Market: Ericsson falls after the revelation of alleged facts of corruption in Iraq


STOCKHOLM (Reuters) – Ericsson fell sharply on the stock market on Wednesday after the Swedish telecom equipment supplier revealed the results of an internal investigation describing alleged facts of corruption in Iraq which could have benefited the armed organization Islamic State (IS). .

The stock fell 9.22% around 0950 GMT on the Stockholm Stock Exchange and was among the biggest decliners in the pan-European STOXX 600 index, up 0.3% at the same time.

A 2019 internal investigation by Ericsson identified payments made to use alternative transport routes to circumvent Iraqi customs, at a time when armed organizations, including the Islamic State, controlled some of these routes.

Ericsson said it could not determine whether any employees were directly involved in funding these organizations, but said the results of the investigation led to several departures.

The Swedish group said on Tuesday it was working with outside advisers to review the findings of the investigation to identify further steps to take.

The investigation, sparked by unusual expense claims in Iraq dating back to 2018, was completed a year later, but Ericsson chose not to disclose the findings at that time.

“The importance of the facts did not exceed the threshold which required them to be disclosed,” chief executive Börje Ekholm told Reuters. “That was our assessment when we completed the survey two years ago.”

Asked whether the group had forwarded the findings of its internal investigation to the US Department of Justice, the leader said he was unable to answer.

“We are under a Deferred Prosecution Agreement (DPA) with US authorities that limits our ability to comment on what has or has not been disclosed,” he said.

In 2019, Ericsson signed an agreement with the American justice providing for the payment of more than a billion dollars to end a series of investigations into acts of corruption in several countries including China, Vietnam and Djibouti.

A spokesperson for the US Department of Justice did not immediately respond to a request for comment.

According to Mads Rosendal, credit analyst at Danske Bank, an investigation by the American justice into the facts of corruption in Iraq would constitute the worst scenario for Ericsson because it could lead to heavy fines.

“Our base case is that Ericsson managed this issue in the previous survey but the uncertainty is slightly negative in terms of credit,” he said.

(Report Supantha Mukherjee in Stockholm, with the contribution of Marie Mannes and Chris Prentice in Washington DC, French version Diana Mandiá, edited by Blandine Hénault)

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