Pfizer and Subsidiaries Settle FCPA Charges for $60.2 Million
By Jeffrey Benzing | August 7, 2022 3:02 pm

Pfizer Inc. and two subsidiaries have agreed to pay a total of $60.2 million to settle foreign bribery charges from the Justice Department and the Securities and Exchange Commission.

The contours of the settlement were reportedly agreed to in November, following more than 18 months of negotiations between the company and law enforcement authorities. Final resolution did not come for nearly nine more months.

Today’s settlement announcement is part of a pharmaceutical industry corruption probe that began in the mid-2000s following disclosures by Pfizer and Johnson & Johnson.

Assistant Attorney General Lanny Breuer announced in November 2009 that prosecutors would be closely examining drug makers’ operations for foreign bribery violations.

In April 2010, Johnson & Johnson agreed to pay $70 million to settle allegations that it had violated the Foreign Corrupt Practices Act. Subsidiaries, including DePuy Inc.,  had been investigated for bribing doctors to prescribe the company’s drugs and use its medical devices.

Teva Pharmaceutical Industries Limited disclosed last week that it had received an SEC subpoena related to FCPA issues in Latin America. The pharmaceutical probe has also included scrutiny of AstraZeneca PLC, Baxter International Inc., Eli Lilly & Co. and Bristol-Myers Squibb Co.

Now Pfizer H.C.P. Corporation, an indirect wholly owned subsidiary of Pfizer Inc., has agreed to a $15 million criminal penalty in a settlement with the Justice Department and will enter into a two-year deferred prosecution agreement.

The subsidiary is accused of paying more than $2 million in bribes to government officials in Bulgaria, Croatia, Kazakhstan and Russia in violation of the FCPA, according to a two-count criminal information filed today in U.S. District Court for the District of Columbia.

The bribery conspiracy included payments to hospital administrators, regulatory and purchasing committees and health care workers to influence government decisions on Pfizer Inc. products, according to the criminal information.

In countries with national health care systems, the Justice Department has said that health care workers are government officials.

The subsidiary used sham consulting contracts, improper cash and travel payments and exclusive distributorship deals to influence officials, according to the information.

Due to “extensive cooperation” and self-reporting of the violations, Pfizer H.C.P received a reduction from a base fine of $28.5 million, the Justice Department said. The company will not be required to retain a corporate monitor, which could have cost millions of dollars.

An analysis by Just Anti-Corruption in May found that no company that has voluntarily disclosed an FCPA violation has been required to hire a monitor since 2008.

In a parallel settlement, the SEC announced today that parent Pfizer Inc. has been charged with FCPA violations for bribes paid to foreign officials by subsidiary employees in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia and Serbia.

Bribes were marked improperly as promotional activities, travel and entertainment, clinical trials and other legitimate business expenses, the SEC said.

The company will pay a $16 million disgorgement and prejudgment interest of $10.3 million.

“Pfizer subsidiaries in several countries had bribery so entwined in their sales culture that they offered points and bonus programs to improperly reward foreign officials who proved to be their best customers,” Kara Brockmeyer, chief of the SEC’s FCPA unit, said in a statement.

Pfizer disclosed misconduct by subsidiaries to U.S. investigators in October 2004.

The SEC has also charged Wyeth LLC, which Pfizer acquired in 2009, for bribes paid beginning in 2005 to government doctors in China, Indonesia and Pakistan. The company, which Pfizer now calls a subsidiary, also made improper payments to customs officials in Saudi Arabia, the SEC said.

Wyeth agreed to a disgorgement of $17.2 million with $1.7 in prejudgment interest.

Pfizer voluntarily reported Wyeth’s improper payments to the SEC following a due-diligence review during acquisition.

Pfizer and Wyeth have not admitted to misconduct in their SEC settlement. The investigation was conducted by Michael Catoe and Charles Cain of the SEC’s FCPA unit.

In light of the Wyeth SEC settlement and due diligence efforts by Pfizer, the Justice Department decided not to pursue action against the acquired company. Pfizer Inc. has not been prosecuted criminally.

Under the deferred prosecution agreement, filed today in the District of Columbia, parent company Pfizer Inc. is required to maintain rigorous anti-corruption programs, including clearly articulated policies against bribery and an effective mechanism to internally report possible violations.

The company is required to maintain a senior executive to serve as chief compliance and risk officer. The executive is required to have significant experience with FCPA compliance and is obligated to report directly to Pfizer’s CEO and the audit committee of the company’s board of directors.

Pfizer must also appoint compliance heads for each of its business units and must establish an executive compliance committee chaired by the CEO.

According to the agreement, Pfizer maintains a global investigations group to respond to corruption issues across the company’s operations and will continue to conduct risk-based reviews of FCPA compliance. An FCPA review team will conduct onsite reviews at five high-risk areas each year.

In addition to diligence and training requirements outlined in the agreement, Pfizer is required to report progress on implementation of compliance measures and report any breaches to the Justice Department.

The company will submit a written report on FCPA compliance efforts and future measures within 180 calendar days. Two follow-up reviews will be required for the period of the agreement, which runs for two years and seven days.

If the Justice Department decides Pfizer has violated the agreement, the length of the deferred prosecution may be extended for an additional year.

Pfizer notes that top leadership was unaware of the bribery and that the company voluntarily disclosed possible bribery problems.

“There is no allegation by either DOJ or SEC that anyone at Pfizer’s or Wyeth’s corporate headquarters knew of or approved the conduct at issue before Pfizer took appropriate action to investigate and report it,” the company said in a statement today.

The Justice Department case is being prosecuted by Assistant Chief Nathaniel B. Edmonds and trial attorney Andrew Gentin of the Criminal Division’s Fraud Section.

Pfizer was represented by Bret A. Campbell and Peter Clark of Cadwalader, Wickersham & Taft LLP.

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