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Lilly pays $29m to settle foreign bribery charges

US Securities and Exchange Commission charges centre on activities in Russia, China, Brazil and Poland

Lilly

Lilly has agreed to pay $29m to settle charges that several foreign subsidiaries paid off government officials in order to win business deals.

The charges were brought by the US Securities and Exchange Commission (SEC) as part of a wider crackdown by the US government on the pharma industry, and concern Lilly's businesses in Russia, Brazil, China and Poland.

The SEC's charges mainly centred on Lilly' activities in Russia, which included allegations that the company's subsidiary in the country used offshore “marketing agreements” to pay millions of dollars to offshore third parties chosen by government customers or distributors.

In several cases, it was found that this process was used to funnel money to government officials, including a payment of $2m to an offshore entity owned by a government official and of $5.2m to offshore entities owned by someone  associated with an important member of Russia's parliament, with little done to review the validity of these transactions.

Lilly is also accused of delaying its response in dealing with these improper payments once it became of them, with the SEC stating that the company “did not curtail the subsidiary's use of the marketing agreements for more than five years”.

Antonia Chion, associate director in the SEC Enforcement Division, said: “We strongly caution company officials from averting their eyes from what they do not wish to see.”

Similar accusations were also brought against Lilly's subsidiary in China, where it is accused of falsifying expense reports in order to provide spa treatments, jewellery and cash payments to government-employed physicians, while its business in Brazil is said to have allowed bribes to health officials to facilitate $1.2m in sales of a Lilly product to state government institutions.

In Poland, the company is accused of making eight improper payments totalling $39,000 to a charity owned by the head of a regional government health authority in exchange for the official's support for placing Lilly drugs on the government reimbursement list.

In a statement regarding the charges, which cover Lilly's activities from 1994 to 2009, the company said it neither admits nor denies the allegations, but believes the settlement will resolve the issues.

“We have cooperated with the US government throughout this investigation and have strengthened our internal controls and compliance program globally, including significant investment in our global anti-corruption programme," said Anne Nobles, Lilly's chief ethics and compliance officer and senior VP of enterprise risk management.

21st December 2012

From: Sales, Regulatory

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