DOJ And The SEC Resolve Another FCPA Case

The FCPA continues to be a priority of the Department of Justice and the SEC. Recent enforcement efforts have result in a string of record setting cases, measured in terms of the amount paid by the company to resolve the investigations, as discussed here. The case resolved yesterday did not set any records. Rather, it was another of the United Nations Oil For Food Program cases, not unlike many others. At the same time, it illustrates the continuing emphasis on FCPA enforcement.

Novo Nordisk is a Danish pharmaceutical company and a leading supplier of insulin. Yesterday, it resolved FCPA investigations with the Department by entering into a deferred prosecution agreement and with the SEC by settling a civil enforcement action. SEC v. Novo Nordisk A/S, Civil Action No. 1:09-CV-00862 (D.D.C. Filed May 11, 2009).

Novo Nordisk focuses on the humanitarian side of the U.N. program. The company sold insulin and other medicines to the Iraq Ministry of Health through Kimadia, the Iraq State Company for the Importation and Distribution of Drugs and Medical Appliances. According to the SEC complaint, Novo Nordisk used its long-time Jordan-based agent to submit bids to Kimadia. The company handled the sales of the goods through two branches, one in Athens, Greece and another in Amman, Jordan. Once a bid was accepted, the contract was prepared and executed and forwarded to the U.N. for approval.

In late 2000 or early 2001, Kimadia advised the agent of the company that a 10% kickback was required to obtain a contract. While the company initially refused, eventually it agreed to pay the kickbacks demanded by Kimadia. The U.N. contracts were artificially inflated by 10%. Novo Nordisk then increased the agent’s commission from 10% to 20% so the agent could funnel the additional money to Kimadia. Overall, the company made a total of about $1.4 million kickback payments on eleven contracts and agreed to pay about $1.3 million on two additional agreements. The SEC’s two count complaint alleges violations of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B).

To settle the case, the company agreed to the entry of a permanent injunction prohibiting future violations of each of the Exchange Act Sections cited in the complaint. In addition, Novo Nordisk agreed to disgorge about $4.3 million in profits, plus $1.6 million in pre-judgment interest. The company also agreed to pay a $9 million penalty pursuant to the deferred prosecution agreement with the Department of Justice.