More pharmas implicated in Iraq bribery probe

While the SFO itself has not confirmed the identities of the companies that have been issued with notices, GlaxoSmithKline (GSK), AstraZeneca and Eli Lilly have all confirmed reports that they have received requests to supply the agency with documentation relating to their participation in the United Nation's (UN) now defunct Oil-for-Food programme. However, a spokesperson for the SFO informed in-PharmaTechnologist.com that the number of firms being investigated easily runs into "double figures," with numerous pharma firms highlighted in an investigation into the corruption of the UN scheme (see table below for further details). GSK, AstraZeneca and Lilly were issued so-called 'Section 2' notices by the SFO in mid-December, with a Lilly spokesperson confirming a response deadline of the end of January. While such notices are regularly issued to financial institutions, banks or accountants who often hold information relevant to suspected fraud, Section 2 powers can only be used in investigations where there is reasonable suspicion of serious or complex fraud. The SFO's investigation started almost a year ago in February 2007, looking into suspected cases of improper payments to the Iraqi government in order to obtain contracts with Iraqi ministries. Akzo Nobel has already been burnt by the revelation that two of its subsidiaries (Intervet International and Organon, since acquired by Schering Plough) were guilty of such illegal bartering, with a December statement by the US Department of Justice detailing the Dutch firm's penalties. While Akzo Nobel managed to avoid criminal charges by agreeing to cooperate fully with ongoing investigations, the company will be forced to pay out $800,000 to the US Treasury if Organon fails to pay a criminal fine of 381,000 to the Dutch Public Prosecutor. Akzo Nobel also announced that it had reached an agreement with the Securities and Exchange Commission, paying $750,000 in civil penalties and approximately $2.2m in disgorgement of all profits in connection with contracts for which its subsidiaries paid kickbacks to the Iraqi government. "Beginning in 2000, the Iraqi government began requiring companies wishing to sell humanitarian goods to government ministries to pay a kickback, often mischaracterised as an 'after sales services fee,' to the government in order to be granted a contract," the Department of Justice explained. "The amount of that fee was usually 10 per cent of the contract price. Such payments were not permitted under the Oil-for-Food Programme or other sanction regimes then in place." The UN's Oil for Food Programme was established in 1996 to enable Iraq to sell its oil whilst ensuring that the proceeds went only to providing humanitarian goods and services such as food and medicine. However, by the time the scheme was closed down in 2003, the Iraqi government had succeeded in diverting almost $2bn from over 2,000 companies in the form of bribes and kickbacks. A 2005 investigation by the UN into the alleged corruption of the scheme noted the "extensive manipulation" of the programme by Saddam Hussein and the Iraqi government, as well as the grievous failure of those in charge of the programme to ensure its integrity. Tens of millions of dollars in fines have been paid by firms found guilty of paying illegal kickbacks, and although some companies (such as Akzo Nobel) have admitted wrongdoing, others are vehemently protesting their innocence. AstraZeneca denies "any allegation of unethical behaviour on [its] part in [its] trading relationships with Iraq," as does GSK, stating that it "does not believe that its employees or agents in Iraq knowingly engaged in any wrongdoing regarding the Oil-for-Food programme." Novo Nordisk, labelled in the 2005 report as having paid almost $1.5m in so-called 'after sales services fees', also proclaimed its innocence, with CEO Lars Rebien Srensen insisting that the firm "has neither been involved in bribing officials or over-invoicing nor in any other way exploited its participation in the Oil-for-Food programme." With the Serious Fraud Office's investigations representing the largest and most complex cases of suspected fraud, and with numerous firms due to hand over documents relating to their involvement in the seven-year oil for food programme, the investigation could easily be expected to last another year, according to the SFO spokesperson. Whether the members of the pharmaceutical industry were unwittingly duped into funding Saddam Hussein's regime or were well aware of the destination of the additional 'service fees', the allegations are unlikely to help repair the sector's already lack lustre reputation. Below is a sample of some of the pharma firms named in the 2005 Independent Inquiry Committee Into the United Nations Oil-For-Food Programme (see here for further details): Company Number of Contracts Affected 'After Sales Services Fee' Paid Menarini 3 $11,862 ACS Dobfar 2 $1,092,677 Ajanta Pharma 12 $199,207 AstraZeneca 3 $167,571 Bayer Turk Kimya 13 $555,800 Beaufour Ipsen International 2 $72,392 Becton Dickinson 4 $262,643 Biomerieux 4 $156,342 Biotest Pharma 7 $790,344 Boston Scientific 1 $28,717 Cilag 6 $509,092 Cipla 13 $76,077 Dr Reddy's 2 $24,765 Eli Lilly 1 $343,191 Hoffman La Roche 16 $296,225 Fresenius 3 $174,638 Glaxo SmithKline Walls House 2 $834,390 Glaxo Wellcome Egypt 1 $54,157 Glaxo Wellcome Export 7 $257,596 Glaxo Wellcome South Africa 1 $19,836 Gulf Pharmaceuticals 8 $323,770 Hikma Pharmaceuticals 25 $1,372,950 IMA 2 $623,368 Janssen Pharmaceuticals 13 $348,295 Leo Pharmaceutical Products 10 $680,653 NV Organon 3 $240,750 Nippon Kayaku 7 $325,457 Novartis 2 $135,826 Novo Nordisk 11 $1,437,946 Panpharma 2 $83,970 Ranbaxy 10 $145,828 Serono Pharma 9 $859,001 SmithKline Beecham 1 $835,935 Wockhardt 3 $70,589