TEVA PHARMACEUTICAL INDUSTRIES LIMITED

INDUSTRY

Pharmaceuticals /Medical Devices /Health

CORPORATE HEADQUARTERS

Petah Tikva, Israel

SUMMARY OF ALLEGATIONS

Nationality of Foreign Officials: Mexico

Summary of Allegations:

Between May 2002 and December 2012, Teva Pharmaceutical Industries ("Teva") and its affiliates allegedly paid bribes to public officials in Russia, Mexico and Ukraine allegedly to influence regulatory and formulary approvals, drug purchase decisions, prescription decisions, and to increase Teva’s market share and develop competitive advantages over competitors. In exchange, Teva allegedly realized more than USD 214,596,170 in profits from business obtained through the use of illegal payments that violated the U.S. Foreign Corrupt Practices Act ("FCPA") and related local laws.

Mexican allegations

From 2011 to 2012, Teva's Mexican subsidiaries and distributors allegedly paid illegal payments to doctors employed at government hospitals allegedly to obtain business valued at approximately USD 16,865,489.

On or about 23 February 2007, an anonymous letter was allegedly delivered to a Teva internal auditor stating that Teva Mexico was allegedly authorizing illicit payments to government officials as incentive to increase sales. For example, Teva Mexico manager allegedly routinely entertained Mexican government officials at a Cancun hotel to increase Teva drug sales in Mexico. In response to the anonymous letter, Teva initiated an internal investigation in 2007 leading to findings of credible evidence of misconduct and eleven Teva Mexico employees were terminated.

Even after the investigation, however, Teva's internal accounting controls were allegedly insufficient to address Teva's business risks in Mexico. As a result, misconduct in Mexico allegedly continued.

In 2011, Teva allegedly decreased Teva Mexico's promotional budget for Copaxone. In 2012, in response to the budgetary restrictions, Teva Mexico allegedly entered into an agreement with its Copaxone distributor in which the distributor would use additional margins for Copaxone sales provided by Teva Mexico, through improper discounts, to pay bribes to doctors. Teva Mexico provided the distributor with list of doctors to be bribed. All doctors paid were allegedly employed at state-owned and state-controlled hospitals and most had received illegal payments in or around 2007. Teva Mexico, through its Copaxone distributors allegedly paid Mexican official between USD 9,600 and USD 30,000 each year to influence their Copaxone prescription decisions. For example, Teva allegedly paid Mexican officials approximately USD 159,000 in 2012. 

Teva Mexico allegedly recorded its bribe payments as legitimate reductions of revenue in its books and records.


Approximate Alleged Payments to Foreign Officials: routine hospitality at a Cancun hotel; cash payment between USD 9,600 and USD 30,000 each year (approximately USD 159,000 in 2012)

Business Advantage Allegedly Obtained: obtain business valued at approximately USD 16,865,489

Nationality of Foreign Officials: Romania

Summary of Allegations:

Teva allegedly paid speaking and consulting fees and provided international travel expenses to Romanian doctors allegedly in exchange for their recommendation of Teva's multiple sclerosis drug Copaxone to as many patients as possible. For example, Teva allegedly provided a doctor with short pre-written presentation to read at healthcare provider meetings.

Many Romanian doctors are considered state employees.


Approximate Alleged Payments to Foreign Officials: Unspecified

Business Advantage Allegedly Obtained: Unspecified

Nationality of Foreign Officials: Russian Federation

Summary of Allegations:

Between May 2002 and December 2012, Teva Pharmaceutical Industries ("Teva") and its affiliates allegedly paid bribes to public officials in Russia, Mexico and Ukraine allegedly to influence regulatory and formulary approvals, drug purchase decisions, prescription decisions, and to increase Teva’s market share and develop competitive advantages. In exchange, Teva allegedly realized more than USD 214,596,170 in profits from businesses obtained through the use of illegal payments that violated the U.S. Foreign Corrupt Practices Act ("FCPA") and related local laws.

Russian allegations

From October 2010 through December 2012, Teva Russia and Teva allegedly paid bribes to a Russian public official to obtain or retain business in Russia valued at approximately USD 197,530,681.

Beginning as early as 2001, Teva allegedly began using a Russian public official and entities/distributors ("the Distributor") he owned or controlled to sell its pharmaceutical products to government entities despite Teva's documented concerns regarding the transparency of the Distributor's structure and knowledge of the official's government position. This Russian public official held a high-ranking government position between 2003 and 2013 and, during the time period, the officials' entities allegedly were officially owned through his spouse. Although the spouse was allegedly not involved in the business, the ownership had transferred allegedly to dodge a Russian law prohibiting certain government officials from owning or operating businesses.

In or around 2008, the Russian Ministry of Health designated a program in which the central government would cover the costs associated with seven illnesses and conditions, including multiple sclerosis targeted by Teva's Copaxone. In 2009, the Russian government launched "Pharma 2020" which directed the state to purchase all pharmaceutical products primarily from local producers by the year 2020. During this time frame, Teva and Teva Russia executives allegedly became aware that the president of the Distributor was under investigation for allegedly making illegal payments to officials at a Russian government agency and that Teva's risk insurance provider had decided to stop insuring transactions with the Distributor. 

On or about 12 November 2010, the Distributor was awarded by the Russian Ministry of Health with the contract to supply the Russian government with Copaxone for 2011. The award allegedly took place only a month after Teva allegedly signed a contract with the Distributor for repackaging and distribution of Copaxone in Russia. Teva allegedly entered into this agreement knowing that the official would use his influence to increase market access for Teva. Throughout their relationship, Teva provided discounts to the Distributor that were larger on average than discounts given to other distributors Teva used in Russia resulting in margin of approximately USD 65 million for the official's entity.

Partly due to Teva's relationship with the Distributor, Teva's Copaxone market share grew. However, Teva allegedly ceased its relationship with the Distributor in August 2013, following the official resignation from his position in March 2013, and Teva lost the Copaxone tender in 2016. Teva ultimately lost its entire Copaxone market share in Russia.

Teva allegedly recorded its payments to the distributor as legitimate reduction of revenue in its books and records.


Approximate Alleged Payments to Foreign Officials: Unspecified

Business Advantage Allegedly Obtained: USD 197,530,681

Nationality of Foreign Officials: Ukraine

Summary of Allegations:

Between May 2002 and December 2012, Teva Pharmaceutical Industries ("Teva") and its affiliates allegedly paid bribes to public officials in Russia, Mexico and Ukraine allegedly to influence regulatory and formulary approvals, drug purchase decisions, prescription decisions, and to increase Teva’s market share and develop competitive advantages over competitors. In exchange, Teva allegedly realized more than USD 214,596,170 in profits from businesses obtained through the use of illegal payments that violated the U.S. Foreign Corrupt Practices Act ("FCPA") and related local laws.

Ukraine allegations

From May 2002 to March 2011, Teva allegedly paid bribes, in forms of more than USD 200,000 in cash payments and at least five vacations to Israel, to then-prominent Ukraine official allegedly in exchange for the officials' improper political influence in the process of registering and promoting Teva drugs.

Between 2002 and 2009, Teva allegedly entered into numerous agreements with Ukrainan official in which he agreed to be compensated for assist Teva with registering and corruptly influencing the registration of Teva's drugs, including Copaxone, in Ukraine. In Ukraine, since at least 2007, medications for multiple sclerosis were dispensed free by the government. 

Teva allegedly recorded its bribe payments as legitimate sales and marketing expenses and consultancy fees in its books and records.


Approximate Alleged Payments to Foreign Officials: more than USD 200,000 in cash payments and at least five vacations to Israel

Business Advantage Allegedly Obtained: assistance registering and corruptly influencing the registration of Teva's drugs

ENFORCEMENT RESULTS

Agencies: Internal Investigation
Results:
Year Resolved:
Compliance Monitor: N/A
Ongoing: Yes
Details:

In response to the investigation by the US authorities, Teva disclosed that the company is conducting a voluntary worldwide investigation into certain business practices that may have FCPA implications and engaged an outside counsel to provide assistance.

According to its Form 6-K filed with the U.S. Securities and Exchange Commission ("SEC") on 2 May 2014, Teva's internal investigation has identified potential violation of FCPA and related local laws in Russia, certain Eastern European countries, certain Latin American countries and other countries. In addition, Teva has become aware that Teva affiliates in certain countries under investigation by local authorities has provided inaccurate or altered information relating to marketing or promotional practices.

In its Form 20-F filed with the SEC on 9 February 2015, Teva disclosed that it has identified practices and transactions in regions previously disclosed likely likely constitute violations of the FCPA and related local laws.

In 2015, Teva launched an internal probe into allegations in Romania.

In its Form 6-K filed with the SEC on 15 November 2016, Teva disclosed that its management has established a provision of approximately USD 520 million based on advanced discussions with the DOJ and SEC to settle the FCPA matters relating to conduct in Russia, Mexico and Ukraine between 2007 and 2013.

On 22 December 2016, in the company press release announcing the settlement, Teva noted that "none of the employees involved in the improper payments are still employed by Teva, including in Russia where the entire leadership team was replaced in 2013."

On 6 February 2017, Teva's CEO Erez Vigodman resigned effective immediately.



Agencies: Israel: Unspecified
Results: Conditional Agreement
Year Resolved: 2018
Compliance Monitor:
Ongoing: No
Details:

On 7 February 2017, Teva confirmed that it is under investigation by the authorities in Israel for the same issues which led to the settlement with the US authorities. The center of the Israeli probe reportedly are suspicions that Teva made hundreds of millions of dollars from bribes and falsified documents in order to conceal them. The bribes in Russia and Mexico were allegedly concealed as discounts to clients and bribes in Ukraine were allegedly concealed as marketing and sales expenses or as consultation fees.

15 January 2018 - The Office of the Israel’s Tax and Economic Prosecutor has reached a Conditional Agreement with Teva with respect to the bribery issues Teva resolved with U.S. authorities in 2016. Under the Conditional Agreement, Teva will take responsibility for its actions and pay an administrative fine of NIS 75 million (approx. USD 22 million), and no indictment will be filed.



Agencies: United States: Civil Lawsuit
Results:
Year Resolved:
Compliance Monitor: N/A
Ongoing: Yes
Details:

On 28 July 2015, Keisha Hall, former director of finance for Teva's Latin American region, filed a complaint against Teva in the U.S. District Court for the Southern District of Florida. The complaint alleges history of events at Teva related to corruption in the company's Latin American operations, including unauthorized payments to doctors in Chile and fraudulent payments to the Mexican government. According to the complaint, Hall experienced internal bickering and roadblocks from her supervisor over procedures for pursuing violations and the conflict eventually led to Hall's termination shortly after she began cooperating with the US authorities's FCPA investigation into Teva.

According to the Wall Street Journal published on 30 July 2015, Teva spokeswoman stated that Hall's allegations are "entirely false" and she was terminated for violating company policy. The spokeswoman added that Teva will "vigorously defend the allegations."



Agencies: United States: Civil Lawsuit
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:

About two weeks after Teva reported, on 15 November 2016, to the SEC that the company has set aside USD 500 million for investigation related to the violation of the FCPA, Teva shareholder Ra'bcca Technologies Ltd. ("Ra'bcca"), represented by Ram Dekel, Ohad Antman and Michael Peterman, filed a request to the Lod District Court to disclose information and documents, prior to the filing of a derivative action against Teva.

Ra'bcca, in its request, reveled concerns that "Teva executives were negligent, rash and turned a blind eye, while being aware or even clearly intending the issues being discussed. The information reported indicates that all or some of Teva executives probably failed to establish an effective anti-corruption and anti-bribery enforcement program, to oversee its implementation, and to enforce it in real time." Additionally, Ra'bcca reveals its suspicions of an alleged breach of trust by the executives, including conflict of interests, preventing Teva in general and board members in particular from receiving relevant information, or receiving illicit benefits from the FCPA violations.

Ra'bcca indicated that it has contacted Teva and requested documents but the request had not been answered.



Agencies: United States: Department of Justice
Results: Compliance Monitor, Deferred Prosecution Agreement, Plea Agreement
Year Resolved: 2016
Compliance Monitor: Three years
Ongoing: No
Details:

On 10 October 2012, the U.S. Department of Justice ("DOJ") sent informal document requests to Teva with respect to compliance with the FCPA in certain countries.

In its Form 6-K filed with the SEC on 15 November 2016, Teva disclosed that the company has established a provision of approximately USD 520 million based on advanced discussions with the DOJ and SEC to settle the FCPA matters in relation to its conducts in Russia, Mexico and Ukraine between 2007 and 2013.

On 22 December 2016, Teva agreed to pay more than USD 519 million to settle the charges by the US authorities that it violated the FCPA by paying bribes to foreign government officials in Russia, Mexico and Ukraine. In its settlement with the DOJ, Teva entered into in a deferred prosecution agreement to settle the charge that the company conspired to violate the anti-bribery provisions of the FCPA and failed to implement adequate internal controls. As part of the agreement, Teva agreed to pay USD 283,177,348 in penalty, continue to cooperate with the DOJ's investigation, enhance its compliance program, implement rigorous internal controls and retain an independent corporate compliance monitor for a term of three years.

In addition, Teva Russia entered into a plea agreement with the DOJ, subject to court approval, in which it pleaded guilty to the DOJ's charge that Teva Russia conspired to violate the anti-bribery provisions of the FCPA. In the plea agreement, the DOJ noted that Teva and Teva Russia were not eligible for more significant discount on the fine or the form of resolution as Teva did not timely voluntarily self-disclose the FCPA violations. However, the DOJ noted that Teva Russia did receive credit for its cooperation with the investigation and remedial measures. In a hearing on 16 June 2017, the U.S. District Court for the Southern District of Florida expressed concern about the structure of the proposed plea agreement, which required Teva Russia to follow the terms of its parent company's deferred-prosecution agreement without imposing any direct monetary penalty on the subsidiary, but indicated its willingness to accept the plea.



Agencies: United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Disgorgement
Year Resolved: 2016
Compliance Monitor: N/A
Ongoing: No
Details:

On 9 July 2012, Teva received a subpoena from the SEC "to produce documents with respect to compliance with the FCPA in Latin America."

In its Form 6-K filed with the SEC on 15 November 2016, Teva disclosed that the company has established a provision of approximately USD 520 million based on advanced discussions with the DOJ and SEC to settle the FCPA matters in relation to its conducts in Russia, Mexico and Ukraine between 2007 and 2013.

On 22 December 2016, Teva agreed to pay more than USD 519 million to settle the charges by the US authorities that it violated the FCPA by paying bribes to foreign government officials in Russia, Mexico and Ukraine. In its settlement with the SEC, Teva entered into a cease and desist order and agreed to pay approximately USD 236 million in disgorgement and prejudgment interest to settle the charges that Teva violated the anti-bribery provisions, books and records provisions, and internal accounting controls provisions of the FCPA.



ENTITIES/INDIVIDUALS INVOLVED

DETAILS OF HOW CONDUCT WAS DISCOVERED

Discovery Method: Whistleblower
Details:

In December 2016, Teva disclosed that the company is investigating claims by an anonymous tipster that Teva bribed state healthcare workers in Romania. The tipster reported the allegation in a series of emails to Teva's CEO, audit committee and compliance staff between October 2015 and November 2016. In addition, the tipster further indicated to Teva that the allegations were being reported to the SEC and the DOJ.


Country: Romania

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