On Thursday the Swedish Court of Appeals will hand down its verdict in a case in which Ericsson executives may face jail time for evasion of tax controls.
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 suspects evasion of tax control. The telecom company has included false invoices in its bookkeeping hiding other payments, according to the prosecutor. Ericsson denies this.
The Ericsson executives won the first round, when the Stockholm District Court acquitted them back in December 2006, but the prosecutor decided to appeal the decision, saying that the District Court had simply drawn the wrong conclusions on several key points.
Eight people were acquitted by the District Court, but only five were included in the appeal. Two are still working for Ericsson, according to company spokesman Fredrik Hallstan.
"They where acquitted on all counts in the District Court, and we hope the Court of Appeals will come to the same conclusion. But we'll have to wait and see," said Hallstan.