The investigation into breaches of the Company’s Code of Business Ethics and the US Foreign Corrupt Practices Act (FCPA) could be the costliest corruption case on record and covered the period from 2013 to the first quarter of 2017. It revealed breaches in China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam.
While the company did not reveal details of the ongoing process, it said the cost will “impact the third quarter 2019 results by SEK12 billion ($1.2 billion),” including monetary sanctions and “other costs related to resolving the investigation.”
The company also admitted that “the breaches are the result of several deficiencies, including a failure to react to red flags and inadequate internal controls which enabled a limited number of employees to actively circumvent internal controls for illegitimate purposes.”
Therefore, as stated, disciplinary measures, including termination where appropriate, have been taken against “identified individuals determined to have breached the Code of Business Ethics.”
“With today’s announcement we confront another legacy issue and take the next step in resolving it,” Börje Ekholm, Ericsson’s President and CEO said.
The company, as he stressed, has to recognize that it has failed in the past, but that it will “work hard every day to build a stronger Ericsson, where ethics and compliance are cornerstones in how we conduct business.”
Ericsson’s announcement, as Bloomberg cited analysts at Citigroup, has “some clear negative implications with meaningful cash outflows down the line,” but the “overhang” around the case “would probably go away by next year.”
The record penalty payment comes at a time when the company reportedly “battles Nokia Oyj for 5G network supply contracts and looks to win customers amid a US-led boycott against rival vendor Huawei Technologies Co.”
