In the Matter of Novartis AG (2016)

• Case Name
• In the Matter of Novartis AG (2016)

• Date Filed
• 03/23/2016

• Enforcement Agency
• SEC

• Countries
• China

• Foreign Official
• Chinese healthcare officials.

• Date of Conduct
• 2009 to 2013

• Nature of Business
• Novartis AG, headquartered in Switzerland, is a global provider of pharmaceutical and over-the-counter health products.  Novartis maintains a class of registered securities that are traded on the New York Stock Exchange. Novartis conducts business in over 180 countries around the world, including China where it operates solely through subsidiaries.

• Influence to be Obtained
• According to the SEC, from at least 2009 to 2013, employees and agents of two Novartis subsidiaries doing business in China provided things of value to foreign officials, primarily healthcare professionals, in order to influence those individuals and thereby increase Novartis sales. 
  
  The SEC found that from 2009 to 2011, employees of a Novartis subsidiary, Shanghai Novartis Trading Ltd (“Sandoz China”), provided cash, gifts, travel, improper sightseeing or vacations, entertainment, and favors for the healthcare professionals.  According to the SEC, the employees, at times with the knowledge and approval of Sandoz China management, recorded these things of value on the general ledger as legitimate employee expenses, sponsorships, conferences, medical studies, and marketing costs.  Sandoz China employees also allegedly paid the healthcare professionals for patient data research.  Although the studies consisted of fictitious data, the SEC claimed that the healthcare professionals were paid approximately $522,000 in 2009 and 2010. 
  
  In addition, between 2011 and 2013, the SEC alleged that employees and agents of another Novartis subsidiary, Beijing Novartis Pharma Co, Ltd (“Novartis China”) made payments to Chinese “government officials” intended to influence them to prescribe or recommend Novartis products.  According to the SEC, these payments were made through event planning and travel companies used by Novartis China to arrange transportation, accommodations, and meals for healthcare professionals in connection with educational conferences and business activities.  These payments were recorded as legitimate selling and marketing costs.

• Enforcement
• On March 23, 2016, the SEC announced a settlement with Novartis through an administrative proceeding.  The SEC order found that Novartis violated the FCPA’s books-and-records and internal controls provisions.  Without admitting or denying the SEC’s findings, Novartis agreed to disgorge $21,579,217 in ill-gotten gains with prejudgment interest of $1,470,887 and to pay a civil monetary penalty of $2,000,000.

• Amount of the Value
• Not Stated

• Amount of Business Related to Payment
• Not Stated

• Intermediary
• Subsidiaries; Third-party Agents.

• Citizenship of Parent Entity
• Switzerland

• Total Sanction
• $ 23,720,104

• Compliance Monitor
• No

• Reporting Requirements
• Yes (2 Years)

• Case is Pending?
• No

• Total Combined Monetary Sanction
• $ 23,720,104

Novartis AG 

• Citation
• In the Matter of Novartis AG, Admin. Proc. File No. 3-17177 (Mar. 23, 2016).

• Date Filed
• 03/23/2016

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Books-and-Records
  • Internal Controls

• Other Statutory Provision
• None

• Disposition
• Cease-and-Desist Order

• Defendant Jurisdictional Basis
• Issuer

• Defendant's Citizenship
• Switzerland