Ericsson, together with its subsidiaries, provides communication infrastructure, services, and software solutions to the telecommunications and other sectors. The Company operates in, among other countries, the Republic of Iraq (Iraq). Ericsson has a well-documented history of using bribes to secure business in countries throughout the Middle East and Asia. For example, in December 2019, Ericsson was the subject of a U.S. Securities and Exchange Commission (SEC) action alleging, among other things, that the Company used third party consultants and illicit payments from 2011 through early 2017 to access business in Djibouti, Saudi Arabia, and China. The Company also entered into a Deferred Prosecution Agreement with the U.S. Department of Justice (DOJ) the same month for its illicit business dealings. Following the foregoing regulatory enforcement actionswhich resulted in Ericsson being fined over $520 million and nearly $540 million by the DOJ and SEC, respectivelyEricsson repeatedly assured investors that the Company had a zero tolerance stance for bribery and was making significant investments in related programs. For example, in a December 2019 press release, the Company asserted that it was [e]nhancing . . . internal anti-corruption and compliance related awareness campaigns (including the Companys zero tolerance for corruption). Likewise, in its 2019 annual report, the Company asserted that it has zero tolerance for corruption and work[s] hard every day to build a culture of compliance, anchored securely within the organization, to ensure that such an event will never happen again. The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Companys business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Ericsson overstated the extent to which it had reformed its business practices to eliminate the use of bribes to secure business in foreign countries; (ii) Ericsson had paid bribes to the terrorist group the Islamic State in Iraq and Syria (ISIS or the Islamic State) to gain access to certain transport routes in Iraq; (iii) accordingly, the Companys revenues derived from its operations in Iraq were, in at least substantial part, derived from unlawful conduct and thus unsustainable; and (iv) as a result, the Companys public statements were materially false and misleading at all relevant times. On February 15, 2022, during intraday trading hours, Ericsson issued a press release disclosing media inquiries into its business dealings in Iraq. That press release assured investors of the Companys transparency regarding these inquiries, while vaguely alluding to having undertaken its own investigative and compliance efforts. Then, on February 16, 2022, Ericssons Chief Executive Officer told a Swedish newspaper that the Company may have made payments to ISIS to gain access to certain transport routes in Iraq, noting that the Company had identified unusual expenses dating back to 2018 but had not yet determined the final recipient of the funds for those expenses, although Defendants could see that it disappeared[,] and that Ericsson has spent considerable resources trying to understand this as best we can. Following these disclosures, Ericssons American Depositary Share (ADS) price fell $1.44 per ADS, or 11.57%, to close at $11.01 per ADS on February 16, 2022. Finally, on Sunday, February 27, 2022, the International Consortium of Investigative Journalists (ICIJ) published a report on Ericssons alleged dealings with ISIS in Iraq, citing a leaked internal investigation that revealed that Ericsson had reportedly made tens of millions of dollars in suspicious payments over nearly a decade to keep its business in the country. The ICIJ report also alleged that a spreadsheet lists company probes into possible bribery, money laundering and embezzlement by employees in Angola, Azerbaijan, Bahrain, Brazil, China, Croatia, Libya, Morocco, the United States and South Africa[,] which have not been previously disclosed. On this news, Ericssons ADS price fell $0.84 per ADS, or 8.3%, from its closing price on February 25, 2022, to close at $9.28 per ADS on February 28, 2022, the next trading day.
For More information as well as to join this case please contact Atara Twersky, Esq. at email@example.com or firstname.lastname@example.org. Atara is Principal at Twersky Law Group and Of counsel at AF&T law firm where she is director of Investor Services. Atara focuses her practice on assisting her clients with increasing their investment portfolio recoveries and ensuring that their portfolios remain healthy and robust. For more information on shareholder recoveries click here and to listen to Atara’s podcast with notable guests in the Pension fund Industry listen to Pension and Investments Podcast, on all matters related to your investment portfolio and more. For more information on Atara and her legal work connected to shareholder protection click here.