Stockholm: Confidential documents have revealed how the telecoms giant Ericsson is alleged to have helped pay bribes to the Islamic State terrorist group in order to continue selling its services after the militants seized control of large parts of Iraq.
The leak of internal investigations at Ericsson, which also found that the firm had put its contractors at risk and allowed them to be kidnapped by the militants, is potentially damaging for the multinational.
In addition to the findings of the alleged payments to IS, the investigations uncovered allegations the company was involved in corruption in at least 10 countries across four continents.
That would suggest a pattern of wrongdoing by Ericsson that is far wider than what the telecoms giant publicly admitted to in 2019 when it entered into a $1bn (£750m) settlement with the US Department of Justice (DoJ).
Ericsson, which is headquartered in Stockholm, employs 100,000 people and sells telecoms equipment in 180 countries. It plays a leading role in developing the next generation of 5G mobile phone technology in the UK.
Two weeks ago, Ericsson’s stock price plunged by 14% when, alerted to the fact media organisations had been leaked the internal reports, it released a public statement admitting to “serious breaches of compliance rules” in Iraq between 2011 and 2019.
Since then the telecoms firm has been bracing for the full disclosure of the reports, which were leaked to the International Consortium of Investigative Journalists (ICIJ) which then shared them with media partners including the BBC, the Washington Post and the Guardian.
The leaked documents, running to 101 pages, were produced in 2019 and 2020. They record the results of internal investigations commissioned by Ericsson into alleged corruption by the company around the world.
Investigators concluded that the multinational firm was likely to have been involved in channelling bribes to IS to allow its products to be transported across parts of Iraq that were held by the terrorists.
The payments were made through a slush fund run by contractors working for the Swedish multinational, according to the investigators.
After questions from journalists about the leaked documents earlier this month, Ericsson appears to have sought to get ahead of a public relations crisis by publishing the statement on its website partially admitting to the investigators’ findings.
In the statement, Ericsson said the investigating team had “identified payments to intermediaries and the use of alternative transport routes in connection with circumventing Iraqi customs, at a time when terrorist organisations, including Islamic State, controlled some transport routes.
“Investigators could not determine the ultimate recipients of these payments. Payment schemes and cash transactions that potentially created the risk of money laundering were also identified.”
The statement also conceded Ericsson employees had engaged in widespread misconduct in Iraq and committed “serious” violations of its regulations, including irregular payments and non-payment of tax, between 2011 and 2019.
Ericsson pleaded guilty to paying tens of millions of dollars in corrupt payments through slush funds between 2000 and 2016 in the settlement. The admissions related to just five countries: Djibouti, China, Vietnam, Indonesia and Kuwait.
But the leaked documents list evidence of alleged corruption and wrongdoing in a further 10 countries over the past decade.
They chronicle suspicious payments totalling at least $37m in Iraq, along with a range of alleged misconduct such as inflated invoices and paying officials to go on holidays to Spain and Sweden.
In Lebanon, the company allegedly used a slush fund to give gifts, entertainment and hospitality to members of the government between 2010 and 2019. The total size of the slush fund appears to have been as large as $800,000. Bribes were also allegedly paid in Bahrain and Angola.
Ericsson was accused in the documents of being involved in corruption during the award of a contract in South Africa and acting fraudulently during the acquisition of a company in the US. Other alleged misconduct was identified by the investigators in Brazil, Azerbaijan, Libya and Morocco.
After taking charge of Mosul in 2014, IS controlled about 40% of Iraq, financing the administration of the territory through a mixture of taxes, the sale of oil and looting until it was driven out in 2017.
According to the investigators, Ericsson, which has operated in Iraq for years and sold $1.9bn worth of equipment between 2011 and 2018, received offers from firms that were prepared to transport their infrastructure through Iraq.
The multinational chose a contractor that cost more money than other firms but promised guaranteed quicker deliveries. This premium-priced option became known as “speedway service” in contrast to “the legal way”, the documents record.
According to the investigators, “the higher cost has likely been used for bribery and payments to local [militants] along transportation routes”. Improper payments were also made to customs officials to circumvent border taxes.
The investigators found 18 invoices that had been paid by Ericsson to one of the suppliers to transport equipment, such as mobile phone masts, on trucks through Iraq. The payments were three times higher than the normal cost of hiring these trucks, and for one consignment, it was 20 times the usual cost.
After plotting the routes on a map of Iraq, and noting that the infrastructure was delivered to areas held by IS and other militias, investigators concluded Ericsson may have engaged in “bribery or illegitimate payments” to carry out its transportation operations.