Washington, D.C., Aug. 7, 2012 – The Securities and Exchange
Commission today charged Pfizer Inc. with violating the Foreign Corrupt
Practices Act (FCPA) when its subsidiaries bribed doctors and other health care
professionals employed by foreign governments in order to win business.
The SEC alleges that employees and agents of Pfizer’s subsidiaries in
Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia
made improper payments to foreign officials to obtain regulatory and formulary
approvals, sales, and increased prescriptions for the company’s pharmaceutical
products. They tried to conceal the bribery by improperly recording the
transactions in accounting records as legitimate expenses for promotional
activities, marketing, training, travel and entertainment, clinical trials,
freight, conferences, and advertising.
The SEC separately charged another pharmaceutical company that Pfizer
acquired a few years ago – Wyeth LLC – with its own FCPA violations. Pfizer and
Wyeth agreed to separate settlements in which they will pay more than $45
million combined to settle their respective charges. In a parallel action, the
Department of Justice announced that Pfizer H.C.P. Corporation agreed to pay a
$15 million penalty to resolve its investigation of FCPA violations.
“Pfizer subsidiaries in several countries had bribery so entwined in their
sales culture that they offered points and bonus programs to improperly reward
foreign officials who proved to be their best customers,” said Kara Brockmeyer,
Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit.
“These charges illustrate the pitfalls that exist for companies that fail to
appropriately monitor potential risks in their global operations.”
According to the SEC’s complaint against Pfizer filed in U.S. District Court
for the District of Columbia, the misconduct dates back as far as 2001.
Employees of Pfizer’s subsidiaries authorized and made cash payments and
provided other incentives to bribe government doctors to utilize Pfizer
products. In China, for example, Pfizer employees invited “high-prescribing
doctors” in the Chinese government to club-like meetings that included extensive
recreational and entertainment activities to reward doctors’ past product sales
or prescriptions. Pfizer China also created various “point programs” under which
government doctors could accumulate points based on the number of Pfizer
prescriptions they wrote. The points were redeemed for various gifts ranging
from medical books to cell phones, tea sets, and reading glasses. In Croatia,
Pfizer employees created a “bonus program” for Croatian doctors who were
employed in senior positions in Croatian government health care institutions.
Once a doctor agreed to use Pfizer products, a percentage of the value purchased
by a doctor’s institution would be funneled back to the doctor in the form of
cash, international travel, or free products.
According to the SEC’s complaint, Pfizer made an initial voluntary disclosure
of misconduct by its subsidiaries to the SEC and Department of Justice in
October 2004, and fully cooperated with SEC investigators. Pfizer took such
extensive remedial actions as undertaking a comprehensive worldwide review of
its compliance program.
The SEC further alleges that Wyeth subsidiaries engaged in FCPA violations
primarily before but also after the company’s acquisition by Pfizer in late
2009. Starting at least in 2005, subsidiaries marketing Wyeth nutritional
products in China, Indonesia, and Pakistan bribed government doctors to
recommend their products to patients by making cash payments or in some cases
providing BlackBerrys and cell phones or travel incentives. They often used
fictitious invoices to conceal the true nature of the payments. In Saudi Arabia,
Wyeth’s subsidiary made an improper cash payment to a customs official to secure
the release of a shipment of promotional items used for marketing purposes. The
promotional items were held in port because Wyeth Saudi Arabia had failed to
secure a required Saudi Arabian Standards Organization Certificate of
Conformity.
Following Pfizer’s acquisition of Wyeth, Pfizer undertook a risk-based FCPA
due diligence review of Wyeth’s global operations and voluntarily reported the
findings to the SEC staff. Pfizer diligently and promptly integrated Wyeth’s
legacy operations into its compliance program and cooperated fully with SEC
investigators.
In settling the SEC’s charges, Pfizer and Wyeth neither admitted nor denied
the allegations. Pfizer consented to the entry of a final judgment ordering it
to pay disgorgement of $16,032,676 in net profits and prejudgment interest of
$10,307,268 for a total of $26,339,944. Wyeth also is required to report to the
SEC on the status of its remediation and implementation of compliance measures
over a two-year period, and is permanently enjoined from further violations of
Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934.
Wyeth consented to the entry of a final judgment ordering it to pay disgorgement
of $17,217,831 in net profits and prejudgment interest of $1,658,793, for a
total of $18,876,624. As a Pfizer subsidiary, the status of Wyeth’s remediation
and implementation of compliance measures will be subsumed in Pfizer’s two-year
self-reporting period. Wyeth also is permanently enjoined from further
violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. The
settlements are subject to court approval.
The SEC’s investigation was conducted by Michael Catoe and Charles Cain of
the Enforcement Division’s FCPA Unit. The SEC acknowledges the assistance of the
U.S. Department of Justice’s Criminal Division’s Fraud Section and the Federal
Bureau of Investigation in this matter.