A group shareholders is suing Ericsson for allegedly failing to disclose information about its own internal investigation into its business practices in Iraq, which caused the company’s shares to significantly drop in value.
The shareholders, which include investment firms and pension funds, are suing for $175 million to $300 million in damages. As of Friday, 37 claimants had filed a claim, with more expected to follow.
In February 2022, the International Consortium of Investigation Journalists (ICIJ) shared with other media organizations key elements of a report about an internal investigation into Ericsson’s business in Iraq, which forced the company to acknowledge the report. Subsequently, the Swedish vendor’s admissions caused its share price to fall some 25%.
The shareholders cite the Market Abuse Regulations (MAR) of the EU and say the report and its contents constitute a failure to inform the public of inside information: “Article 17.1 MAR stipulates that an issuer must inform the public as soon as possible of inside information that directly concerns that issuer. The information must be made public in a way that gives the public quick access to it and the opportunity for a complete and accurate assessment at the right time.”
Ericsson today provided the following statement to Fierce: “Ericsson disputes the claims in their entirety and intends to defend itself vigorously in this matter, which is unprecedented in Swedish litigation and contrary to fundamental principles of Swedish corporate law. As Ericsson has previously announced, Nasdaq Stockholm has concluded its review into Ericsson’s public disclosures regarding Iraq and decided earlier this year to dismiss the matter (read more).”
The shareholders’ claim in Sweden is unrelated to action by U.S. authorities.
Earlier this year, the U.S. District Court for the Eastern District of New York dismissed a case that Ericsson shareholders brought against the company over its share price and business dealings in Iraq. In that case, the court rejected in full the plaintiff’s claims that Ericsson misled investors, concluding that Ericsson did not violate any disclosure obligation.
In March of this year, Ericsson agreed to plead guilty and pay a criminal penalty of more than $206 million after breaching a 2019 deferred prosecution agreement (DPA) for failure to disclose details of its operations in Iraq.