Eli Lilly and Co. agreed to pay $29.4 million to the U.S. Securities and Exchange Commission to settle charges that it paid off government officials to obtain government contracts in Brazil, China, Russia and Poland, the agency said Thursday.
The Indianapolis-based drugmaker said it cooperated with the SEC’s investigation, which covered the years 1994 to 2009.
According to a statement released by the SEC, Lilly paid millions of dollars to government officials or to third-party bank accounts associated with government officials. In the case of Russia, Lilly did not curtail the bribery payments from its subsidiary there until five years after the parent company became aware of them, according to the SEC charges, filed Thursday in federal court in Washington, D.C.
Employees at Lilly’s subsidiary in China falsified expense reports to provide spa treatments, jewelry, and other gifts and cash payments to government-employed physicians, according to the SEC.
“Eli Lilly and its subsidiaries possessed a ‘check the box’ mentality when it came to third-party due diligence,” Kara Novaco Brockmeyer, chief of the SEC Enforcement Division’s Foreign Corrupt Practices unit, said in a prepared statement. “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.”
Lilly paid $14 million in disgorged profits and $6.7 million in interest on those profits. The company also paid a fine of $8.7 million to the SEC.
Anne Nobles, Lilly’s chief ethics and compliance officer, said in a prepared statement, “Since ours is a business based on trust, we strive to conduct ourselves in an ethical way that is beyond reproach. We have cooperated with the U.S. government throughout this investigation and have strengthened our internal controls and compliance program globally, including significant investment in our global anti-corruption program."
Lilly first learned of the SEC’s investigation in August 2003. The company did not admit or deny wrongdoing in response to the SEC’s charges. However, it agreed to pay the settlement and have an independent compliance consultant conduct a 60-day review of the company's internal controls and compliance program related to foreign bribery.
Federal investigators have reached similar settlements with Johnson & Johnson, Pfizer Inc. and other health care companies in recent years, according to Associated Press. Industry experts say it's not unusual for foreign sales representatives to give gifts and payments to government officials, though this practice is not permitted by U.S. law.
Lilly shares rose 33 cents Thursday, to $49.24 each, in afternoon trading.