ERIC Ericsson

By Dave Michaels 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 7, 2019).

WASHINGTON -- Telecom-equipment maker Ericsson AB agreed to pay more than $1 billion to settle U.S. allegations that it conspired to make illegal payments to win business in five countries.

The settlement includes a $520 million criminal penalty and $540 million in illicit profits that must be disgorged, the U.S. Justice Department said Friday. A subsidiary of the Swedish company, Ericsson Egypt Ltd., pleaded guilty in Manhattan federal court to conspiracy to violate antibribery laws.

Ericsson AB said Thursday that it expected a previously announced provision of $1.2 billion would cover fines and other costs related to the probe. An attorney for Ericsson declined to comment.

Ericsson entered into a deferred-prosecution agreement with prosecutors requiring it to retain a compliance monitor for three years and to cooperate in related probes.

The Justice Department said Friday the wrongdoing occurred from 2000 to 2016 in Djibouti, China, Vietnam, Kuwait and Indonesia.

In a separate complaint, the Securities and Exchange Commission said Ericsson subsidiaries won business worth about $427 million by using third parties to bribe officials in Saudi Arabia, China and Djibouti.

In Djibouti, about $2.1 million in bribes were paid to high-ranking government officials to win a contract with a state-owned telecommunications firm, prosecutors said. The payments were facilitated through a sham contract with a consulting company and the use of fake invoices, U.S. authorities said. Ericsson's Egypt subsidiary oversaw the Djibouti operations.

In China, Ericsson's subsidiaries were responsible for tens of millions of dollars paid to agents, consultants and service providers, "a portion of which" was funneled to an account that funded gifts, travel and entertainment for overseas officials, prosecutors said.

"Ericsson's corrupt conduct involved high-level executives and spanned 17 years and at least five countries, all in a misguided effort to increase profits," said Assistant Attorney General Brian Benczkowski.

Steve Peikin, the SEC's co-director of enforcement, said the case represented an "egregious bribery scheme" that involved "slush funds and funneling money through sham intermediaries."

The monetary sanctions are among the highest ever imposed by the U.S. government for violations of the Foreign Corrupt Practices Act. Last year, the Brazilian oil company Petrobras agreed to pay more than $1.7 billion to resolve claims levied by the Justice Department and the SEC, although much of that money went to Brazilian authorities and investors who filed a class-action lawsuit.

Write to Dave Michaels at dave.michaels@wsj.com

(END) Dow Jones Newswires

December 07, 2019 02:47 ET (07:47 GMT)

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