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Inside Ericsson’s bribery and corruption network in war-torn Iraq, which includes its deals with ISIS terrorists: A comprehensive explainer

The day after Ekholm’s admission that the company might have paid ISIS, Ericsson’s share value dropped to $4.4 billion. However, he maintained that the investigation could not identify any Ericsson employee who was directly involved in financing the terrorists in Iraq.

A storm has rocked the fate of Swedish Telecom giant Ericsson after an investigation revealed its deals with the terrorist group ISIS when it had gained control of Iraq in 2014. The company’s internal investigation has revealed that the company sought permission from ISIS to smuggle its equipment from alternative routes in Iraq and has also thrown light on corrupt deals of its subcontractors with Islamic State terrorists.

An investigation led by the International Consortium of Investigative Journalists (ICIJ) exposes Ericsson’s internal probe report in the company which talks in detail about its sustained role in Iraq despite the take over of ISIS. The report reveals that the tech giant minted ‘tens of millions of dollars’ through questionable payments in order to sustain its operations in the war-torn country. The internal investigation done by Ericsson documents its suspicious dealing through slush funds, corrupt dealings of its local subcontractors with terrorists and payoffs to independent executives who wielded its network in Iraq.

Ericsson’s global Corruption racket

In 2013, Ericsson, which is one of key players supported by the US in countering China’s globalist digital expansion dream, admitted that is undergoing an investigation led by the US Department of Justice over allegations of bribery and corruption in many parts of the world. The investigation revealed that Ericsson officials were involved in Bribery in over 5 countries including China, Kuwait, Vietnam, Indonesia and Djbouti which took place over a 17-year period. Another internal investigation in the company revealed that in 2019, the company examined the corruption practices of its employees in over 15 other countries. In the same year, the company entered in a USD 1 billion bribery settlement with the US Department of Justice and the Securities and Exchange Commission.

While Ericsson washed away its sins while signing the settlement with the US, the world was still unaware of its deeds in Iraq. The internal investigation by the company, which was recently exposed by ICIJ was not part of its settlement with the US in 2019. Reportedly, Simpson Thacher & Bartlett, a high-powered New York law firm that defended Ericsson in the US probe, was tasked to prepare its controversial dealings with suspected terrorists in Iraq.

The Internal probe on Iraq

The leaked documents procured by ICIJ contain 73 pages from a 79-page report on Ericsson’s dealings in Iraq with summaries of 28 witness interviews and 22.5 million emails from 2011 to 2019. The report records how the company spread its cellular network in one of the most corrupt countries in the world unhinged by the ISIS takeover. The pattern of bribery and corruption rackets were so intertwined that the report could not conclude the beneficiaries of most payments worth millions of dollars.

Ericsson’s business in Iraq was based upon feeding local fixers who connected them to politicians in turn. The company also heavily relied on self-appointed subcontractors whose dealings with possible terrorists has seen the light of the day. The ICIJ report states that Ericsson’s operations in Iraq were marked by “sham contracts, inflated invoices, falsified financial statements and payments to “consultants” with nebulous job descriptions.” For example, Ericsson paid $1.2 million to a member of the powerful Barzani family for facilitation to the chairman of a mobile phone operator who also happened to be from the same family.

The ICIJ has pointed out that the internal review fails to pinpoint the actors involved in the payments made to terrorists, as alleged earlier. No interviews of officials responsible for moving Ericsson equipment through ISIS territory or those of subcontractors involved in direct operations in the ISIS-held city of Mosul were recorded. However, Ericsson’s payments in Iraq were also tied to business in Lebanon and Portugal, the documents have revealed.

While the report alleges ten of its former and current employees for violating the company’s code of conduct by indulging in bribery, fraud, money laundering and obstruction of the investigation, the company itself ‘gifted’ its clients with expensive artwork, clothes, iPads, watches, etc. Among the tainted employees, Ericsson’s account manager for Korek Telecom, Elie Moubarak reportedly asked for a donation of USD 50,000 from the militant Kurdistani Peshmerga forces for ‘fighting the ISIS’. Ericsson’s company executive in charge of the Middle East and Africa also endorsed the donation justifying it as getting mileage from Sirwan Barzani, leader of the Kurdish forces and also the then chairman of Korek Telecom.

Both Ibrahim and Moubarak were later promoted by the company to higher positions later in time. In conclusion, the report says that Ericsson’s sales in Iraq totaled about $1.9 billion from 2011 to 2018.

Operations in 2014 Iraq

In 2014, when the terrorist outfit Islamic State of Iraq and Syria started occupying parts of Iraq, it became a challenge for multinational companies like Ericsson to sustain their operations in the country. Amidst the war when ISIS was pillaging homes and beheading civilian hostages, two Ericsson employees from Iraq’s Mosul requested the company to stop operations. However, the senior regional executives rejected the plea since halting operations would mean losses in millions.

A month after the ISIS takeover, Ericsson asked its local telecom partner Asiacell to seek permission from ISIS for continuing its operations in the Mosul region for a collaborated project called Peroza. This led to the kidnapping of a crew chief and a subcontractor by gun-toting ISIS terrorists. The internal investigation did not rule out the possibility of the company financing terrorism through its subcontractors, although no company employee was found directly involved.

To continue its operations in Iraq, Ericsson continued rolling out money to local sales agents, contractors and middlemen, while distancing itself from the dirty business of securing contracts and doing business in developing countries, the ICIJ report suggests.

The company’s sales agent Jawhar Surchi, through his company Al-Awsat Telecommunication Services, secured contacts for Ericsson in the country and became a channel for its suspicious payments between local beneficiaries. Among the fictitious payments included USD 10.5 million to an Al-Awsat-linked company and USD 27 million for consultancy services. To win the Peroza project which involved upgrading local network systems, Ericsson gave a ‘commission’ of USD 500,000 to telecom company Asiacell through Al-Aswat.

In a Washington Post Interview, Surchi confessed that he told internal investigators of Ericsson that his close contacts to people in power, including Prime Ministers allowed him to pull strings for Ericsson. He said that he did many favours for Ericsson by helping it win contracts in extreme times.

Direct connections with ISIS

Affan, an engineer conducting tests of cell towers at Ericsson-Asiacell joint Peroza Project delivered a letter on behalf of the company to an office where ISIS had set up operations. In an interview with the ICIJ, Affan has detailed how the company sustained itself in Iraq under the observation of ISIS. According to Affan, the letter sought permission from the terrorist group to continue its operations in the Mosul region.

While Affan worked for Ericsson’s local subcontractor called Orbitel Telecommunications, he confessed that he was asked to deliver the letter in person. He reported that three companies in the region including Ericsson continued to work under the ISIS regime, even after several of his colleagues were detained. Later, Affan was called by an ISIS terrorist for a meet at a bridge overpass and was kidnapped by some men in scarves hiding their identity. While One assailant forced him to call a senior Ericsson manager in the northern city of Sulaymaniyah, he then threatened to blow up Ericsson’s offices while demanding millions of dollars.

The kidnapping of Affan and the demand for money by ISIS has been confirmed in the internal investigation of Ericsson. He informed that when he was kidnapped Ericsson abandoned him and stopped answering his calls. Reportedly, an Ericsson manager said Asiacell that “arrangements should be made to obtain the release of the hostage and to let Ericsson continue the work in Mosul.” When asked about the continued sustenance of such companies in Iraq, employers like Affan have said in multiple interviews that before ISIS, companies paid protection money to terrorists to prevent attacks on their equipment and to allow workers to do their jobs.

The Speedway

For the expansion of the Peroza network, Ericsson and Aircell needed to construct cell towers and transport their equipment from areas in northern Iraq to the central region of the country. By taking an alternative longer route called the ‘Speedway’ in the report, Ericsson avoided Iraqi customs checkpoints. However, through the ‘perilous’ Speedway, ISIS terrorists had set up checkpoints for attacking and kidnapping travellers. The report states that by transporting through areas controlled by militias, including ISIS, “it cannot be excluded” that Cargo Iraq – the transportation company hired by Ericsson “engaged in facilitation payments (to official Customs officers), bribery and potential illicit financing of terrorism to carry out its transportation operations.”

Light Blue depicts the alternative route ‘Speedway’ used by Ericsson despite ISIS threat for transportation. Dark Blue line depects normal route lined with government customs checkpoints. Credits: AWOWM

Reportedly, Ericsson paid USD 22,000 per truck to carry three loads on a single day through the Speedway. While the owner of Cargo Iraq denied paying to ISIS, the internal investigation suspects that Asiacell has engaged in smuggling and potential illegitimate payments directly and through Ericsson.

What lies ahead

After the expose of its suspicious tradings with ISIS by the ICIJ and other media, Ericsson Iraq issued a statement on February 15 stating that it remains committed to transparency. “Ericsson takes any allegation of impropriety extremely seriously and welcomes any new facts brought to light as a result. We reiterate our commitment to investigate and take action as appropriate to address any new information, in line with our Code of Business Ethics and under the terms of our 2019 Deferred Prosecution Agreement (DPA), with US authorities,” the statement said.

After the leak of its internal investigation related to Iraq, The U.S. Department of Justice, on March 2, held the company guilty of failing to disclose its wrongdoings in Iraq before the 2019 criminal settlement on its global-level briberies was signed. It was the US, in its rivalry over telecom networks with Chinese company Huawei, that it favoured western companies like Ericsson to spread their wings and penetrate the developing nations.

Investor shares of Ericsson fell about 9% in Nasdaq Stock Market while CEO Börje Ekholm tried to calm the storm by admitting the embarrassment during a conference call with investors, financial analysts and journalists. The day after Ekholm’s admission that the company might have paid ISIS, Ericsson’s share value dropped to $4.4 billion. However, he maintained that the investigation could not identify any Ericsson employee who was directly involved in financing the terrorists in Iraq.

Since the disclosure, the company is making heavy losses in the market. New York investor David Nyy has filed a lawsuit against the company’s top officials in the New York Federal Court over the company’s potential deals with ISIS. On March 21, Ericsson’s chairman revealed that a “comprehensive review was underway following the company’s potential payments to the Islamic State in Iraq.”

With doubtful dealings with ISIS in war-torn Iraq, Continuing sustenance in the developing country through bribery and corruption, and while all of this being done by putting its employees at risk, Ericsson’s Iraq innings is the darkest chapter in its global shenanigans.

Ayodhra Ram Mandir special coverage by OpIndia

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