of dollars in business. Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division was quoted in the Press Release, “Ericsson’s corrupt conduct involved high-level executives and spanned 17 years and at least five countries, all in a misguided effort to increase profits”.
The company agreed to pay a criminal penalty of $520,650,432 and in a related matter, Ericsson agreed to pay to the SEC disgorgement and prejudgment interest totaling approximately $540 million. An Ericsson subsidiary, Ericsson Egypt Ltd, pleaded guilty today in the Southern District of New York to a one-count criminal information charging it with conspiracy to violate the anti-bribery provisions of the FCPA.
Highlights from the Justice Department Press Release included:
- In Djibouti, between 2010 and 2014, Ericsson, via a subsidiary, made approximately $2.1 million in bribe payments to high-ranking government officials in order to obtain a contract with the state-owned telecommunications company valued at approximately €20.3 million to modernize the mobile networks system in Djibouti.
- In China, between 2000 and 2016, Ericsson subsidiaries caused tens of millions of dollars to be paid to various agents, consultants and service providers, a portion of which was used to fund a travel expense account in China that covered gifts, travel and entertainment for foreign officials, including customers from state-owned telecommunications companies. Ericsson used the travel expense account to win business with Chinese state-owned customers. In addition, between 2013 and 2016, Ericsson subsidiaries made payments of approximately $31.5 million to third party service providers pursuant to sham contracts for services that were never performed.
- In Vietnam, between 2012 and 2015, Ericsson subsidiaries made approximately $4.8 million in payments to a consulting company in order to create off-the-books slush funds, associated with Ericsson’s customers in Vietnam, that were used to make payments to third parties who would not be able to pass Ericsson’s due diligence processes.
- In Kuwait, between 2011 and 2013, an Ericsson subsidiary promised a payment of approximately $450,000 to a consulting company at the request of a sales agent, and then entered into a sham contract with the consulting company and approved a fake invoice for services that were never performed in order to conceal the payment.
Ericsson did not self-disclose the corruption and did not receive the full credit available for cooperation or remediation. The company will be required to retain an independent compliance monitor for three years.