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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)
On May 13, a Delaware Chancery Court judge dismissed a shareholder derivative suit accusing Wal-Mart Stores Inc.'s (Wal-Mart) board of directors of failing to conduct an adequate investigation of Mexican bribery allegations. The lead plaintiffs in the suit, two large state employee pension funds, alleged that the Wal-Mart board of directors also covered up the bribery allegations, which were exposed after a 2012 article by the New York Times reported that top officials at Wal-Mart's Mexican subsidiary oversaw millions of dollars in bribes in connection with the company's expansion in Mexico. The Delaware judge found that an earlier case filed in Federal Court in Arkansas involved the same facts as the Delaware action and had been full y litigated before it was dismissed with prejudice in April 2015. The Arkansas Court had found that the plaintiffs failed to establish that a pre-suit demand on the directors to take action would have been futile, and that holding "preclude[d] re-litigation of the issue" in the Delaware action. See previous FCPA Scorecard coverage of the Arkansas action here. In 2014, the plaintiffs had won the right to access various Wal-Mart internal documents, but they were denied the right to use other Wal-Mart documents that were allegedly provided by an anonymous whistleblower. See previous FCPA Scorecard coverage here.
On March 31, a federal district court in Arkansas dismissed with prejudice a consolidated shareholder derivative suit accusing Wal-Mart Stores Inc.'s (Wal-Mart) board of directors of concealing Mexican bribery claims from investors. The Court found that that the plaintiffs did not establish that a pre-suit demand on the directors to take action would have been futile, and failed to show that the directors knew about or consciously ignored the alleged FCPA violations at the Mexican subsidiary. The Court wrote: "Nothing in the complaint suggests any particularized basis to infer that a majority of the board had actual or constructive knowledge of the alleged misconduct, let alone that they acted improperly with scienter." For the same reasons, the Court dismissed claims that the directors allowed the filing of knowingly false proxy statements. Plaintiffs filed the lawsuit after a 2012 article by the New York Times reported that top officials at Wal-Mart's Mexican subsidiary oversaw millions of dollars in bribes in connection with the company's expansion in Mexico.
On March 13, medical device company Biomet Inc. disclosed in an 8-K that the DOJ had extended by one year the Deferred Prosecution Agreement ("DPA") that was scheduled to expire this month. The DPA related to Biomet's 2012 settlement with the DOJ and SEC of FCPA allegations related to conduct in Argentina, China, and Brazil (see prior FCPA Scorecard coverage). According to the 8-K, 18 months after the DPA was originally entered, Biomet discovered additional potential FCPA violations in Brazil and Mexico and self-disclosed those issues to the DOJ and SEC. In addition to the DPA, Biomet's corporate monitor was also extended for a year. Biomet is now the second company in the last year to have a DPA extended by the DOJ due to new potential violations (the first being the DPA with Standard Chartered Bank regarding economic sanctions violations).
On September 26, the United District Court for the Western District of Arkansas adopted a magistrate judges recommendation denying Wal-Marts motion to dismiss a securities fraud class action arising out of allegations of bribery in Mexico. Plaintiffs had alleged that certain company officials at Wal-Marts Mexican subsidiary paid bribes to obtain permits for new stores in Mexico, and that Wal-Mart had deceived investors by claiming in an SEC filing in December 2011 that its investigation of the alleged bribery had taken place in fiscal year 2012. Plaintiffs alleged that Wal-mart actually learned of the suspected corruption in 2005 and conducted an internal investigation in 2006, much earlier than disclosed. The plaintiffs alleged violations of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, 25 U.S.C. §§ 78j(b) and 78t(a), and violations of SEC Rule 10b-5, 17 C.F.R. § 240.10b-5. The court held that the plaintiffs had met the heighted pleading standard required by the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4(b). The court found, among other things, that the plaintiffs sufficiently alleged that Wal-Marts omission from its 2011 filing of the prior 2005 investigation rendered the filing misleading and that the allegations in the complaint, taken collectively, meet the requisite scienter requirement because they alleged that Wal-Mart knew it was omitting material information that led the statement as a whole to be misleading. Wal-Mart is still under investigation by the DOJ and SEC related to possible FCPA violations in its foreign subsidiaries, and has disclosed continued cooperation with authorities and strengthening of its global anti-corruption measures. In its fiscal 2014 Global Compliance Program Report, Wal-Mart said it spent a total of $439 million in legal fees and other costs associated with investigations of alleged FCPA violations and to restructure its global compliance policies and procedures.
Sector Sweep Continues: Medical Device Manufacturer Orthofix Resolves FCPA Violations Related to Conduct in Mexico
On July 10, 2012, medical device manufacture Orthofix International N.V. became the latest in a string of companies in the sector to resolve an FCPA matter with the U.S. government. The Orthofix FCPA resolution calls for the company to pay a criminal fine to the U.S. Department of Justice (DOJ) of $2.22 million, and a civil monetary sanction (including disgorgement and interest) of $5.2 million to the U.S. Securities and Exchange Commission (SEC). The DOJ resolved the matter through a Deferred Prosecution Agreement, which was attached to the company's 8-K of July 10, 2012, reporting the resolution. According to the allegations in the SEC's Complaint, Promeca S.A. de C.V, a subsidiary based in Mexico, paid bribes to employees of the government-operated health care system, referring to the payments as "chocolates" and booking inaccurate reimbursement requests as meals, car tires or training expenses. The Mexico subsidiary made approximately $317,000 in improper payments over a 7-year period, according to the SEC. As initially reported in an August 31, 2010 8-K, the company disclosed to the DOJ and the SEC that it was investigating certain conduct at Promeca. The FCPA resolution follows a June 7, 2012 guilty plea by the U.S. subsidiary, Orthofix Inc., on a False Claims Act-related matter, resulting in $7.8 million fine and payment of over $34 million to resolve a civil action (see DOJ Press Release). The settlement adds Orthofix to the list of device manufacturers that have settled FCPA matters in 2012, along with Smith & Nephew and Biomet, which settled in February and March 2012, respectively.
On March 14, 2012, aircraft maintenance, repair and overhaul ("MRO") provider, BizJet International Sales and Support, Inc., resolved an FCPA matter with the US DOJ related to conduct in Latin America, including Mexico and Panama. The deferred-prosecution agreement calls for an $11.8 million penalty. BizJet is an indirect subsidiary of the German company, Lufthansa Technik AG, which also entered a DPA.
- Jonice Gray Tucker to discuss “How the new administration sets the tone for 2021” at the American Conference Institute Legal, Regulatory and Compliance Forum on Fintech & Emerging Payment Systems
- Sherry-Maria Safchuk to discuss UDAAP in consumer finance at an American Bar Association webinar
- Jeffrey P. Naimon to discuss "What to expect: The new administration and regulatory changes" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss “The future of fair lending” at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Steven R. vonBerg to discuss "LO comp challenges" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "Major litigation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss “The False Claims Act today” at the Federal Bar Association Qui Tam Section Roundtable