A Paris-based pharmaceutical company ("Sanofi") agreed to pay more than $25 million to settle SEC claims that the company falsely recorded improper payments and lacked sufficient internal accounting controls to detect and prevent violations of the Foreign Corrupt Practices Act ("FCPA"). In resolving the matter, the SEC acknowledged Sanofi's cooperation during the investigation, as well as the company's remedial efforts, including enhancements to its compliance program. Sanofi previously announced in March 2018 that the DOJ had closed its FCPA investigation into the company without action.
According to the SEC's Order, employees of Sanofi's subsidiaries in Kazakhstan and the Middle East bribed public and private sector healthcare providers in order to increase sales of Sanofi products.
- Kazakhstan: The SEC alleged that excessive distributor credit notes and discounts were used to generate funds that were kicked back to employees of Sanofi's Kazakhstan subsidiary and subsequently paid out to Kazakh officials in order to corruptly influence public tenders.
- Jordan: The SEC claimed that employees of Sanofi's local subsidiary paid an influential public healthcare provider the equivalent of over $150,000 in potentially improper consulting fees, speaking fees, and clinical trial fees, while also approving, with no justification, a request from the same health care provider for significant dosages of a high-cost cancer treatment. The healthcare provider requested that Sanofi's fees be paid by check to an unrelated individual – a request that the company accommodated.
- The Gulf: The SEC alleged that employees of Sanofi's Gulf subsidiary routinely submitted false travel and entertainment reimbursement claims for sham roundtable meetings, and distributed the illicit proceeds to healthcare providers in the private sector in order to increase the number of prescriptions of Sanofi products. These falsified expenses included fake receipts issued by a collusive vendor "known to facilitate such activity."
Under the settlement, Sanofi agreed to pay $17.5 million in disgorgement, $2.7 million in prejudgment interest and a civil penalty of $5 million. The company also will submit to the SEC three reports during a two-year period regarding its remediation efforts and follow-up reviews. Sanofi neither admitted to nor denied the findings contained in the SEC Order.
Commentary / James Treanor
The conduct alleged in the Sanofi settlement reads like a résumé of the schemes alleged in FCPA resolutions with numerous pharmaceutical companies in recent years. Charles Cain, the SEC's FCPA Unit Chief, acknowledged as much in his remark that "[w]hile 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 settlement, therefore, is a reminder that effective bribery schemes die hard, and compliance professionals must remain alert to all types of corruption risks. In addition, the alleged improper payments made by one of Sanofi's Middle Eastern subsidiaries were directed to healthcare providers in the private sector, highlighting that the SEC can pursue books and records and internal controls violations even where no foreign government official is involved.
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