New whistleblower provisions in the recently passed Dodd-Frank Act enable whistleblowers to receive rewards for reporting violations of the Foreign Corrupt Practices Act (FCPA). The FCPA prohibits bribery of foreign government officials in international business transactions and false entries in books and records of those companies within the statute. Whistleblowers assisting in a recovery receive a monetary award between 10-30%.
FCPA enforcement is becoming increasingly more important: between 2001 and 2004, the SEC resolved 17 FCPA cases and during 2005 to 2008 the Department obtained 42 resolutions. The largest FCPA settlement to date involves Siemens in late 2008. After allegedly paying $1.4 billion in bribes to government officials in Asia, Africa, Europe, the Middle East and the Americas, the company entered a guilty plea and settlement resulting in $350 million received by the SEC.
According to its recently filed 10-K, Merck has announced that it is currently under investigation by both the Department of Justice and the SEC for possibly violating the anti-bribery law in multiple foreign countries. GlaxoSmithKline, Pfizer, Bristol-Myers Squibb, Eli Lilly, and others have also been targeted.
The current probe is investigating all aspects of the companies’ dealings in non-US markets. A primary focus of the investigation is placed on the recruitment of physicians for clinical trials, as these same physicians also frequently sit on regulatory boards responsible for approving or denying drugs in many countries.
Allegedly, payments made by drug companies to these doctors may have influenced the reliability or integrity of clinical trial data. According to a recent Department of Health and Human Services report, 80 percent of all marketing applications for FDA approved drugs in the US had relied on at least one foreign trial.
If companies had relied on fraudulently conducted clinical trials, they may face liability on a number of fronts, including False Claims Act. The False Claims Act has been incredibly successful at targeting fraud at home, and could also be used to combat fraud abroad.