N.Y. District Court Tosses Investors' Suit Against Ericsson Involving Iraqi Operation

The U.S. District Court for the Eastern District of New York in Brooklyn dismissed with prejudice a suit from a group of Ericsson investors alleging the company misled investors about elements of a Foreign Corrupt Practices Act proceeding. U.S. District Court Judge William Kuntz sided with Ericsson, ruling the investors failed to adequately claim the company made misstatements since the alleged lies were immaterial as a matter of law or not false when made, said a Wednesday ruling (docket 1:22-cv-1167). Ericsson was previously found to have violated the FCPA stemming from its operations in Djibouti, China, Vietnam, Indonesia and Kuwait. In a deferred prosecution agreement, an internal investigation into Ericsson's Iraqi business practices revealed "rampant corruption and FCPA violations," including the payment of bribes to the Islamic State of Iraq and Syria for access to transportation through ISIS territory, said the complaint. After news of the corruption in Ericsson's Iraq operations, the investors filed suit, claiming the company misled investors on (1) the source of Ericsson’s growth in the Middle East; (2) the strength of Ericsson’s compliance policies and anti-corruption controls; and (3) the resolution of the DOJ and SEC investigations and the risk of future enforcement actions. Kuntz dismissed the action, finding the statements on the firm's growth in the Middle East "too general to require further disclosure" and the statements on compliance too general, having never promised "perfect compliance." Ericsson's statements on the enforcement actions weren't misleading given the various warnings the company made on its possible compliance failures, Kuntz said.