According to a statement released by the SEC, Lilly paid millions of dollars to government officials or to third-party bank accounts associated with government officials. In the case of Russia, Lilly did not curtail the bribery payments from its subsidiary there until five years after the parent company became aware of them, according to the SEC charges, filed Thursday in federal court in Washington, D.C.
Employees at Lilly’s subsidiary in China falsified expense reports to provide spa treatments, jewelry, and other gifts and cash payments to government-employed physicians, according to the SEC.
“Eli Lilly and its subsidiaries possessed a ‘check the box’ mentality when it came to third-party due diligence,” Kara Novaco Brockmeyer, chief of the SEC Enforcement Division’s Foreign Corrupt Practices unit, said in a prepared statement. “Companies can’t simply rely on paper-thin assurances by employees, distributors, or customers. They need to look at the surrounding circumstances of any payment to adequately assess whether it could wind up in a government official’s pocket.”
Lilly paid $14 million in disgorged profits and $6.7 million in interest on those profits. The company also paid a fine of $8.7 million to the SEC.
Anne Nobles, Lilly’s chief ethics and compliance officer, said in a prepared statement, “Since ours is a business based on trust, we strive to conduct ourselves in an ethical way that is beyond reproach. We have cooperated with the U.S. government throughout this investigation and have strengthened our internal controls and compliance program globally, including significant investment in our global anti-corruption program."
Lilly is not alone. Other major pharmaceutical companies, including Johnson & Johnson and Pfizer, have reached similar agreements with the SEC in recent years according to news reports. "Industry experts say it's not unusual for foreign sales representatives to give gifts and payments to government officials, though this practice is not permitted by U.S. law," the IBJ reports. Gov. Mitch Daniels served as a high-ranking executive at Lilly before becoming Indiana's governor, and former Indianapolis Mayor Bart Peterson now holds a similar position with the company.