Ericsson Settles Breach of 2019 FCPA Deferred Prosecution Agreement: Agrees to Plead Guilty, Pay $206 Million, and Extend Corporate Monitorship (Part I of III)

Ericsson, a multinational telecommunications company, based in Sweden, settled its breach of its 2019 Deferred Prosecution Agreement, agreed to enter a guilty plea and pay a $206 million penalty.  In 2019, Ericsson entered into a three-year DPA, paid a $1 billion penalty to DOJ and the SEC for FCPA violations. 

DOJ notified Ericson in 2021 that it had breached the DPA by violating the DPA’s cooperation and disclosure provisions, stemming primarily from allegations that Ericsson had failed to disclose its bribery payments to ISIS to facilitate transportation of telecommunications equipment in Iraq. 

As a consequence, Ericsson will now enter a guilty plea to the two-count Information filed as part of the original DPA, which charges Ericsson with conspiracy to commit violate the anti-bribery provisions of the FCPA, and a separate conspiracy to violate the books and records and internal controls provisions of the FCPA.

From 2000 to 2016, Ericsson used third-party agents and consultants to pay bribes to government officials and to manage off-the-books slush funds in Djibouti, China, Vietnam, Indonesia and Kuwait.  These agents were employed through sham contracts and paid pursuant to false invoices. 

As part of its original settlement in 2019, Ericsson agreed to a three-year corporate monitorship.  An Ericsson subsidiary in Egypt also plead guilty to a criminal conspiracy to violate the FCPA anti-bribery provisions.

Subsequently, Ericsson breached the 2019 DPA by failing to truthfully disclose all factual information related to the Djibouti scheme, the China scheme and other violations in Iraq. Specifically, Ericsson failed to comply with the obligations set forth in paragraphs 5 and 6 of the DPA.  As a consequence, Ericsson’s prior partial credit for cooperation under the original 2019 DPA was eliminated from consideration.

Interestingly, DOJ’s investigation of Ericsson’s conduct in Iraq and possible payment of bribes to Iraq is continuing.  If confirmed, this conduct may require Ericsson to subject itself to additional penalties.  So far, Ericsson has claimed that its investigation has found violation of compliance rules and controls but no evidence that bribery payments were made to ISIS or other terrorist organizations.

DOJ noted that Ericsson, since 2019, has significantly enhanced its compliance program and internal accounting controls through structural and leadership changes, including the hiring of a new Chief Legal Officer and new Head of Corporate and Government Investigations, and the creation of a multi-disciplinary Business Risk Committee comprised of group-level senior executives who oversee and apply heightened scrutiny to group material risks, to ensure that Ericsson maintains an effective ethics and compliance program.  Ericsson agreed to continue to enhance its ethics and compliance program and to test these enhancements for effectiveness. Further, DOJ noted that Ericsson enhanced its cooperation and information sharing efforts since notified of the DPA breach.

Under the plea agreement, Ericsson will enter a guilty plea (scheduled for March 20, 2023) to the original two-count information described above.  Also, Ericsson will be required to serve a term of probation through June 2024, and has agreed to extend its corporate monitorship for one year. 

Finally, DOJ’s calculation of the criminal penalty was for just over $727 million, reflecting the midpoint of the applicable guideline range, but DOJ credited $520 million originally paid by Ericsson under its 2019 DPA, resulting in payment of an additional penalty of just over $206 million.

Consistent with its new Corporate Enforcement Policy, thirty-days prior to expiration of the DPA, Ericsson will be required to submit compliance certifications from its CEO and CCO attesting to the implementation of its compliance obligations.

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