Ericsson predicted it would incur costs of more than $1 billion to settle an investigation by US authorities into breaches of corruption rules spanning six markets, with the financial hit set to be booked in its Q3 results.
The Department of Justice and Securities and Exchange Commission are investigating potential breaches of the US Foreign Corrupt Practices Act and the company’s own ethics policies. Ericsson is making provision of SEK12 billion ($1.22 billion) to cover the expected fee and related costs.
Ericsson said it was unable to go into the specifics of the case, but stated it relates to activities in China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam prior to the end of Q1 2017.
The vendor said its internal assessment uncovered “several deficiencies, including a failure to react to red flags and inadequate internal controls”, which enabled some employees to get round the policies “for illegitimate purposes”.
Disciplinary measures have been taken against those involved and the company subsequently updated its internal ethics and compliance programmes.
It first announced the probe in October 2018, but did not disclose the potential scale of the financial impact.
In a conference call, CEO Borje Ekholm (pictured) said the issue was a “sad chapter” in the company’s history, adding it was embarrassing it had not taken firm action when first questioned on the issue by US authorities in 2013.
“Over the last two years we have operationally turned around our company and established a strong portfolio and competitive cost structure. With today’s announcement we confront another legacy issue and take the next step in resolving it.”Subscribe to our daily newsletter Back