The Securities and Exchange Commission reports that a global pharmaceutical company has agreed to pay $25 million to settle charges that it bribed Chinese health care officials in violation of the Foreign Corrupt Practices Act. This amount includes $21.6 million in disgorgement, $1.5 million in pre-judgment interest and a $2 million civil monetary penalty. The company also agreed to provide status reports to the SEC for the next two years on its remediation and implementation of anti-corruption compliance measures.
The SEC alleged that over several years certain employees and agents of company subsidiaries conducting business in China engaged in transactions and provided things of value to foreign officials, principally healthcare professionals, that led to several million dollars in sales to China’s state health institutions. Employees and managers of these subsidiaries attempted to conceal the true nature of the transactions through the use of complicit third parties and by improperly recording the transactions on the books and records of the respective subsidiaries. According to the SEC, the company failed to devise and maintain an effective system of internal accounting controls or an effective anti-corruption compliance program.
However, the SEC notes that as a result of an internal review the company identified weaknesses in the internal controls over third-party relationships at its Chinese subsidiary and promptly took remedial steps to improve those controls, including overhauling its anti-corruption policies and procedures, terminating and/or imposing other disciplinary sanctions against culpable employees, suspending vendor relationships and payments, doubling its training initiatives, reorganizing its compliance function (to include enhanced oversight by regional and headquarters compliance personnel), and eliminating the use of vendors to support external meetings.
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