Ericsson may be one of the “sponsors” of a large terrorist organization banned in Russia. The company could pay bribes in order to be able to work in the territories under its control.
Ericsson contacted terrorists
The Swedish telecom company Ericsson may have financed terrorists from ISIS (“The Islamic State of Iraq and the Levant” is a terrorist organization banned in Russia). Börje Ekholm, CEO of the company, personally announced this in an interview with the Swedish edition of Dagens Industri.
At the time of publication of the material, the connection between Ericsson and ISIS was not confirmed, the investigation was still ongoing. According to the CEO of the company, during the internal audit of the company’s finances, its experts identified “unusual expenses related to 2018.”
“We found that the transport routes, the operation of which was prepaid, ran through areas controlled by terrorist organizations, including ISIS,” the head of Ericsson said.
Ekholm stressed that it is not yet possible to determine who exactly is the recipient of this money.
Large-scale internal investigation
Berje Ekholm made his “confession” against the background of Ericsson’s publication of a statement about an internal investigation conducted at the company regarding spending in 2018. Ericsson representatives said that it was conducted in 2019 and related primarily to the company’s activities in Iraq.
The investigation revealed widespread violations of regulatory requirements, as well as a code of business ethics and rules of conduct for Ericsson employees, as well as its partners in Iraq. The report also says that “doubtful expenses” refers to bribes to terrorists that allowed the company to bypass local customs to operate in the territory of Iraq they occupied. “Ericsson has invested a lot of time and resources to understand these issues,” the report says. “The investigation was unable to establish that any Ericsson employee was directly involved in the financing of terrorist organizations.”
Instant market reaction
Messages about possible “interactions” of one of the largest players in the global telecom market immediately affected its financial position. Ericsson shares fell 14% immediately after Berje Ekholm’s statement.
Ericsson securities are depreciating on the stock exchange in Stockholm (Sweden). Along the way, depository receipts of the company in New York are also falling in price. In preliminary trading, they sank 13%.
IA “Interfax”, 02/16/2022, “Ericsson shares fell after admitting that the company could pay bribes to ISIS in Iraq”: Shares of Swedish telecommunications equipment maker Telefon AB LM Ericsson fall in trading on Wednesday after the company said it could transfer funds to the Islamic State terrorist organization in Iraq.
The company’s shares are down 14% in Stockholm, while depositary receipts are down 13% in pre-trading in New York.
An internal review conducted in 2019 found “serious compliance violations” in connection with operations in Iraq, including possible corrupt payments and misuse of sales agents and consultants, Ericsson said in a statement. “The investigation also revealed payments to intermediaries and the use of alternative transport routes that bypassed Iraqi customs at a time when some routes were controlled by terrorist organizations, including IS,” the press release said. – Inset K.r.
Why Ericsson is in the spotlight
Ericsson currently plays a significant role in the telecommunications markets of many countries, including Russia. Over the past couple of years, it has concluded many large contracts for the supply of equipment for fifth generation (5G) cellular networks around the world, including our country. For example, as reported by CNews, in January 2020, Ericsson, together with the operator MTS, deployed the first industrial 5G network in Russia at the KamAZ plant. In August 2019, Ericsson and Tele2 created Russia’s first public 5G network pilot zone.
Interest in Ericsson equipment is fueled by US sanctions against another major market player, the Chinese company Huawei. The US authorities literally demanded from other countries that they stop using Huawei hardwareincluding her smartphones.
Ericsson’s corrupt past
It’s not the first time Ericsson has been embroiled in a corruption scandal. Earlier, the telecommunications giant was charged with violating the US Foreign Corrupt Practices Act (FCPA).
The company was convicted of repeated bribery of officials and falsification of documents in the period from 2000 to 2016.
The investigation concerned the activities of Ericsson in six countries: Vietnam, Djibouti, Indonesia, China, Kuwait and Saudi Arabia. In September 2019, the company managed to reach a pre-trial agreement with the US Department of Justice and the Securities and Exchange Commission. Under the agreement, the company promised to pay $1.1 billion in exchange for an end to all prosecutions for potential FCPA violations.
But this story did not end there. In October 2021, the US Department of Justice stated that Ericsson violated the terms of the agreement – the company did not provide the information and documents necessary for the settlement in due time.