French pharmaceutical company Sanofi has agreed to pay more than $25 million to resolve SEC charges that its Kazakhstan and Middle East subsidiaries made corrupt payments to win business.
‘Bribery in connection with pharmaceutical sales remains a significant problem despite numerous prior enforcement actions involving the industry and life sciences more generally,’ says Charles Cain, FCPA unit chief in the SEC’s enforcement division, in a statement. ‘While bribery risk can impact any industry, this matter illustrates that more work needs to be done to address the particular risks posed in the pharmaceutical industry.’
The administrative proceeding arose from Sanofi’s alleged violations of the internal accounting controls and recordkeeping provisions of the FCPA.
The SEC says in a filing that, from at least 2011 to 2015, employees and agents of Sanofi’s subsidiaries in Kazakhstan, the Levant (which includes Jordan, Lebanon, Syria and Palestine) and the Gulf (which includes Bahrain, Kuwait, Qatar, Yemen, Oman and the United Arab Emirates) ‘acted to provide things of value’ to foreign officials, including healthcare professionals, in an effort to improperly influence them and boost sales of Sanofi products.
According to the agency, the funds used for the alleged illicit payments were generated through fake expenses for purportedly legitimate travel and entertainment expenses, clinical trial and consulting fees, product samples, roundtable meeting expenses, distributor discounts and credit notes to distributors that were improperly recorded as legitimate expenses in Sanofi’s books and records.
The SEC says that, throughout the period, Sanofi failed to devise and maintain a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program covering the locations at issue. For example, it says with regard to Kazakhstan that, at the time, Sanofi had no standardized commercial policy for distributor discounts and did not review discounts provided by local management.
SETTLEMENT
Under the settlement, Sanofi will pay $17.5 million in disgorgement, $2.7 million in prejudgment interest and a civil penalty of $5 million. It also agrees to report on the status of its remediation and compliance efforts over the next two years.
The SEC states that, in reaching this agreement, it took into account remedial acts promptly undertaken by Sanofi and its co-operation with agency officials.
During the SEC’s investigation, the company provided regular briefings regarding the facts arising in its internal probe, ‘including facts that the commission would not have been able to readily and independently discover… promptly responded to additional requests by the commission staff, and provided translations of documents as needed,’ the agency states.
According to the SEC, Sanofi had already begun enhancing its compliance efforts prior to the agency’s investigation by, for example:
- Developing a centralized program
- Revamping its internal controls and procedures over healthcare professional expenditures
- Increasing the number of its compliance officers globally
- Enhancing the operation of local compliance committees
- Placing compliance personnel in high-risk local markets
- Enhancing its policies governing interactions with healthcare professionals and government officials, gifts, travel, meetings, congresses and contributions
- Enhancing its anti-corruption training, audits and due diligence procedures for third-party agents
- Enhancing its monitoring for certain Sanofi-sponsored events for healthcare professionals.
Sanofi settled without admitting or denying wrongdoing. In a statement, it notes that the US Department of Justice (DoJ) previously completed its related investigation and declined to pursue any action.
‘Sanofi requires all our employees to act with integrity and to follow the highest standards of conduct. We have worked diligently to strengthen our compliance program worldwide and we are pleased the DoJ and SEC recognized these efforts and our close co-operation,’ CEO Olivier Brandicourt says in the statement.
‘We will continue to strengthen internal controls, anti-bribery and corruption compliance programs, and our oversight and training of teams worldwide. Conducting our activities in an ethical way is something our company takes very seriously.’
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
