Novartis AG was a global provider of pharmaceutical and healthcare products incorporated and headquartered in Switzerland. Novartis' securities were registered with the SEC and traded on the New York Stock Exchange. During the relevant period, Novartis was the sole owner of Alcon Inc., an eye care company, which it had acquired in 2011 and later spun off in 2019. Novartis was previously subject to an SEC administrative action in 2016 for its FCPA misconduct in China.
According to the documents in this case, Novartis or Alcon local subsidiaries and affiliates in Korea, Vietnam, and Greece made improper payments or provided benefits to public and private healthcare providers in exchange for prescribing or using Novartis or Alcon products. These schemes varied in method and amount but were known among certain managers of the local subsidiaries or affiliates. Additionally, within Novartis’ former Alcon Asia business, internal accounting controls weaknesses associated with Equipment Financing Arrangements ("EFA") in China from 2013 to 2015 resulted in forged contracts, missing surgical equipment, as well as a significant EFA accounts receivable balance associated with poor performing EFAs, for which Alcon China was able to write off more than $50 million in bad debt.
In a settled administrative action initiated on June 25, 2020, the SEC ordered Novartis to cease and desist its violations of the books and records and internal controls provisions of the FCPA. Under the terms of the proceeding, the SEC ordered Novartis to pay disgorgement of $92,300,000 and prejudgment interest of $20,500,000 and further ordered Novartis to self report to the SEC on the status of the company's enhanced anticorruption compliance policies and procedures.
In a related proceeding, on June 25, 2020, the DOJ filed a two count Information in the District of New Jersey against Novartis Hellas alleging conspiracies to violate the anti-bribery and books and records provisions of the FCPA. On the same date, Novarts Hellas and Novartis entered into a deferred prosecution agreement with the DOJ. Under the terms of the agreement, Novartis Hellas agreed to pay a fine of $225 million, which represented a 25% departure below a midpoint in the U.S. Sentencing Guideline range. Novartis also agreed to self report to the DOJ on the status of the company's enhanced anti-corruption compliance policies and procedures. While Novartis Hellas received full credit for its cooperation and remediation, due to Novartis status as a recidivist, the DOJ assessed the 25% departure from approximately the midpoint of the sentencing guidelines range rather than the bottom.
In a related proceeding, on June 25, 2020, the DOJ filed a single count Information in the District of New Jersey against Alcon Pte Ltd, a former subsidiary of Novartis, alleging a conspiracy to violate the books and records provisions of the FCPA. On the same date, Alcon Pte entered into a deferred prosecution agreement with the DOJ. Under the terms of the agreement, Alcon Pte agreed to pay a fine of $8,925,000, which represents a 25% departure below the bottom of the U.S. Sentencing Guidelines range. In determining the appropriate fine, the DOJ noted the company's cooperation and remediation. Per the terms of the agreement, Alcon Pte and Alcon Inc. agreed to self report on the status of the companies' enhanced anti-corruption compliance policies and procedures.
