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New York Court Tosses Investors' Suit Against Ericsson's FCPA Compliance Statements

The U.S. District Court for the Eastern District of New York dismissed a suit from a group of investors that accused Ericsson of misleading them about elements of a Foreign Corrupt Practices Act proceeding. Judge William Kuntz sided with Ericsson, ruling that the investors failed to claim that the company made misstatements since the alleged lies were "immaterial as a matter of law" or not false when made (In Re Telefonaktiebolaget LM Ericsson Securities Litigation, E.D.N.Y. # 22-1167).

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Ericsson was previously found to have violated the FCPA stemming from its operations in Djibouti, China, Vietnam, Indonesia and Kuwait, afterward entering into a deferred prosecution agreement (see 2303230062). During the proceeding, 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.

Following news of the FCPA violations, the investors filed suit, claiming that 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 after finding the statements on the firm's growth in the Middle East "too general to require further disclosure." The judge also said Ericsson's statements on FCPA compliance were too general and never "promised perfect compliance," and its statements on the enforcement actions were not misleading because of the various warnings the company made on its possible compliance failures.