Pfizer’s $60 Million FCPA Pricetag Is Likely Only The Beginning
The Wall Street Journal tells us today that Pfizer will soon settle Foreign Corrupt Practices Act charges with the SEC and the Justice Department for a total of $60 million. While that figure doesn’t launch Pfizer into the top ten list of all-time FCPA resolutions, it is quite high, and bumps up against Johnson & Johnson’s $77 million settlement from April of this year. Still, it is probably worth noting that $60 million will represent only the start of the potential financial liability for Pfizer. The company might also have to pay for, or already has paid for:
A comprehensive internal investigation to get to the root of the problem. These investigations are very expensive to do correctly. For example, Avon Products, which has been under an FCPA investigation since 2008, has publicly announced costs of $59 million in 2009 and $95 million in 2010 related to its own internal inquiry.
Civil liability from private litigants. While the FCPA does not provide for a private right of action, try telling it to the legions of smart and inventive lawyers who regularly devise ways around that lack of explicit authorization. These lawsuits can take the form of shareholder derivative suits alleging breaches of fiduciary duties, wrongful termination suits when a former employee claims to have blown the whistle on corrupt payments overseas, suits by competitors for conspiracy to restrain trade, and bread-and-butter securities fraud suits for failure to disclose corrupt payments, among others.
“Piggyback” claims by foreign governments. Often these days, after FCPA charges have been resolved by the SEC and DOJ, foreign governments themselves come in to shoot the wounded. After Royal Dutch Shell settled claims with U.S. authorities in November 2010, for example, it had to find another $10 million to pay the Nigerian government a month later. Alcatel-Lucent faced a similar pricetag with the Costa Rican government earlier that year.
Revamping its business to keep this sort of thing from happening again. This might be the highest-price item on the list. Pfizer will have to ensure that all of its employees and subcontractors who are in a position to make questionable payments or account for them or otherwise be responsible for them will know never to do it again. It will also have to make its business function in a new environment that doesn’t allow for such payments. And whether the matter is settled with a deferred prosecution agreement or non-prosecution agreement, understand that Pfizer is essentially on double secret probation now. Bribes to foreign government officials that are found after this point could easily result in the indictment of the company. One can imagine Pfizer would pay a lot to avoid that unhappy event.
It’s almost enough to get your company right with the FCPA in the first place.