October 8, 2015

SEC Enforcement Spotlight – Bristol-Myers Squibb pays over $14 million to settle FCPA charges

By Molly Knobler

New York-based pharmaceutical company Bristol-Myers Squibb (BMS) will pay more than $14 million to settle SEC findings that it violated the Foreign Corrupt Practices Act (FCPA).  According to the SEC’s order instituting settled administrative proceedings, between  2009 and 2014, sales representatives of BMS China sales sought to secure and increase business by providing health care providers in China with cash, jewelry, meals, travel, entertainment, and sponsorships for conferences and meetings.  BMS China inaccurately recorded this spending as legitimate business expenses.  See SEC Press Release.

The SEC further found that BMS failed to institute an effective internal control system to respond to these illegal practices.  Specifically, the SEC found that BMS: (1) failed to respond effectively to red flags indicating sales personnel provided bribes to generate sales from health care providers in China; (2) did not investigate claims by terminated employees that faked invoices were widely used to fund improper payments to health care providers; and (3) was slow to remediate gaps in internal controls and monitor potential inappropriate payments that were repeatedly identified in annual internal audits of BMS China.

Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, commented on the settlement, stating that, “Bristol-Myers Squibb’s failure to institute an effective internal controls system and to respond promptly to indications of significant compliance gaps at its Chinese joint venture enabled a widespread practice of providing corrupt inducements in exchange for prescription sales to continue for years.”

The SEC’s order finds BMS to have violated the FCPA’s internal controls and recordkeeping provisions.  BMS consented to the order and agreed to return $11.4 million of profits and pay $500,000 in prejudgment interest and $2.75 million as a civil penalty

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