On June 25, 2020, Novartis AG, a global healthcare company headquartered in Switzerland, and two of its subsidiaries (one current and one former) agreed to pay a total of $345 million in disgorgement and fines to the U.S. Department of Justice and Securities and Exchange Commission to settle claims that they had violated the Foreign Corrupt Practices Act (FCPA). 15 U.S.C. §§ 78dd-1. Specifically, the DOJ entered into deferred prosecution agreements with a current Novartis subsidiary operating in Greece and a former Novartis subsidiary based in Singapore and overseeing operations in Vietnam, which agreed to collectively pay more than $233 million in criminal fines. And the parent company agreed to pay the SEC $112 million in disgorgement and pre-judgment interest.
According to the charging documents released by the DOJ and SEC, Novartis AG’s various subsidiaries engaged in corrupt schemes in a number of jurisdictions—including beyond simply Greece and Vietnam—to make illicit payments to secure business advantages dating back to as early as 2007. And in each case, the DOJ and SEC alleged that the illicit payments were improperly recorded within the companies’ books and records. For example, the government alleged that, between 2012 and 2015, the Greek subsidiary engaged in a scheme to corruptly influence healthcare providers in Greece by providing improper benefits and things of value to public and private healthcare providers in Greece. Specifically, the company allegedly sponsored healthcare providers’ attendance at international medical conferences, including payments related to their airfare, accommodations, and registration fees. And the government claimed that such payments were improperly recorded internally as scientific and educational expenses, when in fact they were actually intended to induce those providers to prescribe the Novartis-branded drugs.
The SEC and DOJ charges overlapped significantly, but not entirely.With the SEC (but not the DOJ), the companies agreed to settle allegations related to conduct that occurred in Korea and China. But it is not clear that the inclusion of this additional conduct by one and not the other had a material impact on the charging decisions of either enforcer.
Perhaps of most significance, this is yet another example of the DOJ and SEC using the books and records provisions of the FCPA to pursue cases involving alleged bribes, and highlights the extent to which the enforcers will pursue various entities to ensure broad compliance despite subsequent reorganizations. Indeed, the DOJ did not merely accept a DPA with the one subsidiary still owned by Novartis, but rather insisted on both the current and former subsidiaries entering into DPAs, effectively ensuring that all parties involved will continue to be under the close watch of DOJ as they seek to remediate any prior compliance shortcomings.