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Ericsson to pay $200m fine for breaching US deal over Iraq graft

Swedish telecom equipment maker Ericsson has said it will pay a $207 million fine for breaching a deal with US authorities by not disclosing an investigation relating to suspected bribes to the Islamic State group in Iraq.

Published: 3 March 2023 14:34 CET
Ericsson to pay $200m fine for breaching US deal over Iraq graft
Ericsson's HQ in Kista. Photo: Lars Schröder/TT

Swedish prosecutors have also opened an inquiry into the alleged IS payments, a case that has forced the company to vow an overhaul of its compliance oversight after the claims emerged last year.

US prosecutors had already imposed $1 billion in penalties in 2019 to close corruption cases in Djibouti, China, Vietnam, Indonesia and Kuwait, after Ericsson agreed to a so-called deferred prosecution agreement (DPA).

But last year, an investigation coordinated by the International Consortium of Investigative Journalists (ICIJ) revealed that an internal inquiry at Ericsson had also found suspected payments to IS jihadists in Iraq between 2011 and 2019 — a period covered by US prosecution deal.

In a statement late Thursday, Ericsson said it had entered “a guilty plea regarding previously deferred charges relating to conduct prior to 2017,” for not disclosing its inquiry to the US authorities.

“The entry of the plea agreement will bring the 2019 DPA to an end,” it said.

The company had warned of the likely fine in January, setting aside 2.3 billion kronor ($220 million) in its fourth-quarter accounts to cover the cost.

Ericsson noted Thursday that since its deal with the US Department of Justice (DOJ), prosecutors had “not alleged or charged” the company with any new criminal conduct, saying the new fine related only to a failure to disclose documents to the DOJ in a timely manner.

‘Broken promises’

“This resolution is a stark reminder of the historical misconduct that led to the DPA,” Ericsson’s chief executive Börje Ekholm said in the statement. “We have learned from that and we are on an important journey to transform our culture.”

In a separate statement, the DOJ said Ericsson had “breached the DPA by violating the agreement’s cooperation and disclosure provisions.”

“Ericsson repeatedly failed to fully cooperate and failed to disclose evidence and allegations of misconduct in breach of the agreement,” Assistant Attorney General Kenneth A. Polite, Jr, was quoted as saying. “As a result of these broken promises, Ericsson must plead guilty to two criminal offences and pay an additional fine.”

The resolution of the issue was nonetheless received positively by investors, with Ericsson shares rising more than 3 percent in early trading on the Stockholm Stock Exchange.

The telecom giant, which is locked in a battle with Finland’s Nokia and China’s Huawei to supply 5G network equipment, had already posted a 17 percent drop in net profit to 19.1 billion kronor ($1.8 billion) for 2022.

The disappointing earnings came as operators slow spending on rolling out the latest 5G networks due to the global economic slowdown and rising inflation.

Ericsson, which had a total of 105,000 employees at the end of 2022, also announced last week that it would slash 8,500 jobs worldwide as part of a cost-cutting programme.

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NORTHVOLT

Northvolt warns work permit salary threshold could jeopardise Sweden’s green transition

Sweden’s minimum salary threshold for work permits has increased by almost 120 percent in less than a year, and there are plans to increase it again to the median salary next summer. Battery manufacturers Northvolt warns that this could stop the company from hiring and retaining key workers.

Published: 3 July 2024 12:32 CEST
Northvolt warns work permit salary threshold could jeopardise Sweden's green transition

“Northvolt’s extensive labour requirements in northern Sweden cannot currently be met by permanently established workers in Sweden or within the EU,” the company wrote in a response to the government’s proposal to raise the salary threshold to the median salary, currently 35,600 kronor.

“This applies in particular to machine operators and technicians, whose minimum wages under collective bargaining agreements are lower than the median wage, and therefore are particularly vulnerable in this context.”

The EU has highlighted qualified machine operators and technicians as professions which are particularly hard to source within the bloc, meaning companies often have no choice but to source these workers from non-EU countries.

Northvolt has the added complication of being located in northern Sweden, an area which in general often struggles to find key workers in a number of industries, and the company isn’t convinced that enough is being done to fix this.

“Northvolt does not believe that the government and the Public Employment Service’s measures to promote geographic mobility in the Swedish labour market is going to be able to cover the company’s need for labour,” it wrote, while adding that it believes the proposed hike to the work permit salary threshold could have “significant consequences” for its facility in Skellefteå.

“Aside from the direct effects on the company, Northvolt sees a risk that staffing in healthcare, services and infrastructure in northern Sweden could be negatively affected by the salary threshold, which would indirectly affect Northvolt’s expansion.”

In addition to this, the company deems the proposed exemptions to the salary threshold – these would be put forward by the Migration Agency and the Public Employment Service based on professions where there’s a labour shortage – to be insufficient and unpredictable.

Northvolt’s criticism highlighted the fact that the exemptions are based on a model which is currently under development and which may not be ready by the time the law is due to come into force, as well as the fact that professions with a labour shortage will be defined using a so-called SSYK code.

Some key roles for Northvolt to do with battery production do not have one of these codes, as they are relatively new roles.

“It remains to be seen how the proposed model would effectively be able to identify professions with a labour shortage when they don’t have an SSYK code,” the company wrote, adding that this all makes it harder for the company to plan, for example, will an employee who is granted a work permit once be eligible for renewal two years later?

“The employee in that situation would risk being deported from Sweden. If that were to happen, it would be deeply unfair for the employee who has contributed to supporting Swedish society in a role where there is a shortage, and a catastrophe for the employer who has invested years of education and talent in the employee.”

“This lack of predictability can be compared to earlier notorious so-called kompetensutvisningar (talent deportations), and will further complicate the recruitment or necessary talent,” it wrote.

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