Four former employees of Swedish telecommunications company Ericsson AB have been charged with bribery in Stockholm. In parallel, Ericsson agreed to pay its Finnish competitor Nokia $97 million for damages claimed related to its corrupt activities in several countries.
According to court documents, the four Swedish citizens are alleged to have bribed Djibouti officials, including the country’s Attorney General, in 2011 and 2012, in order to win a contract with state-owned phone company, Djibouti Telecom SA.
U.S. Deferred Prosecution Agreement
In 2019, an Ericsson subsidiary pleaded guilty to foreign bribery in the U.S. back in 2019, leading the parent company to pay more than $1 billion to resolve separate but related cases with the U.S. Department of Justice (DoJ) and the Securities and Exchange Commission (SEC) over violations of the U.S. Foreign Corrupt Practices Act (FCPA).
“Swedish telecom giant Ericsson has admitted to a years-long campaign of corruption in five countries to solidify its grip on telecommunications business. Through slush funds, bribes, gifts, and graft, Ericsson conducted telecom business with the guiding principle that money talks’” the DoJ said in its settlement announcement that covered Ericsson’s criminal conduct in Djibouti, China, Vietnam, Indonesia and Kuwait.
According to the DoJ, Ericson’s corrupt conduct spanned 17 years starting in 2000 and involved high-level executives. Ericsson admitted to conspiring with others to violate the FCPA with a long-running scheme including bribe payments to government officials to win contracts, falsifying books and records, and failing to implement reasonable internal accounting controls.
The U.S. Department of Justice described the misconduct in Djibouti that took place between 2010 and 2014. Ericsson, via a subsidiary, made approximately $2.1 million in bribe payments to high-ranking government officials in Djibouti in order to obtain a contract with Djibouti Telecom valued at approximately €20.3 million to modernize the mobile networks system in Djibouti. The corrupt scheme consisted of an Ericsson subsidiary entering into a sham contract with a consulting company and approving false invoices to conceal the bribe payments. Ericsson employees also completed a draft due diligence report that failed to disclose an obvious conflict of interest in the matter, the owner of the consulting company and one of the high-ranking government officials had a spousal relationship.
Interestingly, while the U.S. investigation focused on the multinational, Sweden’s investigation concentrated on the perpetrators. The anti-corruption unit at Sweden’s prosecution authority had assisted in the U.S. investigation and information had come to light that had prompted the opening of an investigation in Sweden. One of the defendants was the head of Ericsson’s Middle East region until 2014, and was part of top management in charge of IT & cloud products until he left in 2017. According to the documents, prosecutors also have evidence that suggests a link to Djibouti’s long-serving president.
Encouraging to see Sweden taking steps to hold individuals criminally or civilly liable for foreign bribery violations. Sweden has long been criticized for not enforcing its laws enough, after making foreign bribery a crime. According to the OECD, Sweden needs to make much greater efforts to actively enforce its anti-bribery legislation. Despite a number of allegations against Swedish companies (Telia, Scania, Saab to name the latest), Sweden has never proceeded against a company or individuals for foreign bribery.
Lawsuit from Competitor
In parallel, Ericsson has agreed earlier this month to pay its Finnish competitor Nokia EUR 80 million (roughly $97 million) for damages claimed related to the FCPA investigation settled with U.S. authorities.
Ericsson stated that the settlement amount to be paid “reflects uncertainty, risk, expense, and potential distraction from business focus associated with a potentially lengthy and complex litigation.”
Ericsson didn’t disclose additional details, classifying terms as confidential. The announcement also emphasized Ericsson’s “zero-tolerance policy” for corruption, noting it’s worked hard in recent years to strengthen an Ethics and Compliance program. Ericsson has indeed agreed, as part of the deferred prosecution agreement with U.S. Authorities, to enhance its compliance program; and to retain an independent compliance monitor for three years.
Such lawsuit from a competitor is noteworthy as not only the fines and costs associated with government investigations into foreign bribery have become substantial and often span multiple jurisdictions, but companies that have won corrupt contracts thanks to the bribing of foreign officials must now also contend with further risks – private lawsuits brought by their shareholders, other derivative lawsuits, and even their competitors.
Companies that have lost government contracts because they refused to pay a bribe to a foreign official could bring a private lawsuit against the corrupt company that was awarded the contract.