Ericsson has disclosed evidence of corruption-related misconduct in its Iraq operations and cannot dismiss the possibility that some payments reached armed groups, including ISIS.
The Swedish telecommunications company launched an internal inquiry in 2019 after detecting unusual expense claims dating back to 2018. That investigation reviewed activity from 2011 through 2019 and examined the conduct of employees, vendors and suppliers in Iraq.
In an official statement, Ericsson said the investigation “identified evidence of corruption-related misconduct,” including:
- Making a monetary donation without a documented, identifiable beneficiary.
- Paying suppliers for work that lacked defined scope and supporting documentation.
- Using suppliers to funnel cash payments.
- Funding inappropriate travel and personal expenses.
- Improper engagement and use of sales agents and consultants.
Ericsson also reported breaches of its internal financial controls, undisclosed conflicts of interest, tax non-compliance, and instances of obstruction during the inquiry.
Investigators uncovered payment schemes and cash transactions that created money-laundering risks. The review flagged payments to intermediaries and the use of alternate transport routes to avoid Iraqi customs at times when some routes were controlled by terrorist groups, including ISIS.
While Ericsson did not find evidence that employees were directly financing terrorist organisations, the company acknowledged that the identified intermediary payments and potential money-laundering paths do not rule out indirect flows of funds to such groups.
As a result of the investigation, several employees were dismissed and the company implemented multiple disciplinary and remedial measures. Ericsson also terminated several third-party relationships identified as problematic.
Ericsson says it is working with external counsel to reinforce and expand existing measures, prioritising Iraq for enhanced training, strengthened policies and procedures, and tighter third-party management processes. These steps aim to close gaps in internal controls and reduce the risk of recurrence.
“We are committed to conducting business responsibly and to upholding ethical standards in anti-corruption, humanitarian and human rights matters,” Ericsson stated.
The company emphasised its adherence to the United Nations’ guiding principles on business and human rights and to applicable international laws.
This announcement follows a previous investigation that resulted in a roughly $1 billion settlement in 2019, after a unit of Ericsson AB admitted to a years-long corruption scheme spanning at least five countries in Asia and the Middle East.
At the time, US authorities described the scheme as a pattern of slush funds, bribes and other illicit payments used to secure business. Officials said the settlement and guilty plea should signal that such conduct would not be tolerated.
The earlier case re-emerged in October of last year when the US Department of Justice alleged that Ericsson had violated the terms of the settlement by failing to produce certain documents.
Although Ericsson’s disclosure about the Iraq findings shows a measure of transparency, the news unnerved investors: the company’s shares fell roughly 15 percent immediately after the announcement and remained about 12 percent lower at the time of reporting.
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