17 November 2021

Ericsson’s violation of the terms of its Deferred Prosecution Agreement concluded with the Department of Justice and the Securities and Exchange Commission

On 22 October 2021, Ericsson indicated that it received correspondence from the US Department of Justice (DoJ) accusing the group, by failing to disclose certain documents and factual information, of having breached certain obligations imposed by the Deferred Prosecution Agreement (DPA) signed on 6 December 2019 with the U.S. authorities [1].


Let’s take a look back at the details of this case which illustrates some of the DoJ’s recent decisions in the fight against economic crime.


I. Recognition of Ericsson’s corruptive system

In 2019, Ericsson agreed to pay more than a billion dollars to close the investigations conducted by the US authorities for violation of the Foreign Corrupt Practices Act (FCPA),[2] admitting having put in place with other companies, from the 2000s until 2016, a system consisting in paying bribes, falsifying accounting documents while not implementing adequate internal accounting controls. [3]

Ericsson used intermediaries to pay bribes to foreign officials as well as to manage slush funds not included in the accounting records. These intermediaries were often engaged through fictitious contracts and paid via false invoices inappropriately recorded in the company’s accounts.[4]

The investigation revealed that Ericsson’s subsidiaries succeeded, through this system of bribery of foreign officials, to obtain several highly lucrative contracts with public telecommunications companies in several countries, such as Djibouti, China, Vietnam, Indonesia, Kuwait, or Saudi Arabia. To obtain those contracts, Ericsson inter alia paid, through several intermediaries, for travel and leisure to the benefit of those officials and their family members.[5]

For example, between 2012 and 2013, Ericsson made payments to two Saudi consultants through one of its subsidiaries via fictitious contracts for services never performed. These payments were authorized knowing – or recklessly ignoring – that there was a high probability that at least some of these commissions would be passed on to public officials of Saudi state-owned enterprises to secure telecommunications contracts. The internal procedures put in place by the company were not respected since the prior due diligence mechanism of the group’s counterparties was initiated almost a year after the signing of these fictitious contracts. By paying around $40 million to the two consultants, Ericsson managed to secure nine contracts from Saudi state-owned enterprises with a total value of more than $700 million.[6]


II. Terms of the DPA with the Department of Justice and the Securities and Exchange Commission

In addition to a fine of more than $1 billion, the DPA concluded with the DoJ and the Securities and Exchange Commission[7] (SEC) also requires Ericsson to (i) continue to cooperate with the DoJ in all ongoing investigations and prosecutions relating to its alleged conduct, including those concerning individuals related to this case, (ii) improve its compliance program and (iii) use an independent monitor for three years.[8]

The authorities imposed this very constraining agreement to Ericsson for two reasons: on the one hand, the company did not voluntarily disclose its conduct to the DoJ, and on the other hand, there was an involvement of the group’s senior executives in corrupt practices in several countries. [9] However, the authorities also found that Ericsson cooperated by (i) conducting a thorough internal investigation, (ii) regularly informing the authorities of its progress, (iii) voluntarily making its foreign-based employees available to the authorities for interviews in the United States, (iv) producing numerous documents to the authorities and (v) disclosing certain misconduct of which the DoJ was not yet aware.[10]


III. Violation of the DPA

On October 21, Ericsson, after referring to the DoJ’s correspondence alleging[11] non-compliance with certain obligations under the DPA, indicated having a right of written reply to explain the nature and circumstances of the violation, as well as the measures taken to remedy the situation. [12]

The company also stated that it intended to respond to the DoJ and continue to cooperate in accordance with the terms of the DPA, including the document production requirements.[13]

On several occasions, the DoJ already warned the public about the consequences of violating the terms of a DPA although this situation is in practice particularly rare.[14]

The correspondence addressed to Ericsson comes after a senior DoJ official said in early October 2021 that violating agreements with the DoJ would henceforth have serious repercussions for violators.[15]

This case seems to illustrate the DoJ’s stated willingness to deal severely with breaches of such agreements. This approach echoes Deputy Attorney General Lisa Monaco’s speech, announcing a tougher DoJ approach to fighting economic crime.[16]

Although it is premature at this stage to predict the outcome of this case, it reminds to the various actors (companies, organizations, practitioners) (i) the importance of the effective implementation of a compliance program covering all the activities of an international group as well as (ii) the particular attention that should be paid to the monitoring of the obligations imposed by a DPA after its conclusion with the prosecuting authorities.

Related content

2 February 2023
ICC Mexico – Sapin II and France’s efforts to tackle corruption
Stéphane de Navacelle is invited by the ICC of México to talk about the Sapin II law and France's efforts...
Press review
Press review - Week of 23 january 2023
27 January 2023
Press review – Week of 23 January 2023
In this week’s press review, you will find two cases which were dismissed, one concerning the defective management of the...
Press review
Week of 16 January 2023
20 January 2023
Press review – Week of 16 January 2023
This week press review includes the latest news on criminal law, business criminal law and criminal procedure. Thus, this review...
Press review
Press review - Week of 9 january 2023
13 January 2023
Press review – Week of 9 January 2023
This week in the press review, a dismissal of the Chlordecone case in the French West Indies and a $17.2...
Press review
Week of 2 January 2023
6 January 2023
Press review – Week of 2 January 2023
This week in the press review, two Members of the European Parliament have been subjected to immunity waiver proceedings in...
Press review
Press review - Week of 26 december 2022
30 December 2022
Press review – Week of 26 December 2022
In this week's news, there are several important events in criminal law. First, the criminal Charles Sobhraj, otherwise known as...
Press review
Press review - Week of 19 december 2022
23 December 2022
Press review – Week of 19 December 2022
This week's press review presents the outcome of an investigation by the Paris Bar Council against several lawyers for ethical...
Press review
Press review - Week of 12 december 2022
16 December 2022
Press review – Week of 12 December 2022
In this press review, from a judicial point of view, there are several important events: The Court de Cassation ruled...
Press review
Week 5 December 2022
9 December 2022
Press review – Week of 5 December 2022
In this press review, you will have the opportunity to discover two court decisions. The first one, is issued by...
6 December 2022
Launch of the international guide to corporate internal invgestigations
NAVACELLE co-hosted the launch of the ABA guide in Dubai along with Al Tamimi & Company, Bär & Karrer and...
Press review
2 December 2022
Press review – Week of 28 November 2022
In this press review, you will discover several important judicial events: the French Supreme Court clarified the status of victim...
Press review
Week of 21 November 2022
25 November 2022
Press review – Week of 21 November 2022
In this press review, you will discover the opening of a preliminary investigation by the French National Financial Prosecutor’s Office...