Enforcement Action

 

Docket or Case Number:    N/A

Court:    N/A

Initiation Date:    12/22/2016  Information

Prosecuting Agency:    US Securities and Exchange Commission

Name of Prosecuting Attorneys:   

  • Jenny Trotman, SEC Miami Regional Office
  • Kathleen Strandell, SEC Miami Regional Office
  • Russell Koonin, SEC Miami Regional Office
  • Thierry Olivier Desmet, Assistant Regional Director, FCPA Unit, SEC Miami

Assisting Agencies:    U.S. Department of Justice , Federal Bureau of Investigation , Financial Services Commission

Type of Action:    SEC Federal Court Proceeding

Origin of the Proceeding:    N/A

Whistleblower:    Yes (Certified fraud examiner and director of finance for Teva Latin America)

Case Status:    Resolved


Summary

Teva Pharmaceutical Industries Ltd. ("Teva") is an Israeli pharmaceutical corporation and the largest generic drug manufacturer in the world. Teva’s American Depositary Receipts traded on the Nasdaq National Market from October 1987 until May 2012, when Teva transferred the listing of its American Depositary Receipts to the New York Stock Exchange.

From at least October 2010 through at least December 2012 , Teva paid bribes to a high-ranking government official in Russia ("Russian Official") intending to influence the official to use his authority to increase sales of Teva’s multiple sclerosis drug, Copaxone, to the Russian government. In 2009, the Russian government announced a new strategy for the Russian Federation's domestic pharmaceutical industry which established a preference for domestic products. In response, Teva partnered with a distribution company ("Russian Distributor") owned by Russian Official to repackage and distribute Copaxone in Russia. In part as a result of Teva’s relationship with Russian Distributor, Teva's Copaxone sales in Russia increased over time and Copaxone’s market share grew. In exchange, Teva offered discounts to Russian Distributor that were larger on average than discounts given to other distributors Teva used in Russia. Payments to Russian Official were improperly recorded as legitimate reductions of revenue in Teva ’s books and records.

From at least May 2002 through March 2011, Teva paid a prominent Ukrainian government official (“ Ukrainian Official” ) more than $200,000, and paid for his vacations to Israel on at least five occasions, in exchange for his improper political influence in the process of registering and promoting various Teva drugs in Ukraine. Teva's payments to the Ukrainian official were improperly recorded as sales and marketing expenses and consultancy fees in Teva’s books and records.

In 2011 and 2012, Teva's Mexican subsidiaries made illegal payments through a distributor to doctors employed at government hospitals to influence their Copaxone prescription decisions. Although Teva had earlier discovered credible evidence of improper payments by Teva's Mexican subsidiaries to government officials in Mexico, the company failed to implement internal accounting controls sufficient to meet the risks posed by Teva’s business in Mexico. The improper payments to Mexican officials were improperly recorded as legitimate reductions of revenue, and the inaccurate books and records and financial statements of the Mexican subsidiaries were consolidated into Teva’s financial statements, which were filed with the Commission.

In total, Teva realized more than $214,596,170 in profits from business obtained as a result of illegal payments to foreign officials in Russia, Ukraine, and Mexico.

On December 22, 2016, the SEC filed a civil complaint against Teva charging the company with anti-bribery, books and records, and internal controls violations. Teva consented to the entry of a final judgment and agreed to pay $214,596,170 in disgorgement and $21,505,654 in pre-judgment interest, for a total of $236,101,824. Teva also agreed to retain an independent corporate monitor for a term of three years. The Commission did not impose a civil penalty on Teva in recognition of Teva's cooperation and the criminal penalty imposed in a separate matter initiated by the DOJ.

In related proceedings, Teva entered into a Deferred Prosecution Agreement with the DOJ and agreed to pay a $283 million penalty. Teva's Russian subsidiary pled guilty to a one count criminal information charging conspiracy to violate the anti-bribery provisions of the FCPA. The combined total amount of U.S. criminal and regulatory penalties to be paid by Teva is nearly $520 million.


Country(ies) involved:    Mexico, Russia, Ukraine

Sanction to Bribe Ratio:    N/A

Sanction to Revenue Ratio:    N/A

Sanction to Profit Ratio:    $236,101,824 / $214,596,170 = 110.02 %

Number of Related Enforcement Actions (Including This Enforcement Action):    3

Country(ies) involved:    Mexico, Russia, Ukraine

Total $ Bribery Payments:    N/A

Total $ Revenue Generated from Bribery:    N/A

Total $ Profit Earned or Expenses Avoided from Bribery:    $221,232,303

Total $ Monetary Sanctions:    $519,279,572

Sanction to Bribe Ratio:    N/A

Sanction to Revenue Ratio:    N/A

Sanction to Profit Ratio:    $519,279,572 / $221,232,303 = (234.72 %)

Name:    Teva Pharmaceutical Industries Limited

Place of Incorporation:    Israel

HQ Country(ies):    Israel

Entity Type:    Public Company

FCPA Claims:    Anti-Bribery, Primary, Issuer (15 U.S.C. § 78dd-1) ; Books & Records, Primary, Issuer (15 U.S.C. § 78m (b)(2)(A)) ; Internal Controls, Primary, Issuer (15 U.S.C. § 78m(b)(2)(B))

Related Claims:    N/A

Statutory Basis for FCPA Jurisdiction:    Issuer

Period of Bribery:   2002 - 2012

Total Bribery Payments:    N/A

Total Revenue Generated from Bribery:    N/A

Total Profit Earned or Expenses Avoided from Bribery:    $214,596,170

Country(ies) involved:    Mexico, Russia, Ukraine

Officials Potentially Influenced (Name; Title; Organization): 

  • Name N/A, Health Care Providers; State-owned and state-controlled hospitals
  • Name N/A, Official; Council of Federation of Russian Federation
  • Ukrainian Official; Member; Scientific and Expert Council of the State Pharmacological Center of Ukraine
  • Ukrainian Official; Deputy Director ; Institutes of the National Academy of Medical Science
  • Ukrainian Official; Vice President; National Academy of Medical Sciences
  • Ukrainian Official; Advisor; President’s Administration
  • Ukrainian Official; Deputy Chairman; Interagency Workgroup for the Issues of Price-Formation for Drugs and Other Medicinal Products

Defendant-Related Entities Involved in the Misconduct:    Mexican Subsidiary - Subsidiary ; Teva LLC - Subsidiary ; Teva Ukraine LLC - Subsidiary

Third-Party Intermediary:   

  • Russian Company , Agent/Consultant/Broker
  • Teva Mexico's Copaxone distributor in Mexico , Agent/Consultant/Broker

Type of Bribe:   Money, Travel/Lodging

Cash, Wire or Check:    No Available, Cash (bills/coins/etc.), Wire Transfer

Purpose of Bribe:    Facilitate and promote sales, Obtain/retain business, Prevent/reduce competition

TRANSACTION OVERVIEW
Teva's Illegal Payments in Russia

Period of Bribery:   2010 – 2012

Total Bribery Payments:    N/A

Total Revenue Generated from Bribery:    $197,530,681

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Russia

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Official; Council of Federation of Russian Federation;

Defendant-Related Entities Involved in the Misconduct:    Teva LLC - Subsidiary

Third Party Intermediary:    Russian Company - Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    No Available

Purpose of Bribe:    Facilitate and promote sales, Obtain/retain business, Prevent/reduce competition

TRANSACTION OVERVIEW
Teva's Illegal Payments in Ukraine

Period of Bribery:   2002 – 2011

Total Bribery Payments:    N/A

Total Revenue Generated from Bribery:    N/A

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Ukraine

Officials Potentially Influenced (Name; Title; Organization):  

  • Ukrainian Official; Deputy Director ; Institutes of the National Academy of Medical Science;
  • Ukrainian Official; Vice President; National Academy of Medical Sciences;
  • Ukrainian Official; Advisor; President’s Administration;
  • Ukrainian Official; Deputy Chairman; Interagency Workgroup for the Issues of Price-Formation for Drugs and Other Medicinal Products;
  • Ukrainian Official; Member; Scientific and Expert Council of the State Pharmacological Center of Ukraine ;

Defendant-Related Entities Involved in the Misconduct:    Teva Ukraine LLC - Subsidiary

Third Party Intermediary:    N/A

Type of Bribe:   Money, Travel/Lodging

Cash, Wire or Check:    Cash (bills/coins/etc.), Wire Transfer

Purpose of Bribe:    Facilitate and promote sales, Obtain/retain business

TRANSACTION OVERVIEW
Payments to Mexican Officials

Period of Bribery:   2011 – 2012

Total Bribery Payments:    N/A

Total Revenue Generated from Bribery:    $16,865,489

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Mexico

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Health Care Providers; State-owned and state-controlled hospitals;

Defendant-Related Entities Involved in the Misconduct:    Mexican Subsidiary - Subsidiary

Third Party Intermediary:    Teva Mexico's Copaxone distributor in Mexico - Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    Cash (bills/coins/etc.)

Purpose of Bribe:    Facilitate and promote sales, Obtain/retain business, Prevent/reduce competition

Misconduct by Subsidiary?  Yes


Parent(s):   Teva Pharmaceutical Industries Limited

Subsidiary:  Teva LLC

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:   
  • Parent Had Knowledge of Sub’s Bribery?:    Yes
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Teva Ukraine LLC

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:   
  • Parent Had Knowledge of Sub’s Bribery?:    Yes
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Sicor de Mexico, S.A.

  • Percentage of Ownership:   
  • Direct or Indirect Ownership:   
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Lemery S.A. de C.V.

  • Percentage of Ownership:   
  • Direct or Indirect Ownership:   
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Lemery Desarrollo y Control S.A. de C.V.

  • Percentage of Ownership:   
  • Direct or Indirect Ownership:   
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Immobiliaria Lemery S.A. de C.V.

  • Percentage of Ownership:   
  • Direct or Indirect Ownership:   
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Vitrium Division Farmaceutica, S.A. de C.V.

  • Percentage of Ownership:   
  • Direct or Indirect Ownership:   
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Teva Pharmaceutical Mexico S.A. de C.V.

  • Percentage of Ownership:   
  • Direct or Indirect Ownership:   
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Ivax Pharmaceuticals Mexico, S.A. de C.V.

  • Percentage of Ownership:   
  • Direct or Indirect Ownership:   
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

M&A Negotiated or Completed During Misconduct, Investigation, or Resolution?     No

Re: Teva Pharmaceutical Industries Limited

  • Inadequate internal controls or auditing
  • Inadequate anti-corruption compliance policies, procedures, or program
  • Inadequate training of employees, agents, subsidiaries, or third parties
  • Inadequate safeguards concerning use of third parties

Mitigating Factors Referenced by the Government (Company Defendants):

Defendant Self-Report Cooperation Voluntary Remedial Measures Misconduct Limited to Low Level Individuals Other factors
Teva Pharmaceutical Industries Limited        

Aggravating Factors Referenced by the Government (Company Defendants):

Defendant Insufficient Cooperation Insufficient Remedial Measures
Teva Pharmaceutical Industries Limited    

Total Monetary Sanctions for the Action:    $236,101,824

Case Status:    Resolved


Disposition:    Consent Agreement

Date of Disposition:    12/22/2016

Teva Pharmaceutical Industries Limited

—  Total Monetary Sanctions for Defendant:    $236,101,824

—  Compliance Obligation:    Yes

—  Reporting Obligation:    Independent monitor

—  Admission of Guilt/Acceptance of Responsibility:    Yes

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