Teva sets aside $520M to settle bribery investigations by DOJ, SEC

Teva is trying to clean the slate on its history of allegedly paying bribes in foreign countries to boost sales. Having revamped its governance programs and set a new tone about bad behavior, it has now put aside more than half a billion dollars to cover anticipated settlements with U.S. authorities.

In its Q3 earnings today,Teva revealed it was in “advanced discussions” to settle investigations by the Justice Department and SEC into violations of the Foreign Corrupt Practices Act (FCPA) and set aside about $520 million to cover the expected settlements. It said those discussions concern matters that occurred in 2007-2013 in Russia, Mexico and Ukraine.

Teva emphasized that none of the conduct involved its U.S. business, inferring instead that it was problems with third parties and subsidiaries. It pledged to do whatever it can to prevent a repeat. “The compliance program that Teva has in place now is serious, rigorous, and comprehensive and is designed to protect the company and its subsidiaries against future violations.” it said in its earnings statement.

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The Israel-based drugmaker has been wrestling with these issues for years. In 2013 it revealed it was looking into allegations of bad acting and then last year fessed up that an internal investigation determined that the company had probably violated the FCPA.

It said once it uncovered FCPA concerns in 2012, it acted quickly, “transforming its governance program and processes on every level.” It also terminated “problematic business relationships with third parties,”  overhauled the management of several subsidiaries, and even quit doing business in some countries. The drugmaker also fired some employees.

Among those let go was a former Teva fraud examiner, but in her case she claims to have been terminated for cooperating with federal authorities after the company ignored her suggestions on how to clean up its Latin American operations. According to the suit filed last year by Keisha Hall, the former director of finance for Latin America, Teva’s practices included unauthorized payments to doctors in Chile, bribes to physicians working in regional hospitals and low inventory controls in Mexico. Teva has said she was let go for violating company policy.

But the company asserted today it is past all of the bad behavior. “Teva has a culture of compliance that begins with a strong tone at the top -- including executive regional and local management -- and underpins every single business decision,” it said in its earnings.

In earnings, Teva reported revenues up 15% because of the inclusion of sales from Actavis, which it acquired from Allergan in August for $40.5 billion. It, however,  cut its revenue guidance for 2016 to a range of $21.6 billion to $21.9 billion, from its previously forecast range of $22 billion to $22.5 billon, Morningstar reported. It sait now expects adjusted earnings per share to be between $5.10 and $5.20, down from $5.20 to $5.40 previously.

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