Swedish telecom equipment group Ericsson’s shares have tumbled after chief executive Börje Ekholm, reportedly admitted that the company may have given money to the Islamic State in Iraq.
Following an internal investigation, the company confirmed earlier this week that several serious breaches of its compliance rules have been uncovered in Iraq, which led to an 11% drop in its share price.
These breaches include paying for transport routes, which are suspected of being under the control of the sanctioned and extremist organization, passing through their territory.
Ekholm stated that while the firm had identified unusual expenses that dated back to 2018, it was unsure as to who the recipient was.
Reports cite, investigators have not yet determined the ultimate recipients or identified any of the firm’s employees who may have been directly involved in financing any terrorist organization.
The admittance comes on the heels of Ericsson settling corruption charges in five other countries, including Iraq’s neighbor Kuwait, by paying the U.S. Department of Justice (DOJ) over $1 billion as part of the Deferred Prosecution Agreement (DPA).
In October of last year, the firm had warned that the U.S. DOJ believed Ericsson had breached its obligations as per the signed DPA by not providing additional information and documents.
It is unclear whether this alleged breach was in connection to the firm’s activities in Iraq.
The company claims that a wide range of suspicious evidence has been uncovered during its internal investigation, ranging from improper expenses and payments to suppliers and agents, including the ones made in cash, to violations of the company’s internal financial controls policy.
Ekholm said that even though the firm has invested significantly in its investigation, it was limited in its powers even after taking guidance from external legal counsel, as well as other external support.
The investigation resulted in several employees leaving the company and the termination of many of its third-party relationships and the undertaking remedial actions.