Thirty-seven Ericsson shareholders are suing the company for up to $300 million over losses claimed to have been suffered following Ericsson’s admission over Iraq business practices where it paid bribes to terror groups. More claims are expected to follow.
The shareholders claim in the Swedish court and is not connected to action by US authorities. On December 6, 2019, Ericsson entered into a Deferred Prosecution Agreement (DPA) with the US Department of Justice for violations of the US Foreign Corrupt Practices Act over several years. The DPA involved, among other things, the payment of a fine of around £750,000.
Ericsson has been present in Iraq since 2003 and had known since 2011 and it had been involved in violations of its own code of business ethics, including corruption and tax violations. In 2019, Ericsson carried out an extensive internal investigation regarding the events in Iraq, an investigation that resulted in a 79-page long undisclosed report. This report was not released to the public and its content is hidden.
In February last year, Ericsson admitted the existence and contents of the report after it was leaked to the media through the International Consortium of Investigative Journalists (ICIJ). The admission of the existence of the secret internal report came two years after it was completed.
The shareholders claim that the report and its contents constitute a failure to inform the public of inside information as defined under EU Market Abuse Regulations (MAR) of the EU.
The summons application states that “Article 17.1 MAR stipulates that an issuer must inform the public as soon as possible of inside information that directly concerns that issuer. The information must be made public in a way that gives the public quick access to it and the opportunity for a complete and accurate assessment at the right time.”
According to the claim, as Ericsson “only released certain information to the public in February 2022 about its actions in Iraq, it has failed to comply with its obligation to publish the inside information as soon as possible according to Article 17.1 MAR. Instead, Ericsson has kept the information secret for a period of at least two years and two months. Ericsson has thereby breached its obligations under MAR.”
The claim highlights that the shareholder plaintiffs in February 2022 became aware of the existence of information that Ericsson had been “involved in, among other things, serious compliance violations and violations of the Company’s own code of business ethics, including corruption and tax violations. In addition, Ericsson had made payments likely to have contributed to the financing of the terrorist organization IS in Iraq and that Ericsson had paid bribes for and used an alternative transport route through IS-controlled territory in order to circumvent Iraqi customs duties, contrary to local law.”
“Ericsson carried out an extensive internal investigation regarding the events in Iraq, an investigation that resulted in a 79-page long report. However, Ericsson had kept secret all this information, which includes both the information on payments to IS, bribes in Iraq and other compliance and tax violations as well as the existence of the internal investigation and the existence and content of the report. Ericsson has not yet published the report or detailed its content.”
On March 2, 2022, Ericsson disclosed in a press release that the DoJ had concluded that the Company had provided insufficient information to the DoJ at the time of entering into the DPA and had breached its obligations under the DPA by not providing sufficient information regarding the Internal Investigation. On March 2, 2023, Ericsson reached a new settlement with the DoJ which included an additional fine of approximately $200 million. The settlement does not cover Ericsson’s actions in Iraq as such, which is subject to continued investigation by the DoJ
READ THE FULL CLAIM DOCUMENT HERE
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