Tech
Ericsson pleads guilty in U.S. to federal bribery violations, agrees to pay $206 million penalty
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Ericsson had already paid a $520.6 million penalty in 2019 over what New York federal prosecutors said was a “yearslong campaign of corruption,” involving the bribery of government officials and the falsification of books and records in Djibouti, China, Vietnam, Indonesia and Kuwait. Additionally, the company paid about $540 million to the Securities and Exchange Commission.
As a result of the 2019 settlement, the company entered into a deferred prosecution agreement (DPA) with the U.S. Attorney’s Office for the Southern District of New York. But the Department of Justice alleged Ericsson violated the agreement by failing to truthfully disclose “all factual information and evidence” involving the company’s schemes in Djibouti and China. The company also allegedly failed to disclose possible evidence of a similar scheme in Iraq.
Ericsson used outside consultants to pay bribes to government officials and manage off-the-books “slush funds” in all five countries, prosecutors said, using “sham contracts” and “false invoices” to obscure the nature of the funds, according to that deferred prosecution agreement.
Ericsson employees in China caused “tens of millions of dollars” to be paid out to agents and consultants, “at least a portion of which was used to provide things of value, including leisure travel and entertainment, to foreign officials,” including at a state-owned telecommunications company, the DOJ said.
In Djibouti, the Justice Department said an Ericsson employee paid over $2 million in bribes to high-ranking government officials in the country’s executive branch and in Djibouti’s state-owned telecommunications firm.
“When the Department afforded Ericsson the opportunity to enter into a DPA to resolve an investigation into serious FCPA violations, the company agreed to comply with all provisions of that agreement,” Assistant Attorney General Kenneth Polite said in a press release. “Instead of honoring that commitment, Ericsson repeatedly failed to fully cooperate and failed to disclose evidence and allegations of misconduct in breach of the agreement.”
Ericsson CEO Börje Ekholm said in a press release, that with the latest penalty and plea agreement, “the matter of the breaches is now resolved.”
“This allows us to focus on executing our strategy while driving continued cultural change across the company with integrity at the center of everything we do,” said Ekholm, who became CEO in 2017. “This resolution is a stark reminder of the historical misconduct that led to the DPA.”
The International Consortium of Investigative Journalists reported in 2022 that Ericsson allegedly “sought permission” from ISIS to continue work in Mosul, Iraq, which was controlled by the terrorist group at the time. The release from federal prosecutors did not directly refer to the ICIJ’s reporting on Ericsson’s alleged dealings with the so-called Islamic State, but noted that the company “failed to promptly report and disclose evidence and allegations of conduct related to its business activities in Iraq that may constitute a violation of the FCPA.”
In a release, Ericsson said its own internal investigation “did not conclude that Ericsson made or was responsible for any payments to any terrorist organization.” A subsequent investigation from 2022 did not change that assessment, the company said.
An Ericsson spokesperson, when asked for comment, pointed CNBC to the company’s statement.
Tech
‘Inundated with requests’: Digital currency firms look to Swiss banks after crypto-friendly lenders fail
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Some of these companies have turned to crypto-friendly Swiss banks, flooding them with requests for banking services, according to multiple industry insiders who spoke to CNBC.
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Typically, the crypto industry has found it difficult to access banking services from traditional lenders, who don’t want to touch anything that does not have a clear regulatory framework. This has included blockchain and crypto firms, who have instead had to turn to specialist banks.
But with two of the biggest lenders, along with SVB, now out of the picture, cryptocurrency firms have turned to Switzerland, which has sought to market itself as a crypto hub with solid regulation.
“We have been inundated with requests,” said an advisor at a private Swiss bank, who preferred to remain anonymous due to the sensitive nature of the matter.
The advisor said on the Monday after Silvergate and Signature Bank’s winddown this month, the private lender had more requests in a single day than ever before.
“It is just nuts,” the advisor said.
U.S., non-Europe firms look to Switzerland
Dominic Castley, chief marketing officer at Sygnum, one of Switzerland’s biggest banks that is focused on servicing digital asset companies, said it is seeing an influx of enquiries.
“Over the past weeks as the current banking industry events have unfolded, we have seen a significant increase in onboarding enquiries from various international locations,” Castley said, adding that Sygnum’s location in both Switzerland and Singapore is attractive to companies.
Sygnum has a Swiss banking license and a capital markets services license in Singapore, bringing it under the purview of regulators.
One Switzerland-based advisor to financial technology companies, who also preferred to remain anonymous due to the sensitivity of the situation, said that has been “a lot more inflow from U.S. customers” to Swiss banks.
An executive at a European trading firm, meanwhile, said their company had been seeing “non-Europe based entities” making enquiries for new banking relationships. The executive, who wished to remain anonymous due to the sensitive nature of the topic, said these firms include crypto-focused hedge funds and venture capital firms.
Castley said interest is “mainly coming from investors, asset managers and blockchain projects looking to diversify their crypto investments with a trusted Swiss partner like Sygnum Bank.”
Switzerland’s other major lender that deals with the digital assets industry — SEBA Bank — did not respond to a request for comment when contacted by CNBC.
Switzerland’s crypto-friendly stance
Part of why companies are seeking out Swiss banks is the country’s regulation which is welcoming to cryptocurrency firms in need of a stable operating environment.
The country has created what locals dub “Crypto Valley” in the region of Zug, just outside the Swiss capital Zurich, where start-ups and more established digital currency firms have set up shop.
In 2021, the government introduced a regulation on companies using so-called “distributed electronic register technology” or blockchain, which originated with the cryptocurrency bitcoin but has since evolved.
Thierry Arys Ruiz, CEO of Swiss-based blockchain firm AgAu.io, said Switzerland is “more stable” and there is “more certainty to what the rules are.”
The anonymous advisor at the private Swiss bank said that companies are coming to Switzerland to be in a “safer jurisdiction” for crypto regulation.
Filming from Washington, D.C., Chew emphasized the large scale of TikTok users, small and medium-sized businesses and its own employees based in the U.S. that rely on the company. The message may preview his appeal to lawmakers Thursday, where he will be faced with questions about the ability of its Chinese parent company ByteDance, and the Chinese government, to access U.S. user information collected by the app.
TikTok says it has worked to create a risk mitigation plan to ensure that U.S. data doesn’t get into the hands of a foreign adversary through its app. The company has said U.S. user data is already stored outside of China.
But many lawmakers and intelligence officials seem to remain unconvinced that the information can be safe while TikTok is owned by a Chinese company. TikTok said last week that the Committee on Foreign Investment in the U.S., which is reviewing risks related to the app, is pushing for ByteDance to sell its stake or face a ban.
Chew disclosed in the video that TikTok has more than 150 million monthly active users, or MAUs, in the U.S., representing massive growth from August 2020, when it said for the first time that it has about 100 million MAUs in the country. That number includes 5 million businesses that use the app to reach their customers, with most of those being small or medium-sized businesses. He also said TikTok has 7,000 U.S.-based employees.
“This comes at a pivotal moment for us,” Chew said, referencing lawmakers’ threats of a TikTok ban. “This could take TikTok away from all 150 million of you.”
Chew then appealed to users directly to share in the comments what they want their representatives to know about why they love TikTok.
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