HIGHLIGHTS
- Ericsson's stock price has already plummeted in recent weeks.
- Ericsson shares have lost roughly a third of their value as a result of the telecom equipment maker's revelation.
Ericsson of Sweden said on Wednesday that US authorities judged its disclosures concerning an internal investigation into its behaviour in Iraq, including alleged kickbacks to the Islamic State group, "insufficient."
The telecom equipment maker's statement sent shares falling, and they were down more than 12% by lunchtime on the Stockholm stock market.
The stock's value has already plummeted in recent weeks as a result of the impending disclosure of a media investigation organised by the International Consortium of Investigative Journalists (ICIJ).
It uncovered an internal Ericsson 2019 probe that was never made public, indicating potential wrongdoing of the group's Iraqi operations over several years, including links to the Islamic State.
The facts were made public on Sunday, but Ericsson has already issued remarks in response to the allegations.
As part of a "deferred prosecution agreement," Ericsson had already paid $1 billion (approximately Rs. 7,598 crores) to the US Department of Justice to resolve a corruption investigation in five nations (DPA).
Last month, the Stockholm-based corporation acknowledged that it had already turned over its internal inquiry into Iraq to US authorities.
However, the Department of Justice (DoJ) informed Ericsson on Tuesday that "the disclosure made by the company prior to the DPA about its internal investigation into conduct in Iraq from 2011 to 2019 was insufficient," according to a statement from the telecom giant.
Furthermore, the DoJ ruled that the corporation "breached the DPA" by failing to make additional disclosures about the inquiry after the agreement was reached.
Ericsson stated that it was "in discussion with the DoJ" about the situation and was working to settle it.
"It is premature to anticipate the result of this issue at this time," the business added.
During a conference call, CEO Borje Ekholm declined to comment on the DoJ announcement's potential financial impact, saying it was hard to anticipate at this point. At the same time, Ekholm admitted that the firm had already lapsed.
"Of course, this is a significant situation, a very serious thing, and includes humiliating and unacceptable prior behaviour," Ekholm told reporters and analysts, emphasising that investments had been made to strengthen compliance and that efforts were also being made to transform the company's culture.
"We had a culture that didn't enable us to record this behaviour in time," Ekholm explained.
After losing momentum in the mid-2010s, particularly as it competed with China's Huawei, which has claimed the world's top rank in network equipment, Ericsson announced a big strategy in 2017 that allowed it to recover.
The corporation is presently competing with Huawei and Finland's Nokia to create 5G networks throughout the world, despite geopolitical concerns between the US and China over the technology.
Ericsson shares have lost roughly a third of their value since the facts first surfaced.
