Eli Lilly will pay a civil settlement of $29.4 million under an agreement with the US Securities and Exchange Commission (SEC) to lay to rest a long-running case alleging illegal activities by foreign affiliates.
Four of Lilly’s subsidiaries – in Brazil, China, Poland and Russia – stand accused of breaching the US Foreign Corrupt Practices Act (FCPA) from 1994 to through 2009, by illegally offering cash and other incentives in these countries to secure business.
According to the SEC, the Indianapolis-based company’s subsidiary in Russia used offshore “marketing agreements” to pay millions of dollars to third parties chosen by government customers or distributors, despite knowing little or nothing about the third parties beyond their offshore address and bank account information.
“These offshore entities rarely provided any services and in some instances were used to funnel money to government officials in order to obtain business for the subsidiary,” it said.
When Lilly did become aware of possible FCPA violations, it did not curtail the use of the marketing agreements for more than five years.
The group’s subsidiaries in Brazil, China, and Poland also made improper payments to government officials or third-parties associated with them.
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“When a parent company learns tell-tale signs of a bribery scheme involving a subsidiary, it must take immediate action to assure that the FCPA is not being violated,” said Antonia Chion, Associate Director in the SEC Enforcement Division. “We strongly caution company officials from averting their eyes from what they do not wish to see.”
To settle these charges, Lilly agreed to pay disgorgement of $13,955,196, prejudgment interest of $6,743,538, and a penalty of $8.7 million for a total payment of $29,398,734.
While the company has not admitted nor denied the allegations, of which it was first notified in 2003, the firm said it has consented to the settlement to resolve “issues from the past”.
In addition, Lilly has also agreed to an independent assessment of its internal controls and compliance programme relating to the FCPA, though stressed that is has already strengthened this area, “including significant investment in our global anti-corruption program”.
