Ericsson Executives Exonerated of Tax Evasion

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The Swedish Court of Appeals on Thursday acquitted three former and two current Ericsson executives who had been charged for evasion of tax controls.

If convicted, the executives could have landed in jail. The verdict comes as a huge relief for the accused officials, who can finally put what has been a very long process behind them, according to Henry Sténson, senior vice president in charge of corporate communications at Ericsson.

They had already won the first round, when the Stockholm District Court acquitted them back in December 2006. At that time the prosecutor should have called it quits, and saved a lot of tax kronor, according to Sténson.

The case has its roots in accounting irregularities related to payments -- totaling in several billion Swedish kronor (several hundred million dollars) -- made by Ericsson to so-called commercial agents in 1998 and 1999.

In mid 1998 Ericsson initiated a modification of its system of paying commercial agents. Ericsson has said that in a number of countries it is critical to use local representatives who are familiar with local rules, customs, culture and language. Ericsson modified its payment systems to meet agents' demands to protect their anonymity. The modification resulted in the payments to agents being made through payment intermediaries, in the present case referred to as service companies, according to Ericsson.

The system, which was abandoned in 2000, is the reason why the Swedish National Economics Crimes Bureau suspected evasion of tax control. The telecom company included false invoices in its bookkeeping to hide other payments, according to the prosecutor. Ericsson has always denied the accusation.

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