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British launch fraud probe of Lilly, other companies

February 14, 2007

Indianapolis-based Eli Lilly and Co. and other companies that participated in the oil-for-food program in Iraq will be investigated by a British agency to determine if they gave kickbacks to Saddam Hussein’s regime, according to the London newspaper The Guardian.

Fellow pharmaceutical giants GlaxoSmithKline and Astra Zeneca, both of which are headquartered in London, along with a number of additional companies also will be probed by the U.K.’s Serious Fraud Office.

The program was intended to allow Iraq to trade certain levels of oil for food and medicine in order to weaken the regime. Instead, the regime allegedly was enriched by an estimated $1.8 billion through kickbacks from hundreds of companies.

A United Nations report delivered two years ago by former U.S. Federal Reserve Bank Chairman Paul Volcker said the kickbacks often were concealed by supplier companies’ charging 10 percent extra to cover services after sales.

Volcker urged an investigation be undertaken. The British probe is the first official investigation to follow the U.N. report. Its investigators can summon witnesses and demand that companies turn over documents.

Volcker’s report accused Lilly of offering a $343,000 bribe to land a $3.2 million contract.

But the newspaper said Lilly reiterated its response that followed the report: “Eli Lilly and Company … denies any wrongdoing with regard to the oil-for-food scheme. As the report highlights, we deny that payments were made to the government of Iraq or its agents in violation of the programme.”

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