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Novartis legal head resigns over Cohen payments

General counsel steps down, but Novartis still facing difficult questions

Felix Ehrat

Novartis’ legal head Felix Ehrat is resigning from his position, and has claimed responsibility for the scandal surrounding the $1.2m payments to President Trump’s lawyer Michael Cohen.

As the Swiss pharma company’s group general counsel, Ehrat was the co-signatory, along with then-CEO Joe Jimenez, on the contract to hire Cohen’s firm to provide consultancy services – a decision which has blown up in Novartis’ face since it came to light last week.

The payments were exposed as part of an ongoing legal battle between Cohen and the lawyer of porn star Stormy Daniels, and as such entangled Novartis in a web of sleaze and clandestine payments, and potentially criminal conduct on Cohen’s part.

Novartis’ new CEO Vas Narasimhan has since admitted that the payments were a serious error, but has been careful to distance himself from the decision.

Ehrat has now fallen on his sword, with the aim of sparing the company any further embarrassment.

In a statement he said: "Although the contract was legally in order, it was an error. As a co-signatory with our former CEO, I take personal responsibility to bring the public debate on this matter to an end."

Shannon Thyme Klinger, currently Novartis’ Chief Ethics, Risk and Compliance Officer, will take over the Group General Counsel role from 1 June, and the company has signalled that its compliance and ethics measures will be tightened in response to the affair.

However Mr Ehrat’s resignation won’t bring the matter to a close, as formal investigations into the payments remain a possibility in Switzerland and the US.

The Office of the Attorney General of Switzerland has responded to media enquiries by saying it is in discussions with the Public Prosecutor's Office in Basel about whether it should launch an investigation.

In the US, the revelations have prompted Democrat Senator Ron Wyden, ranking member of the Senate Finance Committee, to launch an inquiry. Writing to Narasimhan on Friday, Wyden demanded detailed answers about the Cohen agreement, including who at Novartis had approved it and what the company had expected in return for its $1.2m payment.

In a separate letter to the Novartis CEO sent on Monday, two more Democrat senators, Elizabeth Warren and Richard Blumenthal, called the payments "stunningly irresponsible" and listed 15 questions of their own.

A news story from Bloomberg reports that Narasimhan has responded to the scandal by inviting 5,000 senior Novartis managers to a conference call, in which he stressed the need for the company to regain public trust and change how it works with consultants and lobbyists.

Ehrat’s resignation coincides with a ‘Meet Novartis Management’ investor day being held at the company’s headquarters in Basel today, where the company would rather discuss its business and pipeline, but will undoubtedly face further questions about its corporate governance.

Article by
Andrew McConaghie

16th May 2018

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