At this week’s CBI Annual Pharmaceutical Compliance Congress in Washington D.C., SEC Director of Enforcement Andrew Ceresney discussed, among a number of other compliance topics, how a company could minimize the negative consequences of a violation of the Foreign Corrupt Practices Act (FCPA).
Entering emerging markets? Pay-to-play isn’t okay
Pharmaceutical and medical device companies are moving aggressively into emerging markets—and players in those markets, including Russia, India, and Latin America, often regard gift-giving and cash payments as an accepted part of doing business. Paying doctors to prescribe certain medications, paying for favorable formulary placement, or paying bribes disguised as charitable donations can lead to a FCPA investigation, fines, disgorgement of profits, and possible criminal charges.
Mr. Ceresney mentioned several pharmaceutical and medical device companies, including Pfizer, Eli Lilly, Striker and Schering-Plough, which have recently settled FCPA cases, sometimes with significant penalties.
Cooperating with FCPA investigators can reduce penalties
When a company crosses the line and faces charges under the FCPA, the best thing, Mr. Ceresney said, is to cooperate: “Companies that cooperate can receive smaller penalties than they otherwise would face, and in some cases of extraordinary cooperation, pay significantly less.” He cited the recent Goodyear settlement, where because of its cooperation with the investigation the company faced no penalty other than disgorgement of illegitimate profits.
As Mr. Ceresney said, “The bottom line is that the benefits from cooperation are significant and tangible.”
Investigators require comprehensive documentation, so be prepared
Such cooperation always involves providing substantial documentation. The more comprehensive that documentation is, and the sooner it is made available to investigators, the sooner the investigation can be wound up. A well-structured documentation process can expedite your cooperation and lead to smaller penalties. It will also prevent the inadvertent release of proprietary information when providing documents.
Our bottom line? If you operate internationally, you need a well-worked-out FCPA compliance program. But if that program fails, you have to be ready to provide the SEC with all the documentation it requires: minimizing negative consequences is a positive business decision.
Make sure your documentation system is ready to do so.