Lilly to Pay $29.4 Million to End SEC Foreign Bribe Case

Eli Lilly & Co. (LLY) agreed to pay $29.4 million to settle U.S. Securities and Exchange Commission allegations that employees of subsidiaries gave cash and gifts to officials in China, Brazil, Russia and Poland to win millions of dollars in business.

Under the settlement agreement filed today in federal court in Washington, the drugmaker didn’t admit or deny the truth of the allegations. The SEC claimed the company’s violations of the Foreign Corrupt Practices Act began as early as 1994.

“Eli Lilly and its subsidiaries possessed a ‘check the box’ mentality when it came to third-party due diligence,” Kara Novaco Brockmeyer, head of the SEC’s foreign bribery unit, said in a statement. “Companies can’t simply rely on paper-thin assurances by employees, distributors, or customers. They need to look at the surrounding circumstances of any payment to adequately assess whether it could wind up in a government official’s pocket.”

Lilly, the Indianapolis-based maker of the antidepressant Cymbalta, said in a statement today that it was notified of the bribery probe in August 2003. As part of the settlement, Lilly agreed to have an independent consultant conduct a 60-day review of its internal controls and compliance program related to the anti-bribery law.

‘Internal Controls’

“We have cooperated with the U.S. government throughout this investigation and have strengthened our internal controls and compliance program globally, including significant investment in our global anti-corruption program,” Anne Nobles, Lilly’s chief ethics and compliance officer, said in the statement.

The SEC said an Eli Lilly subsidiary in Russia used so- called offshore marketing agreements to pay third parties chosen by government customers or distributors without knowing who these people were beyond an address or bank account information.

These offshore entities were used in some instances to funnel money to government officials to obtain business for the subsidiary, the SEC alleged.

The case is U.S. Securities and Exchange Commission v. Eli Lilly & Co., 12-cv-02045, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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