US Justice Department tells Ericsson it broke agreement on Iraq corruption

Breach determination issued following reports of potential payments made to ISIS.

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Swedish telco equipment giant Ericsson said on Wednesday it was informed by the United States Department of Justice that it breached a 2019 agreement that included deferring any criminal charges before having them dismissed after three years.

"On March 1, 2022, the DOJ informed Ericsson that the disclosure made by the company prior to the DPA [deferred prosecution agreement] about its internal investigation into conduct in Iraq in the period 2011 until 2019 was insufficient," the company said.

"Furthermore, it determined that the company breached the DPA by failing to make subsequent disclosure related to the investigation post-DPA."

At the start of the week, a number of reports appeared that alleged the networking giant hid years of bribery and fraud in its Iraq business.

The alleged actions included making payments to move equipment through ISIS-controlled areas and insisting its contractors continue to work in ISIS-held areas that led to them being kidnapped. The reports all claim to be based on a leak of an Ericsson internal report on its Iraq business, of which the International Consortium of Investigative Journalists said it has 73 of 79 pages.

In February, Ericsson said an internal investigation found serious breaches of compliance rules and ethics violations.

"It identified evidence of corruption-related misconduct, including: Making a monetary donation without a clear beneficiary; paying a supplier for work without a defined scope and documentation; using suppliers to make cash payments; funding inappropriate travel and expenses; and improper use of sales agents and consultants," the company said.

"In addition, it found violations of Ericsson's internal financial controls; conflicts of interest; non-compliance with tax laws; and obstruction of the investigation.

"The investigating team also identified payments to intermediaries and the use of alternate transport routes in connection with circumventing Iraqi Customs, at a time when terrorist organizations, including ISIS, controlled some transport routes.

"Investigators could not determine the ultimate recipients of these payments. Payment schemes and cash transactions that potentially created the risk of money laundering were also identified."

The company said it would not identify any employee that had direct involvement with financing a terrorist organisation, but several employees have left the company in light of the investigation.

Speaking to journalists on Wednesday, Ericsson president and CEO Borje Ekholm said the company would remedy its actions.

"I think the reality here is we found this ourselves in 2018, investigated it in 2019. There are parts that can be substantiated and there are parts that cannot be substantiated," he said.

"The question on financing ... cannot be substantiated. What can be substantiated are several breaches of our code of business ethics, conflict of interest allegations, as well as other types of misconduct. That includes, for example, payment or donations where we cannot find the ultimate recipient, and there are a number of those, and those are hugely embarrassing by itself.

"So, don't get me wrong. They're unacceptable. We cannot do them as a company, and we're going to fix it in the future."

At the start of February, Ericsson accused the media of focusing on business conduct in unstable areas where corruption and terrorists exist.

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