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SEC v. Wyeth LLC

 
:
Pfizer - Wyeth LLC
:
SEC Civil
:
August 7, 2012
:
SEC v. Wyeth LLC
:
SEC v. Wyeth LLC, No. 1:12-cv-01304 (D.D.C. 2012)
:
During Wyeth's alleged misconduct, Wyeth was acquired by Pfizer Inc. in 2009. The DOJ's prosecution of another Pfizer entity, Pfizer H.C.P. Corporation, was related to conduct wholly unrelated to the conduct alleged in the SEC's action against Wyeth.
:
Healthcare-Pharmaceutical
:
China, Indonesia, Pakistan, Saudi Arabia
:
2005; 2006; 2007; 2008; 2009; 2010
:
Employees of government-owned hospitals in China, Indonesia, and Pakistan; customs official in Saudi Arabia.
:
Wyeth LLC ("Wyeth") is a pharmaceutical company headquartered in Madison, New Jersey, and incorporated in Delaware. Its securities were registered with the SEC and its common stock traded on the New York Stock Exchange. On October 15, 2009, Wyeth was acquired by Pfizer Inc., delisted from the New York Stock Exchange and became a wholly-owned subsidiary of Pfizer.

According to court documents, Wyeth subsidiaries in China, Indonesia, Pakistan, and Saudi Arabia allegedly made improper payments to foreign officials (including employees of state-owned hospitals) to procure business, which resulted in inaccurate books and records. The improper payments were falsely recorded as promotional expenses, "Miscellaneous Selling Expenses," "Trade Allowances," "Entertainment," and "Give Aways and Gifts."

In China, Wyeth's indirect majority-owned subsidiary, Shanghai Wyeth Nutritional Co., Ltd., provided cash payments to Chinese state-owned hospitals and healthcare providers employed by the Chinese government. The payments were made to influence the healthcare providers' recommendations of Wyeth nutritional products to patients, to ensure that Wyeth products were made available to new mothers at the hospitals, and to obtain information on new births that could be used for marketing purposes. The payments were funded with the help of collusive travel agencies, and by submitting falsified expense reimbursement requests, which were either inflated or related to events that did not occur.

In Indonesia, Wyeth's indirect majority-owned subsidiary, PT Wyeth Indonesia ("Wyeth Indonesia") (including Wyeth Indonesia's Ethical Nutritional Division), provided cash payments, nutritional products, cell phones, and phone card credits to employees of Indonesian government-owned hospitals. The payments were made to influence the doctors' recommendation of Wyeth nutritional products to their patients, to ensure that Wyeth products would be made available to new mothers at hospitals, and to obtain information about new births that could be used for marketing purposes.

To conceal the gift inducements, Wyeth Indonesia instructed distributors to generate invoices and deliver the products, but to then charge back the value of the goods to Wyeth Indonesia so the institutions received the products without charge. Wyeth's International Corporate Compliance Office ordered this practice to be stopped; however, Wyeth Indonesia employees continued with the practice, and concealed the reimbursement by instructing other vendors to pay the distributors and then obtain reimbursement from Wyeth Indonesia by submitting false invoices.

In Pakistan, Wyeth's indirect majority-owned subsidiary, Wyeth Pakistan Limited ("Wyeth Pakistan") provided cash payments, travel, office equipment and renovations to doctors who were employed by state-owned healthcare institutions, to influence doctors to recommend Wyeth products to new mothers. The improper benefits were initially funded by fictitious expense reimbursement requests, but after Wyeth's external auditor identified questionable reimbursement submissions, Wyeth Pakistan employees began generating funds with the help of collusive vendors.

In Saudi Arabia, Wyeth operated through COCI Corporation's representative office ("Wyeth Saudi Arabia"). Wyeth products were marketed and sold through a Saudi Arabian distributor. The distributor made a payment to a Saudi Arabian customs official to secure the release of Wyeth promotional items, which had been held because Wyeth Saudi Arabia had failed to secure a Certificate of Conformity. Wyeth Saudi Arabia reimbursed the distributor for his cash payment and recorded it as a "facilitation expense."
:
Books and records (Issuer), Internal controls (Issuer)
:
Disgorgement, Injunction/Cease and desist
:
Wyeth was ordered to pay disgorgement of $17,217,831 with prejudgement interest of $1,658793,91, for a total of $18,876,624.91. Wyeth was not ordered to pay a civil penalty, based on Wyeth's "exemplary cooperation" in an SEC investigation.
:
18,876,625
:
0
:
Issuer
:
U.S.
:
Contract Procurement/Retention, Customs Clearance, Other Business Advantage
:
17,217,831
:
Cash, Gifts, Goods/Services, Travel
:
Direct, Sales Agent/Consultant, Subsidiary Company
:
Not stated.
:
China, Indonesia, Pakistan, Saudi Arabia
:
No
:
Yes