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Ericsson reaches resolution on U.S. FCPA investigations

08/12/2019

Ericsson (NASDAQ: ERIC) today announced the resolution of the previously disclosed investigations by the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) regarding the Company's compliance with the U.S. Foreign Corrupt Practices Act (FCPA). While the DOJ and SEC conduct separate investigations, the same facts have been shared by Ericsson with both authorities.

The resolution relates to historical FCPA breaches ending Q1 2017. While the Company had a compliance program and a supporting control framework, they were not adequately implemented. Specifically, certain employees in some markets, some of whom were executives in those markets, acted in bad faith and knowingly failed to implement sufficient controls. They were able to enter into transactions for illegitimate purposes and, together with people under their influence, used sophisticated schemes in order to hide their wrongdoing.

The resolution marks the end of the FCPA-related investigations into Ericsson and its subsidiaries undertaken by the DOJ and the SEC.

The DOJ proceeding is a criminal enforcement action and the SEC proceeding is a civil enforcement action. The agencies resolve their investigation independently of one another using their own discretion and applying different standards of proof. As a result, the DOJ and SEC have come to different conclusions based on the same facts.

DOJ resolution

Ericsson has agreed to enter into a Deferred Prosecution Agreement (DPA) with the DOJ to resolve criminal charges relating to violation of bribery provision of the FCPA in Djibouti. The DPA also resolves criminal charges relating to violations of the accounting provisions of the FCPA in China, Djibouti, Indonesia, Kuwait, and Vietnam. In connection with the matter in Djibouti, Ericssons Egyptian subsidiary pled guilty to bribery today. As part of the resolution Ericsson will pay a fine of USD 520,650,432.

SEC resolution

Ericsson has agreed with the SEC to the entry of a judgment to resolve claims related to allegations of violations of the accounting provisions of the FCPA in China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam and of the bribery provisions of the FCPA in Djibouti, China and Saudi Arabia. As part of the resolution, Ericsson will pay financial sanction of USD 458,380,000, plus pre-judgement interest of USD 81,540,000.

In parallel to the investigations, the Company has since 2016, together with external expert advisors, conducted a comprehensive review of the Company's anti-corruption program. Based on this review, Ericsson has been taking significant steps to improve its Ethics and Compliance program.

Pursuant to the resolutions, Ericsson has agreed to continue enhancing its internal controls and its compliance program.

B rje Ekholm, President and CEO, says: 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 settlement with the SEC and DOJ shows that we have not always met our standards in doing business the right way. This episode shows the importance of fact-based decision making and a culture that supports speaking up and confronting issues. We have worked tirelessly to implement a robust compliance program. This work will never stop.

Ronnie Leten, Chair of the Board of Directors, says: Ultimately we can only be successful if we have an entrenched ethics and compliance culture. I am confident that with the significant steps already undertaken we are better equipped to execute on our strategy without compromising on our values.

DETAILS OF IMPROVED ETHICS AND COMPLIANCE PROGRAM

Improvements to Ericsson's Ethics and Compliance program include:

Additional resources for the Compliance and Investigations functions.

Reorganizing the allegation management process to ensure a centralized, professional intake of allegations, conduct of investigations and remediation.

Refining the risk assessment process to consist of a tiered approach and systematic risk mitigation methodology.

Enhancing the due diligence process of third-parties, including the overall monitoring of third-party engagements.

Introducing more sophisticated analytic tools to better identify and prevent high-risk transactions and engagements.

Enhancing the ethics and compliance vetting process for senior leaders.

Refreshing compliance training modules for employees, including workshops and face-to-face training for employees in exposed roles.

Enhancing the internal anti-corruption and compliance related awareness campaigns (including the Company's zero tolerance for corruption).

INVITATION TO MEDIA AND ANALYST CALL

The company will hold a conference call for journalists, financial analysts and investors. B rje Ekholm, President and CEO, Carl Mellander, Chief Financial Officer, and Xavier Dedullen, Chief Legal Officer will make brief comments and take questions.

The conference call will begin December 7, at 9:30 AM CET (8:30 AM GMT in London and 3.30 AM EST in New York).

To join the conference call, please phone one of the following numbers:

Sweden: 46 (0)8 566 42651 (Toll-free Sweden: 0200 883 685)

International/UK: 44 (0)333 300 0804 (Toll-free International/UK: 0800 358 9473)

US: 1 631 913 1422 (Toll-free US: 1 855 857 0686)

PIN code: 80473445 #

A live audio webcast of the conference call will be available at www.ericsson.com/investors and www.ericsson.com/newsroom

Replay:

A replay of the conference call will be available from about one hour after the conference call has ended until December 14, 2019.

Sweden replay number: 46 (0) 8 519 993 85

International/UK replay number: 44 (0) 333 300 0819

US replay number: 1 (866) 931 1566

PIN code replay: 301305281#

An on-demand webcast will be available at www.ericsson.com/investors an
LINK: https://wcm-com.ericsson.net/en/press-releases/2019/12/ericsson-reache...
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