A&O Shearman FCPA Digest | SEC v. Novo Nordisk A/S (D.D.C. 2009)

Source Documents

Nature of Business
Novo Nordisk is an international manufacturer of insulin, medicines, and other pharmaceutical supplies headquartered in Denmark.

Influence to be Obtained
In April 1995, the U.N. adopted Security Council Resolution 986, which permitted the government of Iraq to sell oil and to use proceeds from those sales to purchase humanitarian supplies such as food for the Iraqi people (“U.N. Oil‑for‑Food Program”). In an extensive scheme, the Iraqi government received illicit payments in the form of surcharges from oil purchasers and kickbacks, often termed “after sales service fees,” from humanitarian goods suppliers. The kickback payments were masked by inflating the contract price, usually by 10% of the contract value.

According to the SEC’s complaint, Novo Nordisk paid illegal kickbacks to the former government of Iraq to secure contracts to provide insulin and other medical supplies to Iraq under the U.N. Oil‑for‑Food Program. Allegedly, Novo Nordisk characterized these kickbacks as “after‑sales service fees,” but did not provide any bona fide services. Branches of Novo Nordisk in Greece and Jordan handled the Iraqi sales. Novo Nordisk allegedly inflated the price of contracts by 10% before submitting them to the United Nations for approval, and then made the illegal payments to Kimadia, a state‑owned company that was part of the Iraqi Ministry of Health, recording the payments as commissions in its books and records.

Enforcement
Without admitting or denying the allegations in the SEC’s complaint, filed May 11, 2009, Novo consented, also on May 11, 2009, to entry of a final judgment (1) enjoining it from future books and records and internal controls FCPA violations; (2) ordering it to disgorge $4,321,523 in profits, plus $1,683,556 in prejudgment interest; and (3) ordering it to pay a civil penalty of $3,025,066.

The SEC considered remedial acts Novo Nordisk promptly undertook and the cooperation it afforded the SEC in its investigation. In a separate proceeding Novo Nordisk also agreed to pay a $9 million penalty under a deferred prosecution agreement with the DOJ.