Shares in Swedish Company (Ericsson) Plunge on Iraq Corruption Admission
Swedish kit vendor Ericsson has been forced to reveal the outcomes of an internal inquiry into the historical conduct of some of its employees in Iraq and investors are running scared.
“Ericsson has continued to receive detailed media inquiries from Swedish and international news outlets,” opened the announcement. “Their interest pertains to information detailed in a 2019 internal investigation by the company, on conduct in Iraq.” The investigation focused on activities between 2011-2019, so they include some of the time current CEO Börje Ekholm was in charge.
The investigation uncovered a catalogue or dodgy-dealing, back-handers and ‘identified evidence of corruption-related misconduct’. They included: making a monetary donation without a clear beneficiary; paying a supplier for work without a defined scope and documentation; using suppliers to make cash payments; funding inappropriate travel and expenses; and improper use of sales agents and consultants.
“The investigating team also identified payments to intermediaries and the use of alternate transport routes in connection with circumventing Iraqi Customs, at a time when terrorist organizations, including ISIS, controlled some transport routes,” said the announcement. “Investigators could not determine the ultimate recipients of these payments. Payment schemes and cash transactions that potentially created the risk of money laundering were also identified.”
So Ericsson seems to be admitting the possibility that its representatives may have made payments to terrorist organizations, which is obviously not a great look. We have no idea how possible it was to do business in Iraq without paying off non-governmental groups that controlled parts of the country during that period, but nobody was forcing Ericsson to be there in the first place.
A few employees have been sacked and the usual lessons learned, but that’s what Ericsson said when it settled with the US for violating corruption laws in 2019. That parts of the company may have been complicit in further corruption that very year, and that it may have involved ISIS, is bound to make people wonder what other skeletons the company has in the closet and how much it may yet have to pay in fines, of which the US somehow seems to be the default and sole beneficiary.
When the last scandal was resolved, Ekholm was able to infer it was the product of a legacy culture over which he had no direct influence (although he was previously Chairman). He can’t do that this time so, as Light Reading explores, this latest scandal is a major issue for him personally. Ericsson’s share price was down 13% at time of writing and it has a job on its hands convincing investors this will be the last of its corruption scandals.