internal investigation, cooperation with the DOJ and remediation of problematic conduct. Both DPAs have a term of three years, and require the retention of an independent compliance monitor for 18 months. Both companies were assessed significant criminal fines as calculated under the US Federal Sentencing Guidelines, which were “discounted” by 20 per cent below the recommended minimum fine according to those guidelines (Smith & Nephew and Biomet paid US$16.8 million and US$17.3 million, respectively). The Orthofix case, in contrast, was voluntarily disclosed to both the DOJ and SEC – Orthofix did not report having been a recipient of a letter sent in 2007 by the SEC to a number of medical device manufacturers (which was likely prompted by Johnson & Johnson’s own voluntary disclosure beforehand) and involved significantly lesser sanctions. Orthofix’s SEC settlement did not contain an anti-bribery charge. Orthofix paid approximately US$5.2 million in disgorgement and prejudgement interest to the SEC, similar to Smith & Nephew and Biomet. Orthofix also was not required to retain a corporate compliance monitor. Orthofix’s DOJ resolution likely reflected its voluntary disclosure of the conduct to the SEC and DOJ, in contrast to the Smith & Nephew and Biomet cases (which were prompted by letters sent by the SEC in the course of one of its first sweeps in 2007). Orthofix entered into a 3-year DPA with the DOJ, containing a criminal internal controls charge only (and no anti-bribery or books and records charges). Orthofix also was required to pay a US$2.2 million criminal fine, which represented the low end of the range provided by the US Federal Sentencing Guidelines.
Pharmaceutical Cases Pfizer Inc..’s and Eli Lilly and Company’s 2012 FCPA resolutions also highlight that how companies respond to FCPA issues can significantly affect the ultimate resolutions with the US enforcement agencies. The Pfizer settlements, in fact, are made up of three enforcement actions: by the DOJ resulting in a two-year DPA with Pfizer HCP Corporation, a New York subsidiary of Pfizer Inc. in connection with conduct in a number of countries, including the pre-acquisition conduct of a subsidiary it acquired in 2003 from Pharmacia Corp.; by the SEC against Pfizer Inc. for much of the same and additional conduct; and another SEC action against Wyeth LLC, a company Pfizer acquired while the original FCPA investigation, which Pfizer had voluntarily disclosed to the SEC and DOJ in 2004, was pending. Pfizer HCP entered into a two-year DPA, containing one count each of violations of the FCPA’s antibribery provisions and conspiracy to violate the FCPA’s anti-bribery, books and records, and internal controls provisions relating to an extensive set of conduct in multiple countries from 1997 to 2006. Pfizer HCP agreed to pay a US$15 million criminal penalty and abide by an extensive list of compliance requirements, and provide compliance reports to the DOJ for the entire two-year term of the DPA. It was not, however, required to retain a compliance monitor. Significantly, a portion of the conduct charged took place before Pfizer acquired a Croatian subsidiary of Pharmacia & Upjohn; the charges were brought apparently as a result of Pfizer’s failure to conduct pre-acquisition FCPA due diligence on Pharmacia & Upjohn’s Croatian operations. In contrast, Pfizer did conduct extensive pre-acquisition FCPA due diligence on its acquisition of Wyeth LLC, resulting in no DOJ enforcement action against Pfizer or Wyeth LLC for significant conduct discovered. At least some of that conduct was publicly disclosed in Wyeth LLC’s settlement with the SEC, which resulted in Wyeth LLC paying US$18.9 million in disgorgement and prejudgement interest, and the SEC filing a settled complaint against Wyeth LLC alleging books and records and internal controls violations in multiple countries. For its part, the Pfizer SEC settlement involved Pfizer paying over US$26 million in disgorgement and prejudgement interest, and the SEC filing a settled complaint alleging books and records and internal controls charges against Pfizer Corp. in connection with payments in multiple countries.
EXPORTING CORRUPTION – OECD PROGRESS REPORT 2013
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