Ericsson Exits Monitorship

Mobile phone giant Ericsson has wrapped up work with its independent compliance monitor, formally concluding one of the biggest and longest FCPA enforcement actions ever. 

Ericsson announced the end of the monitorship Monday morning. That monitor, Andreas Pohlmann, was originally appointed in 2020 several months after Ericsson settled its FCPA violations in December 2019. The settlement included a deferred-prosecution agreement for the standard three-year term, plus $1.06 billion in penalties and a guilty plea from Ericsson’s Egypt subsidiary.

The DPA and Pohlmann’s monitorship were originally scheduled to end in 2023 — but then, plot twist! Prosecutors accused the company of withholding evidence related to its original violations and of failing to disclose other FCPA violations. So in March 2023 Ericsson ended up pleading guilty to the original charges, paying another $207 million in penalties, and extending the monitorship (and a year’s worth of corporate probation) until June 2024.

That brings us to today’s announcement that both the monitorship and the year’s probation have expired. Ericsson is now a free company. 

“This is an important milestone in our journey to improve our organization,” CEO Börje Ekholm said in a prepared statement. “Over the past four years we have implemented important compliance requirements and processes. Our commitment to integrity is rock solid and we have no tolerance for corruption, fraud or other misconduct.”

Important point: because the original settlement happened in 2019, it does not include a requirement for the chief compliance officer and CEO to certify the effectiveness of Ercisson’s compliance program. The certification clause didn’t come into vogue until the Biden Administration introduced them in 2022. 

Ericsson’s chief compliance officer, Rebecca Rohr, had no official comment but did announce the monitorship news on LinkedIn and said, “It’s motivation to look to the future with optimism as we continue our commitment to ethics and integrity.”

Why We Should Care

The Ericsson denouement is interesting because it’s one of the few examples we have of a deferred-prosecution agreement found to be in breach; so therefore it’s also one of the few examples of the additional punishment that prosecutors might impose when a DPA is violated. 

That scenario probably weighs heavily on the mind at Boeing these days, since Justice Department prosecutors recently accused Boeing of breaching the DPA it struck in 2021 to settle criminal charges stemming from its 737 Max plane crashes in the late 2010s. That dispute is scheduled to go before a federal district court judge next week. 

So far prosecutors haven’t said much about what Boeing did to breach its agreement. Their two-page letter to the court only said Boeing failed “to design, implement, and enforce a compliance and ethics program to prevent and detect violations of the U.S. fraud laws throughout its operations” — which could mean anything, really. 

We also have a few examples of DPAs or monitorships extended, usually in the healthcare sector and most seem to be in the early 2010s; but that’s not the same as a DPA found to be in breach. I’ve been wondering lately whether we’ll see more aggressive review of DPAs from the Justice Department, and coincidentally did a podcast touching on that issue just last week.

The Scenario That Worries Me

What will really matter to compliance officers is how the Justice Department handles DPAs found to be in breach and where the CCO had been required to certify the effectiveness of the program. 

That scenario almost inevitably paints a target of personal liability on the CCO’s back. Like, if you spend three years making progress reports to the Fraud Section, and certify to the effectiveness of the program, and then the department finds the agreement in breach — how could that not raise questions about what the CCO had been doing for the last three years? 

To be fair, the CEO of a company in such a scenario presumably would also face personal liability, since he or she would be certifying the compliance program with the CCO. Plus, if you’ve been providing enhanced compliance reporting to the Fraud Section for several years, and that reporting was problematic, one would hope that somewhere along the way a dissatisfied prosecutor would give you a warning to do better. 

So I suspect the odds of this scenario are low, but I’m not sure; and the consequences for a compliance officer suddenly in that predicament could be painfully high. 

Leave a Comment

You must be logged in to post a comment.