On June 16, 2016, Teva Pharmaceutical’s Russian subsidiary (Teva LLC) pled guilty to one count of conspiring to violate the Foreign Corrupt Practices Act (FCPA). Judge Kathleen M. Williams of the United States District Court for the Southern District of Florida hesitated, however, in entering a final judgment under which Teva LLC would pay no fine. While there is no doubt that Teva LLC’s parent entity will pay over a half-billion dollars for violations of the FCPA, the proposed sentence for Teva LLC did not include any obligation to pay fines or civil claims.
The claims against Teva LLC stem from payments made to a Russian official who also ran a pharmaceutical distribution company. Between 2010 and 2013, Teva LLC offered the official’s company favorable pricing terms in exchange for his push to have Russian government entities purchase more Teva drugs for the national health care system. Notably, Teva LLC’s transactions passed internal FCPA checks because Teva LLC omitted key facts such as the official’s ownership of the distribution company and a Russian investigation of possible corruption within the distribution company. The facts of Teva LLC’s violations are not what raise questions at this phase.
Rather, potential cause for concern in the contemporaneous settlement of numerous FCPA against Teva Pharmaceuticals and its subsidiaries in Europe and Mexico. Collectively, Teva Pharmaceuticals and federal prosecutors have agreed to settle all of the outstanding claims in exchange for (i) a $238 million criminal penalty, (ii) a deferred prosecution agreement and (iii) $236 million to settle civil claims. Significantly, while Teva LLC agreed to plead guilty as part of the settlement, Teva Pharmaceuticals has been given a deferred prosecution agreement and is not admitting guilt. Teva Pharmaceuticals, however, will pay the criminal penalty and civil claims. As a result, Judge Williams was presented with the prospect of a guilty plea accompanied by no punishment. In particular, the Court expressed concern regarding what would happen if Teva Pharmaceuticals did not pay its fine and final judgment had already been entered against Teva LLC.
While there is no concern that the Court and counsel will work out the nuts and bolts of the the overall settlement and component pleas in the near future, the potential complexities of FCPA litigation should give practitioners and their clients pause. Further, with directives in place focused on individual liability and strict parameters on cooperation credit, counsel must keep an eye on the broader liability landscape because, ultimately, the Court will demand that violators are held responsible.