Network company Ericsson: Dirty business in Iraq

The telecom equipment supplier Ericsson has tolerated criminal practices by its employees and subcontractors in Iraq for years. Funds may even have ended up with IS, as internal documents show WDR, NDR and SZ could see.

The list of misconduct is impressive: corruption, bribery, fraud and embezzlement, violation of national laws and regulations, accounting fraud and money laundering. Ericsson’s internal investigators found all of this when they investigated the Swedish company’s previous operations in Iraq.

Particularly sensitive: One cannot rule out that funds ended up with the terrorist organization “Islamic State” (IS). The internal report was prepared on behalf of Ericsson – numerous international media have now evaluated it under the leadership of the International Consortium of Investigative Journalists (ICIJ) and researched it on site. are in Germany NDR, WDR and SZ part of the project “theEricssonList:”

Group admits wrongdoing

Ericsson had not responded to a detailed request from the ICIJ and its partner media. Instead, the company issued a press release in mid-February in which it acknowledged some misconduct in its Iraq business. The head of the group, Börje Ekholm, publicly admitted that money could have flowed to IS: “Sometimes we don’t know where the money went, but we see that money has disappeared,” he said of internal Iraq -Detection. The group’s shares went down in the meantime and lost almost 20 percent.

It was lucrative business that lured Ericsson to Iraq, such as the construction of mobile phone networks with local subcontractors. According to the company, between 2011 and 2018 it generated almost two billion dollars in net sales there. But doing business in Iraq was risky. Iraq is one of the most corrupt countries in the world. In addition, the so-called “Islamic State” spread during this time and covered the country with terror.

IS invasion didn’t stop businesses

But those responsible at Ericsson on site didn’t want to give up the business because there was too much at stake for the group. When IS took over the city of Mosul in mid-2014, high-ranking managers decided that the group should continue to operate in Iraq. To withdraw after the IS occupation would have “destroyed the business,” the internal investigation report quotes Ericsson’s management in Iraq at the time as saying.

Subcontractors kidnapped

The decision had consequences: According to an internal report, a little later several employees of a subcontractor were kidnapped by terrorists. Almost everyone was released quickly, but the engineer and team leader Affan (full name known to the editors) remained in captivity. IS terrorists put him under house arrest, which he himself describes as nightmarish.

According to Ericsson’s own investigations, a so-called IS sheik contacted Ericsson. He demanded money for every month Ericsson had worked in Mosul without IS permission. A total of around 2.4 million dollars, that’s how the kidnapping victim Affan remembers the phone call between the Sheik and Ericsson. It remains unclear whether Ericsson then made a direct agreement with IS and paid. There is nothing about this in the internal investigation report.

Ericsson is said to have pushed for more work

Affan was released after about four weeks of uncertainty – he still doesn’t know why. The young man, who is still suffering from the consequences of his kidnapping, raises serious allegations against Ericsson: “For me, the main person responsible is Ericsson, because the company was responsible for the project. They constantly urged us to continue the project, not to stop it. Not even a day. No matter what it costs,” Affan said in an interview with NDR, WDR and SZ.

When asked about the kidnapping, Ericsson declined to comment. The Swedish global corporation is still active in Iraq today and has publicly stated that Iraq is one of a number of countries where there are increased risks to the safety of colleagues and that they are monitoring this very closely.

“Speedway” through IS territory

The kidnapping was not the only possible point of contact with IS. According to the internal investigation documents, Ericsson had equipment transported through a service provider in Iraq. The transport company is said to have given Ericsson a choice. It offered a “legal” route, but it bypassed an Iraqi government customs checkpoint where truck drivers often had to wait for days.

The second option was the so-called “Speedway”, a detour past customs that led through IS territory. Apparently, this route was dangerous not only for the drivers – because, according to eyewitnesses, they had to beware of terrorists and NATO shelling. Anyone who was traveling on the “Speedway” also had to pay a toll to the terrorist militia.

Suspicion of bribery payments

The documents do not reveal whether Ericsson funds actually ended up in the hands of the “Islamic State” in this way. However, the internal investigators were able to register numerous trips with increased costs. “The higher costs were probably used for bribery and payments to local militias along the transport route,” the report says. Also the Ericsson boss Ekholm has since publicly admitted that Ericsson may have paid for the transports to IS, adding that terrorist financing is completely unacceptable and will not be tolerated by Ericsson.

Improper payments were a common practice at least elsewhere in Ericsson’s operations in Iraq: Hundreds of thousands of dollars were siphoned off between 2014 and 2017. According to internal investigators, the money went to hotels, restaurants, bonuses for subcontractors, parties and personal expenses. Ericsson’s rules for handling cash were regularly broken. One employee admitted nearly $10,000 was poured into weekly “cigar nights.”

Expensive presents

Gifts and favors for business associates in the region were also part of the method of doing business. The internal report lists expensive electronics, works of art, luxury goods such as expensive watches or expensive restaurant visits. Ericsson had also concluded deals with the Iraqi Defense Ministry, where investigators also found gifts and flights to Spain and Sweden for representatives of the ministry.

And they weren’t the only ones on Ericsson’s list of clients who received various kinds of donations: members of influential Kurdish families received lucrative consulting contracts worth millions, but no actual consulting service was found.

A structural problem?

“When misconduct can be found in so many places in a company and over such a long period of time, the question arises as to whether this was just a problem in a single country like Iraq and certain employees there, or whether the company was structural , had a deeper problem with dirty business,” says Herbert Storn of the non-profit organization Business Crime Control.

For Ericsson, it is not the first time that sloppy business has been uncovered within the group. In 2019, the Swedes paid more than $1 billion in a settlement with the US Department of Justice and the US Securities and Exchange Commission for unfair business practices in several countries. By bribery and favors to members of the government, the group has obtained lucrative contracts, according to the allegation of the US authorities.

Impunity only subject to conditions

The American authorities only wanted to refrain from further prosecution for the time being under certain conditions: Ericsson had to undertake to comply with the rules in the future and to improve its internal control mechanisms. An external auditor will also monitor Ericsson’s efforts for three years. When asked, the American authorities did not want to answer whether the criminal practices in Iraq that have now become known will cause this deal to burst.

Investor circles said that the US authorities had been informed about the problems in Iraq. Ericsson said tough action had been taken after the internal investigation into the incidents in Iraq and continued work to improve internal structures. It was not until October 2021, however, that the group had to admit that it had partially violated conditions from its comparison with the US authorities.