Ericsson makes $1.2 billion provision to settle U.S. probes, flags third-quarter hit

Mobile telecom gear maker Ericsson said on Thursday its third-quarter results will be hit by a 12 billion Swedish krona ($1.23 billion) provision it was making for U.S. probes into past corruption allegations.

The investigations, by the U.S. Securities and Exchange Commission and the Department of Justice, are linked to Ericsson’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA), Ericsson said.

The Swedish company said it estimated a monetary sanction of $1 billion, along with additional related costs, to settle the investigations.

“The process to find a resolution is still ongoing,” Ericsson said.

The investigation covers a period ending with the first quarter of 2017 and revealed breaches of Ericsson’s Code of Business Ethics and the FCPA in China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam.

Ericsson said the breaches were the outcome of several deficiencies, including the company’s failure to react to red flags and inadequate internal controls.

“We have to recognize that the company has failed in the past,” Ericsson Chief Executive Borje Ekholm said.

Ericsson said this year it expected the investigation would result in “material financial and other measures”, and Handelsbanken analyst Daniel Djurberg said on Thursday that the anticipated fine of $1 billion was in line with market expectations.

“If the market believes that 1 billion is the end-game, then I don’t think Ericsson shares should drop on this,” Djurberg told Reuters.

Ericsson initially received questions from the SEC in 2013 and from the DOJ in 2015, and said it had been voluntarily cooperating with the authorities since.

Reuters | September 26th, 2019

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