Skip to content


Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

What’s the collateral damage from Ericsson’s DPA breach?

Earlier this month, telecom giant Ericsson agreed to resolve breaches of its 2019 FCPA DPA by paying $206.7 million in new penalties and pleading guilty to charges deferred by the DPA — one count of conspiracy to violate the FCPA anti-bribery provisions and one count of conspiracy to violate the internal controls and books and records provisions.

The new financial penalty of $206.7 million isn’t nothing, but it’s small in relation to Ericsson’s 2022 revenue of $26.9 billion. The guilty plea, however, could be a lot more significant because of potential collateral damage.


In criminal cases, guilty pleas by parent companies almost never happen. The DOJ knows how much downstream harm they can do. Even in the most egregious FCPA cases, the usual enforcement pattern is for a foreign subsidiary to plead guilty while the parent enters into a deferred prosecution agreement. That usually shields the parent and uninvolved subsidiaries from major fallout.

That happened with Ericsson in 2019. The parent company got a DPA while a subsidiary in Egypt pleaded guilty to one count of conspiracy to violate the FCPA anti-bribery provisions.

The DOJ encourages federal prosecutors to consider collateral damage. The Justice Manual (the U.S. Attorneys handbook) says in a section headed “Collateral Consequences”:

In the corporate context, prosecutors may take into account the possibly substantial consequences to a corporation’s employees, investors, pensioners, and customers, many of whom may, depending on the size and nature of the corporation and their role in its operations, have played no role in the criminal conduct, have been unaware of it, have been unable to prevent it, or have been victimized by it. . . . Obtaining a conviction may produce a result that seriously harms innocent third parties who played no role in the criminal conduct.

What are some potential consequences when a parent company pleads guilty to an FCPA violation?

Before going further, an important caveat. Ericsson agreed to plead guilty not to substantive FCPA offenses but to FCPA-related conspiracy offenses. The difference between them could mean huge differences in outcomes. I’m using Ericsson’s DPA breaches and subsequent guilty plea to talk about potential collateral damage from any FCPA guilty plea. Still, I don’t know the actual outcome for Ericsson. No one does.

Debarment from public procurement. Guilty pleas might trigger discretionary or automatic reviews. The reviews could result in prospective disqualification or retroactive action for existing contracts. Many governments and their agencies have adopted suspension and debarment provisions triggered by “integrity-related offenses.” Under most regimes, that would include overseas bribery convictions through guilty pleas. Suspensions and debarments have various durations, from days or months to years.

Licensing eligibility. Telecommunications companies depend on government-issued licenses to operate. “Good moral character” can be an eligibility threshold. In the EU, member countries are required to debar candidates or tenderers for public contracts who have been “the subject of a conviction by final judgment” of corruption. It doesn’t matter if the conviction was outside the EU, but variations in national legislation among EU members can produce different outcomes.

Ability to borrow from public and private lenders. Internal credit-worthiness rules at private banks can impact the eligibility of borrowers with past guilty pleas. Also, originators for syndicated loans may face hurdles from participating banks. Public lending institutions like the World Bank may follow similar eligibility rules.

Breach of debt covenants. There can be negative consequences for borrowers who have issued public debt securities. Guilty pleas to certain crimes can be breaches of conditions. Bondholders or their managers may have a right (or even the obligation) to require repayment or obtain additional assurances.

Due diligence responses. Questionnaires typically cover past compliance. Whether disclosure of FCPA-related guilty pleas would matter depends on the situation. But in our era of ESG, anything touching corporate citizenship and integrity is potentially significant.

Media treatment. We all know how labels and tag lines can stick. Years after Siemens’ FCPA enforcement action in 2008, reports about the company still mentioned what happened, and “FCPA violator” almost became part of Siemens’ name. (Note that Siemens AG — the corporate parent — pleaded guilty to two counts of violating the FCPA’s internal controls and books and records provisions. Siemens’ subsidiaries in Bangladesh and Venezuela each pleaded guilty to one count of conspiracy to violate the anti-bribery and books and records provisions. The absence of parent-level anti-bribery admissions probably saved it from automatic debarment for public contracts in the EU and elsewhere.)

Future enforcement. Ericsson’s guilty plea places it in special jeopardy if it should commit future FCPA offenses. The guilty plea terminated the 2019 DPA and extinguished Ericsson’s “cooperation credit” that the DOJ factored into the earlier resolution. Not being able to point to earlier cooperation, and now having a guilty plea on its record, make a future declination or DPA with lenient terms less likely.


The collateral damage I’ve described may or may not result from Ericsson’s guilty plea. As I said at the start, no one can say what happens now.

And I’ll say again: Ericsson pleaded guilty not to substantive FCPA counts but to two FCPA-related conspiracy counts. Conspiracy offenses might well produce different results than substantive offenses.

But as Damian Williams, the U.S. Attorney from New York, said last week, Ericsson is “now facing a steep price for its continued missteps.”

That price may go beyond the $206.7 million penalty the DOJ imposed for Ericsson’s DPA breaches.

Share this post


Comments are closed for this article!