Ericsson allocates $220mln for ISIS-related corruption case

By Al Mayadeen English
Source: Agencies
12 Jan 2023 23:52

The Swedish telecom giant is being investigated by the US DoJ regarding corruption cases in Iraq including bribes to ISIS terrorist organization.

Ericsson headquarters in Stockholm, Sweden

The Swedish telecommunications company Ericsson, against which Washington has opened two investigations, announced that it has allocated about $220 million for possible fines in a corruption case in Iraq, one of which is related to the ISIS terrorist organization.

Ericsson stated that it "has not reached an agreement with the US Department of Justice regarding these alleged violations and that discussions are continuing to resolve the dispute."

The group said in a statement that the amount "will be booked in the Company’s fourth quarter 2022 financial results," which it will publish later this month.

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“The company believes that this is a sufficiently reliable estimate of the financial penalty associated with any potential breach resolution, and this provision also includes estimated expenses for the previously announced extended monitorship,” the company said.

The allocated amount regarding the case reassured the investors, which have been holding negative prospects on Ericsson for several months.

Following the announcement, the group’s shares on the Stockholm Stock Exchange increased by more than 6%, reaching 67.66 Swedish kronor at around 13:20 (GMT).

In the past decade, the Swedish telecom giant went through numerous restructuring phases, and it was subjected to a US investigation for corruption.

Earlier, the US judiciary had confirmed that the documents it received from Ericsson over possible corruption in Iraq, including suspicions of paying bribes to ISIS, were insufficient.

In February 2022, Ericsson informed the US Department of Justice about an internal investigation of misconduct, looking into payments in Iraq upon signing a Deferred Prosecution Agreement (DPA) in 2019 to settle probes into corruption.

Upon the news, Ericsson's shares then fell 14% as concerns arose that the DoJ would fine the company after disclosing that the investigation found evidence of misconduct.

This forced Ericsson to publish the results of an internal investigation dating back to 2019, in order to uncover possible corruption in the group's Iraqi activities during the past 8 years.

The internal investigation talked about suspicious sums for land transportation in the areas that ISIS controlled, and it is believed that the organization benefited from these funds when it controlled part of Iraqi territory.

Last April, the group confirmed that it was "likely" that the US Department of Justice would issue new fines, given the global jurisdiction the United States has in a number of areas, which allows it to pursue a number of foreign groups.

Ericsson later revealed on June 10 that "the US Securities and Exchange Commission opened an investigation regarding the matters contained in the company's report on its investigation into practices in Iraq in 2019."

In addition to probes against the company by the US Department of Justice and the US Securities and Exchange Commission, the company is facing an investigation by the Swedish judiciary as well.

This issue is of concern to investors because Ericsson has a history of violations in these areas.

It's noteworthy that in December 2019, Ericsson paid $1 billion to the US judiciary to close a corruption case in 5 countries, as part of a deal called the "deferred prosecution deal."