SciClone Agrees to Pay $12.8 Million to Settle SEC Bribery Violation Charges
SciClone Pharmaceuticals Inc., a US-based, China-focused specialty pharmaceutical company will install a number of compliance measures after employees of SciClone subsidiaries acted as SciClone agents and gave money, gifts, and other things of value to foreign officials in China in order to obtain sales of SciClone pharmaceutical products. These transactions were falsely recorded in SciClone’s books and records as legitimate business expenses (travel, conferences, and promotional expenses). Although the company fired the specialist and conducted an internal investigation regarding that employee’s conduct, no further action or remedial measures were taken. The SEC determined SciClone failed to devise and maintain a sufficient system of internal accounting control and lacked an effective anti-corruption compliance program.
One of the SEC’s charges that SciClone violated was Section 30(A)(g) of the Foreign Corrupt Practices Act. This section makes it unlawful for any issuer to corruptly act outside of the United States by an offer or promise of anything of value to any foreign official.
To settle the charges, the pharmaceutical company agreed to pay $12.8 million in penalties and will hire a compliance officer for its China operations, extensively review employee travel and entertainment reimbursement policies, and reduce the number of suppliers providing third-party travel ($9.426 million in disgorgement of sales profits, $900,000 in prejudgment interest and a $2.5 million penalty).
As a result, SciClone agreed to take steps to improve internal accounting controls to make a dedicated compliance function. Those include incorporating anti-corruption policies in third-party contracts, providing anti-corruption training, disciplining employees and managers who violate such policies, and making internal audit and compliance departments. Under the settlement terms, SciClone will conduct an initial review and submit a report about the implementation of compliance measures, then conduct and prepare at least three follow-up reviews and reports.