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Novartis CEO says deal with Trump's lawyer was a mistake

Novartis AG CEO Vasant Narasimhan said the $1.2 million deal the drugmaker struck with President Donald Trump's lawyer, Michael Cohen, and his shell company Essential Consultants was a mistake and urged employees to keep calm and carry on.

"We made a mistake entering into this engagement and as a consequence are being criticized by a world that expects more from us," Narasimhan said in a May 10 email circulated to employees, which a spokesman provided to S&P Global Market Intelligence.

"Yesterday was not a good day for Novartis," Narasimhan said.

After Los Angeles lawyer Michael Avenatti, who is representing actress Stormy Daniels in a lawsuit against Trump, revealed documents on May 8 that showed Novartis had been making payments to Cohen, the company acknowledged the next day it had paid $1.2 million to the New York lawyer.

The payments were made in $100,000-a-month installments starting in February 2017 — shortly after Trump entered the White House.

Those payments sparked the interests of lawyers from the office of U.S. special counsel Robert Mueller, who are investigating whether there was any coordination between Trump's 2016 presidential campaign and Russian interference into the election.

Novartis said it "cooperated fully with the special counsel's office and provided all the information requested" about the company's agreement with Essential Consultants and considered the matter "closed as to itself and is not aware of any outstanding questions regarding the agreement."

The Swiss biopharmaceutical company said it contracted with Cohen to gain insight into "certain U.S. healthcare policy matters, including the Affordable Care Act."

But the drugmaker said that after it had met with Cohen in March 2017 for an initial meeting, it determined Trump's lawyer and Essential Consultants would be "unable to provide the services" Novartis had anticipated. The company, however, kept paying Cohen for the remainder of the year, saying it was bound by the contract until it expired in February.

A series of statements

Novartis' response to the news about the deal came in a series of statements, each adding a little more detail.

The company has declined to answer S&P Global's questions about why the payments to Cohen were not disclosed to shareholders and if the drugmaker had a plan for doing so before Avenatti included the information in his report.

It did not respond to questions about whether Narasimhan also had penned, or planned to, a letter to shareholders explaining the Cohen agreement.

The company also did not respond to questions about when Narasimhan become aware of the agreement and the payments from Novartis to Cohen and Essential Consultants and if Novartis had conducted any due diligence before signing the contract.

In addition, the company declined to explain if it was a regular practice of Novartis to pay outside lawyers working for heads of nations or other politicians to gain insight that may benefit the corporation. It also declined to say when was the last time someone representing the drugmaker spoke with Trump or anyone at the White House.

Novartis spent about $8.8 million on U.S. lobbying in 2017, according to OpenSecrets.org, a website run by the Center for Responsive Politics.

In his report, Avenatti noted that Narasimhan was among the 15 European business leaders who had dinner with Trump in January at the World Economic Forum in Davos, Switzerland.

In its May 9 statements to S&P Global Market Intelligence, Novartis said the dinner invitation was not related to its agreement with Cohen.

'This moment will pass'

In his email to employees, Narasimhan said the news over the situation made him "frustrated and tired."

"But I woke up this morning full of determination," he told employees. "Determined to fight for the transformative medicines we create and the patients we serve. Determined to fight for this company I deeply love. Determined to fight for all of you so you continue to feel proud, inspired and empowered to transform the health of the world every day."

"This moment will pass and we will learn," Narasimhan wrote. "Our medicines, however, will endure for generations."

What defines Novartis and its employees now, he said, is "how we respond to this difficult situation."

"I look to you to remain resilient and keep your focus on serving patients," Narasimhan added. "Together we will respond by continuing our work to profoundly impact human health. Please focus on that noble purpose in this difficult moment — bending the curve of life."