AstraZeneca will pay $5.5M to the Securities and Exchange Commission to settle claims that it violated the Foreign Corrupt Practices Act by making improper payments to state controlled health care providers in China and Russia.
The SEC complaint provides that the staff of AstraZeneca’s foreign
subsidiaries bribed health care providers in China and Russia with cash and gifts to persuade them to purchase products from the company. In addition, the SEC stated that AstraZeneca lacked proper internal accounting controls over the relations of its China and Russia subsidiaries and government officials and falsely recorded the improper payments as “bona fide business expenses” in its financial statements. The SEC added that AstraZeneca did not track employee reimbursements or speaker fees, gifts, travel and entertainment, and did not enforce its corporate policy against improper payments to government officials in China and Russia. It also did not provide adequate FCPA training to sales staff who regularly interacted with local officials in the health care industry, according to the SEC.
The SEC indicates that AstraZeneca has taken steps to become compliant with the Foreign Corrupt Practices Act by providing anti-corruption training and revamping its internal controls and procedures.
Implications for U.S. Companies that do Business Abroad
AstraZeneca’s settlement and the $5.5M payment that it must make emphasizes the importance of FCPA compliance by U.S. companies that do business abroad. The line between proper and improper payments, gifts, travel and entertainment expenses to foreign officials under the FCPA can be difficult to draw by company staff without proper training. Doing business in countries where the level of corruption is high, such as Russia and China, can make FCPA compliance especially challenging.
As such, it is key for U.S. companies to have robust FCPA compliance programs and audit testing, to provide careful due diligence for particular transactions and relationships, to keep proper records, and to promptly respond to violations or indications of violations. Our team of international trade attorneys at Fox Rothschild can assist with any of these matters.