The sum will have an impact of €80 million on earnings before interest and taxes and €26 million on cashflow in Ericsson’s second quarter 2021 earnings.
The remaining settlement amount will be made in similar instalments in 2022 and 2023 respectively, to be recorded as Other Operating Expenses under Segment Emerging Business and Other.
According to the company, ‘the amount reflects uncertainty, risk, expense, and potential distraction from business focus associated with a potentially lengthy and complex litigation’.
The compensation relates to events that were subject to a 2019 resolution with the US Department of Justice (DOJ) and US Securities and Exchange Commission (SEC) of investigations into Ericsson's violations of the US Foreign Corrupt Practices Act (FCPA).
At the time, the resolution with DOJ related to criminal charges of books and records and internal controls violations of the FCPA in five countries including in Djibouti and a guilty plea to one instance of bribery in Djibouti. As such Ericsson entered into a Deferred Prosecution Agreement (DPA) with the DOJ. In relation to the changes in Djibouti, Ericsson’s Egyptian subsidiary plead guilty to bribery resulting in Ericsson paying a fine of approximately $520 million.
The resolution with the SEC related to allegations of violations of the books and records and internal controls provision of the FCPA in six countries and of the bribery provision of the FCPA in three of these six countries. As part of this agreement, Ericsson will pay a fine of close to $458 million plus interest of $81 million.
“This episode shows the importance of fact-based decision making and a culture that supports speaking up and confronting issues. We have worked tirelessly to implement a robust compliance program. This work will never stop,” said Börje Ekholm, president and CEO, Ericsson at the time.
