On Thursday, U.S. pharmaceutical company Eli Lilly and Co agreed to pay a sum of $29 million to settle civil charges by SEC alleging that the company’s subsidiaries had made improper payments to foreign government officials to get business in, Brazil, China Poland and Russia. Lilly’s settlement is part of a broader investigation into the U.S. pharmaceutical industry by authorities.
The present settlement is in respect of the outcomes of an investigation by the SEC made into activities of Eli Lilly spanning from 1994 to 2009. The company said that it was first notified of the probe in 2003. In the instant case, SEC had alleged that a Russian unit of the company had been using instruments termed as ‘marketing agreements’ to channel millions of dollars through offshore companies to foreign government officials.
Eli Lilly agreed to the settlement without admitting or denying the charges. The company issued a statement saying that in addition to paying the settlement amount the company has also agreed to have an independent compliance consultant conduct a review of its FCPA compliance.
Kara Novaco Brockmeyer, head of the SEC enforcement unit specializing in FCPA said that “Companies can’t simply rely on paper thin assurances by employees, distributors, or customers. They need to look at the surrounding circumstances of any payment to adequately assess whether it could wind up in a government official’s pocket.” “Eli Lilly and its subsidiaries,” said Brockmeyer, “possessed a ‘check the box’ mentality when it came to third-party due diligence.”
Under the Foreign Corrupt Practices Act (FCPA) U.S. companies and foreign firms with listed U.S. stock are prohibited from bribing government officials to seek business. Speed-money, however, or expenses to speed up processes, and spent legally, is generally not covered by the act.