In May 2009, Novo Nordisk A/S (“Novo”), a Danish pharmaceutical company, agreed to pay approximately $18 million in combined fines and penalties for making or authorizing improper payments to obtain contracts to provide insulin and other medicines to the former Iraqi government under the United Nations’ Oil-for-Food Program. During the relevant time period, Novo’s American Depositary Receipts were traded on the New York Stock Exchange; it was thus deemed an “issuer” for purposes of the FCPA and subject to the FCPA’s books and records and internal control provisions.
Pursuant to a three-year Department of Justice (“DOJ”) deferred prosecution agreement, and as detailed in a one-count criminal information charging Novo with conspiracy to commit wire fraud and to violate the FCPA’s books and records provisions, Novo acknowledged responsibility for approximately $1.4 million in improper kickback payments it made to its Jordanian agent with the understanding that the agent would pass along the payments to the former Iraqi government to obtain contracts with the State Company for Drugs and Medical Appliances (“Kimadia”), an Iraqi state-owned company that was part of the Ministry of Health of the former Iraqi government.
Pursuant to the deferred prosecution agreement, Novo agreed to pay a $9 million criminal fine and, among other things, agreed to cooperate with the DOJ's continuing Oil-for-Food investigations. In agreeing to resolve the matter through a deferred prosecution agreement, the DOJ recognized Novo’s “thorough review of the illicit payments and its implementation of enhanced compliance policies and procedures.”
In a parallel enforcement action based on the same core conduct described in the DOJ's criminal information, the SEC filed a settled civil action against Novo alleging violations of the FCPA's books and records and internal control provisions. The SEC’s complaint contains more detailed allegations than the DOJ information and alleges that a Kimadia import manager informed Novo’s agent that Kimadia required a 10% kickback in order for Novo to obtain contracts under the Oil-for-Food program. According to the complaint, the import manager informed the agent that if Novo did not agree to the payments, Novo would not be awarded the contracts.
The complaint alleges that the agent then informed the General Manager of Novo’s branch office in Jordan and the Business Manager of Novo’s branch office in Greece (both of whom handled sales to Iraq) of the demand and that these individuals then discussed the demand with a Novo Senior Vice President and Officer. After the Officer rejected the Kimadia demand, and after the Kimadia import manager “angrily refused” Novo’s officer to reduce its prices by 10%, the complaint alleges that the General Manager, Business Manager, and the Senior Vice President nevertheless authorized the improper kickback payments.
In order to conceal the conduct, the complaint alleges that Novo inflated the agent’s commission “under the guise of increased distribution and marketing costs” and failed to properly record the inflated commission payments in its books and records. In addition to the approximate $1.4 million in improper commission payments actually paid to the agent to secure 11 contracts with Kimadia, the complaint also alleges that Novo authorized the payment of an additional $1.3 million to the agent to secure two additional contracts. Based on this conduct, the SEC charged Novo with failure to accurately record the payments in its books and records and failure to devise and maintain a system of internal accounting controls to detect and prevent such illicit payments.
Without admitting or denying the SEC's allegations, Novo agreed to consent to entry of a final judgment under which it will pay approximately $9 million in combined fines and penalties ($4.3 million in disgorgement of profits, a $3.0 million civil penalty, and $1.7 million in pre-judgment interest). In resolving the matter, the SEC noted the remedial actions promptly undertaken by Novo and the cooperation of the company in the SEC's investigation.