U.S. regulators have slapped AstraZeneca Plc (NYSE:AZN) with a $5.52 million bill stemming from investigations that found the company in the wrong over violation of the Foreign Corrupt Practices Act. AstraZeneca is accused of paying healthcare officials in China and Russia to influence the sale of its products in those countries over a period of several years.
Keep in mind that AstraZeneca neither admitted nor denied bribing officials in China and Russia in order to obtain undue business advantages over the competition. However, the company has agreed to pay the amount that the U.S. Securities and Exchange Commission (SEC) has demanded in order to resolve the bribery probe and put the issue behind it.
Illicit payments
SEC investigations revealed that AstraZeneca marketers allegedly paid bribes to government officials in China and Russia for at least five years between 2005 and 2010. The SEC claims that AstraZeneca’s subsidiaries in China and Russia were directly involved in the illicit payments to officials, but AstraZeneca is being penalized for failing to put in place strong internal accounting controls to prevent payment of bribes in exchange for business.
In addition to failing to maintain strong internal accounting controls, AstraZeneca is accused of falsely recording the payments in its accounting books as bona fide business expenses.
How money changed hands
AstraZeneca’s sales and marketing staff in China and Russia targeted state-employed healthcare providers. They would allegedly give those officials gifts, pay for their travel, settle conference bills in their favor and pay them cash. In the end, AstraZeneca expected business favors from those officials, a practice that amounted to violation of the Foreign Corrupt Practices Act.
In some cases, AstraZeneca subsidiaries allegedly paid local officials so that they could get proposed financial sanctions dismissed or reduced. It is unclear if AstraZeneca was being extorted in these cases or if it was bribery.
Putting strong systems in place
To avoid future violations and fines, AstraZeneca has been working to strengthen its internal accounting controls. The company has also been taking steps to fire or reassign employees who engaged in the supposed bribery syndicate.