Swiss pharmaceutical giant Novartis, a current and former subsidiary, has agreed to pay a total of $346.7m to reach settlements with the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) following investigations into bribery schemes.
The DOJ alleges Greek subsidiary Novartis Hellas offered “inappropriate economic benefits” to the country’s healthcare professionals between 2012 to 2015 in connection with ophthalmology product Lucentis.
Novartis has also entered into a deferred prosecution agreement (DPA), which covers books and records issues pertaining to its conduct around the Lucentis product and a 2009 epidemiological study, to resolve the DOJ investigation.
Separately, Alcon, a subsidiary Novartis sold last year, has entered a DPA relating to “inappropriate economic benefits” provided to Vietnamese healthcare professionals, along with books and records violations from 2011 to 2014 in the country involving an Alcon distributor.
For its part, the SEC investigation has been resolved via an agreement reached with Novartis that pertains to internal controls and books and records violations in Greece, Vietnam and South Korea.
In South Korea, the violations relate to conduct of the pharmaceuticals for which the company has “already taken responsibility” and it is in the “final stages” of settling with the local authorities, Novartis said.
The company, along with its current and former subsidiaries, will pay $233.9m to the DOJ and $112.8m to the SEC, ending all legacy Foreign Corrupt Practices Act investigations.
Questions now remain about the clawback provisions at the company, given that current members of the Novartis executive committee were in office at the time the schemes in Greece and Vietnam took place.
While Vas Narasimhan only became chief executive of Novartis in 2018, he held other roles at the company prior to his appointment and joined the executive committee in February 2016.
A disclosure in Novartis’ annual report states that “any incentive compensation paid to Executive Committee members is subject to malus and clawback rules”, but that the board of directors and compensation committee “may decide” on what this constituted and whether any action would be taken.
It adds: “This applies in cases where the pay-out violates laws or conflicts with internal management standards, including company and accounting policies.”
Shannon Thyme Klinger, group general counsel at Novartis, said that the settlements reached with the DOJ and SEC represent “another milestone” in its commitment to resolving legacy compliance issues.
Last year, Minerva announced the inclusion of a new anti-corruption metric in its pre-AGM research reports. Alongside indicators for climate change, cyber-security and tax governance, the new corruption indicator and voting guidelines will help investors take an integrated approach to ESG voting and stewardship decisions.Last Updated: 3 July 2020