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FCPA Compliance Considerations Brought to Light by Glaxo Smith Kline


FCPA Compliance

A compliance program is only as good as its weakest link. 

When it comes to compliance, chain of command  is critical, so if any link within the chain is rusty or broken, danger of a total collapse brought on by shady business practices could headline newspapers. This breakage is distinctly evident within the context of the recent allegations of bribery and corruption within the Glaxo Smith Kline probe, and there exists a multitude of lessons to consider. I’ve outlined four:

First: Evaluate engagements from a risk-based approach when considering FCPA scrutiny.

Risk-laden ventures warrant adequate levels of scrutiny from all levels of the company’s compliance program, and an effective compliance program will redistribute resources to vet the more risky engagements, and will constantly evolve in order to evaluate risks in new markets and business ventures. For example, winning a contract in the UK through legal and compliant channels warrants less scrutiny from a compliance program than a large pharmaceuticals contract won in China by way of engaging third party sales agents in China.

Second: The risk-based compliance approach is only effective if the company in question is realistic about the locale in which it is dealing.

Specific countries must be evaluated more deeply than others. Ukraine, China, and Russia are notorious for backroom deals. Any engagement within countries that are known for corruption should be evaluated intensively with a hands-on approach. Database searching is simply not enough. Deals wrought with location-based risk need deeper investigations which may cost a bit more, but are a fraction of a fraction less expensive than prosecution and corporate restructuring. In addition, if your bases are covered and it turns out that you have committed an FCPA violation, the prosecuting agency will look more favorably on the company that chose to conduct thorough diligence, rather than a company who simply typed a company’s name into Lexis Nexis and Google.

Third: Consider the industry.

GSK provided the world with a revealing purview of the sorts of dealings that are inherent within the pharmaceutical industry. Within the FCPA Compliance network, the medical device and pharma industries are the red-headed stepchildren and the golden geese. With so many hospitals, doctors, nurses, and administrators around the globe functioning as “foreign officials” for FCPA purposes, it has never been more important to appropriately analyze the relationships with such individuals prior to engaging them. Not necessarily because they are corrupt, or are seeking a bribe, but because such dealings are galactic-sized beacons for SEC and DOJ scrutiny. These relationships within the pharma industry make prosecutors lick their lips— so to insure that they don’t get the full three course meal, make certain that your diligence is truly diligent, and has been thoroughly documented.

Fourth: Consider for a moment the appearance of immorality of which GSK has been accused.

GSK has been accused of showering officials with $489mm worth of gifts and bribes, lining their pockets and cooking books – but who really paid for these massive bribes and subsequent profits? The people of China did. The costs of such actions were passed onto the consumer, and not within the scope of entertainment such as movie tickets or luxury goods, but vital healthcare needs. Inflated prices for medicine could have possibly caused enormous hardships for individuals, as well as insurance companies. This isn’t to say that any bribery isn’t always morally wrong in the eyes of DOJ and SEC, but the relative after effects on the infirmed will surely light the burner under caring federal prosecutors. Such acts that carry implications of inhumanity will surely garner much unwanted attention and scrutiny, and will increase the probability of intensive government investigations.


Due Diligence Professional Danyal Solomon

Danyal Solomon is a Global Diligence Consultant at Kreller. Coming from a strong Turkish descent, he hails from Tucson, Arizona, and received his Bachelor's Degrees in Political Science and Middle Eastern Languages at Columbia University in New York City. After graduating, he moved to Egypt to work as a Market Researcher at Microsoft, and then promptly watched his Cairo apartment burn on his flight back to New York during the Egyptian Revolution in 2010. He has since moved to Northern Kentucky, and enjoys renovating and refurbishing his home. Danyal is fascinated by laws, language, and culture, and is an avid traveler fluent in Arabic, Spanish, English, and Baseball.