Ericsson settles Nokia bribery-related damages claim for $97M

Ericsson has agreed to pay Nokia EUR 80 million (roughly $97 million) for a damages claim related to bribery and corruption investigations previously settled with U.S. authorities.

In 2019 Ericsson was fined more than $1 billion to resolve separate but related cases with the U.S. Department of Justice (DoJ) and the Securities and Exchange Commission (SEC) over violations of the U.S. Foreign Corrupt Practices Act (FCPA).

The FCPA consists of both anti-bribery and accounting transparency provisions. The investigations spanned corrupt actives in six countries outside of the U.S., including Djibouti, where there was a guilty plea for one instance of bribery.

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With the DoJ, Ericsson agreed to three years of compliance monitoring by a third party that started in June 2020, after which bribery charges would be dismissed.

On Wednesday, Ericsson said the settlement amount to be paid to its Finnish rival Nokia “reflects uncertainty, risk, expense, and potential distraction from business focus associated with a potentially lengthy and complex litigation.”

Nokia said the information in Ericsson’s press release is accurate but declined to comment further on the agreement.  

The Swedish vendor disclosed Q2 impacts from the agreement, including EUR 80 million ($96.5 million) impact on earnings before interest and taxes (EBIT) and EUR 26 million (about $31.4 million) on cashflow.

Impacts to cash-flow will continue as the remainder of the settlement amount will be paid in similar installments in 2022 and 2023, respectively, according to Ericsson.

Ericsson didn’t disclose additional details, classifying terms as confidential.

The announcement also emphasized Ericsson’s “zero-tolerance policy” for corruption, noting it’s worked hard in recent years to strengthen an Ethics and Compliance program.

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The Swedish vendor had been cooperating with the SEC on the investigation since 2013 and the DoJ since 2015.

According to the DoJ, Ericson’s corrupt conduct spanned 17 years starting in 2000 and involved high-level executives. Ericsson admitted to conspiring with others to violate the FCPA with a long-running scheme including bribe payments to government officials to win contracts, falsifying books and records, and failing to implement reasonable internal accounting controls, according to the Justice Department.

“Ericsson used third party agents and consultants to make bribe payments to government officials and/or to manage off-the-books slush funds. These agents were often engaged through sham contracts and paid pursuant to false invoices, and the payments to them were improperly accounted for in Ericsson’s books and records,” the DoJ said in a 2019 settlement announcement that covered Ericsson’s criminal conduct in Djibouti, China, Vietnam, Indonesia and Kuwait.