Ericsson Slumps After DOJ Faults Disclosure Over Iraq Probe

(Bloomberg) -- Ericsson, mired in a scandal over potential payments to the terrorist organization ISIS, slumped after the U.S. Department of Justice said it failed to make adequate disclosures about its operations in Iraq before entering a deferred prosecution agreement in 2019.

The DOJ also determined that Ericsson also breached the agreement by “failing to make subsequent disclosure” after signing it, according to a statement by the company on Wednesday. Ericsson shares fell more than 12% at the start of trading in Stockholm.

Ericsson's dealings in Iraq came to the fore in mid-February, when the company said that it had received questions from the media regarding past compliance-related matters in the country. Chief Executive Officer Borje Ekholm said in an interview with local media that Ericsson had identified “unusual expenses dating back to 2018” but the company hasn't yet determined who the final recipient of the money was.

New reports on Sunday detailed Ericsson's involvement in payments likely to have been made to gain access to transport routes, with information originating from an internal report commissioned by Ericsson and obtained by the International Consortium of Investigative Journalists.

The deferred prosecution agreement remains in effect with Ericsson placed under compliance monitorship. Ericsson is committed to co-operating with the DOJ to resolve the matter, it said and it would be “premature to predict the outcome.”

Ericsson said it believes the descriptions in the media reports about the conduct of its employees, vendors and suppliers in Iraq are covered by its internal investigation from 2019. The probe could not identify that any Ericsson employee was directly involved in financing terrorist organizations, and “based on our current assessment of the media reports, we do not believe they change this conclusion,” the company said on Wednesday.

The investigation had led to the exit of several employees from the company, and “multiple other disciplinary and other remedial action were taken,” it said.

In October, Ericsson was already accused by the DOJ of breaching a $1 billion agreement it made with prosecutors in 2019 to end a long-running corruption probe.