SEC v. Telefonaktiebolaget LM Ericsson, No. 1:19-cv-11214, Southern District of New York (Jan. 1, 2019) — Complaint

AMY JANE LONGO
REGIONAL TRIAL COUNSEL
Finola H. Manvelian
Wendy E. Pearson
Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
Los Angeles Regional Office
444 South Flower St, Suite 900
Los Angeles, CA 90071
(323) 965-3835 (Longo)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
SECURITIES AND EXCHANGE COMMISSION, Case No.
vs.
Plaintiff
COMPLAINT
TELEFONAKTIEBOLAGET LM ERICSSON,
Defendant.
Plaintiff U.S. Securities and Exchange Commission (the “SEC”) alleges:
SUMMARY
1. This matter arises from violations of the anti-bribery, recordkeeping, and internal
accounting controls provisions of the Foreign Corrupt Practices Act (“FCPA”) [15. U.S.C.
§§ 78dd-1, 78m(b)(2)(A)-(B)] by defendant Telefonaktiebolaget LM Ericsson (“Ericsson”), a
multinational networking and telecommunications equipment and services company
headquartered in Sweden.
2. From 2011 through early 2017, Ericsson subsidiaries paid approximately $62
million in bribes to government officials through third parties in Djibouti, Saudi Arabia, and
China to obtain or retain business. Ericsson realized approximately $427 million in profits from

business obtained through the use of these illicit payments. Ericsson’s practice involved either
entering into agreements with third party consultants who had connections with or access to
public officials, and/or paying for travel and entertainment expenses for foreign officials and
sometimes their families in order to influence their decision-making.
3. In Vietnam and Indonesia, Ericsson subsidiaries used consultants to create slush
funds of approximately $56 million and the ultimate recipients of these funds were unknown.
The consultants in Vietnam and Indonesia served strictly as intermediaries to transfer money to
third parties.
4. In China, Ericsson subsidiaries made approximately $31.5 million in payments
pursuant to sham service provider agreements under which no legitimate services were provided.
These payments were made so as to continue to use and pay third party agents in China in
contravention of Ericsson’s policies and procedures.
5. Ericsson also made a payment in the amount of $450,000 through a subsidiary to
a consulting company in Qatar that was not in compliance with Ericsson’s internal accounting
controls. Employees of the Ericsson subsidiary, at the direction of a senior employee, created a
sham consultancy agreement to disguise the payment to the consultant.
6. These illicit payments were improperly characterized in the books and records of
Ericsson’s subsidiaries as legitimate expenses and consolidated in Ericsson’s financial
statements, which were filed with the SEC throughout the relevant period.
7. As a result of its conduct in Djibouti, Saudi Arabia, and China, Ericsson, through
its subsidiaries, violated Section 30A of the Securities Exchange Act of 1934 (“Exchange Act”)
[15 U.S.C. § 78dd-1] when it authorized or paid bribes to foreign officials in order to obtain or
retain business.
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8. As a result of its conduct in Djibouti, Saudi Arabia, China, Vietnam, Indonesia
and Kuwait, Ericsson, through its subsidiaries, violated Section 13(b)(2)(A) of the Exchange Act
[15 U.S.C. § 78m(b)(2)(A)] when it created false books and records by failing to accurately or
completely record payments to third parties and to foreign officials. Ericsson also violated
Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)] by failing to have sufficient
internal accounting controls in place to detect and prevent the authorization or payment of
improper payments.
JURISDICTION AND VENUE
9. This Court has jurisdiction over this action under Sections 21(d), 21(e) and 27 of
the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e) and 78aa].
10. Ericsson, directly or indirectly, made use of the means or instrumentalities of
interstate commerce, of the mails, or of the facilities of a national securities exchange in
connection with the transactions, acts, practices, and courses of business alleged in this
Complaint.
11. Venue is proper in this District pursuant to Section 27 of the Exchange Act [15
U.S.C. § 78aa]. Certain acts or transactions constituting the violations by Ericsson occurred in
this district.
DEFENDANT
12. Telefonaktiebolaget LM Ericsson (“Ericsson” or the “Company”) is a
multinational networking and telecommunications equipment and services company
headquartered in Sweden. Throughout the relevant time period, Ericsson’s common shares were
registered with the SEC pursuant to Section 12(b) of the Exchange Act [15 U.S.C. § 781] and
traded in the form of American Depositary Shares that were represented by American Depositary
Receipts listed on the NASDAQ. As such, Ericsson was required to file reports, including Form
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20-F, with the SEC pursuant to Section 13(a) of the Exchange Act [15 U.S.C. § 78m] and related
rules thereunder, and was an “issuer” within the meaning of the FCPA [15 U.S.C. § 78dd-1].
RELATED ENTITIES
13. Ericsson AB (“EAB”) is a wholly owned subsidiary of Ericsson established in
Sweden. EAB is one of Ericsson’s largest subsidiaries. Ericsson exercised control over the
activities of EAB. EAB’s board included some Ericsson executives, and EAB’s senior managers
reported to Ericsson’s management. EAB’s books and records were consolidated into Ericsson’s
financial statements filed with the SEC.
14. Ericsson Egypt Ltd (“Ericsson Egypt”) is a majority-owned foreign subsidiary of
Ericsson. The head of Ericsson’s Middle East region and individuals employed by Ericsson
Egypt oversaw Ericsson’s operations in North East Africa, including Djibouti. Ericsson Egypt’s
books and records were consolidated into Ericsson’s financial statements.
15. Ericsson operated in China through its foreign subsidiaries, including Ericsson
(China) Company Ltd., Ericsson (China) Communications Co., Ltd. and Ericsson Hong Kong, as
well as its indirect majority-owned joint venture, Nanjing Ericsson Panda Communications
Company Ltd., (collectively referred to as “Ericsson China”). The financial statements of
Ericsson China were consolidated with those of Ericsson.
16. PT Ericsson Indonesia (“Ericsson Indonesia”) is a majority-owned foreign
subsidiary of Ericsson established in Indonesia. The financial statements of Ericsson Indonesia
were consolidated with those of Ericsson.
17. Ericsson Vietnam Co. Ltd. (“Ericsson Vietnam”) is a wholly owned foreign
subsidiary of Ericsson established in Vietnam. The financial statements of Ericsson Vietnam
were consolidated with those of Ericsson.
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18. Ericsson Resource & Competence Center Sdn. Bhd. (“Ericsson Malaysia”), is a
wholly-owned foreign subsidiary of Ericsson that operates in Malaysia. The financial statements
of Ericsson Malaysia were consolidated with those of Ericsson.
FACTUAL ALLEGATIONS
A. The Djibouti Bribery Scheme
19. Beginning in approximately 2011, Ericsson, through the head of Ericsson’s
Middle East region and employees of Ericsson Egypt, authorized and directed the payment of
bribes in Djibouti in order to obtain a contract from a state owned telecommunications company
(“Djibouti SOE”).
20. EAB had planned to bid for a large networking contract with the Djibouti SOE in
2010. An Ericsson Egypt employee informed Ericsson’s head of Northeast Africa that EAB
could win the contract with Djibouti SOE if EAB paid bribes to foreign officials in Djibouti.
Later, these employees also heard this directly from a Djibouti foreign official.
21. Fearing that they may not be awarded the contract, the head of Ericsson’s Middle
East region and employees of Ericsson Egypt devised a plan to bribe the government officials.
For this purpose, EAB, through its Ethiopia branch, retained a consulting company (the “Djibouti
Consultant”) that was owned by the wife of a senior Djibouti foreign official and controlled by
the same Djibouti foreign official. This fact was known to the head of Ericsson’s Middle East
region and employees of Ericsson Egypt.
22. In October 2010, EAB submitted a bid to Djibouti SOE, and on May 11, 2011,
Djibouti SOE signed a contract with EAB valued at approximately €20,300,000 ($29 million).
23. On June 16, 2011, EAB’s branch in Ethiopia and the Djibouti Consultant signed a
consulting agreement. The services contemplated in the contract were never intended to be
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performed. In fact, the consulting agreement was a sham and was intended primarily to funnel
bribes to the Djibouti foreign official.
24. Thereafter, Ericsson’s head of Northeast Africa received pressure from two
foreign officials (“Djibouti Foreign Official 1” and “Djibouti Foreign Official 2”) for EAB’s
Dubai branch to pay the Djibouti Consultant. Both of these foreign officials had decision-making
authority over the bid for the contract with Djibouti SOE.
25. For example, on August 14, 2011, Ericsson’s head of Northeast Africa stated in
an email, “I just got another call from [Djibouti Foreign Official 1]. We need to wire the
payment within the current week.”
26. On August 17, 2011, Ericsson’s head of Northeast Africa stated, “I just got now a
call from [representatives of Foreign Official 2]. I really need ... to wire the $.”
27. On August 18, 2011, Ericsson’s head of Northeast Africa emailed a payment
processor, “Tell me what can I do to make [the payment] happen fast. I am getting strong
pressures from [Foreign Official 2]. This is not nice.”
28. On August 23, 2011, the Djibouti Consultant told Ericsson’s head of Northeast
Africa that if the consulting payment was not made, the Djibouti SOE would no longer be
interested in pursuing business with Ericsson.
29. On or around August 24, 2011, EAB, through its branch in Dubai, transferred
approximately $1,441,050 (EUR 1,000,000) to the Djibouti Consultant through a U.S.-based
correspondent account.
30. EAB, through its Dubai branch, made two additional payments to the Djibouti
Consultant in or around October 2011 and March 2012. The three payments to the Djibouti
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Consultant totaled approximately $2.1 million. The payments were made in U.S. dollars through
correspondent bank accounts in New York.
31. Ericsson’s head of Northeast Africa, who authorized the payments, knew that the
Djibouti Consultant would transfer a significant portion of the consulting fees to the two foreign
officials with decision-making power in exchange for obtaining the contract with Djibouti SOE.
32. On September 21, 2011, Ericsson issued a press release announcing that the
company had been awarded a contract with the Djibouti SOE.
33. The head of Ericsson’s Middle East region and Ericsson Egypt employees falsely
booked the payments to the Djibouti Consultant in the books of EAB’s Dubai branch under a
cost of sales account, when they were, in fact, bribes to foreign officials in Djibouti. The EAB
Dubai branch’s books and records were consolidated into Ericsson’s financial statements.
The Saudi Arabia Bribery Scheme
34. In 2012 and 2013, Ericsson, through the Saudi Arabia branch of EAB, made
payments to two consultants in Saudi Arabia (“Saudi Consultant A” and “Saudi Consultant B”)
in connection with securing business from a state-owned telecommunications company (“Saudi
SOE”).
35. Saudi Consultant A and Saudi Consultant B were retained because the head of
EAB’s Saudi branch believed that their owners had influence over Saudi SOE officials making
decisions on contracts pertaining to Saudi SOE.
36. The head of EAB’s Saudi branch and the head of Ericsson’s Middle East region
signed these consulting agreements and authorized the payments to the consultants while
knowing or recklessly ignoring red flags which indicated a high probability that at least a portion
of these commissions were intended for, or would be passed to, foreign officials at Saudi SOE to
obtain or retain telecommunication contracts.
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37. For example, the contracts with both consultants described identical services. The
services contemplated in the contract were never intended to be performed.
38. In fact, besides its owners, Saudi Consultant A had only one employee.
Additionally, Saudi Consultant A had only one client – EAB’s Saudi branch. Saudi Consultant A
was formed in January 2012, almost one year after the agreement was signed, specifically for the
purpose of receiving payments pursuant to the consulting agreement with EAB’s Saudi branch.
Similarly, one of Saudi Consultant B’s references was a senior official at Saudi SOE.
39. EAB’s Saudi branch employees did not follow Ericsson’s internal policies in
retaining the two consultants. EAB’s Saudi branch employees completed the due diligence on
Saudi Consultant A and Saudi Consultant B almost one year after the agreements with the
consultants were signed. The due diligence was a sham and was conducted only because it was
necessary to begin making payments.
40. In or around December 2012, in connection with payments made to both
consultants, a senior foreign official with decision making authority at the Saudi SOE pressured
the head of EAB’s Saudi branch to make higher payments to Saudi Consultant A and Saudi
Consultant B.
41. Saudi Consultant B claimed to be based in Saudi Arabia, yet some of the
payments EAB made through its Saudi branch to Saudi Consultant B were sent to a Channel
Islands bank account. Some of the payments to Saudi Consultant B were made on the same day
as the payments made to Saudi Consultant A.
42. Between March 2012 and February 2013, Ericsson, through EAB’s Saudi branch,
paid a total of approximately $40 million to the two Saudi Consultants and received nine
contracts from Saudi SOE valued at more than $700 million.
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43. Internally, EAB employees referred to these payments as “corporate marketing
fees” which some employees believed to be code for bribes. Additionally, one EAB executive
acknowledged that the payments to the consultants were extraordinarily large.
44. An employee of EAB’s Saudi branch communicated with the owners of Saudi
Consultant A and Saudi Consultant B regarding the sham consulting agreements using U.S.-
based email servers.  Ericsson recorded the payments to Saudi Consultant A and Saudi
Consultant B on the books of EAB’s Saudi branch as cost of sales. The financial results of
EAB’s Saudi branch were consolidated into Ericsson’s financial statements.
The Saudi Arabia & China Leisure Trips
45. Ericsson, through EAB’s Saudi branch and Ericsson China, funded leisure travel
and entertainment for foreign officials from Saudi SOE and China, respectively, in exchange for
new or continuing business from state-owned entities.
46. Between 2015 and 2017, EAB’s Saudi branch paid for lavish non-business related
trips for two Saudi SOE employees who had decision-making authority at the Saudi SOE. At that
time, the Saudi SOE had contracts with several different telecommunications companies. EAB,
through its Saudi branch, paid for travel and entertainment expenses for the Saudi SOE
employees, and occasionally one of their spouses, in order to secure an advantage over
Ericsson’s competitors in obtaining additional and continuing orders from the Saudi SOE.
47. For example, EAB’s Saudi branch paid for plane tickets, which cost
approximately $70,000, for a Saudi SOE executive and seven of his family members to travel
from Riyadh, Saudi Arabia to Los Angeles, California, between August 8 and September 15,
2016. Additional pleasure trips to Paris were provided to the two Saudi SOE employees. EAB’s
Saudi branch paid for spa services, shopping, and accommodations at five star hotels on some of
these trips.
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48. During this period, EAB’s Saudi branch generated at least $40.54 million of gross
revenues from the Saudi SOE.
49. Similarly, Ericsson China, paid for leisure trips for Chinese foreign officials in
order to obtain business from a state-owned telecommunications company in China (“China
SOE”). These trips were paid through an off-the-books structure created at the direction of the
head of Ericsson’s Asia Pacific Region in order to disguise expenditures for gifts, trips, and
entertainment of Chinese government officials and employees of China SOE. Ericsson China
employees effectuated the structure by knowingly signing purchase requests and approving
invoices submitted by third party service providers for services that were never provided. In at
least one instance, Ericsson China employees facilitated payments to a fake service provider for
the purpose of funneling money to agents and to cover travel and entertainment expenses for
Chinese foreign officials.
50. From 2013 to 2015, Ericsson China paid $19.5 million to third party service
providers, in part to fund gifts and leisure trips given to Chinese foreign officials.
51. Ericsson China paid approximately $3.2 million in travel expenses provided from
May 2013 through December 2013 for executives at the China SOE to destinations including the
United States, Australia, and France. In one instance, in May 2013, Ericsson China paid for a
delegation of China SOE employees for a trip to the United States and the United Kingdom, with
luxury accommodations, including stops in Palo Alto, Las Vegas, Phoenix, Chicago, and
London. The China SOE awarded Ericsson China contracts between May 2013 and December
2013 worth over $294 million.
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52. Ericsson China held letters of guarantee at several hotels and a travel agency that
allowed Ericsson’s agents to place travel and entertainment expenses for Chinese officials on
Ericsson China’s tab.
53. The trips described above appear to have been purely for sightseeing and had no
legitimate business purpose. No Ericsson, EAB Saudi branch, or Ericsson China employees
accompanied the foreign officials from Saudi Arabia or China, and the foreign officials did not
participate in any business meetings or product demonstrations on these trips.
54. The trips described above were falsely booked as legitimate travel and
entertainment expenses in the books of Ericsson China and EAB’s Saudi branch which were
consolidated into Ericsson’s financial statements.
B. Vietnam
55. From at least 2011 through 2015, Ericsson, through entities including EAB,
Ericsson Vietnam and Ericsson Malaysia engaged a purported sales consultant (“Vietnamese
Consultant”) to provide consultancy services for various projects with customers in Vietnam.
The Vietnamese Consultant did not provide these services. Instead, Vietnamese Consultant
maintained a slush fund in Vietnam, through which payments were made to third parties. In total,
the Vietnamese Consultant was paid, through manual payments, approximately $11.4 million
between 2011 and 2015.
56. Vietnamese Consultant served strictly as an intermediary, who used this slush
fund to make payments to third parties. The recipients were disguised through the use of code
names such as “Exim,” “Ivory” and “Rezone”.
57. Ericsson Vietnam did not have adequate internal accounting controls to identify
the significant red flags raised by the payments to Vietnamese Consultant. Vietnamese
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Consultant was incorporated in the British Virgin Islands and held its bank account in Hong
Kong. Although Vietnamese Consultant dissolved in 2007, payments continued through 2015.
58. Ericsson Vietnam employees understood that the slush funds managed by
Vietnamese Consultant were connected to Vietnamese customers, several of which were state-
owned. A portion of slush funds managed by Vietnamese Consultant were given to customers as
cash gifts.
59. Ericsson, through its employees and agents, falsified Ericsson’s books and records
in order to conceal the slush fund payments. The payments were improperly booked to a cost of
sales account in EAB’s and Ericsson Vietnam’s books.
60. The financial results of EAB and Ericsson Vietnam were consolidated into
Ericsson’s financial statements.
Indonesia
61. Between 2012 and 2015, Ericsson Indonesia made approximately $45 million in
payments to a purported sales consultant (“Indonesian Consultant”), in order to create slush
funds to be managed by Indonesian Consultant with oversight and direction from employees of
Ericsson Indonesia.
62. Indonesian Consultant served as an intermediary to transfer money to unknown
third parties. The payments to Indonesian Consultant were made pursuant to sham contracts
between Ericsson Indonesia and Indonesian Consultant for services that were never performed.
Moreover, Indonesian Consultant’s invoices did not reflect the true nature of or contain a
description of the services provided.
63. Ericsson Indonesia employees referred to the slush funds using code names. One
slush fund, the “fridge,” held millions of dollars of cash in U.S. dollars used for “off the book
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expenses” including customer entertainment and a pleasure trip to Bali. Ericsson Indonesia
maintained other slush funds with indecipherable purposes such as “Operational.”
64. To conceal them, the improper payments were recorded in the books of Ericsson
Indonesia in a “Customer Service” account under cost of sales.
65. Ericsson Indonesia’s books and records were consolidated into Ericsson’s
financial statements.
Kuwait
66. In December 2013, Ericsson, through EAB’s branch in Qatar, made an improper
payment to a consultant (“Kuwait Consultant”) pursuant to a sham contract for services that were
never actually performed.
67. In or around October 2011, a state owned telecommunications company in
Kuwait opened a request for proposals to upgrade its radio access network (“Kuwait Contract”).
EAB bid for the Kuwait Contract.
68. An employee of EAB entered into an oral agreement with Kuwait Consultant for
assistance in obtaining Kuwait Contract. The Kuwait Consultant was owned by two individuals
whose relative was a government official in Qatar.
69. From October 2011 through November 2011, Kuwait Consultant provided an
EAB employee with inside information such as competitor bid information about the Kuwait
Contract tender.
70. EAB was awarded the Kuwait Contract, which was worth approximately $180
million, in December 2012.
71. Communications between the representative of the Kuwait Consultant and the
EAB employee in January and February 2013 show that the Kuwait Consultant expected to
receive 3% of the value of the equipment of the Kuwait Contract, and that the representative of
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the Kuwait Consultant made a “commitment to [his] friends in Kuwait” which he would not pay
from his own funds.
72. In November 2013, Kuwait Consultant escalated the issue to the head of
Ericsson’s Middle East region, who eventually agreed to make a payment to Kuwait Consultant
in the amount of $450,000 through a sham agreement.
73. On December 12, 2013, an EAB employee sent an email attaching a draft
“Consultancy Frame Agreement” between Kuwait Consultant and EAB’s branch in Qatar. The
email stated, “I have been asked to sort out the mess we got into in Kuwait . . . . I have
constructed the attached agreement. . . . I do not want anyone to think that I had anything to do
with this just because I am now cleaning up!”
74. On or around December 18, 2013, the head of Ericsson’s Middle East region
signed the Consultancy Frame Agreement on behalf of EAB’s Qatar branch. The agreement
stated that EAB’s Qatar branch engaged Kuwait Consultant to provide services “within the area
of marketing and sales support to increase customer satisfaction and enhance Ericsson business
in Kuwait . . . with the purpose of winning the LTE business with [Kuwait SOE].” These
services were never provided. Accordingly, the head of Ericsson’s Middle East region asked the
Kuwait Consultant to create a sham invoice to support the settlement payment.
75. In December 2013, EAB’s branch in Qatar paid $450,000 to Kuwait Consultant
through correspondent bank accounts in New York, New York, to Kuwait Consultant’s bank
account in Qatar.
76. Ericsson’s books and records did not reflect that this transaction was, in fact,
related to an arrangement to reimburse the consultant for payments to unknown recipients.
Rather, EAB employees, at the direction of the head of Ericsson’s Middle East region, created a
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sham contract to disguise the payment to the consultant and approved a fake invoice for services
in order to conceal the transaction.
77. The payment was recorded in the books of EAB’s Qatari branch under operating
expenses. The financial results of EAB’s Qatari branch were consolidated into Ericsson’s
financial statements.
China
78. Between 2013 and 2016, Ericsson China paid $31.5 million to third party service
providers who had connections and access to foreign officials. These third parties did not provide
any legitimate services to Ericsson in exchange for the large payments they received.
79. The purpose of these payments was to allow Ericsson China to continue to use
and pay third party agents in China in contravention of Ericsson’s policies and procedures.
80. In 2013, Ericsson instituted a policy restricting the use of third party agents.
Ericsson’s head of Asia Pacific determined that it was important for Ericsson China’s business to
continue to engage third party agents with strong connections to Ericsson China’s state-owned
customers. To continue to use and pay agents who were not approved or paid in compliance with
Ericsson’s internal procedures, EAB and Ericsson China employees made payments through
sham contracts with service providers.
81. To further avoid detection, EAB and Ericsson China employees processed the
payments manually using paper purchase requests, rather than through the electronic computer
system.
82. Ericsson China improperly recorded these payments as “other external services,”
“site acquisition services” and “service fulfillment of contract.” The financial statements of
Ericsson China were consolidated into those of Ericsson.
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C. Ericsson’s Willful Failure to Implement and Maintain Sufficient Internal
Accounting Controls
83. During the relevant period, Ericsson knowingly and willfully failed to implement
adequate internal accounting controls with respect to retention of consultants and agents,
payment of bribes, and making improper payments.
84. In particular, Ericsson failed to implement controls to ensure the effective
enforcement of its policies and procedures that, among other things, (a) required employees
properly to document and account for payments to agents and consultants, including the ultimate
recipients of the payments and the reasons for the payments; (b) required adequate due diligence
for the retention of third-party agents and consultants; (c) required completed due diligence and a
fully executed contract with a third party before the third party could begin providing services;
(d) required that agreed-upon payments be commensurate with the services to be performed and
that the services paid for were performed; (e) prohibited certain compensation arrangements with
third parties, such as advance payments; and (f) established oversight procedures, by personnel at
Ericsson’s headquarters and others, to ensure that third parties were retained and paid pursuant to
appropriate controls.
85. As an example, Ericsson failed to implement an effective system of internal
accounting controls over its third-party consultant in Djibouti. EAB, through its branch in
Ethiopia, entered into a consultancy agreement with the Djibouti Consultant before the due
diligence on the Djibouti Consultant was completed. Additionally, the agreement with the
Djibouti Consultant deviated from Ericsson’s standard template agreement, was not properly
executed and approved, and provided that the Djibouti Consultant would receive an advance
payment, contrary to Ericsson’s policies and procedures. Likewise, the due diligence report on
the Djibouti Consultant was not signed or approved in compliance with Ericsson’s established
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management approval requirements, and omitted reference to the high-level official in the
government of Djibouti who controlled the Djibouti Consultant. Further, in order to process
payments to the Djibouti Consultant on an expedited basis, employees bypassed Ericsson’s
policies, procedures, and internal accounting controls relating to payment to agents and
consultants, at the direction of Ericsson’s head of Northeast Africa.
86. In Saudi Arabia, an EAB Saudi branch employee completed the due diligence on
Saudi Consultant A and Saudi Consultant B almost one year after the agreements with the
consultants were signed. The due diligence was conducted only because it was required before
making payments.
87. In China, Ericsson failed to implement an effective system of internal accounting
controls to prevent or detect the creation of sham service provider arrangements facilitated by
fake purchase requests and invoices submitted by third party service providers for services that
were never provided. Additionally, Ericsson China employees were able to provide foreign
officials with leisure trips and gifts without detection.
88. In Vietnam and Indonesia, neither Ericsson Vietnam nor Ericsson Indonesia had
adequate internal accounting controls to identify the significant red flags raised by the payments
to Vietnamese Consultant and Indonesian Consultant.
89. In Kuwait, the $450,000 payment to the Kuwait Consultant was not approved or
paid in compliance with Ericsson’s internal accounting controls. There was no written
consultancy agreement in place with the Kuwait Consultant and no due diligence was completed
at the time the purported services were performed.
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D. Ericsson’s Falsified Books and Records
90. Due to Ericsson’s failure to implement and enforce effective internal accounting
controls, employees were able to disguise the true nature and purpose of certain transactions in
Ericsson’s books and records.
91. Ericsson, through its employees and agents, including senior-level employees,
paid millions of dollars to various agents, consultants, and service providers who were not
approved or paid in compliance with Ericsson’s internal procedures. Some of the payments were
made in cash and were used to create slush funds, the purpose and recipients of which are
unknown. Other payments were made pursuant to sham service provider agreements under
which no legitimate services were provided to Ericsson, so as to continue to use and pay agents
in contravention of the Company’s policies and procedures.
92. In connection with these payments, Ericsson, through its employees and agents,
including senior-level employees, knowingly and willfully created or facilitated the creation of
fictitious contracts, invoices, and purchase orders for services that were not rendered and were
never intended to be rendered; used secret codenames for certain expenditures; and bypassed
Ericsson’s standard vendor sourcing process, including by using hard copy, rather than
electronic, documentation to evade detection. The payments were falsely or misleadingly
characterized in Ericsson’s books and records, including as consulting expenses, cost of sales,
“corporate marketing fees,” “other external services” or “service fulfillment of contract.”
93. Ericsson, through its employees and agents, disguised in its books and records the
approximately $2.1 million in bribe payments to, and for the benefit of, foreign officials in
Djibouti.
94. Ericsson, through its employees and agents, disguised in its books and records
approximately $40 million in improper payments in connection with obtaining business in Saudi
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Arabia. Payments for lavish trips and entertainment intended to influence Saudi foreign officials
also were disguised in Ericsson’s books and records.
95. In connection with the conduct described above in China, approximately $31.5
million in payments to third party service providers were inaccurately recorded in Ericsson’s
consolidated books and records. An additional $19.5 million which was paid to third party
consultants to fund gifts and leisure trips given to Chinese foreign officials, was also inaccurately
characterized in Ericsson’s books and records.
96. In connection with the conduct described above in Vietnam, approximately $11.4
million in payments to the Vietnamese Consultant were inaccurately recorded in Ericsson’s
consolidated books and records.
97. In connection with the conduct described above in Indonesia, approximately $45
million in payments to the Indonesian Consultant were inaccurately recorded in Ericsson’s
consolidated books and records.
98. With respect to the conduct described above in Kuwait, the $450,000 payment to
the consultant was inaccurately recorded in Ericsson’s consolidated books and records.
FIRST CLAIM FOR RELIEF
Violations of Section 30A of the Exchange Act
(Against Defendant)
99. Paragraphs 1 through 98 are re-alleged and incorporated by reference.
100. As described above, Ericsson, through its officers, directors, employees or agents
corruptly offered, promised to pay, or authorized unlawful payments to one or more persons,
while knowing that all or a portion of those payments would be offered, given or promised,
directly or indirectly, to foreign officials for the purposes of influencing their acts or decisions in
their official capacity, inducing them to do or omit to do actions in violation of their lawful
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duties, securing an improper advantage, or inducing such foreign officials to use their influence
with a foreign government or instrumentality thereof to assist Ericsson in obtaining or retaining
business.
101. By reason of the foregoing, Ericsson violated, and unless enjoined, will continue
to violate, the anti-bribery provisions of the FCPA, as codified at Section 30A of the Exchange
Act [15 U.S.C. § 78-dd-1].
SECOND CLAIM FOR RELIEF
Violations of Exchange Act Section 13(b)(2)(B) of the Exchange Act
(Against Defendant)
102. Paragraphs 1 through 98 are re-alleged and incorporated by reference.
103. By engaging in the conduct described above, Ericsson failed to devise and
maintain a system of internal accounting controls sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with management’s general or specific
authorization; and (ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles or any other criteria
applicable to such statements, and to maintain accountability for its assets.
104. By engaging in the conduct described above, Ericsson violated, and unless
enjoined, will continue to violate, the internal accounting controls provisions of the FCPA, as
codified at Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)].
THIRD CLAIM FOR RELIEF
Violations of Exchange Act Section 13(b)(2)(A)
(Against Defendant)
105. Paragraphs 1 through 98 are re-alleged and incorporated by reference.
106. As alleged above, Ericsson failed to keep books, records, and accounts, which, in
reasonable detail, accurately and fairly reflected its transactions and disposition of its assets.
20

107. By reason of the foregoing, Ericsson violated, and unless enjoined, will continue
to violate, the books-and-records provisions of the FCPA, as codified at Section 13(b)(2)(A) of
the Exchange Act [15 U.S.C. §78m(b)(2)(A)].
PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that the Court:
I.
Issue findings of fact and conclusions of law that Ericsson committed the alleged
violations.
II.
Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of Civil
Procedure, permanently enjoining Ericsson, and its officers, agents, servants, employees, and
attorneys, and all persons in active concert or participation with any of them, who receive actual
notice of the judgment by personal service or otherwise, and each of them, from violating
Section 30A, 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78dd-1,
78m(b)(2)(A), and 78m(b)(2)(B)].
III.
Order Ericsson to disgorge all ill-gotten gains, with prejudgment interest, wrongfully
obtained from the conduct alleged in this Complaint.
IV.
Retain jurisdiction of this action in accordance with the principles of equity and the
Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and
decrees that may be entered, or to entertain any suitable application or motion for additional
relief within the jurisdiction of this Court.
21

V.
Grant such other and further relief as this Court may determine to be just and necessary.
Dated: December 6, 2019
/s/ Amy Jane Longo
AMY JANE LONGO
[email protected]
Securities and Exchange Commission
Los Angeles Regional Office
444 S. Flower Street, Suite 900
Los Angeles, CA 90071
(323) 965-3835 (Longo)
FINOLA H. MANVELIAN*
[email protected]
(323) 965-3980 (Manvelian)
WENDY E. PEARSON*
[email protected]
(323) 965-4546 (Pearson)
*Not admitted in SDNY
22

Complaints and Other Initiating Documents
1:19-cv-11214 Securities and Exchange Commission v. Telefonaktiebolaget LM Ericsson
U.S. District Court
Southern District of New York
Notice of Electronic Filing
The following transaction was entered by Longo, Amy on 12/6/2019 at 4:44 PM EST and filed on
12/6/2019
Case Name: Securities and Exchange Commission v. Telefonaktiebolaget LM Ericsson
Case Number: 1:19-cv-11214
Filer: Securities and Exchange Commission
Document Number: 1
Docket Text:
COMPLAINT against Telefonaktiebolaget LM Ericsson. Document filed by Securities and
Exchange Commission.(Longo, Amy)
1:19-cv-11214 Notice has been electronically mailed to:
Amy J. Longo [email protected]
1:19-cv-11214 Notice has been delivered by other means to:
The following document(s) are associated with this transaction:
Document description:Main Document
Original filename:n/a
Electronic document Stamp:
[STAMP dcecfStamp_ID=1008691343 [Date=12/6/2019] [FileNumber=23221767-
0] [5ce2b1bbb5074cd7f6817f39270e10d74923cab763e0a9fd05b65d077445bd38c2
c2e3d4393bff96647c07b7536007e94345823c4ea7208396594808742905b1]]

Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 1 of 22 

AMY JANE LONGO 
REGIONAL TRIAL COUNSEL 
Finola H. Manvelian 
Wendy E. Pearson 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
Los Angeles Regional Office  
444 South Flower St, Suite 900 
Los Angeles, CA 90071 
(323) 965-3835 (Longo) 

UNITED STATES DISTRICT COURT  
SOUTHERN DISTRICT OF NEW YORK 

SECURITIES AND EXCHANGE COMMISSION, Case No. 

vs. 

Plaintiff  
COMPLAINT 

TELEFONAKTIEBOLAGET LM ERICSSON, 

Defendant. 

Plaintiff U.S. Securities and Exchange Commission (the “SEC”) alleges: 

SUMMARY 

1. This matter arises from violations of the anti-bribery, recordkeeping, and internal 

accounting controls provisions of the Foreign Corrupt Practices Act (“FCPA”) [15. U.S.C. 

§§ 78dd-1, 78m(b)(2)(A)-(B)] by defendant Telefonaktiebolaget LM Ericsson (“Ericsson”), a 

multinational networking and telecommunications equipment and services company 

headquartered in Sweden. 

2. From 2011 through early 2017, Ericsson subsidiaries paid approximately $62 

million in bribes to government officials through third parties in Djibouti, Saudi Arabia, and 

China to obtain or retain business. Ericsson realized approximately $427 million in profits from 



 

 

 

 

 

 

 

 

 

Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 2 of 22 

business obtained through the use of these illicit payments. Ericsson’s practice involved either 

entering into agreements with third party consultants who had connections with or access to 

public officials, and/or paying for travel and entertainment expenses for foreign officials and 

sometimes their families in order to influence their decision-making. 

3. In Vietnam and Indonesia, Ericsson subsidiaries used consultants to create slush 

funds of approximately $56 million and the ultimate recipients of these funds were unknown. 

The consultants in Vietnam and Indonesia served strictly as intermediaries to transfer money to 

third parties. 

4. In China, Ericsson subsidiaries made approximately $31.5 million in payments 

pursuant to sham service provider agreements under which no legitimate services were provided. 

These payments were made so as to continue to use and pay third party agents in China in 

contravention of Ericsson’s policies and procedures. 

5. Ericsson also made a payment in the amount of $450,000 through a subsidiary to 

a consulting company in Qatar that was not in compliance with Ericsson’s internal accounting 

controls. Employees of the Ericsson subsidiary, at the direction of a senior employee, created a 

sham consultancy agreement to disguise the payment to the consultant. 

6. These illicit payments were improperly characterized in the books and records of 

Ericsson’s subsidiaries as legitimate expenses and consolidated in Ericsson’s financial 

statements, which were filed with the SEC throughout the relevant period. 

7. As a result of its conduct in Djibouti, Saudi Arabia, and China, Ericsson, through 

its subsidiaries, violated Section 30A of the Securities Exchange Act of 1934 (“Exchange Act”) 

[15 U.S.C. § 78dd-1] when it authorized or paid bribes to foreign officials in order to obtain or 

retain business. 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 3 of 22 

8. As a result of its conduct in Djibouti, Saudi Arabia, China, Vietnam, Indonesia 

and Kuwait, Ericsson, through its subsidiaries, violated Section 13(b)(2)(A) of the Exchange Act 

[15 U.S.C. § 78m(b)(2)(A)] when it created false books and records by failing to accurately or 

completely record payments to third parties and to foreign officials. Ericsson also violated 

Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)] by failing to have sufficient 

internal accounting controls in place to detect and prevent the authorization or payment of 

improper payments. 

JURISDICTION AND VENUE 

9. This Court has jurisdiction over this action under Sections 21(d), 21(e) and 27 of 

the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e) and 78aa]. 

10. Ericsson, directly or indirectly, made use of the means or instrumentalities of 

interstate commerce, of the mails, or of the facilities of a national securities exchange in 

connection with the transactions, acts, practices, and courses of business alleged in this 

Complaint. 

11. Venue is proper in this District pursuant to Section 27 of the Exchange Act [15 

U.S.C. § 78aa]. Certain acts or transactions constituting the violations by Ericsson occurred in 

this district. 

DEFENDANT 

12. Telefonaktiebolaget LM Ericsson (“Ericsson” or the “Company”) is a 

multinational networking and telecommunications equipment and services company 

headquartered in Sweden. Throughout the relevant time period, Ericsson’s common shares were 

registered with the SEC pursuant to Section 12(b) of the Exchange Act [15 U.S.C. § 781] and 

traded in the form of American Depositary Shares that were represented by American Depositary 

Receipts listed on the NASDAQ. As such, Ericsson was required to file reports, including Form 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 4 of 22 

20-F, with the SEC pursuant to Section 13(a) of the Exchange Act [15 U.S.C. § 78m] and related 

rules thereunder, and was an “issuer” within the meaning of the FCPA [15 U.S.C. § 78dd-1]. 

RELATED ENTITIES 

13. Ericsson AB (“EAB”) is a wholly owned subsidiary of Ericsson established in 

Sweden. EAB is one of Ericsson’s largest subsidiaries. Ericsson exercised control over the 

activities of EAB. EAB’s board included some Ericsson executives, and EAB’s senior managers 

reported to Ericsson’s management. EAB’s books and records were consolidated into Ericsson’s 

financial statements filed with the SEC. 

14. Ericsson Egypt Ltd (“Ericsson Egypt”) is a majority-owned foreign subsidiary of 

Ericsson. The head of Ericsson’s Middle East region and individuals employed by Ericsson 

Egypt oversaw Ericsson’s operations in North East Africa, including Djibouti. Ericsson Egypt’s 

books and records were consolidated into Ericsson’s financial statements. 

15. Ericsson operated in China through its foreign subsidiaries, including Ericsson 

(China) Company Ltd., Ericsson (China) Communications Co., Ltd. and Ericsson Hong Kong, as 

well as its indirect majority-owned joint venture, Nanjing Ericsson Panda Communications 

Company Ltd., (collectively referred to as “Ericsson China”). The financial statements of 

Ericsson China were consolidated with those of Ericsson. 

16. PT Ericsson Indonesia (“Ericsson Indonesia”) is a majority-owned foreign 

subsidiary of Ericsson established in Indonesia. The financial statements of Ericsson Indonesia 

were consolidated with those of Ericsson. 

17. Ericsson Vietnam Co. Ltd. (“Ericsson Vietnam”) is a wholly owned foreign 

subsidiary of Ericsson established in Vietnam. The financial statements of Ericsson Vietnam 

were consolidated with those of Ericsson. 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 5 of 22 

18. Ericsson Resource & Competence Center Sdn. Bhd. (“Ericsson Malaysia”), is a 

wholly-owned foreign subsidiary of Ericsson that operates in Malaysia. The financial statements 

of Ericsson Malaysia were consolidated with those of Ericsson. 

FACTUAL ALLEGATIONS 

A. The Djibouti Bribery Scheme 

19. Beginning in approximately 2011, Ericsson, through the head of Ericsson’s 

Middle East region and employees of Ericsson Egypt, authorized and directed the payment of 

bribes in Djibouti in order to obtain a contract from a state owned telecommunications company 

(“Djibouti SOE”). 

20. EAB had planned to bid for a large networking contract with the Djibouti SOE in 

2010. An Ericsson Egypt employee informed Ericsson’s head of Northeast Africa that EAB 

could win the contract with Djibouti SOE if EAB paid bribes to foreign officials in Djibouti. 

Later, these employees also heard this directly from a Djibouti foreign official. 

21. Fearing that they may not be awarded the contract, the head of Ericsson’s Middle 

East region and employees of Ericsson Egypt devised a plan to bribe the government officials. 

For this purpose, EAB, through its Ethiopia branch, retained a consulting company (the “Djibouti 

Consultant”) that was owned by the wife of a senior Djibouti foreign official and controlled by 

the same Djibouti foreign official. This fact was known to the head of Ericsson’s Middle East 

region and employees of Ericsson Egypt. 

22. In October 2010, EAB submitted a bid to Djibouti SOE, and on May 11, 2011, 

Djibouti SOE signed a contract with EAB valued at approximately €20,300,000 ($29 million). 

23. On June 16, 2011, EAB’s branch in Ethiopia and the Djibouti Consultant signed a 

consulting agreement. The services contemplated in the contract were never intended to be 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 6 of 22 

performed. In fact, the consulting agreement was a sham and was intended primarily to funnel 

bribes to the Djibouti foreign official. 

24. Thereafter, Ericsson’s head of Northeast Africa received pressure from two 

foreign officials (“Djibouti Foreign Official 1” and “Djibouti Foreign Official 2”) for EAB’s 

Dubai branch to pay the Djibouti Consultant. Both of these foreign officials had decision-making 

authority over the bid for the contract with Djibouti SOE. 

25. For example, on August 14, 2011, Ericsson’s head of Northeast Africa stated in 

an email, “I just got another call from [Djibouti Foreign Official 1]. We need to wire the 

payment within the current week.” 

26. On August 17, 2011, Ericsson’s head of Northeast Africa stated, “I just got now a 

call from [representatives of Foreign Official 2]. I really need ... to wire the $.” 

27. On August 18, 2011, Ericsson’s head of Northeast Africa emailed a payment 

processor, “Tell me what can I do to make [the payment] happen fast. I am getting strong 

pressures from [Foreign Official 2]. This is not nice.” 

28. On August 23, 2011, the Djibouti Consultant told Ericsson’s head of Northeast 

Africa that if the consulting payment was not made, the Djibouti SOE would no longer be 

interested in pursuing business with Ericsson. 

29. On or around August 24, 2011, EAB, through its branch in Dubai, transferred 

approximately $1,441,050 (EUR 1,000,000) to the Djibouti Consultant through a U.S.-based 

correspondent account. 

30. EAB, through its Dubai branch, made two additional payments to the Djibouti 

Consultant in or around October 2011 and March 2012. The three payments to the Djibouti 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 7 of 22 

Consultant totaled approximately $2.1 million. The payments were made in U.S. dollars through 

correspondent bank accounts in New York. 

31. Ericsson’s head of Northeast Africa, who authorized the payments, knew that the 

Djibouti Consultant would transfer a significant portion of the consulting fees to the two foreign 

officials with decision-making power in exchange for obtaining the contract with Djibouti SOE. 

32. On September 21, 2011, Ericsson issued a press release announcing that the 

company had been awarded a contract with the Djibouti SOE. 

33. The head of Ericsson’s Middle East region and Ericsson Egypt employees falsely 

booked the payments to the Djibouti Consultant in the books of EAB’s Dubai branch under a 

cost of sales account, when they were, in fact, bribes to foreign officials in Djibouti. The EAB 

Dubai branch’s books and records were consolidated into Ericsson’s financial statements. 

The Saudi Arabia Bribery Scheme 

34. In 2012 and 2013, Ericsson, through the Saudi Arabia branch of EAB, made 

payments to two consultants in Saudi Arabia (“Saudi Consultant A” and “Saudi Consultant B”) 

in connection with securing business from a state-owned telecommunications company (“Saudi 

SOE”). 

35. Saudi Consultant A and Saudi Consultant B were retained because the head of 

EAB’s Saudi branch believed that their owners had influence over Saudi SOE officials making 

decisions on contracts pertaining to Saudi SOE. 

36. The head of EAB’s Saudi branch and the head of Ericsson’s Middle East region 

signed these consulting agreements and authorized the payments to the consultants while 

knowing or recklessly ignoring red flags which indicated a high probability that at least a portion 

of these commissions were intended for, or would be passed to, foreign officials at Saudi SOE to 

obtain or retain telecommunication contracts. 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 8 of 22 

37. For example, the contracts with both consultants described identical services. The 

services contemplated in the contract were never intended to be performed.  

38. In fact, besides its owners, Saudi Consultant A had only one employee. 

Additionally, Saudi Consultant A had only one client – EAB’s Saudi branch. Saudi Consultant A 

was formed in January 2012, almost one year after the agreement was signed, specifically for the 

purpose of receiving payments pursuant to the consulting agreement with EAB’s Saudi branch. 

Similarly, one of Saudi Consultant B’s references was a senior official at Saudi SOE. 

39. EAB’s Saudi branch employees did not follow Ericsson’s internal policies in 

retaining the two consultants. EAB’s Saudi branch employees completed the due diligence on 

Saudi Consultant A and Saudi Consultant B almost one year after the agreements with the 

consultants were signed. The due diligence was a sham and was conducted only because it was 

necessary to begin making payments. 

40. In or around December 2012, in connection with payments made to both 

consultants, a senior foreign official with decision making authority at the Saudi SOE pressured 

the head of EAB’s Saudi branch to make higher payments to Saudi Consultant A and Saudi 

Consultant B. 

41. Saudi Consultant B claimed to be based in Saudi Arabia, yet some of the 

payments EAB made through its Saudi branch to Saudi Consultant B were sent to a Channel 

Islands bank account. Some of the payments to Saudi Consultant B were made on the same day 

as the payments made to Saudi Consultant A. 

42. Between March 2012 and February 2013, Ericsson, through EAB’s Saudi branch, 

paid a total of approximately $40 million to the two Saudi Consultants and received nine 

contracts from Saudi SOE valued at more than $700 million. 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 9 of 22 

43. Internally, EAB employees referred to these payments as “corporate marketing 

fees” which some employees believed to be code for bribes. Additionally, one EAB executive 

acknowledged that the payments to the consultants were extraordinarily large. 

44. An employee of EAB’s Saudi branch communicated with the owners of Saudi 

Consultant A and Saudi Consultant B regarding the sham consulting agreements using U.S.-

based email servers.  Ericsson recorded the payments to Saudi Consultant A and Saudi 

Consultant B on the books of EAB’s Saudi branch as cost of sales. The financial results of 

EAB’s Saudi branch were consolidated into Ericsson’s financial statements. 

The Saudi Arabia & China Leisure Trips 

45. Ericsson, through EAB’s Saudi branch and Ericsson China, funded leisure travel 

and entertainment for foreign officials from Saudi SOE and China, respectively, in exchange for 

new or continuing business from state-owned entities. 

46. Between 2015 and 2017, EAB’s Saudi branch paid for lavish non-business related 

trips for two Saudi SOE employees who had decision-making authority at the Saudi SOE. At that 

time, the Saudi SOE had contracts with several different telecommunications companies. EAB, 

through its Saudi branch, paid for travel and entertainment expenses for the Saudi SOE 

employees, and occasionally one of their spouses, in order to secure an advantage over 

Ericsson’s competitors in obtaining additional and continuing orders from the Saudi SOE. 

47. For example, EAB’s Saudi branch paid for plane tickets, which cost 

approximately $70,000, for a Saudi SOE executive and seven of his family members to travel 

from Riyadh, Saudi Arabia to Los Angeles, California, between August 8 and September 15, 

2016. Additional pleasure trips to Paris were provided to the two Saudi SOE employees. EAB’s 

Saudi branch paid for spa services, shopping, and accommodations at five star hotels on some of 

these trips. 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 10 of 22 

48. During this period, EAB’s Saudi branch generated at least $40.54 million of gross 

revenues from the Saudi SOE. 

49. Similarly, Ericsson China, paid for leisure trips for Chinese foreign officials in 

order to obtain business from a state-owned telecommunications company in China (“China 

SOE”). These trips were paid through an off-the-books structure created at the direction of the 

head of Ericsson’s Asia Pacific Region in order to disguise expenditures for gifts, trips, and 

entertainment of Chinese government officials and employees of China SOE. Ericsson China 

employees effectuated the structure by knowingly signing purchase requests and approving 

invoices submitted by third party service providers for services that were never provided. In at 

least one instance, Ericsson China employees facilitated payments to a fake service provider for 

the purpose of funneling money to agents and to cover travel and entertainment expenses for 

Chinese foreign officials. 

50. From 2013 to 2015, Ericsson China paid $19.5 million to third party service 

providers, in part to fund gifts and leisure trips given to Chinese foreign officials. 

51. Ericsson China paid approximately $3.2 million in travel expenses provided from 

May 2013 through December 2013 for executives at the China SOE to destinations including the 

United States, Australia, and France. In one instance, in May 2013, Ericsson China paid for a 

delegation of China SOE employees for a trip to the United States and the United Kingdom, with 

luxury accommodations, including stops in Palo Alto, Las Vegas, Phoenix, Chicago, and 

London. The China SOE awarded Ericsson China contracts between May 2013 and December 

2013 worth over $294 million. 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 11 of 22 

52. Ericsson China held letters of guarantee at several hotels and a travel agency that 

allowed Ericsson’s agents to place travel and entertainment expenses for Chinese officials on 

Ericsson China’s tab. 

53. The trips described above appear to have been purely for sightseeing and had no 

legitimate business purpose. No Ericsson, EAB Saudi branch, or Ericsson China employees 

accompanied the foreign officials from Saudi Arabia or China, and the foreign officials did not 

participate in any business meetings or product demonstrations on these trips. 

54. The trips described above were falsely booked as legitimate travel and 

entertainment expenses in the books of Ericsson China and EAB’s Saudi branch which were 

consolidated into Ericsson’s financial statements. 

B. Vietnam 

55. From at least 2011 through 2015, Ericsson, through entities including EAB, 

Ericsson Vietnam and Ericsson Malaysia engaged a purported sales consultant (“Vietnamese 

Consultant”) to provide consultancy services for various projects with customers in Vietnam. 

The Vietnamese Consultant did not provide these services. Instead, Vietnamese Consultant 

maintained a slush fund in Vietnam, through which payments were made to third parties. In total, 

the Vietnamese Consultant was paid, through manual payments, approximately $11.4 million 

between 2011 and 2015. 

56. Vietnamese Consultant served strictly as an intermediary, who used this slush 

fund to make payments to third parties. The recipients were disguised through the use of code 

names such as “Exim,” “Ivory” and “Rezone”. 

57. Ericsson Vietnam did not have adequate internal accounting controls to identify 

the significant red flags raised by the payments to Vietnamese Consultant. Vietnamese 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 12 of 22 

Consultant was incorporated in the British Virgin Islands and held its bank account in Hong 

Kong. Although Vietnamese Consultant dissolved in 2007, payments continued through 2015. 

58. Ericsson Vietnam employees understood that the slush funds managed by 

Vietnamese Consultant were connected to Vietnamese customers, several of which were state-

owned. A portion of slush funds managed by Vietnamese Consultant were given to customers as 

cash gifts. 

59. Ericsson, through its employees and agents, falsified Ericsson’s books and records 

in order to conceal the slush fund payments. The payments were improperly booked to a cost of 

sales account in EAB’s and Ericsson Vietnam’s books. 

60. The financial results of EAB and Ericsson Vietnam were consolidated into 

Ericsson’s financial statements. 

Indonesia 

61. Between 2012 and 2015, Ericsson Indonesia made approximately $45 million in 

payments to a purported sales consultant (“Indonesian Consultant”), in order to create slush 

funds to be managed by Indonesian Consultant with oversight and direction from employees of 

Ericsson Indonesia. 

62. Indonesian Consultant served as an intermediary to transfer money to unknown 

third parties. The payments to Indonesian Consultant were made pursuant to sham contracts 

between Ericsson Indonesia and Indonesian Consultant for services that were never performed. 

Moreover, Indonesian Consultant’s invoices did not reflect the true nature of or contain a 

description of the services provided. 

63. Ericsson Indonesia employees referred to the slush funds using code names. One 

slush fund, the “fridge,” held millions of dollars of cash in U.S. dollars used for “off the book 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 13 of 22 

expenses” including customer entertainment and a pleasure trip to Bali. Ericsson Indonesia 

maintained other slush funds with indecipherable purposes such as “Operational.”  

64. To conceal them, the improper payments were recorded in the books of Ericsson 

Indonesia in a “Customer Service” account under cost of sales. 

65. Ericsson Indonesia’s books and records were consolidated into Ericsson’s 

financial statements. 

Kuwait 

66. In December 2013, Ericsson, through EAB’s branch in Qatar, made an improper 

payment to a consultant (“Kuwait Consultant”) pursuant to a sham contract for services that were 

never actually performed. 

67. In or around October 2011, a state owned telecommunications company in 

Kuwait opened a request for proposals to upgrade its radio access network (“Kuwait Contract”).  

EAB bid for the Kuwait Contract. 

68. An employee of EAB entered into an oral agreement with Kuwait Consultant for 

assistance in obtaining Kuwait Contract. The Kuwait Consultant was owned by two individuals 

whose relative was a government official in Qatar.  

69. From October 2011 through November 2011, Kuwait Consultant provided an 

EAB employee with inside information such as competitor bid information about the Kuwait 

Contract tender. 

70. EAB was awarded the Kuwait Contract, which was worth approximately $180 

million, in December 2012. 

71. Communications between the representative of the Kuwait Consultant and the 

EAB employee in January and February 2013 show that the Kuwait Consultant expected to 

receive 3% of the value of the equipment of the Kuwait Contract, and that the representative of 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 14 of 22 

the Kuwait Consultant made a “commitment to [his] friends in Kuwait” which he would not pay 

from his own funds. 

72. In November 2013, Kuwait Consultant escalated the issue to the head of 

Ericsson’s Middle East region, who eventually agreed to make a payment to Kuwait Consultant 

in the amount of $450,000 through a sham agreement. 

73. On December 12, 2013, an EAB employee sent an email attaching a draft 

“Consultancy Frame Agreement” between Kuwait Consultant and EAB’s branch in Qatar. The 

email stated, “I have been asked to sort out the mess we got into in Kuwait . . . . I have 

constructed the attached agreement. . . . I do not want anyone to think that I had anything to do 

with this just because I am now cleaning up!” 

74. On or around December 18, 2013, the head of Ericsson’s Middle East region 

signed the Consultancy Frame Agreement on behalf of EAB’s Qatar branch. The agreement 

stated that EAB’s Qatar branch engaged Kuwait Consultant to provide services “within the area 

of marketing and sales support to increase customer satisfaction and enhance Ericsson business 

in Kuwait . . . with the purpose of winning the LTE business with [Kuwait SOE].” These 

services were never provided. Accordingly, the head of Ericsson’s Middle East region asked the 

Kuwait Consultant to create a sham invoice to support the settlement payment. 

75. In December 2013, EAB’s branch in Qatar paid $450,000 to Kuwait Consultant 

through correspondent bank accounts in New York, New York, to Kuwait Consultant’s bank 

account in Qatar. 

76. Ericsson’s books and records did not reflect that this transaction was, in fact, 

related to an arrangement to reimburse the consultant for payments to unknown recipients. 

Rather, EAB employees, at the direction of the head of Ericsson’s Middle East region, created a 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 15 of 22 

sham contract to disguise the payment to the consultant and approved a fake invoice for services 

in order to conceal the transaction. 

77. The payment was recorded in the books of EAB’s Qatari branch under operating 

expenses. The financial results of EAB’s Qatari branch were consolidated into Ericsson’s 

financial statements. 

China 

78. Between 2013 and 2016, Ericsson China paid $31.5 million to third party service 

providers who had connections and access to foreign officials. These third parties did not provide 

any legitimate services to Ericsson in exchange for the large payments they received. 

79. The purpose of these payments was to allow Ericsson China to continue to use 

and pay third party agents in China in contravention of Ericsson’s policies and procedures. 

80. In 2013, Ericsson instituted a policy restricting the use of third party agents. 

Ericsson’s head of Asia Pacific determined that it was important for Ericsson China’s business to 

continue to engage third party agents with strong connections to Ericsson China’s state-owned 

customers. To continue to use and pay agents who were not approved or paid in compliance with 

Ericsson’s internal procedures, EAB and Ericsson China employees made payments through 

sham contracts with service providers. 

81. To further avoid detection, EAB and Ericsson China employees processed the 

payments manually using paper purchase requests, rather than through the electronic computer 

system.   

82. Ericsson China improperly recorded these payments as “other external services,” 

“site acquisition services” and “service fulfillment of contract.” The financial statements of 

Ericsson China were consolidated into those of Ericsson. 

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C. Ericsson’s Willful Failure to Implement and Maintain Sufficient Internal 
Accounting Controls 

83. During the relevant period, Ericsson knowingly and willfully failed to implement 

adequate internal accounting controls with respect to retention of consultants and agents, 

payment of bribes, and making improper payments.  

84. In particular, Ericsson failed to implement controls to ensure the effective 

enforcement of its policies and procedures that, among other things, (a) required employees 

properly to document and account for payments to agents and consultants, including the ultimate 

recipients of the payments and the reasons for the payments; (b) required adequate due diligence 

for the retention of third-party agents and consultants; (c) required completed due diligence and a 

fully executed contract with a third party before the third party could begin providing services; 

(d) required that agreed-upon payments be commensurate with the services to be performed and 

that the services paid for were performed; (e) prohibited certain compensation arrangements with 

third parties, such as advance payments; and (f) established oversight procedures, by personnel at 

Ericsson’s headquarters and others, to ensure that third parties were retained and paid pursuant to 

appropriate controls. 

85. As an example, Ericsson failed to implement an effective system of internal 

accounting controls over its third-party consultant in Djibouti. EAB, through its branch in 

Ethiopia, entered into a consultancy agreement with the Djibouti Consultant before the due 

diligence on the Djibouti Consultant was completed. Additionally, the agreement with the 

Djibouti Consultant deviated from Ericsson’s standard template agreement, was not properly 

executed and approved, and provided that the Djibouti Consultant would receive an advance 

payment, contrary to Ericsson’s policies and procedures. Likewise, the due diligence report on 

the Djibouti Consultant was not signed or approved in compliance with Ericsson’s established 

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management approval requirements, and omitted reference to the high-level official in the 

government of Djibouti who controlled the Djibouti Consultant. Further, in order to process 

payments to the Djibouti Consultant on an expedited basis, employees bypassed Ericsson’s 

policies, procedures, and internal accounting controls relating to payment to agents and 

consultants, at the direction of Ericsson’s head of Northeast Africa. 

86. In Saudi Arabia, an EAB Saudi branch employee completed the due diligence on 

Saudi Consultant A and Saudi Consultant B almost one year after the agreements with the 

consultants were signed. The due diligence was conducted only because it was required before 

making payments. 

87. In China, Ericsson failed to implement an effective system of internal accounting 

controls to prevent or detect the creation of sham service provider arrangements facilitated by 

fake purchase requests and invoices submitted by third party service providers for services that 

were never provided. Additionally, Ericsson China employees were able to provide foreign 

officials with leisure trips and gifts without detection. 

88. In Vietnam and Indonesia, neither Ericsson Vietnam nor Ericsson Indonesia had 

adequate internal accounting controls to identify the significant red flags raised by the payments 

to Vietnamese Consultant and Indonesian Consultant. 

89. In Kuwait, the $450,000 payment to the Kuwait Consultant was not approved or 

paid in compliance with Ericsson’s internal accounting controls. There was no written 

consultancy agreement in place with the Kuwait Consultant and no due diligence was completed 

at the time the purported services were performed. 

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D. Ericsson’s Falsified Books and Records 

90. Due to Ericsson’s failure to implement and enforce effective internal accounting 

controls, employees were able to disguise the true nature and purpose of certain transactions in 

Ericsson’s books and records. 

91. Ericsson, through its employees and agents, including senior-level employees, 

paid millions of dollars to various agents, consultants, and service providers who were not 

approved or paid in compliance with Ericsson’s internal procedures. Some of the payments were 

made in cash and were used to create slush funds, the purpose and recipients of which are 

unknown. Other payments were made pursuant to sham service provider agreements under 

which no legitimate services were provided to Ericsson, so as to continue to use and pay agents 

in contravention of the Company’s policies and procedures. 

92. In connection with these payments, Ericsson, through its employees and agents, 

including senior-level employees, knowingly and willfully created or facilitated the creation of 

fictitious contracts, invoices, and purchase orders for services that were not rendered and were 

never intended to be rendered; used secret codenames for certain expenditures; and bypassed 

Ericsson’s standard vendor sourcing process, including by using hard copy, rather than 

electronic, documentation to evade detection. The payments were falsely or misleadingly 

characterized in Ericsson’s books and records, including as consulting expenses, cost of sales, 

“corporate marketing fees,” “other external services” or “service fulfillment of contract.” 

93. Ericsson, through its employees and agents, disguised in its books and records the 

approximately $2.1 million in bribe payments to, and for the benefit of, foreign officials in 

Djibouti. 

94. Ericsson, through its employees and agents, disguised in its books and records 

approximately $40 million in improper payments in connection with obtaining business in Saudi 

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Arabia. Payments for lavish trips and entertainment intended to influence Saudi foreign officials 

also were disguised in Ericsson’s books and records. 

95. In connection with the conduct described above in China, approximately $31.5 

million in payments to third party service providers were inaccurately recorded in Ericsson’s 

consolidated books and records. An additional $19.5 million which was paid to third party 

consultants to fund gifts and leisure trips given to Chinese foreign officials, was also inaccurately 

characterized in Ericsson’s books and records. 

96. In connection with the conduct described above in Vietnam, approximately $11.4 

million in payments to the Vietnamese Consultant were inaccurately recorded in Ericsson’s 

consolidated books and records. 

97. In connection with the conduct described above in Indonesia, approximately $45 

million in payments to the Indonesian Consultant were inaccurately recorded in Ericsson’s 

consolidated books and records. 

98. With respect to the conduct described above in Kuwait, the $450,000 payment to 

the consultant was inaccurately recorded in Ericsson’s consolidated books and records. 

FIRST CLAIM FOR RELIEF 

Violations of Section 30A of the Exchange Act 

(Against Defendant) 

99. Paragraphs 1 through 98 are re-alleged and incorporated by reference. 

100. As described above, Ericsson, through its officers, directors, employees or agents 

corruptly offered, promised to pay, or authorized unlawful payments to one or more persons, 

while knowing that all or a portion of those payments would be offered, given or promised, 

directly or indirectly, to foreign officials for the purposes of influencing their acts or decisions in 

their official capacity, inducing them to do or omit to do actions in violation of their lawful 

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duties, securing an improper advantage, or inducing such foreign officials to use their influence 

with a foreign government or instrumentality thereof to assist Ericsson in obtaining or retaining 

business. 

101. By reason of the foregoing, Ericsson violated, and unless enjoined, will continue 

to violate, the anti-bribery provisions of the FCPA, as codified at Section 30A of the Exchange 

Act [15 U.S.C. § 78-dd-1]. 

SECOND CLAIM FOR RELIEF 

Violations of Exchange Act Section 13(b)(2)(B) of the Exchange Act 

(Against Defendant) 

102. Paragraphs 1 through 98 are re-alleged and incorporated by reference. 

103. By engaging in the conduct described above, Ericsson failed to devise and 

maintain a system of internal accounting controls sufficient to provide reasonable assurances 

that: (i) transactions are executed in accordance with management’s general or specific 

authorization; and (ii) transactions are recorded as necessary to permit preparation of financial 

statements in conformity with generally accepted accounting principles or any other criteria 

applicable to such statements, and to maintain accountability for its assets. 

104. By engaging in the conduct described above, Ericsson violated, and unless 

enjoined, will continue to violate, the internal accounting controls provisions of the FCPA, as 

codified at Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)]. 

THIRD CLAIM FOR RELIEF 

Violations of Exchange Act Section 13(b)(2)(A) 

(Against Defendant) 

105. Paragraphs 1 through 98 are re-alleged and incorporated by reference. 

106. As alleged above, Ericsson failed to keep books, records, and accounts, which, in 

reasonable detail, accurately and fairly reflected its transactions and disposition of its assets. 

20Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 21 of 22 

107. By reason of the foregoing, Ericsson violated, and unless enjoined, will continue 

to violate, the books-and-records provisions of the FCPA, as codified at Section 13(b)(2)(A) of 

the Exchange Act [15 U.S.C. §78m(b)(2)(A)]. 

PRAYER FOR RELIEF 

WHEREFORE, the SEC respectfully requests that the Court: 

I. 

Issue findings of fact and conclusions of law that Ericsson committed the alleged 

violations. 

II. 

Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of Civil 

Procedure, permanently enjoining Ericsson, and its officers, agents, servants, employees, and 

attorneys, and all persons in active concert or participation with any of them, who receive actual 

notice of the judgment by personal service or otherwise, and each of them, from violating 

Section 30A, 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78dd-1, 

78m(b)(2)(A), and 78m(b)(2)(B)]. 

III. 

Order Ericsson to disgorge all ill-gotten gains, with prejudgment interest, wrongfully 

obtained from the conduct alleged in this Complaint. 

IV. 

Retain jurisdiction of this action in accordance with the principles of equity and the 

Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and 

decrees that may be entered, or to entertain any suitable application or motion for additional 

relief within the jurisdiction of this Court. 

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Case 1:19-cv-11214 Document 1 Filed 12/06/19 Page 22 of 22 

V. 

Grant such other and further relief as this Court may determine to be just and necessary. 

Dated: December 6, 2019 

/s/ Amy Jane Longo 
AMY JANE LONGO 
[email protected] 
Securities and Exchange Commission  
Los Angeles Regional Office  
444 S. Flower Street, Suite 900 
Los Angeles, CA 90071 
(323) 965-3835 (Longo) 

FINOLA H. MANVELIAN* 
[email protected] 
(323) 965-3980 (Manvelian) 
WENDY E. PEARSON* 
[email protected] 
(323) 965-4546 (Pearson) 

*Not admitted in SDNY 

22 

mailto:[email protected]
mailto:[email protected]
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Complaints and Other Initiating Documents 
1:19-cv-11214 Securities and Exchange Commission v. Telefonaktiebolaget LM Ericsson 

U.S. District Court 

Southern District of New York 

Notice of Electronic Filing 

The following transaction was entered by Longo, Amy on 12/6/2019 at 4:44 PM EST and filed on 
12/6/2019 
Case Name: Securities and Exchange Commission v. Telefonaktiebolaget LM Ericsson 
Case Number: 1:19-cv-11214 
Filer: Securities and Exchange Commission 
Document Number: 1 

Docket Text: 
COMPLAINT against Telefonaktiebolaget LM Ericsson. Document filed by Securities and 
Exchange Commission.(Longo, Amy) 

1:19-cv-11214 Notice has been electronically mailed to: 

Amy J. Longo [email protected] 

1:19-cv-11214 Notice has been delivered by other means to: 

The following document(s) are associated with this transaction: 

Document description:Main Document 
Original filename:n/a 
Electronic document Stamp: 
[STAMP dcecfStamp_ID=1008691343 [Date=12/6/2019] [FileNumber=23221767-
0] [5ce2b1bbb5074cd7f6817f39270e10d74923cab763e0a9fd05b65d077445bd38c2 
c2e3d4393bff96647c07b7536007e94345823c4ea7208396594808742905b1]] 

mailto:[email protected]