Teva Settles Foreign Corruption Probe for $519 Million -- 2nd Update

By Samuel Rubenfeld and Austen Hufford

Teva Pharmaceutical Industries Ltd. agreed to pay $519 million to settle U.S. charges that it violated U.S. foreign-bribery law in its operations in Ukraine, Mexico and Russia.

The Israeli company, which is the world's largest maker of generics by sales, will pay the largest criminal fine imposed by the U.S. government against a pharmaceutical firm for violating the Foreign Corrupt Practices Act, prosecutors said. The law, jointly enforced by the U.S. Justice Department and the Securities and Exchange Commission, bars the use of bribes for foreign officials to get or receive business.

The U.S. has extensively enforced the FCPA on pharmaceutical firms over the years following a 2010 industry sweep. The sector, which increasingly does its business in foreign markets, faces heightened FCPA exposure in countries with national health systems, where doctors are considered public officials. In 2016, pharmaceutical giants GlaxoSmithKline PLC, AstraZeneca PLC and Novartis AG all settled cases involving FCPA violations.

Teva entered into a deferred-prosecution agreement that charges the company with violating the antibribery provisions of the FCPA, and it agreed to pay a $283.2 million criminal fine, continue to cooperate with a U.S. investigation and retain a compliance monitor. The Russian subsidiary pleaded guilty. The parent company also agreed to pay $236 million in disgorgement and interest to the SEC.

Last quarter, Teva set aside $520 million for a possible settlement. Erez Vigodman, Teva's president and chief executive, said in a statement Thursday that the conduct leading to the investigation had ended years ago, calling the behavior "regrettable and unacceptable."

According to court documents filed in the case, Teva executives and Russia-based employees paid bribes to a high-ranking Russian government official intending to influence him to increase sales of Teva's multiple sclerosis drug, Copaxone, during annual purchase auctions held by the Russian health ministry. Between 2010 and at least 2012, under an agreement with a repackaging and distribution company operated by the official and owned by his wife, Teva earned more than $200 million in profits on Copaxone sales to the Russian government, the documents say.

Overall, according to the U.S., Teva made more than $214 million in illicit profits.

The company disclosed in August 2012 that it received an SEC subpoena, and the Justice Department joined the investigation months later. Teva's statement on Thursday said that after learning of FCPA concerns in 2012, the company began an internal investigation, hired independent counsel and conducted a global risk assessment. It later named a global head of compliance and updated its policies and procedures.

Teva said that none of the employees involved in improper payments are still employed by the company, including in Russia, where in 2013 the entire leadership team was replaced.

"The Teva of today is a fundamentally different company," said Mr. Vigodman, in the statement.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

December 22, 2016 15:33 ET (20:33 GMT)

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