The United States Department of Justice (DoJ) has announced that Pacific Health Corporation (PHC) and related entities have agreed to pay US$16.5 million to settle charges that they engaged in an illegal kickback scheme to deliver unnecessary hospital treatments to "homeless Medicare or Medi-Cal beneficiaries". The hospitals - Los Angeles Metropolitan Medical Centre, Newport Specialty Hospital, (formerly known as Tustin Hospital and Medical Centre), and Anaheim General Hospital - allegedly billed Medicare and Medi-Cal for the unnecessary services. The three hospitals, a fourth related hospital, Bellflower Medical Centre, and their related entities have entered into a corporate integrity agreement to "deter future misconduct". A PHC subsidiary, Los Angeles Doctors Hospital Inc, has agreed to plead guilty to a federal conspiracy charge arising out of the illegal kickback scheme.
DoJ's media release (24 August 2012)
Garth Peterson, a former managing director and “rising star” at Morgan Stanley’s Shanghai office, was sentenced to a nine month prison term for violating the U.S. Foreign Corrupt Practices Act (FCPA). Peterson pleaded guilty in April to one count of conspiring to evade internal accounting controls required under the FCPA. Prosecutors were seeking a sentence of 51 months due to the “gravity of his fraud”. In exchange for business a Chinese official provided to Morgan Stanley’s funds, from 2004 to 2007, Peterson acquired millions in real estate investments for the Chinese official and himself. Peterson had previously reached a settlement with the Securities and Exchange Commission (SEC), conceding to a lifetime ban from the securities industry, a $250,000 disgorgement, and relinquishing the Shanghai real estate he had secretly acquired. Peterson was also fired by Morgan Stanley in 2008 for his misconduct. According to court records, Morgan Stanley trained Peterson on the FCPA seven times and reminded him to comply with the FCPA at least thirty-five times. The Department of Justice declined to bring a case against Morgan Stanley citing the company’s internal control system and the fact it voluntarily disclosed Peterson’s actions and cooperated throughout the investigation.
Wall Street Journal: Former Morgan Stanley Exec Gets Nine Months in FCPA Case (17 August 2012)
(Source: Wall Street Journal)
The United States (US) Securities and Exchange Commission (SEC) has announced that it has adopted rules mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring oil, gas and mining companies to disclose certain payments made to the US Government or foreign governments. The rules also apply to subsidiaries of these companies.
SEC's media release (22 August 2012)
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Reuters: U.S. SEC forces disclosure of oil, mining payments abroad (22 August 2012)
(Source: SEC; Reuters)
The United States (US) Securities and Exchange Commission (SEC) has announced that Oracle Corporation (Oracle) has agreed to pay US$2 million to settle potential Foreign Corrupt Practices Act violations. The SEC alleged that Oracle failed to prevent certain employees at its Indian subsidiary, Oracle India Private Limited, from secretly setting aside money off the company's books which was subsequently used to make unauthorised payments to purported local vendors, several of which were merely storefronts that did not provide any services to Oracle. Further, the company allegedly generated fake invoices for these payments.
SEC's media release (16 August 2012)
The U.S. Securities and Exchange Commission (SEC) and Department of Justice (DOJ) reached settlements with Pfizer totaling US$60 million which resolve charges the company and its subsidiaries, including Wyeth which Pfizer acquired in 2009, violated the Foreign Corrupt Practices Act (FCPA) by paying bribes to doctors and other health care providers to increase drug sales. The SEC settlement was US$45 million while the company agreed to pay the DOJ a US$15 million penalty. The allegations of illegal behavior spanned the globe and included countries such as Bulgaria, Italy, Russia and China. In a statement released by Pfizer, the company said it reported all misconduct to the government in 2004 after improper payments were discovered in a newly acquired subsidiary located in Croatia and conducted an investigation which lasted multiple years, updating the government as the investigation progressed. Pfizer also stated that it learned about the allegations related to Wyeth soon after closing on the acquisition and reported those findings to the government as well. The government has recently been conducting a wide ranging investigation into the sales and marketing practices of drug and device makers abroad. Last year, Johnson & Johnson agreed to settle similar allegations for US$70 million and several other drug makers have said that they are cooperating with investigations into their overseas businesses.
New York Times: Pfizer Settles U.S. Charges of Bribing Doctors Abroad (7 August 2012)
(Source: New York Times)
In a recent regulatory filing, Israel-based Teva Pharmaceuticals Industries Ltd (Teva) disclosed that they had received a subpoena from the U.S. Securities and Exchange Commission (SEC) requesting documents related to Teva’s business in Latin America. The SEC is investigating Teva for possible violations of the U.S. Foreign Corrupt Practices Act (FCPA). Teva acknowledged in its filing that it is conducting its own investigation into “certain practices which may have FCPA implications”, adding that “these matters are in their early stages and no conclusion can be drawn at this time”. According to the SEC and the U.S. Department of Justice, doctors working for government-run hospitals abroad qualify as public officials so some industry practices, such as paying a doctor to promote a medicine, can be violations of the FCPA if that doctor works for a foreign government owned institution. Several drug companies have recently come under scrutiny in the 3-year old investigation into the pharmaceutical industry’s compliance with the FCPA, including Merck & Co., AstraZeneca PLC, Bristol Myers Squibb Co., and GlaxoSmithKline PLC. Johnson & Johnson has agreed to pay US$70 million and it is believed Pfizer has agreed to pay US$60 million to settle the government’s allegations.
Wall Street Journal: Teva Pharmaceutical Gets SEC Subpoena (3 August 2012)
(Source: Wall Street Journal)
The United States (US) Securities and Exchange Commission (SEC) has announced that pharmaceutical company Pfizer has agreed to settle SEC charges that its subsidiary, Wyeth, bribed doctors and other health care professionals employed by foreign governments "to obtain regulatory and formulary approvals, sales, and increased prescriptions for the company's pharmaceutical products". According to SEC, Wyeth attempted to conceal the bribery by recording the transactions as "legitimate expenses for promotional activities, marketing, training, travel and entertainment, clinical trials, freight, conferences, and advertising". Pfizer and Wyeth have agreed to pay over US$45 million in total to settle the bribery allegations.
SEC's media release (7 August 2012)
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US Department of Justice's (DoJ) media release (7 August 2012)
(Source: SEC; DoJ)
According to research conducted by business ethics consultancy GoodCorporation, logistics companies are at risk of offending the United Kingdom's bribery laws "by failing to publish a complete draft of anti-corruption policies". According to the Financial Times, "only two in three big logistics groups have publicly outlined their approach to fighting bribery", with GoodCorporation director Michale Littlechild finding that logistics companies lack "the very basic documents".
Financial Times: Logistics groups at risk from bribery law (5 August 2012 - subscriber access only)
(Source: Financial Times)
The Financial Times reports that according to a study by Ernst & Young, oil and gas companies were subject to the most prosecutions for bribery in the United Kingdom (UK) compared to other sectors, totalling approximately 20% of prosecutions since 2008. The payment reportedly related to those made overseas or kickbacks to foreign government officials. According to the study, western oil companies "are at risk of being liable for any bribes or corrupt activity by any partners acting on their behalf" because they usually operate in joint ventures with state-owned entities or government officials. UK head of Ernst & Young's anti-bribery and corruption team Jonathan Middup reportedly commented that companies do not spend enough time and effort on the issue of third-party due diligence, instead focussing on compliance "around corporate hospitality and facilitation payments".
Financial Times: Oil and gas has highest bribery rate (15 July 2012 - subscriber access only)
(Source: Financial Times)
The United States (US) Department of Justice (DoJ) has announced that aircraft maintenance company Nordam Group Inc has agreed to pay US$2 million to settle alleged violations of the Foreign Corrupt Practices Act. NORDAM, its subsidiaries and associates allegedly bribed "employees of airlines created, controlled and exclusively owned by the People's Republic of China in order to secure contracts to perform [maintenance, repair and overhaul] services for those airlines".
DoJ's media release (17 July 2012)
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