In this episode of the Crime, Corruption, and Compliance podcast, host Michael Volkov dives into the Ericsson FCPA Deferred Prosecution Agreement breach settlement. The case highlights important issues with conducting internal investigations, corporate culture, and dealing with the Justice Department in the event of a breach. The episode delves into the details of the case, discussing the lessons learned from this massive failure and nightmare scenario with regard to disclosures, and how it serves as a cautionary tale for all investigators, whether conducted by internal staff or outside counsel.

Here are some key ideas discussed in this episode:

Ericsson, the Swedish telecom company, breached its 2019 Deferred Prosecution Agreement and agreed to enter a guilty plea to the original charges in the DPA and pay a $206M penalty.
The breach was primarily due to Ericsson's failure to disclose its bribery payments or potential bribery payments to ISIS to facilitate transportation of telecom equipment in Iraq.
Ericsson used third-party agents and consultants to pay bribes to government officials in a number of countries to manage slush funds.
Ericsson's failures have undermined the integrity of its corporate commitment to compliance and ethical culture, damaged its reputation, and threatened its relationship with the Justice Department and overall government regulators.
The breach prevented the DOJ from bringing criminal charges against certain individuals and harmed the US's ongoing criminal investigation.
Ericsson's breach presents a laundry list of internal investigation errors, such as a failure to produce responsive documents for many years, omitting key details related to its investigative findings, and a lack of fundamental culture improvements.
Ericsson has significantly enhanced its compliance program and internal accounting controls through structural and leadership changes, including hiring a new Chief Legal Officer and Head of Corporate and Government Investigations.
The DOJ's calculation of the criminal penalty was for just over $727,000,000, reflecting the midpoint of the applicable guideline range, and Ericsson will be required to serve a term of probation, which can be revoked for further violations found.
Ericsson agreed to continue to enhance its program and to test these enhancements for effectiveness.
Ericsson's violations were pervasive and systemic, reflecting a rotten culture that promoted bribery as a means to make money.
Failures to disclose by outside counsel partially reflect failures of senior leadership responsible for oversight and direction of outside counsel.
Outside counsel must establish an effective working relationship with transparency, coordination, and full disclosure.
Senior executives must engage with outside counsel at each and every step of the investigation to check on the overall process.
The failure to produce certain documents underscores the need for a document retention policy.

KEY QUOTES:

"This breach really presents a laundry list of internal investigation errors. ...It is a cautionary tale for all investigators, whether conducted by internal staff or outside counsel." - Michael Volkov

"The failures to disclose, in my view, partially reflect failures of various actors, including outside counsel, but also senior leadership." - Michael Volkov

"Its culture was rotten, and it promoted bribery as a means to an important end that is just making money." - Michael Volkov

Resources

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The Volkov Law Group

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