Ericsson, global telecom equipment manufacturer said it is setting aside $1 billion (SEK 12bn) to cover the cost of an investigation by the United States government into Ericsson’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA).
A statement by the telecom company yesterday noted that the investigation is being conducted by United States Securities and Exchange Commission (SEC) and the United States Department of Justice (DOJ) since 20113 and 205 respectively which is still ongoing.
The investigation covers a period ending Q1 2017 and revealed breaches of the company’s Code of Business Ethics and the FCPA in six countries: China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam.
The company previously communicated that the resolution of the investigations will result in material financial and other measures. “While Ericsson cannot comment in detail on the ongoing process with the U.S. authorities, the company can with current visibility now estimate the cost and thus make a provision, which will impact the third quarter 2019 results by SEK 12 billion,” the statement said.
“The provision constitutes the Company’s current estimate of expenditure related to resolving the U.S. investigations, of which the combined monetary sanctions from SEC and DOJ is estimated at USD 1 billion, and the remainder pertains to other costs related to resolving the investigation.
The provision will be booked as Other Operating Expenses in the income statement of Segment Emerging Business and Other. Börje Ekholm, president and CEO, said: “Over the last two years we have operationally turned around our company and established a strong portfolio and competitive cost structure. With today’s announcement we confront another legacy issue and take the next step in resolving it.
“We have to recognise that the company has failed in the past and I can assure you that we work hard every day to build a stronger Ericsson, where ethics and compliance are cornerstones in how we conduct business.
“Over the past two years, we have made significant investments in our ethics and compliance program including our investigative capabilities and have taken actions against employees who have transgressed our values and standards.”