- Pharmaceutical giant Novartis will pay more than $112 million to settle charges it violated accounting controls under the Foreign Corrupt Practices Act (FCPA), the Securities and Exchange Commission (SEC) announced.
- Local subsidiaries of the Basel, Switzerland-based company engaged in schemes to make improper payments or provide benefits to healthcare providers in exchange for prescribing Novartis products.
- "Poor control environments are fertile soil for malfeasance," Charles Cain, the SEC's chief of FCPA enforcement, said. "As illustrated by Novartis' misconduct, weaknesses in one part of the business can often serve as a harbinger of larger unaddressed problems."
Improper payment schemes took place between 2012 and 2016 and were known among certain managers of the company's subsidiaries, the SEC said. The payments were made in South Korea, Vietnam, and Greece.
The SEC charged the company with having insufficient internal accounting controls within a former business unit, called Alcon, which operated in China from 2013 to 2015. The unit used forged contracts as part of local financing arrangements that generated large losses and resulted in Novartis and Alcon writing off more than $50 million in bad debt.
Under the settlement, Novartis consented to an order requiring the company to cease and desist from committing violations of the books and records and internal accounting controls provisions of the FCPA.
The company also agreed to pay disgorgement of $92.3 million and $20.5 million in prejudgment interest, and to comply with a three-year undertaking to self-report on the status of its remediation, and implementation of compliance measures.
In addition, subsidiaries of Novartis and Alcon entered into deferred prosecution agreements with the U.S. Department of Justice, and have agreed to pay more than $233 million in criminal fines.