plunged on Wednesday after the Swedish telecom equipment maker said an internal investigation identified that it may have made payments to the terror organization ISIS in Iraq.
Ericsson’s (ticker: ERIC) U.S-listed shares dropped as much as 11.16% in premarket trading on Wednesday. The stock fell as much as 9.59% in midmorning trading in Stockholm.
In a statement late Tuesday, Ericsson said an internal investigation in 2019 found “serious breaches of compliance rules” over its conduct in Iraq, including evidence of corruption-related misconduct and improper use of sales agents and consultants.
“The investigating team also identified payments to intermediaries and the use of alternate transport routes in connection with circumventing Iraqi Customs, at a time when terrorist organizations, including ISIS, controlled some transport routes”, Ericsson said.
The company said its internal investigators could not determine who the final recipient of the money was.
The probe was triggered by unusual expense claims in Iraq dating back to 2018. It ended a year later, but Ericsson chose not to disclose it at that time. Several employees had left the company as a result of the investigation, the company said.
Ericsson said that as a result of media inquiries, it was working with external counsel to review the findings of the investigation and identify any additional measures that the company should take.
Earlier on Tuesday, Ericsson CEO Borje Ekholm told Swedish newspaper Dagens Industri that the company was seeing that “transport routes have been purchased through areas that have been controlled by terrorist organizations, including Isis.”
Ericsson agreed to pay the U.S. Department of Justice (DOJ) $1 billion in 2019 to resolve an investigation into violations of the U.S. Foreign Corrupt Practices Act.
The DOJ said the case arose from Ericsson’s scheme to “make and improperly record tens of millions of dollars in improper payments around the world”. The DOJ named Djibouti, China, Vietnam, Indonesia and Kuwait as the countries involved.
However, in October Ericsson said the DOJ had determined that the Swedish telecoms group had breached its obligations under a deferred prosecution agreement by failing to provide certain documents and factual information.