Pfizer Settles FCPA Charges for $60 Million

[Link: The Pfizer DPA Enhanced Compliance Obligations-the New Normal? by Thomas Fox]

Earlier this month, global pharmaceutical company Pfizer Inc. agreed to pay $60 million to the U.S. Securities and Exchange Commission and the U.S. Department of Justice to settle charges that the company violated the Foreign Corrupt Practices Act. From law firm Warner Norcross & Judd:

“The charges arose from government claims that ‘employees and agents’ of Pfizer subsidiaries made unlawful payments to doctors and other health care professionals employed by governments in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia. The government claimed that the payments were made in the process of obtaining regulatory approvals, but also in the process of making sales and in promoting increased prescriptions for its drugs.”

For your reference, three lessons from the settlement:

1. Cooperating with authorities can pay off:

“In imposing the terms of the Agreement, DOJ cited Pfizer Inc.’s ‘extraordinary cooperation’ with the DOJ and the SEC. According to the DOJ, Pfizer first brought the facts to the government’s attention in a 2004 voluntary self disclosure, undertook ‘early and extensive’ remedial efforts, and agreed to maintain strong compliance procedures in the future. Based on these factors and others, the DOJ describes the $15 million criminal fine as a ‘downward departure’ from the fine range of $22.8 million to $45.6 million it calculated under the U.S. Sentencing Guidelines.” (Sheppard Mullin)

2. Ignorance of FCPA violations is no excuse:

“The SEC acknowledged in its complaint that neither Pfizer officers nor employees knew or approved of activities of its subsidiaries, but the SEC blamed the company for failing to devise and maintain appropriate internal controls.” (Warner Norcross & Judd)

3. Each of the two US regulators has (and will pursue) its own agenda:

“… the two agencies apply a different standard of proof: the SEC must apply a “preponderance of the evidence” standard, whereas the DOJ applies a “beyond a reasonable doubt” standard. One side effect of the lower SEC evidentiary standard is that it allows the SEC to cover a wider swath of conduct, including conduct in countries that the DOJ may decline to charge for lack of evidence of criminal intent or other elements of the crime. More conduct ultimately results in more profits, and a higher disgorgement figure under the SEC’s civil “preponderance of evidence” standard.” (Sheppard Mullin)

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