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FCPA Blog Daily News

Entries in Poland (42)

Thursday
Dec202012

Eli Lilly pays $29 million in SEC settlement

Eli Lilly and Company resolved FCPA civil charges brought by the Securities and Exchange Commission based on bribes to government officials in Russia, Brazil, China, and Poland.

Click to read more ...

Friday
Oct122012

Beam launches India investigation

Illinois-based spirits company Beam Inc. is investigating possible FCPA violations in India, according to a report Friday by the Times of India.

Click to read more ...

Monday
Feb062012

Smith & Nephew Reaches $22 Million Settlement

U.K.-based medical device maker Smith & Nephew plc agreed to pay $22.2 million to settle Foreign Corrupt Practices Act offenses committed by its U.S. and German subsidiaries. The company admitted bribing government-employed doctors in Greece for more than a decade to win business.

Click to read more ...

Tuesday
Jul272010

Medical Ghosting And The FCPA

The debate about medical ghosting has focused on the U.S. market. But could the DOJ and SEC now be looking at the practice overseas, where it might violate the FCPA?

Main Justice reported that in April, the DOJ and SEC sent letters to AstraZeneca PLC, Baxter International Inc., Eli Lilly & Co., and Bristol-Myers Squibb Co. The letters asked about business practices in Brazil, China, Germany, Greece, Italy, Poland, Russia, and Saudi Arabia.

Medical ghosting works like this. Drug companies hire outside firms to draft articles touting a drug, then retain a doctor or scientist to sign off as the author. The drug company then finds a publisher, who doesn't know the article was written by someone other than the person who signed it.

Doctors and scientists eagerly participate because publication credit increases their prestige and professional standing. And the drug-companies use the medical journal articles as "independent" proof that their drugs are safe and effective.

A Senate report released last month and quoted in the New York Times said: “Manipulation of medical literature could lead physicians to prescribe drugs that are more costly or may even harm patients."

The FCPA's antibribery provisions prohibit among other things (1) the giving of anything of value (2) to a foreign official (3) to obtain or retain business. See, e.g., 15 U.S.C. §78dd-1(a) [Section 30A of the Securities & Exchange Act of 1934].

Ghosting has those elements. Giving a doctor or scientist an unsigned manuscript for publication has real value. Doctors and scientists working in government-owned or managed hospitals overseas are "foreign officials" under the FCPA. And articles appearing to independently endorse a drug help its manufacturer obtain or retain business.

We don't know if medical ghosting will figure in any FCPA-related investigations of the drug companies. But it could.

Sunday
Oct112009

Charity Without Fear

The question most asked by our readers during the past year was this: What does the Foreign Corrupt Practices Act say about charitable contributions? It comes up so often because all American and U.S. public companies are subject to the FCPA's antibribery provisions, and most have citizenship programs overseas that involve supporting public and private charitable causes. So they need to be sure their donations are FCPA compliant. That's not always easy to figure out. The FCPA itself doesn't mention charitable giving, and the DOJ and SEC have never issued any formal guidelines about it.

When the question first came up around here, we turned to Pete from D.C. (above), a compliance professional who's logged a lot of miles. He helped us with a post that first appeared nearly two years ago. With a few updates we've included, here's what it said:
__________

No good deed goes unpunished, or so the saying goes. That sure came true for Schering-Plough. From February 1999 to March 2002, the New Jersey-based maker of Afrin, Claritin, Coricidin and Cipro, among other leading drugs, violated the Foreign Corrupt Practices Act through overseas charitable giving.

According to the Securities and Exchange Commission's June 2004 complaint, the company's subsidiary in Poland made improper payments to a charitable organization called the Chudow Castle Foundation. The Foundation was headed by an individual who was the director of the Silesian Health Fund during the relevant time. The health fund was a Polish governmental body that, among other things, provided money for the purchase of pharmaceutical products and influenced the purchase of those products by other entities, such as hospitals, through the allocation of health fund resources.

The SEC said Schering-Plough Poland paid 315,800 zlotys (approximately $76,000 at the time of the payments) to the Chudow Castle Foundation to induce its director to influence the health fund's purchase of Schering-Plough's pharmaceutical products. The SEC also said that none of the payments to the Foundation were accurately reflected on the subsidiary's books and records and that Schering-Plough's system of internal accounting controls was inadequate to prevent or detect the improper payments.

As a result, Schering-Plough paid a $500,000 civil penalty and consented to an SEC order requiring it to avoid violating Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. It also had to retain an independent consultant to review its policies and procedures regarding compliance with the Foreign Corrupt Practices Act and implement any changes recommended by the consultant.

Schering-Plough's case, as far as we know, remains the only FCPA enforcement action based entirely on charitable giving. We're talking about it now because it raised important compliance concerns that still linger. For example, how much due diligence is expected of companies with respect to their overseas charitable donations?

At an FCPA conference a couple of years ago, an audience member posed that question to Mark Mendelsohn, the head of the Department of Justice's group that prosecutes FCPA cases. He said each donation has to be considered on its merits, but there are always common-sense guidelines that help determine if donations could violate the FCPA. Is there a nexus between the charity and any government entity from which the company is seeking a decision? If the governmental decision-maker holds a position at the charity, that's a red flag. Is the donation consistent with the company's overall pattern of charitable contributions? For Schering-Plough, the SEC said that "[d]uring 2000 and 2001, the payments constituted approximately 40% and 20%, respectively, of S-P Poland's total promotional donations budget. Moreover, the Foundation was the only recipient of such donations that received multiple payments, making the four payments in 2000 and seven payments in 2001 highly unusual." If one donation or a series of them is more than the company has made to any other charity in the past five years, that's a red flag too.

Beyond the points made by Mark Mendelsohn, there are other smell tests for charitable donations. Who initiated the request for payment to the charity? The key to most bribery charges appears to be the personal benefit to the government official, or the quid pro quo expected of him or her. If a government official hinted at or begged for a payment to the charity, that's another red flag. Will there be a tax deduction for the donation? In most countries, one important result of any gift to charity is tax relief. Therefore, not seeking the tax benefit can become yet another red flag.

And one final point. All due diligence concerning charitable payments -- the asking and answering of the questions posed above -- should be well documented. Nothing will aid in defending against a potential FCPA charge more than a stack of contemporaneously-generated papers backing the story that the payment really was meant to be a charitable contribution and not a bribe. Don't be shy about it. Create real-time documents that demonstrate awareness of potential FCPA issues and measures taken to manage and mitigate the risk. That, after all, is what compliance is really about.
__________

Schering-Plough Corporation trades on the New York Stock Exchange under the symbol SGP.

View the SEC's Litigation Release No. 18740 (June 9, 2004) here.

Download the SEC's civil complaint in Securities and Exchange Commission v. Schering-Plough Corporation (D.D.C. 2004) here.
.

Monday
Jan072008

When Is Charity A Bribe?

No good deed goes unpunished, or so the saying goes. That sure came true for Schering-Plough a few years ago. From February 1999 to March 2002, the New Jersey-based maker of Afrin, Claritin, Coricidin and Cipro, among other leading drugs, violated the Foreign Corrupt Practices Act through overseas charitable giving.

According to the Securities and Exchange Commission's June 2004 complaint, the company's subsidiary in Poland made improper payments to a charitable organization called the Chudow Castle Foundation. The Foundation was headed by an individual who was the director of the Silesian Health Fund during the relevant time. The health fund was a Polish governmental body that, among other things, provided money for the purchase of pharmaceutical products and influenced the purchase of those products by other entities, such as hospitals, through the allocation of health fund resources.

The SEC said Schering-Plough Poland paid 315,800 zlotys (approximately $76,000 at the time of the payments) to the Chudow Castle Foundation to induce its director to influence the health fund's purchase of Schering-Plough's pharmaceutical products. The SEC also said that none of the payments to the Foundation were accurately reflected on the subsidiary's books and records and that Schering-Plough's system of internal accounting controls was inadequate to prevent or detect the improper payments.

As a result, Schering-Plough paid a $500,000 civil penalty and consented to an SEC order requiring it to avoid violating Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. It also had to retain an independent consultant to review its policies and procedures regarding compliance with the Foreign Corrupt Practices Act and implement any changes recommended by the consultant.

Schering-Plough's case, as far as we know, remains the only FCPA prosecution based entirely on charitable giving. We're talking about it now because it raised important compliance concerns that still linger. For example, how much due diligence is expected of companies with respect to their overseas charitable donations? At an FCPA conference last year, an audience member popped that question to Mark Mendelsohn, the head of the Department of Justice's group that prosecutes FCPA cases. He said each donation has to be considered on its merits, but there are always common-sense guidelines that help determine if donations could violate the FCPA. Is there a nexus between the charity and any government entity from which the company is seeking a decision? If the governmental decision-maker holds a position at the charity, that's a red flag. Is the donation consistent with the company's overall pattern of charitable contributions? For Schering-Plough, the SEC said that "[d]uring 2000 and 2001, the payments constituted approximately 40% and 20%, respectively, of S-P Poland's total promotional donations budget. Moreover, the Foundation was the only recipient of such donations that received multiple payments, making the four payments in 2000 and seven payments in 2001 highly unusual." If one donation or a series of them is more than the company has made to any other charity in the past five years, that's a red flag too.

Beyond the points made by Mr. Mendelsohn, there are other smell tests for charitable donations. Who initiated the request for payment to the charity? The key to most bribery charges appears to be the personal benefit to the government official, or the quid pro quo expected of him or her. If a government official hinted at or begged for a payment to the charity, that's another red flag. Will there be a tax deduction for the donation? In most countries, one important result of any gift to charity is tax relief. Therefore, not seeking the tax benefit can become yet another red flag.

And one final point. All due diligence concerning charitable payments -- the asking and answering of the questions posed above -- should be well documented. Nothing will aid in defending against a potential FCPA charge more than a stack of contemporaneously-generated papers backing the story that the payment really was meant to be a charitable contribution and not a bribe. Don't be shy about it. Create real-time documents that demonstrate awareness of potential FCPA issues and measures taken to manage and mitigate the risk. That, after all, is what compliance is really about.

Schering-Plough Corporation trades on the New York Stock Exchange under the symbol SGP.

View the SEC's Litigation Release No. 18740 / June 9, 2004 Here.

View the SEC's June 9, 2004 complaint against Schering-Plough Here.

As a postscript, we need to say how much we like what's written above. That sounds like outrageous braggadocio, but it's not. Our friend, Pete from D.C., is the inspiration and chief draftsman of this post. Despite his encyclopedic knowledge of the FCPA and vast experience in its application, he chooses to remain an anonymous contributor to these pages. We can only thank him yet again for his interest and great help in our work here -- and encourage him once more to reveal to the world his almost handsome face.

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