SEC Investigates Kit Maker Payments To Islamic State (IS)

Abdul Ghani

A new investigation by the US Securities and Exchange Commission brings Ericsson into great difficulties. It's about payments to the terrorist organization IS. The US Securities and Exchange Commission (SEC) has opened a new investigation into the company's handling of "misconduct" in Iraq. The shares of the Swedish mobile communications equipment supplier then fell by 2.5 percent on June 10, 2022. Ericsson has lost around a third of its market value since February.

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Ericsson CEO Börje Ekholm.Image by Wikimedia Creative Commons

In February 2022, the group disclosed that bribes had been paid in Iraq, possibly indirectly, to the terrorist organization Islamic State (IS). This was preceded by the International Consortium of Investigative Journalists (ICIJ) research.

During the investigations 2011-2019, money orders without a clear recipient and payments to suppliers without information on the scope of the services were found at Ericsson. Payments were also made to middlemen, and alternative transport routes were chosen, for example, to avoid Iraqi customs. The company said some routes were controlled at the time by terrorist organizations such as the Islamic State (IS). However, the auditors have not yet been able to determine who ultimately received the money. There is no direct evidence of payments to IS. Other payments also indicated a potential money laundering risk. Ericsson boss Börje Ekholm said,

According to corruption investigations, Ericsson had already paid around one billion US dollars in 2019. It was about business in China, Indonesia, Vietnam, and Kuwait at that time. At the time, Ericsson also had to agree to provide certain documents and information - and the US Department of Justice later concluded that the company had violated this requirement.

Higher penalty than $1 billion expected

"We believe that given Iraq's repeated misconduct, violation of the Deferred Prosecution Agreement (DPA), and corruption, the combined penalty to be paid in this round of investigation is likely to be slightly higher than the previous one," said analysts from Jefferies of the Reuters news agency.

"Both parties are still working to finalize a deal in the first half of this year," said an Ericsson spokesman.

Mads Rosendal, an analyst at Danske Bank Credit Research, wrote that the new probe "could also mean further delays in the Vonage acquisition, which we believe could now be slightly more likely to be blocked." Ericsson wanted to take over cloud-based VoIP telephony systems provider for 6.2 billion US dollars in November 2021. The completion of the acquisition of the US group was then expected in the first half of 2022.

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Member Of Freelancers Union (USA), Freelance Writer!, and Digital Creator. Ghani Mengal is an enthusiast Freelance blogger and digital marketer. His content has been published and featured on many popular blogs, websites, and publications. Including TeelFeed, LifeHack.org, Data-Driven Investor, TextSniper, Scientific Publication The Predict, The Startup, The Ascent, Heart Affairs, Illumination, And The List goes on.

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