ERICSSON

Industry

Technology / Software / Electronics

Corporate Headquarters

Stockholm, Sweden

Summary of Allegations:

Nationality of Foreign Officials: Bulgaria, Libya, Poland, Slovenia

Summary of Allegations:

According to press reports from 26 May 2003, the Swiss Federal Public Prosecutor's Office began investigating Ericsson in 2003 for alleged bribery of officials in Bulgaria, Libya, Poland and Slovenia in connection with mobile contracts. The investigation was apparently prompted by reports from Swiss bank UBS after finding CHF 550 million in irregularities in the Company's financial transactions. According to a report from Reuters on 10 September 2003, the Swiss investigators did not find enough evidence to charge Ericsson with bribery.

Approximate Alleged Payments to Foreign Officials: Unspecified

Business Advantage Allegedly Obtained: Unspecified

Nationality of Foreign Officials: China

Summary of Allegations:

In an 11 October 2011 story, the China Times reported that Shen Changfu, former chairman and president of China Mobile Chongqing Branch, was on trial for accusations of bribery. The allegations were that he accepted CNY 36.2 million from Ericsson as well as the Chinese telecommunications supplier Huawei in 1996 when he arranged for Ericsson's facilities to be purchased by the Chongqing Telecom Bureau, which Shen then directed. The CNY 36.2 million bribe represented 2% of the purchase deal, according to the prosecution. Shen was also accused of procuring advantages for members of his family (from Huawei), including a few years of salary for his son, who was employed briefly by Huawei.

Approximate Alleged Payments to Foreign Officials: CNY 36.2 million

Business Advantage Allegedly Obtained: Assistance in selling facilities to the Chongquin Telecom Bureau

Nationality of Foreign Officials: China, Djibouti, Indonesia, Kuwait, Saudi Arabia, Vietnam

Summary of Allegations:

Between 2011 and 2017, Ericsson subsidiaries bribed public officers in Saudi Arabia, China, Djibouti, Vietnam, Indonesia, and Kuwait with about US $62 million to secure contracts with state-owned telecommunications companies, yielding profits amounting to US $427 million.

Ericsson subsidiaries orchestrated the bribery schemes by retaining consultants to funnel money to third parties who then provided a significant portion of the payment to public officials, making use of sham service provider agreements with no services rendered, slush funds, code names, sham transactions, and invoices. The bribes were mischaracterized in Ericsson's books and records as legitimate expenses and consolidated in Ericsson’s financial statements and SEC filings. The responsible subsidiaries and joint ventures included Ericsson (China) Company Ltd., Ericsson (China) Communications Co., Ltd. Ericsson Hong Kong, Nanjing Ericsson Panda Communications Company Ltd, PT Ericsson Indonesia, Ericsson Vietnam Co. Ltd, Ericsson Resource & Competence Center Sdn. Bhd, and Ericsson Egypt Ltd.

Djibouti

In October 2010, Ericsson submitted a bid to a Djibouti state-owned telecommunications company for a large networking contract.

In May 2011, Ericsson signed a contract with the SOE worth US $29 million.

In June 2011, Ericsson's Ethiopia branch signed a consulting agreement with a consulting company in Djibouti owned by the wife of a senior Djibouti official and controlled by this official, with no legitimate services intended but serving as a conduit to funnel bribes to officials with decision-making authority over the bid. Ericsson compiled a due diligence report on the consulting company without disclosing the spousal relationship between the owner and the official.

Ericsson thereafter received solicitations from the officials to pay the consulting company. Between August 2011 until 2014, it transferred three payments totaling US $2.1 million to the consulting company via multiple agents including Ericsson Egypt Ltd, knowing that the consulting company would pay a substantial portion of the fees to the officials to secure the bid.

In September 2011, Ericsson announced that it had been awarded the networking contract with the SOE.

Saudi Arabia and China

Ericsson's Saudi Arabia branch bribed local telecommunications state-owned entity officials with US $40 million to secure nine contracts from the SOE worth more than US $700 million. Ericsson utilized two local consultants to transfer the bribes and disguised the scheme via sham service contracts. No due diligence was conducted until one year after the service contracts were signed.

Ericsson's branches in Saudi Arabia and China covered leisure travel and entertainment for public officials and their spouses to secure business from the SOEs. The expenses include plane tickets, gifts, spa services, shopping, and lodging, securing business with revenues totaling US $40.54 million from the Saudi SOE, and US $294 million from the China SOE. In China, Ericsson utilized a fake service provider, agents, and a travel agency to funnel the bribes.

Vietnam

Between 2011 and 2015, Ericsson Vietnam and Malaysia hired a consultant in Vietnam connected to local SOEs, with US $4.8 million for purported consulting services with no actual services delivered. Ericsson utilized the consultant only as an intermediary to maintain a slush fund for payments to customers as cash gifts via third parties.

Indonesia

Between 2012 and 2015, Ericsson Indonesia entered into a sham consulting contract with a local consultant paying US $45 million for services never delivered. The consultant was utilized to create a slush fund and transfer the money to third parties to cover customers' entertainment and travel unrelated to business.

Kuwait

In 2011, Ericsson submitted a bid for a radio access network upgrade contract with a state-owned company in Kuwait. It engaged with a Kuwait consultant owned by individuals closely affiliated with a government officer in Qatar for services never delivered.

The consultant then provided Ericsson with inside competitor-bidding information and Ericsson was awarded the contract worth US $182 million in 2012.

In 2013, Ericsson paid the consultant US $450,000 via a sham agreement for sales and marketing support services, which were never rendered.

China

Between 2000 and 2016, Ericsson bribed public officials in China with US $31.5 million via third-party service providers connected to the officials but not providing any legitimate services, in violation of Ericsson's internal policies restricting the use of third party agents.

Approximate Alleged Payments to Foreign Officials: US $62 million

Business Advantage Allegedly Obtained: US $427 million

Nationality of Foreign Officials: Costa Rica

Summary of Allegations:

Transparency International's OECD Anti-Bribery Convention Progress Report 2009 says that Ericsson has been under investigation in Costa Rica for "alleged bribery of officials at the National Institute of Electricity," which is the state-owned Instituto Costarricense de Electricidad ("ICE"). According to Inside Costa Rica's report of 6 October 2004, ICE initiated an investigation into allegations that Ericsson had paid for two ICE officials to travel to Prague. ICE's investigation purportedly determined that the allegations were true, and decided to re-open the bid for 600,000 new cellular phone lines that Ericsson had originally won. Inside Costa Rica reported on 3 June 2005 that Ericsson would proceed with the contract, presumably after having won the bid that was re-opened after ICE's investigation of Ericsson.

Approximate Alleged Payments to Foreign Officials: Travel for two officials to Prague

Business Advantage Allegedly Obtained: Unspecified

Nationality of Foreign Officials: Greece

Summary of Allegations:

Ericsson Microwave Systems, former Greek subsidiary of Ericsson, allegedly paid SEK 116 million (approximately USD 18 million) to a commercial agent, Thomas Liakounakos, which was then used to bribe Greek officials to secure a deal for Ericsson in 1999. Liakounakos allegedly paid bribes to former Greek defense minister Akis Tsochatzopoulos and procurement director Yiannis Sbokos through his company SONAK.

Ericsson Microwave Systems said in a statement that it had paid money to the commercial agent, but did not know what became of it. The Greek order was for the Ericsson airborne surveillance system ERIEYE and was worth SEK 4.9 billion (USD 759 million). Ericsson subsequently sold its defense business to Swedish group Saab.

Approximate Alleged Payments to Foreign Officials: USD 18 million

Business Advantage Allegedly Obtained: Contract for Ericsson's airborne surveillance system worth USD 759 million

Nationality of Foreign Officials: Oman

Summary of Allegations:

According to a Thomson Financial News report on 21 November 2007, Swedish Radio released a story alleging that Ericsson had used a Swiss bank account to make payments to an official in Oman in the late 1990s. According to the allegations, the Company made payments totaling SEK 12 million (approximately USD 1.9 million in November 2007) to the account of the Omani official in close proximity to Ericsson's winning bid for mobile network expansion in Oman (worth SEK 300 million). However, the story quoted a Swedish prosecutor as saying that authorities there will not open an investigation of these allegations due to the expiration of the statute of limitations.

Approximate Alleged Payments to Foreign Officials: SEK 12 million (approximately USD 1.9 million)

Business Advantage Allegedly Obtained: Contract for mobile network expansion in Oman worth SEK 300 million

Nationality of Foreign Officials: Romania

Summary of Allegations:

According to a Business New Europe report on 7 November 2012, allegations of bribery in Romania surfaced due to an arbitration case between Ericsson and its former Romania country manager, Thomas Lundin. In the arbitration case, Ericsson accused Lundin of embezzling money from the Company, while Lundin has insisted that the Company's board in Romania knew that the money was in fact given as bribes to Romanian politicians. According to the story, Lundin alleges that USD 7 million was paid to Romanian officials in exchange for the award of a EUR 40 million contract for the "112" national emergency assistance service to Ericsson in 2003.

The Business New Europe article says that Cristian Sima, the owner of a British Virgin Islands investment company called WBS Holding, made public statements in Icelandic media to the effect that Lundin served as a managing partner in WBS Holding and told him that bribes were paid through the accounts of a Romanian journalist at WBS Holding.

The Wall Street Journal reported on 23 May 2013 that the U.S. Securities & Exchange Commission ("SEC") has initiated an investigation into the allegations of bribery in Romania.

Approximate Alleged Payments to Foreign Officials: USD 7 million

Business Advantage Allegedly Obtained: EUR 40 million contract for servicing of the national emergency assistance number

Nationality of Foreign Officials: Russian Federation

Summary of Allegations:

The Local, a Swedish English-language newspaper, reported on 25 November 2004 that Swiss authorities began investigating allegations of a "payment of one billion crowns from Switzerland via Austria to Russia in connection with a railway building project that was never implemented." The current status of this investigation is unclear.

Approximate Alleged Payments to Foreign Officials: SEK 1 billion

Business Advantage Allegedly Obtained: Unspecified

Enforcement Results

Agencies: China: People's Procuratorate

Results: Prosecution of Individuals

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

Media reports on 18 November 2012 stated that an equipment procurement officer from Ericsson had been questioned by Chinese authorities, as part of the investigation of Li Hua, general manager of the Sichuan office of China Mobile, and Chen Binglan, deputy general manager of the same branch. Li and Chen are in custody. Another Chinese executive, Shen Changfu, former director of the Chongqing Telecom Administration and subsequently general manager of China Mobile Chongqing, was detained in an investigation by the Chinese authorities of procurement contracts with foreign suppliers, including Ericsson. It is unclear whether Ericsson itself is a subject of the Chinese investigation.

Agencies: Costa Rica: National Institute of Electricity

Results:

Year Resolved: 2004

Compliance Monitor:

Ongoing: No

Details:

Transparency International's OECD Anti-Bribery Convention Progress Report 2009 says that Ericsson has been under investigation in Costa Rica for "alleged bribery of officials at the National Institute of Electricity," which is the state-owned Instituto Costarricense de Electricidad ("ICE"). According to Inside Costa Rica's report of 6 October 2004, ICE initiated an investigation into allegations that Ericsson had paid for two ICE officials to travel to Prague. ICE's investigation purportedly determined that the allegations were true, and decided to re-open the bid for 600,000 new cellular phone lines that Ericsson had originally won. Inside Costa Rica reported on 3 June 2005 that Ericsson would proceed with the contract, presumably after having won the bid that was re-opened after ICE's investigation of Ericsson.

Agencies: Greece: Athens Public Prosecutor's Office

Results: Prosecution of Individuals

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

On 11 April 2012, Tsohatzopoulos was arrested on charges of money laundering.

On 2 October 2012, Greek police raided Sbokos' office and residence in Greece. On the same day, Sbokos was arrested for his involvement in kickbacks and money laundering.

On 7 October 2013, following a five-month trial, Tsohatzopoulos was found guilty of setting up a complex money-laundering network to cover the trail of millions of dollars in bribes he's said to have pocketed from government weapon purchases and sentenced to 20 years in prison. In the same trial, 16 other defendants, including Sbokos, Tsohatzopoulos' wife (Vicki Stamati) and daughter (Areti), and several business partners, were also found to have colluded with him to launder the bribe money using a network of offshore companies and property purchases. Sbokos was sentenced to 16 years in prison, both Stamati and Areti to 12.

On 28 September 2015, Liakounakos was arrested and charged with money laundering and bribes in the case of supplying the Greek Armed Force with the radar system ERIEYE of Ericssion. Liakounakos appeared before prosecutor on 29 September 2015 and testified to his role in the scandal before an investigative magistrate on corruption on 2 October 2015. He will remain in custody pending trial.

On 19 June 2016, Ericsson disclosed that seven of its current and former employees have been served with summons in preliminary investigation proceedings by a Greek prosecutor involving allegations of possible corruption. However, they have not been provided with full relevant documentation from the investigation and not yet been questioned by the Greek prosecutor.

Agencies: Sweden: Prosecution Authority, Anti-Corruption Unit

Results:

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

On 12 December 2019, Sweden’s Prosecution Authority confirmed that it launched a preliminary investigation into Ericsson, triggered by information that came to light from its collaboration with the U.S. corruption probe into the company.

Agencies: Switzerland: Federal Public Prosecutor's Office

Results: No Action

Year Resolved: 2003

Compliance Monitor:

Ongoing: No

Details:

According to press reports from 26 May 2003, the Swiss Federal Public Prosecutor's Office began investigating Ericsson in 2003 for alleged bribery of officials in Bulgaria, Libya, Poland and Slovenia in connection with mobile contracts. The investigation was apparently prompted by reports from Swiss bank UBS after finding CHF 550 million in irregularities in the Company's financial transactions. According to a report from Reuters on 10 September 2003, the Swiss investigators did not find enough evidence to charge Ericsson with bribery.

Agencies: Switzerland: Unspecified

Results:

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

The Local, a Swedish English-language newspaper, reported on 25 November 2004 that Swiss authorities began investigating allegations of a "payment of one billion crowns from Switzerland via Austria to Russia in connection with a railway building project that was never implemented." The current status of this investigation is unclear.

Agencies: United States: Department of Justice, United States: Securities and Exchange Commission

Results: Cease-and-Desist Order, Compliance Monitor, Deferred Prosecution Agreement

Year Resolved: 2019

Compliance Monitor: Yes

Ongoing: No

Details:

On 23 May 2013, the Wall Street Journal reported that the SEC has initiated an investigation into the allegations of bribery involving Ericsson in Romania.

On 17 June 2016, Ericsson announced through a press release that Ericsson had received a voluntary request from US authorities to answer questions related to Ericsson's anti-corruption program and questions related to the FCPA.  Ericsson is cooperating with the US authorities. SvD Näringsliv reported, on 16 June 2016, that both the SEC and DOJ are investigating Ericsson's activities in China.

On 25 September 2019, Ericsson announced that it had reserved approximately US $1 billion for the resolution of the investigations by the DOJ and SEC.

On 6 December 2019, Ericsson reached a settlement with the DOJ and SEC regarding its violations of the anti-bribery, books and records, and internal controls provisions of the FCPA in Saudi Arabia, China, Djibouti, Vietnam, Indonesia, and Kuwait between 2011 and 2017. Ericsson agreed to pay US $458,380,000 in disgorgement and US $81,540,000 in prejudgment interest to the SEC, and also entered into a three-year deferred prosecution agreement with the DOJ, agreeing to pay a criminal penalty of US $520,650,432 and to maintain an independent compliance monitor. Ericsson Egypt Ltd pleaded guilty to one count of conspiracy to violate the anti-bribery provisions of the FCPA.

ENTITIES / INDIVIDUALS INVOLVED
  • Telefonaktiebolaget LM Ericsson ("Ericsson")
  • China Mobile - Sichuan branch
  • Chongqing Ericsson Technology Co., Ltd (the sole subsidiary of Ericsson in Western China)
  • Thomas Lundin (former Romania country manager for Ericsson)
  • Ericsson (China) Company Ltd.
  • Ericsson (China) Communications Co., Ltd.
  • Ericsson Hong Kong
  • Nanjing Ericsson Panda Communications Company Ltd
  • PT Ericsson Indonesia
  • Ericsson Vietnam Co. Ltd
  • Ericsson Resource & Competence Center Sdn. Bhd
  • Ericsson Egypt Ltd.
Details Of How Conduct Was Discovered

Discovery Method: Media or Investigative Report

Details:

Country:

Discovery Method: Discovered from separate investigation

Details:

In 2019, the U.S. corruption probe into Ericsson triggered Sweden Prosecution Authority's preliminary investigation into Ericsson's alleged corruption misconducts.

Country:

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