Pharmaceutical Company Settles with SEC Regarding FCPA Offenses in China

FCPA SEC China

On March 23, the SEC announced that it settled FCPA allegations with a Switzerland-based pharmaceutical company, via a cease and desist order finding that the company violated the FCPA’s book and records and internal controls provisions related to activities in China. The SEC found that employees of two of the company’s Chinese subsidiaries gave money and gifts to Chinese health care providers at state-owned hospitals in order to boost sales. In some cases, the order found, the company’s employees created spreadsheets that linked payments to individual Chinese health care providers to increased sales of certain drugs and created a ranking system for the health care providers.

The SEC’s order found that the company recorded the payments as lecture fees, conferences, seminars, medical studies, and travel and entertainment. The SEC further found that the company failed to devise and implement a sufficient system of internal accounting controls to detect the improper payments, and lacked an effective anti-corruption compliance program. The order did not say whether the company self-disclosed the involved conduct, but the order notes the company’s cooperation and states that the company began an internal investigation after news reports surfaced that a competitor was investigating similar FCPA concerns in its Chinese subsidiaries.

The company consented to the SEC’s order without admitting or denying the charges and agreed to pay $25 million to resolve the case, including a $2 million penalty, disgorgement of $21.5 million in profits, and $1.5 million in prejudgment interest. The company will also provide status reports to the SEC for the next two years regarding remediation efforts and new anti-corruption compliance measures.