Telecoms giant Ericsson says payments for Iraq access may have gone to Isis
Ericsson, the telecoms company based in Stockholm, disclosed yesterday that it might have made payments to Islamic State terrorists to get access to transport routes in Iraq.
The high-tech equipment maker, involved in the expansion of 5G networks in the UK, revealed details of an internal corruption investigation. Its shares fell by more than 12 per cent in Sweden after the announcement.
Ericsson disclosed that it had discovered payments to intermediaries and the use of “alternate transport routes in connection with circumventing Iraqi customs, at a time when terrorist organisations, including Isis, controlled some routes”.
It said that investigators “could not determine the ultimate recipients of these payments” and they “could not identify that any Ericsson employee was directly involved in financing terrorist organisations”. It found, however, cash transactions that potentially created the risk of money laundering.
The findings arose after unusual expense claims in Iraq, dating back to 2018, led to a review that uncovered compliance concerns and an internal investigation in 2019.
The inquiry, which included the conduct of Ericsson employees, vendors and suppliers in Iraq between 2011 and 2019, found “serious breaches of compliance rules”.
It discovered evidence of “corruption-related” misconduct, including paying a supplier for work without a “defined scope” and documentation. Suppliers were used to make cash payments, inappropriate travel and expenses were funded and there was improper use of agents and consultants.
The investigation, which faced obstruction, also found violations of Ericsson’s internal financial controls, conflicts of interest and non-compliance with tax laws. The company detailed the revelations after media inquiries, including from the International Consortium of Investigative Journalists. It said that it was reviewing the investigation.
Borje Ekholm, Ericsson’s chief executive, told Reuters that the “materiality of our findings did not pass our threshold to make a disclosure” when it completed the investigation two years ago.
Ericsson is one of the world’s largest telecoms equipment makers, with customers in more than 180 countries and more than 101,000 employees.
The US is its largest market, where it has been supporting the expansion of the 5G networks, as in the UK.
The company website says that it has an office in Baghdad and has been active in Iraq since a UN embargo was lifted. It has provided network design to Asiacell, a Kurdish telecoms company, through a 2019 contract that built on previous work in western provinces. In 2018 it won a new contract to upgrade the network of Zain, a Kuwaiti mobile company, in Iraq.
The revelations are the latest corruption scandal to hit the company. In 2019 Ericsson agreed with the US Department of Justice to pay more than $1 billion to resolve a corruption investigation covering countries including China and Kuwait.
Ericsson said in its statement that it continued to invest “significantly to understand these matters fully” and it could not “exclude the possibility that we may not have found all the underlying facts”. It said that after its investigation several employees “were exited” from the company, “other disciplinary and other remedial actions were taken” and it ended several third-party relationships.
The Department of Justice did not respond to a request for comment yesterday. Ericsson declined to comment further.
