Global Healthcare Company To Enter DPA, Pay $345 Million To DOJ And SEC, To Resolve FCPA Claims
On June 25, 2020, Novartis AG, a global healthcare company headquartered in Switzerland, and two of its subsidiaries (one current and one former) agreed to pay a total of $345 million in disgorgement and fines to the U.S. Department of Justice and Securities and Exchange Commission to settle claims that they had violated the Foreign Corrupt Practices Act (FCPA). 15 U.S.C. §§ 78dd-1. Specifically, the DOJ entered into deferred prosecution agreements with a current Novartis subsidiary operating in Greece and a former Novartis subsidiary based in Singapore and overseeing operations in Vietnam, which agreed to collectively pay more than $233 million in criminal fines. And the parent company agreed to pay the SEC $112 million in disgorgement and pre-judgment interest.
Supreme Court In Liu Upholds SEC Ability To Seek Equitable Disgorgement Of Net Profits For Return To Victims, But Indicates Limits On Broader Disgorgement Theories
On June 22, 2020, in an 8-1 decision authored by Justice Sotomayor, the United States Supreme Court upheld the ability of the Securities and Exchange Commission to seek disgorgement in civil actions brought in district court as a form of “equitable relief ” under 15 U. S. C. §78u(d), at least to the extent the disgorgement is of a defendant’s “net profits” and the disgorged funds are returned to defendant’s victims. Liu v. SEC, No. 18–1501, __ S.Ct. __ (June 22, 2020). Though it was generally expected that the Supreme Court would uphold the SEC’s ability to seek disgorgement in some form, the precise contours of any such decision have been much anticipated since the Supreme Court held in Kokesh v. SEC, 581 U. S. ___ (2017), that at least certain forms of disgorgement sought by the SEC enforcement action impose a “penalty” for purposes of calculating the appropriate statute of limitations under 28 U. S. C. §2462, calling into question whether it could be considered “equitable relief.” The Liu decision is ostensibly a win for the SEC, in that it upheld the SEC’s ability to obtain disgorgement. But by focusing on ensuring that a given disgorgement order constitutes “equitable relief,” the Supreme Court has placed important limits on the manner in which the SEC may obtain disgorgement that could have significant impacts on the way the SEC pursues enforcement actions.