Benczkowski Brian Benczkowski testifies before the Senate Judiciary Committee during his confirmation hearing to be assistant attorney general in the Criminal Division. Credit: Diego M. Radzinschi/ NLJ

Updated at 7:10 p.m.

Ericsson AB on Friday agreed to pay more than $1 billion to resolve claims that the Swedish telecommunications company paid bribes between 2000 and 2017 to build business in Asia, Africa and the Middle East, capping a long-running investigation with one of the largest penalties ever assessed in the U.S. government's enforcement of anti-corruption law.

The settlement came three months after the Stockholm-based Ericsson, represented by Simpson Thacher & Bartlett partner Cheryl Scarboro, said it had set aside $1.2 billion to cover anticipated U.S. penalties. Under the terms of the settlement, Ericsson agreed to pay a $520 million criminal penalty to the Justice Department and give up about $540 million in alleged ill-gotten gains to the Securities and Exchange Commission.

Ericsson is also required to retain an independent compliance monitor for three years.

Brian Benczkowski, the head of the Justice Department's criminal division, had hinted earlier this week that the settlement was imminent. Without naming Ericsson, Benczkowski said at a conference in the Washington area that an upcoming corporate settlement would vault the Justice Department into a record year for recovering money under the Foreign Corrupt Practices Act, a federal law prohibiting overseas bribery.

In a prepared statement, Benczkowski credited the Internal Revenue Service, the SEC and federal prosecutors in Manhattan with their assistance in the investigation.

"Ericsson's corrupt conduct involved high-level executives and spanned 17 years and at least five countries, all in a misguided effort to increase profits," Benczkowski said Friday. "Such wrongdoing called for a strong response from law enforcement, and through a tenacious effort with our partners in the Southern District of New York, the SEC, and the IRS, today's action not only holds Ericsson accountable for these schemes, but should deter other companies from engaging in similar criminal conduct.

The Justice Department and SEC alleged that Ericsson used intermediaries to bribe officials in six countries, including Saudi Arabia and China, winning business valued at about $427 million as it scored lucrative contracts with state-owned telecommunications firms. Ericsson was also accused of having intermediaries pay for entertainment and lavish travel for government officials and their families.

Scarboro, a Washington-based Simpson Thacher partner and formerly the first chief of the SEC's FCPA unit, did not immediately comment.

Ericsson's CEO and president Börje Ekholm said in a statement: "I am upset by these past failings. Reaching a resolution with the US authorities allows us to close this legacy chapter. We can now move forward and build a stronger company."

The company pointed to number of steps taken to improve the ethics and compliance program. Those steps include refreshing compliance training; "introducing more sophisticated analytic tools to better identify and prevent high-risk transactions and engagements"; and enhanced ethics and compliance vetting for senior leaders.

The settlement marked the seventh criminal resolution the Justice Department reached with a corporation this year. It came on the heels of a shipbuilding subsidiary of the South Korea-based Samsung Group agreeing to pay $75 million to resolve corruption allegations stemming from a scheme to pay millions of dollars in bribes to Brazilian government officials. In another noteworthy settlement, Walmart Inc. paid $137 million to resolve an investigation into alleged bribery of government officials in Mexico, India, Brazil and China.

The Justice Department this year also issued declination letters to two companies under its policy for crediting companies that voluntarily disclose misconduct and cooperate with the government. In both cases, the Justice Department highlighted the companies' prompt reporting of misconduct and efforts to improve their compliance programs.

The Justice Department said Ericsson did not disclose the misconduct, which involved high-level executives. Ericsson was, however, credited for launching an internal probe, turning over extensive records and making regular presentations to the Justice Department, among other steps to cooperate with the government's investigation.

The more than $520 million criminal penalty reflected a 15% reduction from the bottom of the fine range set by federal sentencing guidelines, in what the Justice Department said was a nod to Ericsson's efforts to improve its compliance program.

 

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This post was updated with comment from Ericsson.