A U.S. company will pay the Securities and Exchange Commission nearly $13 million to settle charges that it violated the Foreign Corrupt Practices Act by bribing Chinese government officials. This amount includes $9.4 million in disgorgement, $900,000 in prejudgment interest and a $2.5 million civil penalty. The company noted that the Department of Justice has declined to file criminal charges after a related investigation.
According to the SEC, from at least 2007 to 2012 employees of the company’s subsidiaries acting as the company’s agents in conducting business in China gave money, gifts, trips, meals, entertainment and foreign language classes to foreign officials, including healthcare professionals employed by state-owned hospitals in China, to obtain an increase in prescriptions of the company’s pharmaceutical products. Various means were employed, the SEC states, and these schemes were known to and condoned by various managers within the company’s China-based corporate structure. The related transactions were falsely recorded in the company’s books and records as legitimate sales, marketing and promotion expenses. The company also failed to devise and maintain a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program.
The SEC notes that the company has since taken steps to improve its internal accounting controls and create a dedicated compliance function. These include (1) hiring a compliance officer for its China operations, (2) undertaking an extensive review of the policies and procedures surrounding employee travel and entertainment reimbursements, (3) substantially reducing the number of suppliers providing third-party travel and event planning services, (4) improving its policies and procedures around third-party due diligence and payments, (5) incorporating anti-corruption provisions in its third-party contracts, (6) providing anti-corruption training to its third-party travel and event planning vendors, (7) disciplining employees (and their managers) who violate its policies, and (8) creating internal audit and compliance departments. In addition, the company has undertaken to report regularly to the SEC on the status of its remediation and implementation of compliance measures.