Prosecuting Agency:
U.S. Securities and Exchange Commission
Type of Action:
SEC Administrative Proceeding
Docket or Case Number:
3-19718
Name of Prosecuting Attorneys:
Anita B. Bandy, SEC Headquarters
Mark Cave, SEC Headquarters
Eric Day, SEC Headquarters
US Assisting Agencies: Unknown
Foreign Enforcement Action/Investigation: Unknown
Foreign Assisting Agencies: Unknown
Origin of the Proceeding:
Voluntary disclosure
Whistleblower:
Unknown
Case Status:
Resolved
Summary
Cardinal Health, Inc., incorporated and headquartered in Ohio, was a global healthcare services and products company specializing in the distribution of pharmaceuticals and other medical products. Cardinal’s common stock was registered with the SEC and traded on the New York Stock Exchange.
In November 2010, Cardinal entered the Chinese market by acquiring the Chinese subsidiaries of an established pharmaceutical distribution company. Cardinal rebranded the acquired entities as “Cardinal China” after the acquisition. Cardinal owned and controlled Cardinal China, which distributed pharmaceuticals, medical devices, and consumer health products into the Chinese market. Cardinal China’s books and records were consolidated into Cardinal’s financial statements.
According to the documents in this case, between 2010 and 2016, Cardinal China retained thousands of employees and managed two large marketing accounts for the benefit of a European dermocosmetic company whose products Cardinal China distributed in China. Cardinal China employees used the marketing account funds to promote the dermocosmetic company's products, and some of the payments made from the accounts were made to Chinese government-employed healthcare professionals and to employees of state-owned retail companies who had influence over purchasing decisions. The SEC noted that while Cardinal terminated many marketing accounts at Cardinal China after its acquisition due to FCPA-related compliance risks, the company underestimated the ongoing risk by the marketing accounts associated with the dermocosmetic company, and Cardinal did not apply its full accounting controls to the accounts.
In a settled administrative proceeding initiated on February 28, 2020, the SEC ordered Cardinal to cease and desist its violations of the books and records and internal controls provisions of the FCPA. The SEC further ordered Cardinal to pay disgorgement of $5,400,000 plus prejudgment interest of $916,887 and a civil fine of $2,500,000. The SEC noted Cardinal's voluntary disclosure of the misconduct, cooperation in the investigations, and significant remedial measures.
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