Risk Management

Three Companies Probed On Bribe Charges

Bristol-Myers, Lucent Technologies, and DaimlerChrysler are being investigated for possible violations of the Foreign Corrupt Practices Act.
Stephen TaubNovember 11, 2004

The Securities and Exchange Commission is currently investigating at least three major, multinational companies for allegedly bribing foreign officials.

In its quarterly filing, Bristol-Myers Squibb Co. disclosed that in late October the SEC launched an informal inquiry into the activities of the company’s German pharmaceutical subsidiaries. The investigation may be related to potential violations of the Foreign Corrupt Practices Act (FCPA) and possibly German law, company officials told the Associated Press.

The FCPA, enforced by the U.S. Department of Justice and the SEC, makes it unlawful to bribe foreign government officials to obtain or retain business.

Bristol-Myers officials believe that the probe may encompass matters currently under investigation by a prosecutor in Munich. Executives said they are cooperating with both the SEC and the German authorities.

The drug maker is conducting a separate, internal review of its pharmaceutical operations in Mexico. The review covers areas of compliance with legal, financial, and regulatory requirements and the company’s Standards of Business Conduct and Ethics.

Meanwhile, potential bribery charges involving Lucent Technologies Inc. surfaced on Monday. The company reported that former chairman and chief executive officer Richard McGinn; one-time head of the company’s Saudi Arabian operations, John Heindel; and a third former employee received “Wells” notices from the SEC. The notices indicate that the commission is considering recommending that civil actions be taken against the three individuals for violations of the FCPA.

The allegations include violations of the anti-bribery provisions of the FCPA. The charges also include aiding and abetting the company’s alleged violations of FCPA accounting requirements and of its rules mandating a proper system of internal accounting controls, company sources said.

Lucent acknowledges that the actions are the result of a previously disclosed investigation by the SEC and the Department of Justice into possible FCPA violations related to the company’s operation in Saudi Arabia from 1997 to 2000.

Although Lucent has not received a Wells notice, the investigation is continuing, company officials said.

Earlier this month, the Associated Press reported that the SEC is investigating charges made by a former employee in DaimlerChrysler’s audit department that the auto maker used secret bank accounts to bribe government officials. The SEC notified the company in August that it had opened a probe into the company’s compliance with the FCPA.

The investigation followed the filing of a “whistleblower” complaint with the U.S. Department of Labor under the Sarbanes-Oxley Act by the former employee, who was fired earlier this year.