London — In issue 995, there was a top story about Ericsson paying a bribe to secure a contract with Djibouti Telecom. In this issue, we lay out more detail drawn from US Court documents and ask: will those who took the bribe also be fined along with Ericsson who gave the bribe?
The Securities and Exchange Commission documents presenting the prosecution describe what it calls The Djibouti Bribery Scheme. Throughout this excerpt of the document we have substituted Ericsson for the EAB used in the document: Ericsson Egypt was a majority-owned subsidiary and operating entity of LM Ericsson":"Beginning in approximately 2011, Ericsson, through the head of Ericsson's Middle East region and employees of Ericsson Egypt, authorized and directed the payment of bribes in Djibouti in order to obtain a contract from a state owned telecommunications company ("Djibouti SOE")".
"(Ericsson) had planned to bid for a large networking contract with Djibouti SOE in 2010. An Ericsson Egypt employee informed Ericsson's head of Northeast Africa that EAB could win the contract with Djibouti SOE if (Ericsson) paid bribes to foreign officials in Djibouti".
"Later, these employees also heard this directly from a Djibouti foreign official. Fearing that they may not be awarded the contract, the Head of Ericsson's Middle East region and employees of Ericsson Egypt devised a plan to bribe the government officials".
"For this purpose, (Ericsson), through its Ethiopia branch, retained a consulting company (the "Djibouti Consultant") that was owned by the wife of a senior Djibouti foreign official and controlled by the same Djibouti foreign official. This fact was known to the head of Ericsson's Middle East region and employees of Ericsson Egypt"
"In October 2010, (Ericsson) submitted a bid to Djibouti SOE, and on May 11, 2011, Djibouti SOE signed a contract with EAB valued at approximately €20,300,000 ($29 million). 23. On June 16, 2011, EAB's branch in Ethiopia and the Djibouti Consultant signed a consulting agreement".
"The services contemplated in the contract were never intended to be performed. In fact, the consulting agreement was a sham and was intended primarily to funnel bribes to the Djibouti foreign official".
Thereafter, Ericsson's head of Northeast Africa received pressure from two foreign officials ("Djibouti Foreign Official 1" and "Djibouti Foreign Official 2") for EAB's Dubai branch to pay the Djibouti Consultant".
"Both of these foreign officials had decision-making authority over the bid for the contract with Djibouti SOE. For example, on August 14, 2011, Ericsson's head of Northeast Africa stated in an email, "I just got another call from [Djibouti Foreign Official 1]. We need to wire the payment within the current week." On August 17, 2011, Ericsson's head of Northeast Africa stated, "I just got now a call from [representatives of Foreign Official 2]. I really need ... to wire the $." On August 18, 2011, Ericsson's head of Northeast Africa emailed a payment processor, "Tell me what can I do to make [the payment] happen fast. I am getting strong pressures from [Foreign Official 2]. This is not nice."
"On August 23, 2011, the Djibouti Consultant told Ericsson's head of Northeast Africa that if the consulting payment was not made, the Djibouti SOE would no longer be interested in pursuing business with Ericsson. On or around August 24, 2011, (Ericsson), through its branch in Dubai, transferred approximately $1,441,050 (EUR 1,000,000) to the Djibouti Consultant through a U.S.-based correspondent account. (Ericsson), through its Dubai branch, made two additional payments to the Djibouti Consultant in or around October 2011 and March 2012.
"The three payments to the Djibouti Consultant totaled approximately $2.1 million. The payments were made in U.S. dollars through correspondent bank accounts in New York. Ericsson's head of Northeast Africa, who authorized the payments, knew that the Djibouti Consultant would transfer a significant portion of the consulting fees to the two foreign officials with decision-making power in exchange for obtaining the contract with Djibouti SOE".
"On September 21, 2011, Ericsson issued a press release announcing that the company had been awarded a contract with the Djibouti SOE. The Head of Ericsson's Middle East region and Ericsson Egypt employees falsely booked the payments to the Djibouti Consultant in the books of EAB's Dubai branch under a cost of sales account, when they were, in fact, bribes to foreign officials in Djibouti. (Ericsson's) Dubai branch's books and records were consolidated into Ericsson's financial statements".
In September 2011, Djibouti's monopoly operator Djibouti Telecom signed a deal with Ericsson to build its 3G network and improve its 3G network. The deal was announced by Carlo Alloni, president, Ericsson North East Africa. Commenting on the tie-up, the operator's CEO Abdulrahman Mohamed Hassan said: 'We have grown rapidly as a company and in order to maintain the momentum and build on it we have chosen Ericsson as a partner to assist us in improving our services.'
The documents anonymize the names of the Djibouti officials involved but describe the role of one of them:"During the relevant time period, "Foreign Official 1," was a high-ranking government official in the executive branch of the government of Djibouti. Foreign Official 1 had influence over decisions made by (Djobouti) Telecom Company. Foreign Official 1 was a "foreign official" as that term is used in the FCPA, Title 15, United States Code, Section 78dd-1(f)(1)(A).
"During the relevant time period, "Foreign Official 2," was a high-ranking government official in the executive branch of the government of Djibouti. Foreign Official 2 used his influence with the government of Djibouti to affect and influence the acts and decisions of (Djibouti) Telecom Company. Foreign Official 2 was a "foreign official" as that term is used in the FCPA, Title 15, United States Code, Section 78dd-1(f)(1)(A).13"
"During the relevant time period, "Foreign Official 3," was the CEO of Telecom Company. Foreign Official 3 had influence over decisions made by Telecom Company. Foreign Official 3 was a "foreign official" as that term is used in the FCPA, Title 15, United States Code, Section 78dd-1(f)(1)(A)". Therefore the identity of this person is clear even if he has not been named. It must be assumed that the bribe was then signed off by two other Government Officials who got a share of the money.
In order to discourage future corrupt payments in the African telecoms sector, the SEC should really "name and shame" not just those dispensing the bribes but those also accepting them. As it appears at least two Government officials were involved, there is probably little chance of any prosecution in Djibouti itself. But if the Djibouti Government were serious about corruption, it would sack all those involved and confiscate the money they received. Don't hold your breathe o