Ericsson faces huge lawsuit on Angolan dealings

Swedish telecom equipment manufacturer Ericsson is facing a multimillion-rand lawsuit in SA over its business dealings in Angola in a case that might attract the attention of US authorities who have been on the group’s case.

Moroccan national Mehdi Bencherki has accused the company of doing an off-thebooks deal with him to recoup $200m of the its money, held by the Banco Nacional de Angola (BNA), and win clients in that country on behalf of Ericsson. US authorities fined the company billions of rand for similar conduct in other jurisdictions.

The $19.6m (about R365m) lawsuit launched by Bencherki will be heard in SA courts as Ericsson’s headquarters on the continent are in the country.

Bencherki, who now resides in Dubai, alleges that Ericsson contracted him to help facilitate the release of its funds held by BNA as the central bank was experiencing “a shortage of foreign currency” around 2014.

Bencherki will tell the court that Ericsson promised him 5% of any funds that he could secure the release of, and that he was due to be paid a fee of $10m on the $200m he said he helped facilitate its release by the Angolan central bank. He said that beyond this, he also, as per the alleged agreement with Ericsson, helped the company win new business in Angola in the form of a contract with Movicel, which saw Ericsson replace Movicel’s then supplier, a Chinese company called ZTE.

The value of this contract was $95m, which meant he was entitled to receive $4.75m in success fees, said Bencherki.

He alleges that he entered into an oral “business development agreement” with the company to provide the abovementioned services, and that the payments that were due to him

were not supposed to go to the plaintiff directly, but instead through two intermediaries — one based in Lebanon and the other through a company registered in Mexico.

He goes on to explain why the agreement was oral and not reduced to writing, because Ericsson wanted to “avoid scrutiny from international regulators”.

The high court in Johannesburg gave Bencherki permission last week to see his particulars of claim ahead of the matter being ventilated in court.

“Since the plaintiff’s case is based on an oral agreement which was allegedly concluded some 12 years ago, the documentary record, largely in the form of email correspondence, will prove highly probative,” judge Norman Manoim ruled.

“The plaintiff has attached a list of 149 documents which he alleges are the essential documents in the trial bundle. In his affidavit he traces a number of these emails which are at least consistent with, if not conclusive of, his version in the proposed amendments and which predate the London agreement.

“From these, which involve Magnus Mchunguzi [former Ericsson executive] and another Ericsson person Adam Hashem, the vice-president, major accounts for West Africa, it is apparent the plaintiff was seen as someone well connected in Angola. He is described by Mchunguzi in one email, dated September 2012, as ‘our man for Angola and we have dropped other pretenders.’”

DISAPPOINTED

An Ericsson spokesperson said the company was considering the legal options available to it. “We are disappointed with the trial court’s recent ruling and are considering all options as we continue to dispute the historical allegations at issue. Ericsson will not comment on pending litigation and will continue to strongly defend the case in the courts.”

Ericsson is no stranger to controversy. In 2019, it admitted to accusations of bribery and other wrongdoing in multiple countries and paid a $1bn fine under a deferred prosecution agreement struck with the US department of justice.

This was after the company admitted to a long-standing scheme to use third party agents and consultants to make bribe payments to government officials and/or to manage off-thebooks slush funds.

The admission and the huge fine allowed the company to avoid a criminal conviction but required it to report any potential wrongdoing and submit to the scrutiny of an outside monitor over a three-year period.

However, US authorities in 2023 again fined Ericsson $206m for breaching its deferred prosecution deal with US authorities by withholding information about its alleged misconduct in Iraq and other countries.