Ericsson says its 2019 probe found serious compliance breaches in Iraq

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Ericsson logo is seen at its headquarters in Stockholm, Sweden June 14, 2018. REUTERS/Olof Swahnberg/File Photo

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STOCKHOLM, Feb 15 (Reuters) - Ericsson (ERICb.ST) said on Tuesday an internal investigation in 2019 found serious breaches of its compliance rules in Iraq, including evidence of corruption-related misconduct and improper use of sales agents and consultants.

The Swedish telecom equipment group said it was working with external counsel to review the findings resulting from the investigation to identify any additional measures that it should take.

The probe, which was triggered by unusual expense claims in Iraq dating back to 2018, finished a year later but the company chose not to disclose it at that time.

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But Ericsson said as a result of media inquiries, it was reviewing its investigation and would compare with information presented by media.

"The materiality of our findings did not pass our threshold to make a disclosure," Chief Executive Officer Börje Ekholm told Reuters. "That was our judgment when we completed the investigation two years ago."

Ericsson said the investigation resulted in several employees exiting the company, other remedial actions being taken, and termination of a number of third-party relationships.

The company said the internal investigating team had identified payments to intermediaries and the use of alternate transport routes in connection with circumventing Iraqi Customs, at a time when militant organisations, including Islamic State, controlled some transport routes.

The investigators could not determine the ultimate recipients of these payments or identify that any Ericsson employee was directly involved in financing such organisations, the company said in a statement.

"We invested significant resources to complete the investigation, but as a company we have limited powers to investigate," Ekholm said. "We tried to do the best we could, took guidance from external legal counsel and other external support."

In 2019, Ericsson had agreed with the U.S. Department of Justice (DoJ) to pay more than $1 billion to resolve a different series of probes into corruption, including the bribing of government officials that took place over many years in countries including China, Vietnam and Djibouti.

In October last year, it received correspondence from DoJ stating that the company breached its obligations under a Deferred Prosecution Agreement (DPA) by failing to provide certain documents and factual information. read more

When asked if Ericsson had disclosed its 2019 internal investigation to the DoJ, Ekholm said: "We are under the DPA with the U.S. authorities which limits our ability to comment on what is disclosed or not disclosed."

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

"If new facts come to light or new information, we will for sure reopen the investigation and run it full speed ahead to investigate those matters," Ekholm said.

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Reporting by Supantha Mukherjee in Stockholm and Chris Prentice in Washington DC; Editing by Susan Fenton, Niklas Pollard and Jane Merriman

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