Ericsson has agreed to pay Nokia about €80M (roughly $97M) in damages to settle its bribery charges following the investigation held by the U.S Department of Justice. The U.S Department of Justice convicted Ericsson of corruption, violating the Foreign Corruption Practices Act carried out between 2000 and 2016.
According to DOJ, Ericsson has admitted its engagement in multiple corruption practices which includes bribing of US government officials, falsifying books and records, and its failure to implement reasonable internal accounting controls.
Ericsson’s unfair and illegal business schemes heavily affected Nokia’s business, which as we all know, is closely competing against Ericsson in the telecommunications industry.
It is clear that the payment of €80M damages claim to Nokia is Ericsson’s way to avoid “potentially lengthy and complex litigation” — which is a potential distraction on its business.
Furthermore, Ericsson said that it has zero-tolerance policy for corruption, and has, in recent years, strengthen its Ethics and Compliance program to build a “culture of compliance.”
The settlement will impact Ericsson’s business in the second quarter of 2021 by €80M on earnings before interest and taxes (EBIT), and €26M on cashflow. This, however, have a lingering effect on the Swedish network gear manufacturer as the remainder of the settlement will be spread in three installments up to 2023, impacting Ericsson’s cashflow in the next two years.
Nokia refused to further comment on Ericsson’s press release. However, the company’s spokeswoman confirmed that all the information the Swedish disclosed in the document is “accurate”.