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Foreign Corrupt Practices Act & Anti-Corruption

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  • Teva Pharmaceuticals Sets Aside $520 Million for Potential FCPA Settlement

    Teva Pharmaceutical Industries Ltd. (Teva), an Israeli company, stated in its Form 6-K filed with the SEC on November 15, 2016, that it has set aside approximately $520 million for a potential settlement of FCPA matters being investigated by the SEC and DOJ. Teva explained that the reserve relates to conduct that occurred between 2007 and 2013 in Russia, Mexico, and the Ukraine, and that it was discovered in the course of the investigation that began in early 2012 with the issuance of an SEC subpoena to Teva, as well as a concurrent internal investigation of its worldwide business practices.

    Should Teva enter into a settlement, it will top the growing list of pharmaceutical companies that have been subject to multimillion dollar penalties for conduct in violation of the FCPA, including the following:

    • AstraZeneca ($5.5 million settlement in 2016 of allegations relating to bribery of Chinese and Russian doctors)
    • GlaxoSmithKline ($20 million settlement in 2016 of allegations relating to bribery of Chinese health care professionals)
    • Novartis ($25 million settlement in 2016 of allegations relating to bribery of Chinese doctors
    • Bristol-Myers Squibb & Co. ($14 million settlement in 2015 of allegations relating to bribery of healthcare professionals at state-owned hospitals in China)
    • Eli Lily & Co. ($29 million settlement in 2012 of allegations relating to bribery of government employed physicians in Russia, Brazil, China and Poland)
    • Johnson & Johnson ($70 million settlement in 2011 of allegations relating to conspiracy and bribery of doctors employed by state-controlled health care systems in Greece)

    SEC FCPA Update Johnson & Johnson Mexico Russia Eli Lilly Teva Pharmaceuticals Ukraine FCPA Bristol-Myers Squibb Novartis SEC AstraZeneca GlaxoSmithKline

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  • Teva Pharmaceuticals Sets Aside $520 Million for Potential FCPA Settlement

    Teva Pharmaceutical Industries Ltd. (Teva), an Israeli company, stated in its Form 6-K filed with the SEC on November 15, 2016, that it has set aside approximately $520 million for a potential settlement of FCPA matters being investigated by the SEC and DOJ. Teva explained that the reserve relates to conduct that occurred between 2007 and 2013 in Russia, Mexico, and the Ukraine, and that it was discovered in the course of the investigation that began in early 2012 with the issuance of an SEC subpoena to Teva, as well as a concurrent internal investigation of its worldwide business practices.

    Should Teva enter into a settlement, it will top the growing list of pharmaceutical companies that have been subject to multimillion dollar penalties for conduct in violation of the FCPA, including the following:

    • AstraZeneca ($5.5 million settlement in 2016 of allegations relating to bribery of Chinese and Russian doctors)
    • GlaxoSmithKline ($20 million settlement in 2016 of allegations relating to bribery of Chinese health care professionals)
    • Novartis ($25 million settlement in 2016 of allegations relating to bribery of Chinese doctors
    • Bristol-Myers Squibb & Co. ($14 million settlement in 2015 of allegations relating to bribery of healthcare professionals at state-owned hospitals in China)
    • Eli Lily & Co. ($29 million settlement in 2012 of allegations relating to bribery of government employed physicians in Russia, Brazil, China and Poland)
    • Johnson & Johnson ($70 million settlement in 2011 of allegations relating to conspiracy and bribery of doctors employed by state-controlled health care systems in Greece)

    SEC FCPA Update Johnson & Johnson Mexico Russia Eli Lilly Teva Pharmaceuticals Ukraine FCPA Bristol-Myers Squibb Novartis SEC AstraZeneca GlaxoSmithKline

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  • Anheuser-Busch InBev Settles FCPA Civil Charges with SEC, Including Charges of Improper Whistleblower Restrictions

    On September 28, Anheuser-Busch InBev (AB InBev) agreed to pay $6 million to the SEC to settle FCPA civil charges in connection with payments to government officials in India through third-party sales promoters.   AB InBev entered into an Administrative Order Instituting Cease-and-Desist Proceedings to settle charges that it violated the books and records and internal controls provisions of the FCPA.  AB InBev did not admit or deny the charges.

    According to the SEC’s Order, Belgium-based brewing company AB InBev made improper payments to Indian government officials via third-party sales promoters in order to obtain beer orders and increase brewery hours (which would increase sales and production).  The Order found that AB InBev had inadequate internal accounting controls to detect and prevent these payments and to ensure that transactions were recorded properly.

    The SEC’s Order also includes allegations that AB InBev violated Dodd-Frank’s whistleblower provisions by impeding an individual from communicating directly with the SEC.  The Order describes an individual who told AB InBev about the improper payments and thereafter entered into a Separation Agreement with AB InBev.  This individual had previously been communicating voluntarily with the SEC about the improper payments in India.  However, believing that language in the Separation Agreement impeded his communications with the SEC, the SEC alleged that the individual thereafter stopped communicating with the Commission until receiving a subpoena for testimony.  According to the Order, the employee feared that communications with the SEC would trigger the liquidated damages provision of the agreement, requiring him to pay $250,000 for violating the deal’s confidentiality terms.

    SEC India News InBev

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  • Former CEO of Chinese Subsidiary Acquired by Harris Corp. Settles FCPA Offenses Following Proactive Investigation and Disclosure of Conduct by Acquiring Company

    On September 13, Jun Ping Zhang (Ping), the former Chairman and CEO of a subsidiary of Harris Corporation, a Florida-based provider of information technology services to government and commercial markets, agreed to pay a civil penalty of $46,000 to settle the SEC’s allegations that Ping violated the anti-bribery, books and records, and internal controls provisions of the FCPA.  The matter was resolved by an administrative cease and desist order and Ping did not admit or deny the SEC’s findings.

    The allegations relate to actions taken in 2011 and 2012 by Ping, a U.S. resident and citizen, and various unnamed sales staff of Harris Corp.’s wholly-owned subsidiary, Hunan CareFx Information Technology, LLC (CareFx China).  Ping and the sales staff were alleged to have provided illegal gifts to Chinese government officials to obtain and retain business with various state-owned hospitals and regional Departments of Health. The settlement did not allege personal enrichment and contained no order of disgorgement.

    The investigation giving rise to the allegations was spawned in fall 2012 when Harris Corp., notified the SEC and DOJ that it had identified potential violations of the FCPA during a post-acquisition audit of CareFx Corporation, which it had acquired in April 2011.  With the assistance of outside counsel, Harris Corp. conducted an internal investigation into the conduct of CareFx China, a Chinese legal entity and wholly-owned subsidiary of CareFx, which began selling electronic medical records software to state-owned hospitals and regional Departments of Health in late 2009.  The allegations contained within the administrative order depict an ongoing scheme in which CareFx China sales staff under Ping’s management and with his knowledge submitted bogus expenses for cash reimbursement and then used that cash to pay for improper gifts to government officials for the purposes of influencing their decisions to purchase CareFx China’s products and services.

    According to the SEC, from April 2011 to April 2012, Ping “directly authorized or indirectly allowed between $200,000 and $1,000,000 in improper gifts to government officials,” after which CareFx China was awarded over $9,600,000 in contracts with state-owned entities.  As CareFx China’s books and records were consolidated into Harris Corp.’s financial statements following the CareFx acquisition in April 2011, Ping, who had responsibility for reviewing CareFx China’s monthly expense report summaries, knew that the improperly recorded expenses and illegal activity would not be properly disclosed to Harris Corp., nor were they disclosed in the pre-acquisition due diligence.

    According to a September 4, 2012 Wall Street Journal blog post, Harris Corp., concurrent with its internal investigation and timely self-disclosure in 2012, took remedial actions in relation to CareFx China, including making changes to internal control procedures, ending its gift-giving practice, providing additional compliance training, and terminating certain employees.  Shortly thereafter, according to the SEC order, Harris Corp. sold all of CareFx China’s “outward facing operations” and, in mid-2015, Harris Corp. terminated all employees in CareFx China and no longer maintains China-based business operations.

    SEC FCPA Update Corporate Compliance Program China Bribery FCPA SEC

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  • Former CEO of Chinese Subsidiary Acquired by Harris Corp. Settles FCPA Offenses Following Proactive Investigation and Disclosure of Conduct by Acquiring Company

    On September 13, Jun Ping Zhang (Ping), the former Chairman and CEO of a subsidiary of Harris Corporation, a Florida-based provider of information technology services to government and commercial markets, agreed to pay a civil penalty of $46,000 to settle the SEC’s allegations that Ping violated the anti-bribery, books and records, and internal controls provisions of the FCPA.  The matter was resolved by an administrative cease and desist order and Ping did not admit or deny the SEC’s findings.

    The allegations relate to actions taken in 2011 and 2012 by Ping, a U.S. resident and citizen, and various unnamed sales staff of Harris Corp.’s wholly-owned subsidiary, Hunan CareFx Information Technology, LLC (CareFx China).  Ping and the sales staff were alleged to have provided illegal gifts to Chinese government officials to obtain and retain business with various state-owned hospitals and regional Departments of Health. The settlement did not allege personal enrichment and contained no order of disgorgement.

    The investigation giving rise to the allegations was spawned in fall 2012 when Harris Corp., notified the SEC and DOJ that it had identified potential violations of the FCPA during a post-acquisition audit of CareFx Corporation, which it had acquired in April 2011.  With the assistance of outside counsel, Harris Corp. conducted an internal investigation into the conduct of CareFx China, a Chinese legal entity and wholly-owned subsidiary of CareFx, which began selling electronic medical records software to state-owned hospitals and regional Departments of Health in late 2009.  The allegations contained within the administrative order depict an ongoing scheme in which CareFx China sales staff under Ping’s management and with his knowledge submitted bogus expenses for cash reimbursement and then used that cash to pay for improper gifts to government officials for the purposes of influencing their decisions to purchase CareFx China’s products and services.

    According to the SEC, from April 2011 to April 2012, Ping “directly authorized or indirectly allowed between $200,000 and $1,000,000 in improper gifts to government officials,” after which CareFx China was awarded over $9,600,000 in contracts with state-owned entities.  As CareFx China’s books and records were consolidated into Harris Corp.’s financial statements following the CareFx acquisition in April 2011, Ping, who had responsibility for reviewing CareFx China’s monthly expense report summaries, knew that the improperly recorded expenses and illegal activity would not be properly disclosed to Harris Corp., nor were they disclosed in the pre-acquisition due diligence.

    According to a September 4, 2012 Wall Street Journal blog post, Harris Corp., concurrent with its internal investigation and timely self-disclosure in 2012, took remedial actions in relation to CareFx China, including making changes to internal control procedures, ending its gift-giving practice, providing additional compliance training, and terminating certain employees.  Shortly thereafter, according to the SEC order, Harris Corp. sold all of CareFx China’s “outward facing operations” and, in mid-2015, Harris Corp. terminated all employees in CareFx China and no longer maintains China-based business operations.

    SEC FCPA Update Corporate Compliance Program China Bribery FCPA SEC

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  • DOJ and SEC Decline FCPA Action Against Cisco

    On September 8, Cisco Systems Inc. disclosed in its annual statement that following an investigation into its operations in Russia and certain of the Commonwealth of Independent States, the DOJ and SEC have both declined to bring enforcement actions under the FCPA.  An announcement of possible violations was first disclosed in the December 2013 blog post by Roxane Marenberg, Vice President and Deputy General Counsel in Cisco’s Global Compliance Enablement division. In the post, Marenberg stated that the company was conducting an investigation into alleged FCPA violations at the request of the SEC and DOJ in response to a communication those agencies had received concerning the  company’s operations and discounting practices. Cisco’s disclosures did not provide any further detail about the nature of the business activities being investigated.

    DOJ SEC FCPA Enforcement Action Russia Cisco

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  • DOJ Declines FCPA Charges Against AstraZeneca Following SEC Settlement

    In conjunction with the SEC’s recent settlement AstraZeneca, the U.K.-based pharmaceutical company announced on August 30 that the DOJ has closed its parallel foreign bribery investigation.  As detailed here, the SEC settled charges against Astrazeneca for allegedly improper payments made by the company’s wholly owned subsidiaries in China and Russia. Under the SEC settlement, the company agreed to disgorge $4.325 million and pay a $375,000 civil penalty with $822,000 in prejudgment interest.  As reported by Reuters, the company issued a public statement stating it was “pleased to have resolution of these matters.”

    DOJ SEC China FCPA Enforcement Action Russia UK AstraZeneca

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  • Biomet Sets Aside Reserves for DPA Breaches

    On August 8, 2016, medical device manufacturer Biomet announced in an SEC filing that it is “probable” that the company will incur additional liabilities in connection with the company’s 2012 deferred prosecution agreement (DPA) related to FCPA violations in Mexico and Brazil.  The company stated that it had set aside funds for this purpose, but did not specify the amount.  Biomet’s SEC filing stated that the company “expects to continue discussions with the SEC and DOJ but the terms of a potential resolution were not certain.”

    Two months ago, DOJ stated in a court filing that Biomet had breached the DPA by failing to implement and maintain a compliance program.  See previous FCPA Scorecard coverage of that filing here.

    DOJ SEC Biomet

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  • Oil and Gas Company Discloses SEC Investigation into Potential FCPA Violations

    On March 15, an Ohio-based provider of sand products used in the oil and gas industry, disclosed  that in December 2015, the SEC notified it of an investigation of potential violations of the FCPA and other securities laws related to its international operations.  The company had previously retained outside counsel to conduct an investigation and determined that no further action was necessary.  The company did not estimate the potential costs of the SEC investigation or any potential penalties or fines that could result.

    SEC FCPA Update News

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  • UK Serious Fraud Office Issues First Deferred Prosecution Agreement with Standard Bank

    On November 30, 2015 the United Kingdom’s Serious Fraud Office (SFO), working with the DOJ and SEC, entered into a deferred prosecution agreement (DPA) with Standard Bank under the U.K.’s Bribery Act of 2010 regarding payments by two former employees that were allegedly made to bribe members of the Tanzanian government.  The DPA represents the SFO’s first-ever DPA and the first use of Section 7 of the Bribery Act, failure of commercial organizations to prevent bribery, by any U.K. prosecutor.  As part of this DPA, Standard Bank has agreed to pay a combined $32.2 million in sanctions to the U.K. and Tanzania, and to cover the SFO’s litigation and investigation costs. The DPA also requires Standard Bank’s continued cooperation with authorities and the implementation of certain recommendations from its independent compliance consultants.

    In addition to the DPA, Standard Bank agreed to pay $4.2 million to the SEC to settle charges related to the failure to disclose the underlying bribe payments in the bank’s offering documents and statements to potential investors.  In light of Standard Bank’s cooperation with the SFO and the DPA, the DOJ reportedly closed its own investigation without bringing independent charges.

    Notably, in one of the first examples of the SEC implementing its plan to make more defendants admit to the allegations against them as part of resolutions, Standard Bank agreed to the facts underlying the SEC charges.

    DOJ SEC UK UK Bribery Act UK Serious Fraud Office SFO DPA Standard Bank

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