Ericsson bosses risk jail

Four former Ericsson directors, including head of strategy Torbjörn Nilsson, will appear in court on Monday charged with "serious obstruction of tax controls". They could face several years in prison if found guilty.

The charges concern tax avoidance to the tune of several million kronor to cover losses following a business failure in Russia.

A total of eight individuals were involved in the conspiracy. Four of them were charged as long ago as April last year, but the investigation has progressed slowly.

Two investigations have now been combined, resulting in a trial of four accused. They will be questioned in a hearing scheduled to last 43 days about financial transactions and wording in correspondence to senior bosses. The complex affair is next to impossible for outsiders to fully understand.

According to the charges, the accused used false invoices to build up large accounts in foreign banks. This money was then used to finance business deals in progress.

Ericsson directors allegedly transferred 400m kronor from the marketing company EMK in Switzerland to a bank in Austria. The description on the invoices was “sponsorship”, which the company could deduct tax for.

In reality, the money was used to pay off a debt of almost 1bn kronor, which Ericsson’s subsidiary in Austria owed the bank. The debt concerned a payment to a so-called business agent, who was to have helped Ericsson on a deal in Russia. The deal collapsed and the money was paid to prevent the Austrian subsidiary going into liquidation.

Thus far, Ericsson and the prosecutor are in agreement. But Ericsson claim there was no deliberate deception or fraudelent invoices. However, the investigation appears to have uncovered evidence which contradicts Ericsson’s view.

In a letter to then chief executive, Kurt Hellström, and former director of finance, Sten Fornell, one of the accused writes that the whole point of creating EMK was to “avoid a huge scandal” and bury it “quickly and effectively”. The trial is set to last until October.