Earlier this week, the SEC announced a $5.5 million enforcement action against AstraZeneca based on the actions of its foreign subsidiaries.
The action stems from an almost decade-old issue involving the UK-based company providing various items of value to Russian and Chinese physicians via foreign subsidiaries.
Here are the key takeaways from this enforcement action:
The enforcement action was against a U.K. company based on the fact the company had shares registered with the SEC, thus making the company subject to the FCPA.
The enforcement action was yet another action against a healthcare related company premised on the notion that employees of various foreign health care systems are "foreign officials" under the FCPA.
There was no allegation that the parent company had any knowledge or involvement in the alleged improper payment scheme carried out by its Chinese and Russian subsidiaries. Rather, the SEC held AstraZeneca liable under the books and records and internal controls provisions.
As to books and records, the order states:
“AZN violated [the books and records provisions] when its subsidiaries mischaracterized improper payments as legitimate expenses in AZN’s books and records.”
As to internal controls, the order states:
“AZN violated [the internal controls provisions] by failing to devise and maintain a sufficient system of internal accounting controls relating to employee reimbursements, third-party vendors, speaker fees, conferences, gifts, travel and entertainment. AZN did not adequately enforce its corporate policy against making improper payments to government officials with respect to its subsidiaries in Russia and China. Although the company had a written policy that prohibited these unauthorized transactions, AZN did not employ reasonable controls to detect and prevent such improper payments. AZN failed to ensure that its Russia and China subsidiaries maintained accurate and complete recording of financial transactions referencing payments to government officials. These records never appropriately described the transactions, and were always inaccurate or incomplete, when the purpose of the payment involved an improper incentive to the government official. The company also did not employ reasonable measures to ensure that sponsorship activities involving government officials in China were appropriately approved through the company’s established electronic system by a predesignated official in the country. Additionally, AZN did not provide adequate FCPA training to its sales and marketing employees in China and Russia who had routine interactions with government officials in the healthcare industry that posed a high risk for bribery and corruption. Furthermore, AZN did not employ reasonable due diligence and monitoring of third-party contractors engaged by its China and Russia subsidiaries, such as travel vendors who provided false invoices to the subsidiaries’ employees that facilitated the unauthorized use of corporate funds to improperly incentivize HCPs.”
Read more about this FCPA enforcement action on the FCPA Professor Blog.