Ericsson said it will make a provision of SEK 12 billion – in the wake of an investigation on bribery charges conducted by two United States agencies — impacting the third quarter 2019 results.
United States Securities and Exchange Commission (SEC) and United States Department of Justice (DOJ) are conducting an investigation into Ericsson’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA).
The investigation covers a period ending Q1 2017 and revealed breaches of the company’s code of business ethics and the FCPA in six countries: China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam.
The Stockholm-based Ericsson, one of the leading telecom equipment makers, did not reveal the name of officers involved in the issue. Ericsson today said it has terminated those employees.
Ericsson said the provision constitutes the company’s estimate of expenditure related to resolving the U.S. investigations, of which the combined monetary sanctions from SEC and DOJ is estimated at USD 1 billion, and the remainder pertains to other costs related to resolving the investigation.
Ericsson said the company identified breaches of its code of business ethics and the FCPA and it has taken several measures to block bribery in the system. 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 circumvent internal controls for illegitimate purposes.
Ericsson said it could experience reputational harm and other negative consequences impacting its telecom business. Its customers or suppliers may reconsider their relationships with the company, or governmental and regulatory authorities could seek to penalize the company or place restrictions on its operations.
