Ericsson Estimates Costs in Worldwide Corruption Probes

Ericsson said it's expects to pay 12 billion kronor, about 1,2 billion US dollars, to resolve investigations in seven different countries. Most of the funds are planned for penalties in United States, around 10 billion kronor, while others will be payed in China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam.

The company previously communicated that the resolution of the investigations will result in material financial and other measures. While Ericsson cannot comment in detail on the ongoing process with the U.S. authorities, the company can with current visibility now estimate the cost and thus make a provision, which will impact the third quarter 2019 results by 12 billion kronor, the company said in a statement.

The provision constitutes the Company’s current estimate of expenditure related to resolving the U.S. investigations, of which the combined monetary sanctions from SEC and DOJ is estimated at one billion US dollars, and the remainder pertains to other costs related to resolving the investigation. The provision will be booked as Other Operating Expenses in the income statement of Segment Emerging Business and Other.

In the course of the investigations, Ericsson identified breaches of its Code of Business Ethics and the FCPA. 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. Disciplinary measures, including terminations where appropriate, have been taken against identified individuals determined to have breached the Code of Business Ethics.

“Over the last two years we have operationally turned around our company and established a strong portfolio and competitive cost structure. With this announcement we confront another legacy issue and take the next step in resolving it. We have to recognize that the company has failed in the past and I can assure you that we work hard every day to build a stronger Ericsson, where ethics and compliance are cornerstones in how we conduct business. Over the past two years, we have made significant investments in our ethics and compliance program including our investigative capabilities and have taken actions against employees who have transgressed our values and standards,“ said Börje Ekholm, President and CEO, Ericsson.