US government will monitor Ericsson for an extra year

Swedish kit maker Ericsson has revealed it needs an extra 12 months of monitoring just to make absolutely sure it doesn’t risk giving money to terrorists.

The company initially agreed back in late 2019 to let the US Department of Justice (DoJ) keep an eye on it for a period of three years, ending June 2023. It was part of a SEK10.1 billion settlement of corruption charges related to its conduct in China, Djibouti, Indonesia, Kuwait and Vietnam.

Then, earlier this year, details of an internal investigation into Ericsson’s business in Iraq were leaked to the International Consortium of Investigative Journalists (ICIJ). Its report catalogued a whole host of misdeeds from 2011-2019, including potential bribes paid to ISIS in return for access to important transport routes. Unsurprisingly, the DoJ said Ericsson’s failure to make sufficient disclosures about Iraq – both before and after the settlement – constituted a breach of said settlement.

On Wednesday, Ericsson announced it has agreed with the DoJ and the Securities and Exchange Commission (SEC) to extend the term of its independent compliance monitor until June 2024.

“This extension is consistent with our commitment to continuous improvement of Ericsson’s ethics and compliance programme. We have made significant progress in changing our culture and implementing an enhanced compliance framework and system of internal controls, and we will use this additional time to ensure these improvements are ingrained in our organisation, our daily interactions and the way we do business,” said Ericsson CEO Börje Ekholm, in a statement.

“We are dedicated to acting with integrity in everything we do and continuing to align business operations with strengthened internal controls, governance and risk management processes,” added Ericsson chairman Ronnie Leten. “Our work with the monitor has meaningfully advanced our ethics and compliance programme, and we welcome this extension of our engagement.”

Why it takes four years of independent monitoring to make sure no one in your organisation is tempted to give money to gun-toting fanatics is anyone’s guess. Particularly since the last time that allegedly happened, it made headlines around the world and sent the share price down the pan.

After all, it’s not like it took Ericsson four years to work out that quitting Russia would be a good idea. Russia invaded Ukraine on 24 February and just days later Ericsson suspended all deliveries to its Russian clients. In April, it announced its Russian operations were suspended indefinitely.

On Thursday, Ericsson announced it has agreed to sell its customer support business in Russia to a local entity owned by former managers of its Russian subsidiary. It was keen to point out that the unit is not involved with the export of hardware, software, or related services to Russian mobile operators.

“Going into 2023, Ericsson expects to have a small presence in Russia on a local basis. A legal entity owned by Ericsson will continue to be registered to complete the wind-down and to fulfil legal, contractual, and administrative requirements,” Ericsson said in a separate statement.

It seems some matters of business ethics are easier to resolve than others.