Eli Lily began in 2003, and of Pfizer in 2004,489 two of the longest-running investigations to finally result in enforcement actions. The investigations of the medical device manufacturers began in 2007 as a result of one of the first industry “sweeps” conducted by the SEC and DOJ; in those cases the SEC voluntarily requested documents from Smith and Nephew and Biometin 2007.490 Each set of enforcement actions treated the employees of publicly-owned hospitals and other healthcare providers, such as doctors, as “foreign officials” under the FCPA. They also involved substantial penalties and disgorgement of profits paid by the companies to settle the matters. The amounts of penalties and disgorgement, as well as the form of resolution agreed to by the DOJ and SEC – whether the companies were required to retain a corporate compliance monitor, and in one case, whether the company was charged at all – appear to be correlated with whether the companies made voluntary disclosures to the US government agencies, cooperated with those agencies, whether they took steps to remediate the conduct that led to the alleged FCPA violations, and other factors. In the case of Smith & Nephew plc, US and German subsidiaries of the UK-based parent company made improper payments to offshore shell companies controlled by a Greek distributor, where that distributor subsequently paid some or all of those funds to doctors at public hospitals in Greece. The purpose of the payments was to induce Greek doctors to purchase Smith & Nephew products. In the case of Biomet Inc.,491 Argentinian, Chinese, Swedish and US subsidiaries of the US parent company paid bribes to increase sales of medical devices through doctors at public hospitals in Argentina, Brazil and China from 2000 to 2008.492 In the case of Orthofix International N.V.,493 a Mexican subsidiary of the orthopaedic devices manufacturer incorporated in the Netherlands Antilles but based in the US, paid bribes to hospital officials at a Mexican government health care agency from 2003 to 2010 to gain and retain contracts with various hospitals.494 The pharmaceutical sector’s case facts were somewhat similar to those of the medical device cases. According to the complaint in the SEC’s settlement with Pfizer Inc.,495 from 2001 through 2007, Pfizer subsidiaries in China, the Czech Republic, Italy and the US improperly influenced doctors and other healthcare professionals employed at state-owned hospitals in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia and Serbia to purchase Pfizer products. Subsidiaries also made improper payments to customs and other officials in Russia to improperly secure regulatory and formulary approvals, purchase or prescription decisions, and customs clearance. A separate SEC complaint filed at the same time as the Pfizer Inc. settlement involved a company Pfizer acquired in 2009, Wyeth LLC.496 The SEC’s enforcement against Wyeth LLC related to payments to government doctors and other healthcare professionals in China, Indonesia and Pakistan, as well as customs officials in Saudi Arabia, from 2005 to 2010, to improperly recommend 489
See Eli Lilly & Company, Current Report (Form 10-Q), November 12, 2003; Pfizer Inc., 2004 Financial Report, at Note 17. http://www.pfizer.com/investors/financial_reports/financial_report_2004.jsp. 490 SEC may have come to learn about the conduct that was the subject of the subpoenas by a voluntary disclosure of an internal FCPA investigation made by Johnson & Johnson Inc. in 2006. Johnson & Johnson eventually entered into parallel DOJ and SEC enforcement actions under the FCPA in 2011. Those settlements included a Deferred Prosecution Agreement with the DOJ, that included a criminal fine of $21.4 million, and a settled complaint with the SEC that included disgorgement and prejudgment interest of over $48.6 million. Deferred Pros. Agreement at Attachment A, para. 28, United States v. Johnson and Johnson, No. 11-cr-099 (D.D.C. Apr. 8, 2011) (hereinafter United States v. Johnson and Johnson), available at http://www.justice.gov/criminal/fraud/fcpa/cases/depuy-inc/04-0811depuy-dpa.pdf; SEC v. Johnson & Johnson, case no. 1:11 –cv-00686 (D.D.C. 2011). 491 http://www.sec.gov/news/press/2012/2012-50.htm. http://www.sec.gov/litigation/complaints/2012/comp22306.pdf. 492 Deferred Prosecution Agreement at 5, United States v. Biomet, Inc., No. 1:12-cr-00080-RBW (D.D.C. Mar. 26, 2012). 493 http://www.sec.gov/news/press/2012/2012-133.htm; http://www.sec.gov/litigation/complaints/2012/comp-pr2012133.pdf; http://www.justice.gov/criminal/fraud/fcpa/cases/orthofix/2012-07-10-orthofix-dpa.pdf. 494 Enforcement Action, Date and Sanctions: Orthofix International N.V., July 10, 2012 SEC Settlement: US$4,983,644 in disgorgement of profits and US$242,000 in prejudgment interest, monitoring of its FCPA compliance program and reporting back to the SEC for two years; DPA of three years: US$2,220,000 criminal penalty; US$2,220,000 criminal penalty; and implementation of an enhanced compliance program including independent review, audit and annual reporting for three years. 495 http://www.sec.gov/news/press/2012/2012-152.htm. 496 http://www.sec.gov/litigation/complaints/2012/comp-pr2012-152-wyeth.pdf.
EXPORTING CORRUPTION – OECD PROGRESS REPORT 2013
93