Ericsson’s shares fell sharply after the Swedish telecoms equipment maker’s chief executive, Borje Ekholm, admitted it could have paid the Iraqi terror group Isis.
Ericsson Say Late Tuesday, a 2019 internal investigation found Iraq had grossly violated compliance rules, including paying for shipping routes to evade local customs.
“What we’re seeing is that the shipping routes are bought through areas controlled by terrorist groups, including Isis,” Ekholm told Swedish newspaper Dagens Industri on Wednesday.
Ericsson shares fell as much as 8.5% on Wednesday and were down 7% in early trade.
Ericsson paid Over $1 billion in December 2019 settle down The United States conducts criminal and civil investigations of foreign corruption in countries including China, Indonesia, Vietnam, Djibouti, and Kuwait.
But the Swedish group Say In October, the U.S. Justice Department warned that it had violated its obligations under a deferred prosecution agreement by failing to provide documents and information. It is unclear whether Iraq’s allegations form part of a breach, but the country is not one of five named in the 2019 settlement.
Ericsson said unusual fee claims dating back to 2018 sparked an internal investigation that found it had breached compliance and ethics rules for “corruption-related misconduct”.
Evidence includes making donations without a clear beneficiary; paying suppliers without documentation; using suppliers for cash payments; inappropriate travel and expenses; and inappropriate use of sales agents and consultants. The company added that it also found Ericsson violated internal financial controls, conflicts of interest, non-compliance with tax laws and obstruction of investigations.
Its investigators were unable to identify the ultimate recipient of the alternate shipping routes, but they occurred at a time when ISIS and other terrorist groups controlled some of the routes. The investigation also found that cash payments “may pose a money laundering risk”.
The Swedish group said it was “unable to establish that any Ericsson employees were directly involved in the financing of terrorist groups”, but added that several employees “have left the company”.
The revelations have made it hard for Ekholm to try to put corruption investigations behind him as part of a restructuring of the Swedish group. The group has regained its crown as the world’s largest network equipment maker thanks to its success in 5G telecom contracts.
Steve Peikin, then co-director of the SEC’s Enforcement Division, said in 2019 that Ericsson “has been involved for years across multiple continents through the covert use of bribe funds and the pooling of funds through false middlemen. shocking bribery scheme”.
Ekholm said at the time: “We have been working tirelessly to implement a strong compliance program. This work will never stop.”