Bristol-Myers Squibb Settles with SEC over China FCPA Allegations
5 October 2015
Bristol-Myers Squibb Company agreed to pay over $14 million to settle SEC administrative proceedings alleging FCPA violations from 2009-2014 in connection with payments to HCPs in China. The SEC found the following:
Bristol-Myers Squibb’s China affiliate primarily operated through a joint venture in which Bristol-Myers Squibb held a 60% interest. Bristol-Myers Squibb had operational control of the JV since 2009, when the company gained the right to name the JV’s president and a majority of the board.
In 2009, Bristol-Myers Squibb’s China affiliate found that its sales personnel had submitted fake and altered invoices and receipts and otherwise non-compliant claims for reimbursement of travel and entertainment expenses. During the next few years, the affiliate found further “irregularities,” such as “fake and altered purchase orders, invoices, agendas, and attendance sheets for meetings with HCPs that likely had not occurred.”Employees of the affiliate admitted that they had submitted false claims for reimbursement and used the funds to benefit HCPs in exchange for prescription sales, a practice the employees claimed was widespread at the affiliate. Terminated employees emailed the affiliate’s president in 2010 and 2011, stating that they had used the funds to provide rebates, entertainment, and gift cards for HCPs. The affiliate did not investigate these claims. Sales representatives also provided cash payments, meals, travel, jewelry, speaking engagements, sponsorships, and other benefits to HCPs.
The company thus falsely recorded as advertising and promotional expenses payments to, and expenses for, employees of state-controlled hospitals and state-owned hospitals and pharmacies.
From around 2006 to 2013, the company had identified weaknesses, gaps, and deficiencies in its compliance program and internal controls, such as the China affiliate’s failure to track payments to HCPs. These issues were not timely remediated.
The SEC found that the company has since undertaken “significant” remedial measures, including the following:
- termination of more than 90 employees;
- replacement of officers of the China affiliate;
- implementation of 100% pre-reimbursement review of all expense claims;
- retention of a third party to conduct surprise checks at events sponsored by sales representative; and
- execution of data-analytics-based risk assessments.
Bristol-Myers Squibb was ordered to pay disgorgement of $11.4 million, prejudgment interest of $0.5 million, and a penalty of $2.75 million. The company neither admitted nor denied the SEC’s findings.