In a statement Friday about its recent $1 billion FCPA resolution, Swedish telecom Ericsson made some frank admissions about its bad actors, and provided rare insight into what simultaneous FCPA negotiations with the DOJ and SEC are like.
The company also gave more details about what it’s been doing to fix its compliance and ethics program.
Here’s that FCPA statement taken verbatim from LM Ericsson Telephone Company’s Form 6-K:
Ericsson reached a resolution on U.S. FCPA investigations
On December 7, 2019, Ericsson announced the resolution of the previously disclosed investigations by the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) regarding the Company’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA). While the DOJ and SEC conduct separate investigations, the same facts have been shared by Ericsson with both authorities.
The resolution relates to historical FCPA breaches ending Q1 2017. While the Company had a compliance program and a supporting control framework, they were not adequately implemented. Specifically, certain employees in some markets, some of whom were executives in those markets, acted in bad faith and knowingly failed to implement sufficient controls. They were able to enter into transactions for illegitimate purposes and, together with people under their influence, used sophisticated schemes in order to hide their wrongdoing. The resolution marks the end of the FCPA-related investigations into Ericsson and its subsidiaries undertaken by the DOJ and the SEC.
The DOJ proceeding is a criminal enforcement action and the SEC proceeding is a civil enforcement action. The agencies resolve their investigation independently of one another using their own discretion and applying different standards of proof. As a result, the DOJ and SEC have come to different conclusions based on the same facts.
Ericsson has agreed to enter into a Deferred Prosecution Agreement (DPA) with the DOJ to resolve criminal charges relating to violation of bribery provision of the FCPA in Djibouti. The DPA also resolves criminal charges relating to violations of the accounting provisions of the FCPA in China, Djibouti, Indonesia, Kuwait, and Vietnam. In connection with the matter in Djibouti, Ericsson’s Egyptian subsidiary pled guilty to bribery. As part of the resolution Ericsson paid a fine of USD 520,650,432.
Ericsson has agreed with the SEC to the entry of a judgment to resolve claims related to allegations of violations of the accounting provisions of the FCPA in China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam and of the bribery provisions of the FCPA in Djibouti, China and Saudi Arabia. As part of the resolution, Ericsson paid financial sanction of USD 458,380,000, plus pre-judgement interest of USD 81,540,000.
As part of the settlement, Ericsson has agreed to engage an independent compliance monitor for a period of three years while the Company continues to undertake significant reforms to strengthen its Ethics & Compliance program.
In parallel to the investigations, the Company has since 2016, together with external expert advisors, conducted a comprehensive review of the Company’s anti-corruption program. Based on this review, Ericsson has been taking significant steps to improve its Ethics and Compliance program. Pursuant to the resolutions, Ericsson has agreed to continue enhancing its internal controls and its compliance program.
Improvements to Ericsson’s Ethics and Compliance program include:
• Additional resources for the Compliance and Investigations functions
• Reorganizing the allegation management process to ensure a centralized, professional intake of allegations, conduct of investigations and remediation
• Refining the risk assessment process to consist of a tiered approach and systematic risk mitigation methodology
• Enhancing the due diligence process of third-parties, including the overall monitoring of third-party engagements
• Introducing more sophisticated analytic tools to better identify and prevent high-risk transactions and engagements
• Enhancing the ethics and compliance vetting process for senior leaders
• Refreshing compliance training modules for employees, including workshops and face-to-face training for employees in exposed roles
• Enhancing the internal anti-corruption and compliance related awareness campaigns (including the Company’s zero tolerance for corruption).
Ericsson’s Form 6-K filing from January 24, 2020 was provided by FCPA Tracker.