Ericsson

On February 15, 2022, Ericsson disclosed results of an internal investigation that detailed suspect payments made to use alternate transport routes in connection with circumventing Iraqi Customs, at a time when militant organizations, including ISIS, controlled some routes. The Company found “violations of Ericsson’s internal financial controls; conflicts of interest; non-compliance with tax laws; and obstruction of the investigation.” Though the investigation closed in 2019, the Company reportedly “did not find it material enough to disclose the findings” but “revisited its stance after enquiries about the probe from media outlets.”

On this news, Ericsson’s American Depositary Shares (“ADS”) price fell $1.45, or 11.6%, to close at $11.01 per ADS on February 16, 2022, thereby injuring investors.

Then, on February 27, 2022, the International Consortium of Investigative Journalists published a report alleging that Ericsson had reportedly made “tens of millions of dollars in suspicious payments” over nearly a decade to keep its business in Iraq. The report also claimed that “a spreadsheet lists company probes into possible bribery, money laundering and embezzlement by employees in Angola, Azerbaijan, Bahrain, Brazil, China, Croatia, Libya, Morocco, the United States and South Africa[,]” which “have not been previously disclosed.”

On this news, Ericsson’s ADS price fell $0.84, or 8.3%, to close at $9.28 pers ADS on February 28, 2022, thereby injuring investors further.

The complaint alleges that defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose that: (1) Ericsson overstated the extent to which it had reformed its business practices to eliminate the use of bribes to secure business in foreign countries; (2) Ericsson had paid bribes to the terrorist group the Islamic State in Iraq and Syria to gain access to certain transport routes in Iraq; (3) accordingly, the Company’s revenues derived from its operations in Iraq were, in at least substantial part, derived from unlawful conduct and thus unsustainable; and (4) as a result of the foregoing, Defendants’ public statements were materially false and misleading at all relevant times.