Johnson & Johnson Fined $70M For Overseas Bribes
15 CommentsBy Ed Silverman // April 8th, 2011 // 12:28 pm
The healthcare giant was charged by the US Securities and Exchange Commission with violating the Foreign Corrupt Practices Act by bribing public doctors in several European countries - and paying kickbacks to Iraq - to illegally obtain business. The FCPA forbids US companies from bribing foreign government officials (read here).
Specifically, various Johnson & Johnson units paid bribes to public doctors in Greece who chose J&J surgical implants; public doctors and hospital administrators in Poland who awarded contracts to J&J, and public doctors in Romania to prescribe J&J meds. The subsidiaries - including DePuy and Janssen Pharmaceutica - also paid kickbacks to Iraq to obtain 19 contracts under the United Nations Oil for Food Program, according to the SEC complaint.
To settle charges, J&J agreed to pay $48.6 million in disgorgement and prejudgment interest, and another $21.4 to settle parallel criminal charges that were announced by the US Department of Justice. Meanwhile, J&J is also paying $8 million to resolve an investigation by the United Kingdom Serious Fraud Office into its DePuy unit (see this).
Why did the docs agree? The doctors and administrators working for public entities in Greece, Poland, and Romania, who ordered or prescribed J&J products, were rewarded with cash and inappropriate travel, among other goodies. And J&J subsidiaries, employees and agents used slush funds, sham civil contracts with doctors, and off-shore companies in the Isle of Man to carry out the bribery.
The charges are not a huge surprise, however. Last summer, the feds announced they have begun paying closer attention to interactions between the pharmaceutical industry and foreign governments (background). And several months ago, at least five big drugmakers received letters as the federal government seeks to uncover any violations of the FCPA.
Four years ago, by the way, the healthcare giant made a “voluntary disclosure” to US authorities about improper payments, which were made by unspecified foreign subsidiaries in connection with the sale of medical devices in a pair of unnamed countries. And the worldwide chairman of medical devices and diagnostics retired (read this). In this disclosure, the SEC noted that J&J also conducted an internal probe, according to an SEC statement.
UPDATE: In a statement, J&J ceo Bill Weldon says this: “I know that these actions are not representative of Johnson & Johnson employees around the world who do what is honest and right every day, in the conduct of our business and in service to patients and customers worldwide. We will continue to demonstrate that Johnson & Johnson is a company that embraces responsible corporate behavior.”
Of course, a few other J&J employees did conduct a surreptitious recall of numerous over-the-counter problems in an attempt to paper over system manufacturing problems. A congressional probe labeled this the case of the Phantom Recall and, as you know, tens of millions of products have since been recalled. The episode led to a consent decree and caused a loss of trust among consumers and investors; hurt sales; reduced employee bonuses; prompted government probes and lawsuits, and a reorganization at the McNeil Consumer Healthcare unit (see this).
david egilman
No jail time or even criminal charges. I thought corporations were people. People would have gone to jail.
Mike Wokasch
I’m usually not much into politics, I don’t have an agenda here, and I certainly don’t condone violations of the Foreign Corrupt Practices Act but perhaps the US government should play by the same rules. No more covert or outright payments to the likes of the Taliban, foreign government officials, or even governments disguised as “foreign aid”. This should probably include “in kind” payments in terms of the cost of military support.
While we are at it we should probably also have a Sunshine Act with complete accounting and disclosure, updated monthly on a .gov website of who got how much for these type payments. What’s good for US corporations should apply to the US government. Maybe somebody can enlighten me as to why this isn’t so. http://www.pharmareform.com
Nick Mavrogenes
Perhaps Mr. Weldon should make a hasty retreat to his retirement. If he thinks that things can’t possibly get worse, they undoubtedly will.
Betsy
I see J & J’s delicious as ever “I am stuck on Band-Aid” commercial on TV and feel especially sad about the plight of the rest of company.
$70M? Lucky them.
D Bunker
David,
Yes, Isn’t it remarkable that Corporations Lobbying contributions are deemed political speech and as such covered under the 1st Amendment, but when they have to pay $70 Million in penalties, it’s just the cost of doing business.
However, I believe that RICO stands for Racketeer Influenced Corrupt Organizations, not people. And given the endless litany of these corporations/organizations repeatedly engaging in ‘Monetary Transactions Prohibited By Law’ …. it’s only a matter of time before the public becomes sufficiently aware and execs Will be getting tossed into the joint.
Stephany
What David Egilman said!!
Shakespeare
Does not a corporation bleed?
MsPiggy
What we see here is more evidence nothing has changed, or is there any serious effort going into changing behavioral/criminal accountability for criminal corporations…
Stay tuned, because J&J is only the first salvo in a very long line of Pharma corporations caught up in this bribery racket..
Think of this action as “LET’S MAKE DEAL” government style.
J&J is already operating under an CIA (corporate integrity agreement)…We can see how ineffective those worthless documents are…
Johnson&Johnson reported gross profit of $42.795 billion in 2010. This fine for multiple counts of criminal bribery equals 0.16 % of earnings..
David Egilman is correct…If you or I were caught up in a criminal bribery sting; we would be looking at a very long prison sentence with little or no leniency from the Feds.
Corporations are getting a much different & preferential kind of justice, which amounts to with all intent & outcome, no justice at all.
Doc
What else has to happen at J&J before the BODs thinks it might be a good idea to replace Weldon? Unbelievable.
NJ Lawyer
About a year and a half ago, Lanny Breuer (Asst Attorney General, Criminal Division) gave a speech at a pharmaceutical industry conference, where he noted that:
“Our focus and resolve in the FCPA area will not abate, and we will be intensely focused on rooting out foreign bribery in your industry. That will mean investigation and, if warranted, prosecution of corporations to be sure, but also investigation and prosecution of senior executives. Effective deterrence requires no less. Indeed, we firmly believe that for our enforcement efforts to have real deterrent effect, culpable individuals must be prosecuted and go to jail where the facts and the law warrant.”
http://mainjustice.virtual.vps-host.net/2009/11/12/criminal-division-chief-breuers-fcpa-pharma-speech/
Seems to be lip service.
Bathwater
Has anyone seen the Baby?
John Q
I think the poor baby is trying to recover from tainted meds distributed J&J.
Basel lair
Formulas for business models:
1. Purely legal following all the laws, morals, ethics etc of society;
LEGAL + NO ILLEGAL = RETURN
2. Purelly illegal;
NO LEGAL + ILLEGAL = RETURN (better than #1)
3. Combination of # 1 and # 2
LEGAL + ILLEGAL = RETURN (better than #1 or #2)
Most if not all corporations use the #3 business model and if caught just pay the fine as cost of doing biz. It is that simple. The returns from using the commbination formula are so great and seductive that they would never stop till most end up in jail. Even then it is not sure thing for some will take a hit for it and get paid by bosses for spending time in jail. Here how it works:
1 LEGAL + 1 ILLEGAL + 2 RETURN
Other formulas produce only 1 RETURN VALUE. Since most use #3 how do you as an honest biz type comete with that kind of competition? You can’t so you don’t fight them but join them or get out of biz.
industry insider
Basel is right. The fine represents something like 0.00000007% of J&J’s 2010 earnings. Cost of doing business.
John F.
I feel J&J fails pays quite a bit in lunches to doctors and fails to inform them of the horrendous long term injuries from Levaquin. Bribing doctors in Greece is no surprise.