Ericsson announces settlement with impact in second quarter 2021
Ericsson (NASDAQ: ERIC) has settled a damages claim with Nokia for EUR 80 million related to a 2019 resolution with the U.S. Department of Justice for violations of the Foreign Corrupt Practices Act in multiple countries. The settlement will impact EUR 80 million on EBIT and EUR 26 million on cash flow in Q2 2021, with further payments scheduled for 2022 and 2023. This reflects risks and uncertainties associated with prolonged litigation. Ericsson emphasizes its commitment to a zero-tolerance policy for corruption and enhancing its compliance program.
- Settlement reduces legal uncertainties and potential distractions in business operations.
- Strengthening of compliance programs can improve corporate governance and investor confidence.
- Immediate impact of EUR 80 million on EBIT and EUR 26 million on cash flow in Q2 2021 may affect short-term financial health.
- Future cash flow impacts due to installments in 2022 and 2023 could strain financial resources.
STOCKHOLM, May 12, 2021 /PRNewswire/ -- Ericsson (NASDAQ: ERIC) has reached an agreement with Nokia for settling a damages claim against Ericsson. The settlement relates to events that were the subject of a 2019 resolution with the U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) of investigations into Ericsson's violations of the U.S. Foreign Corrupt Practices Act (FCPA).
As communicated in 2019, the resolution with DOJ related to criminal charges of books and records and internal controls violations of the FCPA in five countries including in Djibouti and a guilty plea to one instance of bribery in Djibouti. The resolution with the SEC related to allegations of violations of the books and records and internal controls provision of the FCPA in six countries and of the bribery provision of the FCPA in three of these six countries.
The agreement with Nokia contemplates the payment by Ericsson of a total settlement amount of EUR 80 m (SEK 0.8 b equivalent). The amount reflects uncertainty, risk, expense, and potential distraction from business focus associated with a potentially lengthy and complex litigation. The settlement will have an impact of EUR 80 m on EBIT and EUR 26 m on cashflow in Q2 2021. The remainder of the settlement amount will be made in similar installments in 2022 and 2023 respectively, impacting cash-flow. The settlement amount will be recorded as Other Operating Expenses under Segment Emerging Business and Other. Further details of the terms of the settlement are confidential.
Ericsson has a zero-tolerance policy for corruption and has in recent years worked hard to strengthen its Ethics and Compliance program and to build a culture of compliance.
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Ericsson enables communications service providers to capture the full value of connectivity. The company's portfolio spans Networks, Digital Services, Managed Services, and Emerging Business and is designed to help our customers go digital, increase efficiency and find new revenue streams. Ericsson's investments in innovation have delivered the benefits of telephony and mobile broadband to billions of people around the world. The Ericsson stock is listed on Nasdaq Stockholm and on Nasdaq New York. www.ericsson.com
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