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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

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Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
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Marc Alain Bohn
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Bill Waite
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Russell A. Stamets
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Richard Bistrong
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Eric Carlson
Contributing Editor

AstraZeneca pays $5.5 million to resolve China, Russia FCPA offenses

The Securities and Exchange Commission Tuesday charged U.K.-based pharma AstraZeneca PLC with violating the books and records and internal controls provisions of the Foreign Corrupt Practices Act when wholly-owned subsidiaries in China and Russia made illegal payments to boost drug sales.

AstraZeneca agreed to pay $4.325 million in disgorgement, $822,000 in prejudgment interest, and a $375,000 civil penalty.

The SEC brought the charges in an internal administrative order and didn’t go to court.

AstraZeneca settled the enforcement action without admitting or denying the SEC’s findings.

The violations the SEC described ended by 2010. The statute of limitations for FCPA offenses is five years. AZ waived certain statute of limitations defenses, according to the SEC’s administrative order.

In China from 2007 until 2010, AstraZeneca sales staff “made numerous improper payments in cash, gifts and other items” to doctors at state-owned healthcare providers “as incentives to purchase or prescribe AZN pharmaceuticals,” the SEC said.

“Sales and marketing team members, including managers within various business units at AZ China, designed and implemented the improper payment schemes.”

The offenses occurred in several regions throughout China.

The SEC said,

[C]ertain AZ China sales staff and their managers maintained written charts and schedules that recorded the amount of forecasted or actual payments of maintenance fees, gifts, entertainment and other expenses that AZ China would make per month or year in numerous regions throughout China.

Some gifts and payments went to individual doctors and others went to hospitals or medical departments.

AZ China sales staff and managers funded the illegal payments using fake fa piao (tax receipts).

(Eric Carlson’s series for the FCPA Blog on fa piao is here.)

AZ China also worked with “a collusive travel vendor who submitted fake or inflated invoices to generate cash that could be used to funnel money” to the doctors and healthcare providers.

The China staff set up bank accounts in doctors’ names.

They also paid “speaker fees” to doctors reflected in documentation “containing no meeting date, venue, subject or fees associated with the particular speaker event,” the SEC said.

“In some instances, the related speaker engagement was totally fabricated and never occurred.”

In 2008, some cash payments went to local Chinese government officials for reductions or dismissals of proposed financial sanctions against AZ China.

In Russia from at least 2005 until 2010, AZ employees used similar tactics to make and hide illegal payments to government-employed doctors.

The AZ Russia employees also kept charts that recorded doctors’ names, where they practiced, and how much influence they had over purchasing decisions.

The charts showed “the manner in which they could be motivated to purchase AZ products through gifts, conference support, and other means,” the SEC said.

Several levels of AZ Russia management either directed or approved the illegal payments and gifts, the SEC said.

AZ didn’t self-report the FCPA violations, the SEC said.

But the company “provided significant cooperation” to the SEC during the agency’s investigation.

AstraZeneca “immediately took a cooperative posture and ensured that it consistently provided complete information in a timely manner,” the SEC said.

The pharma “voluntarily and timely disclosed information obtained during its own internal investigation.” It also provided translations of key documents and disclosed facts the SEC wouldn’t have been able to readily and independently discover, the SEC said.

During the investigation, AstraZeneca enhanced its internal controls and compliance program. It added compliance budgets and staff at the corporate level and in the local markets, the SEC said.

The company fired some employees involved in the FCPA offenses. It reassigned others to lower-risk positions and gave them targeted training.

It developed a centralized compliance program and revamped its internal controls and procedures, and placed key compliance personnel in high-risk local markets, the SEC said.

AZ also enhanced its anti-corruption training and audits. It improved its policies governing interactions with healthcare providers and government officials regarding gifts, travel and entertainment, third-party engagements, meetings, congresses, and contributions, the SEC said. 

In October 2006, AstraZeneca received an SEC letter requesting documents about its business practices in Croatia, Italy, Russia, and Slovakia starting from 2003. The request targeted payments to doctors or government officials, and related internal accounting controls.

In 2011, the company said its office in Belgrade, Serbia was served with a criminal indictment “relating to allegations that local employees . . . made allegedly improper payments to physicians at the Institute of Oncology and Radiology of Serbia.”

*     *     *

The SEC’s Securities Exchange Act of 1934 Release No. 78730, Accounting and Auditing Enforcement Release No. 3798, and Administrative Proceeding File No. 3-17517 In the Matter of AstraZeneca PLC (all dated August 30, 2016) are here (pdf).


Richard L. Cassin is the publisher and editor of the FCPA Blog. He’ll be the keynote speaker at the FCPA Blog NYC Conference 2016.

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  1. How did this case come to the surface? I am interested in general how do US authorities, like SEC or DOJ get information about corporate FCPA violations in other countries and even more important – how do they investigate them across borders? In this case – were they cooperating with Chinese authorities who conducted investigation in China or solely through what AZ provided via their own internal investigation? Does anyone know this?

  2. Andrijana: SEC does not have the resources nor jurisdiction to conduct bribery investigations outside of the US. In the vast majority of cases they rely entirely on the outcome of the internal investigation of the suspect issuer. Such internal investigation usually occurs once the issuer is summoned by the SEC to respond to the accusations. In most cases this works, SEC's main targets are typically large multinationals who, once faced with an FCPA accusation, tend to take these things quite seriously. At least on the surface.

    Where does the SEC get the information in the first place? Insiders, activists or whistle blowers. If the information they get seems credible, it is usually enough to work with and summon the issuer. The issuer themselves then complete the puzzle.

    I can assure you no multinational would settle an FCPA case if their own internal investigation did not confirm the suspicions or accusations. Even without technically admitting bribery, a settlement is generally/publicly seen as an admission of guilt, and no CEO or board would take on this tarnishing reputation (with all the potential financial and PR consequences) if they weren't actually guilty of it.

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