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Catch of the Week: Ericsson Agrees to Pay Record-Setting $1 Billion for FCPA Violations

Posted  December 12, 2019

This week’s “Catch of the Week” is a Swedish fish: Telefonaktiebolaget LM Ericsson, the telecommunications giant based in Stockholm, agreed to pay over $1 billion in penalties, including $540 million to the SEC and $520 million to the DOJ, for violating the Foreign Corrupt Practices Act (“FCPA”).  This is one of the largest FCPA settlements in history.  Ericsson’s corrupt conduct was pervasive and long-standing:  it involved high-level executives, spanned seventeen years, and concerned business activities in China, Djibouti, Vietnam, Indonesia, Kuwait, and Saudi Arabia.

The FCPA is a U.S. law designed to curb the direct or indirect payment of bribes to foreign government officials aimed at obtaining, retaining or securing any type of business advantage.  Bribery is defined broadly and includes offering or promising things of value such as travel and entertainment, gifts or even hiring relatives of foreign government officials.  The FCPA also prohibits falsifying company books and records or failing to maintain adequate internal controls to prevent bribery or even the risk thereof from taking place.  Among other individuals and entities, the FCPA covers companies whose stock trades or is listed on national securities exchange in the U.S.  Violations are primarily investigated by the SEC and the DOJ – although other agencies like the CFTC, the IRS and foreign regulators might also be involved.  Whistleblowers, including non-U.S. citizens living abroad, with knowledge of FCPA violations may be able to report wrongdoing under the SEC Whistleblower Program.

Using Third Parties to Pay Bribes and Falsifying Records to Conceal Improper Payments

The bribery scheme devised and implemented by Ericsson’s subsidiaries – with knowledge of senior management – involved retaining third party “consultant” entities some of which were owned by relatives of foreign government officials.  The agreements were, in reality, “sham” contracts put in place to create slush funds ultimately used to pay foreign government officials.  For instance, in Djibouti, Saudi Arabia, and China, Ericsson used third parties to pay around $62 million in bribes while obtaining close to $427 million in profits from business obtained through illicit payments.  In addition, and to conceal improper payments, fake invoices were generated and later recorded in the subsidiaries’ books and records as legitimate expenses.

Paying Lavish Trips and Entertainment

Ericsson’s subsidiaries covered various international trips of foreign government officials in decision-making positions, including employees of state-owned companies.  These trips had no obvious business purpose.  In one instance, Ericsson paid around $70,000 in plane tickets for a senior Saudi state-owned company employee and seven of his relatives to travel to Los Angeles.  In other instances, the Swedish company paid for spa services, shopping, and accommodations at five-star hotels.

The Ericsson settlements show that the FCPA continues to be a high enforcement priority for the U.S. government.  U.S. Attorney Geoffrey S. Berman of the Southern District of New York stated:  “Today’s guilty plea and surrender of over a billion dollars in combined penalties should communicate clearly to all corporate actors that doing business this way will not be tolerated.”


If you have information about possible FCPA violations, and would like to talk to the whistleblower attorneys at Constantine Cannon, please contact us for a confidential consultation.

Tagged in: Catch of the Week, FCPA, Financial and Investment Fraud,