Foreign Bribery

Types Of SEC Cases:  Foreign Bribery

Teva Pharmaceuticals Fined $519 Million For FCPA Foreign Bribery Fraud

The SEC announced that it reached a settlement agreement related to civil charges that it brought against Teva Pharmaceuticals (“Teva” or the “Company”) for committing foreign bribery, in violation of the Foreign Corrupt Practices Act (“FCPA”).  Teva also entered into a deferred prosecution agreement with the U.S. Department of Justice in connection with criminal charges related to the foreign bribery.

Bribery Of Foreign Government Officials

In its court Complaint, the SEC charged Teva with foreign bribery for payments that Teva made to government officials of Russia, Ukraine, and Mexico.  The foreign bribery payments were allegedly made to those officials to influence regulatory and formulary approvals, drug purchasing decisions, prescription decisions, and to increase Teva’s market share and develop competitive advantages over its competitors. Because of those foreign bribes, Teva purportedly obtained business resulting in over $200 million of profits. The SEC further asserted that senior executives of the Company knowingly and/or willfully disregarded signs that the payments were being made as bribes to the foreign government officials. In an SEC press release about the foreign bribery case, the Director of the SECʼs Miami Regional Office explained:

As we allege in our complaint, many of these bribes were concealed as legitimate payments to distributors.  While distributors can help companies navigate complex regulatory environments and provide valuable industry relationships, they also can create significant corruption risks for companies.

Fictitious Accounting Records Used To Hide The Foreign Bribery

In addition to making illegal payments to the foreign government officials, Teva allegedly created fictitious books and records to hide the illegal activity.  (For more information about Accounting, Disclosure, and Books and Records frauds, click here.) The Deputy Director of the SECʼs Enforcement Division added in the press release:

As alleged in our complaint, Teva failed to devise and maintain proper internal accounting controls to prevent the companyʼs payments of bribes to win business in certain regions around the globe.

Settlement and Penalty

In its press release, the SEC stated that Teva agreed to the following settlement:

• $236 million (disgorgement and interest to the SEC)
• $283 million penalty (deferred prosecution agreement – U.S. Department of Justice)
• Retention of an independent corporate monitor for at least three years following the settlement

Whistleblowers Can Report Foreign Bribery To The SEC

This case illustrates some types of misconduct that could give rise to SEC whistleblower cases if reported to the Commission through the SEC whistleblower program. However, the SEC has not made any public statement as to whether this case was itself an actual SEC whistleblower case.  The SEC Office of the Whistleblower posts Notices of Covered Action (“NoCA”) for Commission actions where a final judgment or order results in monetary sanctions exceeding $1 million.  The NoCA list does not disclose if a particular Enforcement action was brought as the result of an SEC whistleblower case, tip, complaint, or referral being filed with the Commission.

Additional Information

For more information about foreign bribery under the FCPA, click on the links below:

• The SEC’s court Complaint in SEC v. Teva.  (External link to the SEC’s website.)
• The SEC’s Press Release announcing the settlement.  (External link to the SEC’s website.)