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Teva settles FCPA charges with SEC, DOJ for $519M

Teva Pharmaceutical Industries Ltd. agreed to pay about $519 million to the U.S. Department of Justice and the SEC to settle charges of bribing government officials in Ukraine, Mexico and Russia.

The company must pay more than $236 million in disgorgement and interest to the SEC. Teva and its Russian unit Teva LLC will also pay a $283.2 million criminal penalty in a deferred prosecution agreement with the DOJ.

In addition, the company is required to retain an independent corporate monitor for at least three years. It also agreed to continue to cooperate with the DOJ's investigation, enhance its compliance program and implement rigorous internal controls.

The SEC complaint claims the company made more than $214 million in illegitimate profits by making the influential payments to increase its market share and get regulatory and formulary approvals, and favorable drug purchase and prescription decisions, violating the Foreign Corrupt Practices Act.

According to the DOJ, the companies admitted that Teva Pharmaceutical executives and Teva LLC employees paid bribes to a high-ranking Russian government official to influence him to use his authority to boost sales of Teva Pharmaceutical's multiple sclerosis drug, Copaxone, in annual drug purchase auctions held by Russia's Ministry of Health.

Teva Pharmaceutical further admitted to bribing a senior Ukrainian government official to influence the government's approval of the company's drug registrations that were necessary to market and sell their products in the country.

Also, the company admitted that it failed to both implement a system of internal accounting control and enforce the already existing control at its Mexican unit that was involved in bribing doctors employed by the Mexican government. It admitted that the managers overseeing the compliance function were unable or unwilling to enforce the anticorruption policies.

Teva LLC signed a plea agreement in which it agreed to plead guilty to a one-count criminal information, filed Dec. 22 in the Southern District of Florida, charging it with conspiring to violate the antibribery provisions of the Foreign Corrupt Practices Act, or FCPA. The plea agreement is subject to court approval.

Teva Pharmaceutical said in a news release that the settlement with the SEC and DOJ involves past conduct and that the employees involved are no longer at the company, including in Russia where the entire leadership team was replaced in 2013. None of the conduct in question involved Teva's U.S. sales.

The company said it started a voluntary and comprehensive investigation into its global operations, in addition to responding to the government's specific requests for documents and information, after learning of the FCPA violations in early 2012. It engaged independent counsel to assist in the investigation and conducted a global corruption risk assessment and a multicountry survey.

Starting in 2012, Teva Pharmaceutical accelerated the pace of changes to address these issues by naming a global head of compliance and transformed its governance program and processes, resulting in the termination of problematic business relationships with third parties, separation of relevant employees from the company, an overhaul of the management of several units and termination of operations in several countries.

Teva Pharmaceutical has also restructured the company through a new global organizational structure and chain of command that reduces risks.

In November, the drugmaker disclosed that it entered into advanced talks with the DOJ and SEC to settle the FCPA investigations and set aside a provision of about $520 million.