SEC Investigates Ericsson for Bribery in Romania

July 18, 2013 — The U.S. Foreign Corrupt Practices Act (FCPA) makes it a crime for international corporations to compete for business abroad by paying bribes to foreign officials. Neither is it permitted to pay an “agent” to make the actual payments. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) of 2010 offers whistleblowers inside the business a way to take action when they discover illegal foreign bribery operations. Tipsters who notify the Securities and Exchange Commission (SEC) or the U.S. Department of Justice (DOJ) about foreign bribery operations may be entitled to a handsome financial reward under Dodd-Frank.

Insider Employee Blew the Whistle on Alleged $7 Million Slush Fund

The SEC is now formally investigating Ericsson AB concerning the Swedish multinational corporation’s possible FCPA violations in Romania. A former Ericsson employee blew the whistle on the company’s alleged use of a slush fund to bribe Romanian officials in an effort to win contracts in the country. Thomas Lundin, a former Ericsson general manager in Romania, claims that Ericsson maintained a $7 million pot of cash to bribe Romanian decision makers as a means to obtain business. The bribes, Lundin maintains, explain how Ericsson was able to quickly grow its business in Romania from next to nothing to more than $1 billion.

Ericsson claims that Lundin stole the $7 million, according to Reporting Project.

Lundin has described a Worldwide Commission Scheme (WCS) by Ericsson — a group of offshore companies located in Switzerland, Liechtenstein and Cyprus — that Ericsson allegedly used to make bribery payments to two former telecommunications ministers in Romania, and possibly more. Ericsson has countered that the money was not used to pay bribes, but was spent to pay local “agents” to secure new contracts for the company in Romania.

Informants Collaborate With the SEC to Stop FCPA Violations

It’s difficult to keep a $7 million slush fund secret. Conscientious employees often discover FCPA violations and look for ways to stop it. If you are contemplating a collaboration with the government concerning foreign bribery operations that you’ve uncovered, the whistleblower attorneys with Waters & Kraus are prepared to safeguard your interests under the Dodd-Frank Act. Contact us by email or call our FCPA lawyers at 800.226.9880 to learn more about our anti-bribery practice.

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