Ericsson today said it will apportion $1.23 billion in its third quarter 2019 earnings to cover an estimated fine of $1 billion, plus other related costs, related to a corruption investigation by the U.S. Securities and Exchange Commission and the U.S. Department of Justice.
Ericsson has been cooperating since 2013 with the SEC and since 2015 with the DOJ in regard to Ericsson's compliance with the U.S. Foreign Corrupt Practices Act (FCPA).
The company says the investigation covers a period ending in the first quarter of 2017 and involves its activities in six countries: China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam. Ericsson has not said what the corruption investigation pertains to, although some press reports have said it relates to bribery scandals dating back more than a decade.
The FCPA is a U.S. law consisting of both anti-bribery provisions and accounting transparency provisions. It requires that every company listed on a U.S. stock exchange must maintain accurate and detailed records and maintain an internal control system to ensure the accuracy of those records.
In a statement today, Ericsson said, “It is the company's assessment that the breaches are the result of several deficiencies, including a failure to react to red flags and inadequate internal controls, which enabled a limited number of employees to actively circumvent internal controls for illegitimate purposes.”
Apparently, some employees were fired and disciplinary measures were taken against other individuals.
Hans Vestberg served as CEO of Ericsson from 2010 through July 2016, when he was ousted from the company following poor financial results. He would have led the company during the period when the alleged corruption occurred and also during the time when Ericsson began cooperating with the SEC and DOJ. In January 2017, Ericsson named Borje Ekholm as president and CEO. Hans Vestberg has gone on to become CEO of Verizon.