Novartis, KBR at Center of New FCPA Allegations

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We’ve seen two big stories concerning the Foreign Corrupt Practices Act (FCPA) come to light in the news media over the past few days. A report by The Huffington Post has alleged that “[h]undreds of major international corporations” including KBR, Rolls-Royce and Samsung hired Unaoil and that the company engaged in bribery of foreign government officials. Additionally, an anonymous internal whistleblower has accused Novartis of paying bribes in Turkey via a consulting firm to secure drugs on formularies.

The Novartis allegations comes shortly after the Swiss drugmaker settled a Securities and Exchange Commission investigation into allegations of bribery by two Chinese subsidiaries of Novartis. It was only a week ago that the SEC announced the $25 million settlement over the China FCPA violations, which included fines and disgorgement for failure to maintain accurate books and records as well as a sufficient system of internal accounting controls. The SEC investigation found that money, gifts and other items of value were provided to Chinese health care professionals at state run health institutions.

For the unknown Novartis whistleblower, the email to the CEO and head of the audit and compliance committee does not mean that he or she cannot earn a reward from the SEC. The SEC whistleblower program allows most internal whistleblowers 90 days after internal reporting to file a Form TCR with the allegations and evidence in order to preserve their right to an award. If he or she does so, then the program also makes the individual eligible as the origin of the internal investigation to a reward based on the outcome of any additional information discovered in the course of the company’s investigation.

Among the series of Huffington Post articles published concerning the Unaoil corruption scandal, KBR is specifically identified in the article as “screwed”. The Huffington Post appears to be reporting based on thousands of internal documents obtained from Halliburton or KBR.

It is too soon to conclude that Halliburton/KBR is truly in trouble, though. The corruption scandal at Unaoil looks to have been heavily discussed in the Australian news media in 2012 and 2013. After allegations of bribery on behalf of Leighton Offshore arose, Unaoil and Leighton found themselves in court in the UK arguing over the terms of the contract and who owed what. Unaoil denied the allegations in the media and a British High Court judge called claims that a marketing fee revealed possible corrupt payment was “at best tenuous.”

Moreover, I expect that the Justice Department insider leaks published by the Wall Street Journal on the Wal-Mart investigation will give most FCPA veterans pose before making conclusory statements. The New York Times published an extensive series on the bribery of government officials by Walmart in Mexico and the resulting internal investigation’s inadequate nature. As a result, experts opined on the potential for massive DOJ and SEC fines for FCPA violations. However, after hundreds of millions of dollars in internal investigations by the company and an extensive government investigation, the WSJ article said that the government had found little evidence of misconduct in Mexico.

If you have questions about this information or want to speak to one of our FCPA whistleblower lawyers about reporting bribery of a government official through the SEC whistleblower program, please contact us via our online contact form.