April 19, 2024

You are here: Home / Archives for fraud cases

Merck to Pay $950 Million Over Vioxx

November 23, 2011 by Leave a Comment

Merck has agreed to pay $950 million and has pleaded guilty to a criminal charge over the marketing and sales of the painkiller Vioxx, the company and the Justice Department said Tuesday.

The negotiated settlement, which includes resolution of civil cases, was the latest of a series of fraud cases brought by federal and state prosecutors against major pharmaceutical companies.

By the time Vioxx, which was approved by the Food and Drug Administration in 1999, was pulled off the market in 2004 because evidence showed that it posed a substantial heart risk, about 25 million Americans had taken the drug.

In a statement on Tuesday, Merck said that it had previously disclosed the seven-year investigation by the United States attorney in Massachusetts and had charged $950 million against its earnings in October 2010.

Merck agreed to pay a $321 million criminal fine and plead guilty to one misdemeanor count of illegally introducing a drug into interstate commerce, the Justice Department said in a news release. The charge arose from Merck’s promotion of Vioxx to treat rheumatoid arthritis before the Food and Drug Administration approved it for that purpose in 2002.

Merck also is paying $426 million to the federal government and $202 million to state Medicaid agencies. Those payments will settle civil claims that its illegal marketing caused doctors to prescribe and bill the government for Vioxx they otherwise would not have prescribed.

Physicians are free to prescribe drugs for any purpose they see fit, but pharmaceutical companies are prohibited from marketing them for any uses except those that the Food and Drug Administration has determined are safe and beneficial.

“When a pharmaceutical company ignores F.D.A. rules aimed at keeping our medicines safe and effective, that company undermines the ability of health care providers to make the best medical decisions on behalf of their patients,” Tony West, assistant attorney general of the Justice Department’s civil division, said in a statement.

Merck, based in Whitehouse Station, N.J., withdrew Vioxx from the market in more than 80 countries in 2004 after a clinical trial showed it doubled the risk of heart attack, stroke and death.

In 2007, Merck agreed to pay $4.85 billion to settle 27,000 lawsuits by people who had claimed they or their relatives had suffered injury or death after taking the drug. Merck has also signed a corporate integrity agreement in connection with the settlement, promising to monitor future promotional activity and report back regularly to the government. Merck joins Pfizer and most other major drug companies in settling long investigations with prosecutors.

No person was held liable for Merck’s conduct. “It’s just a cost of doing business until a pharmaceutical executive does a perp walk,” said Erik Gordon, a pharmaceutical analyst and clinical assistant professor at the Ross School of Business at the University of Michigan.

Investors are also suing Merck, saying it played down the risks of Vioxx and cost them billions of dollars in stock value after the drug was removed from the market.

Merck shares declined most of the day on Tuesday, dropping 0.97 percent to $33.81.

Article source: http://feeds.nytimes.com/click.phdo?i=c1a93e7f0373cfafb88f9efe4b147e2f

Filed Under: Business News Tagged With: , ,

Olympus Hid Investing Losses in Big Merger Payouts

November 8, 2011 by Leave a Comment

TOKYO — Olympus said Tuesday that more than $1 billion in merger payouts were used to hide years of losses on investments, an acknowledgment that is an abrupt about-face for the company, which had denied any wrongdoing in the wake of a widening scandal.

That revelation alone could make this one of the biggest accounting fraud cases in corporate history. It is also a spectacular turn of events amid a boardroom battle that has pitted Olympus’s former British chief executive turned whistle-blower, Michael C. Woodford, against an otherwise all-Japanese company board.

Mr. Woodford was fired in mid-September after trying to force an investigation into a series of acquisitions, made before his appointment as president in February. He has since released internal documents to the news media and called for the entire company board to resign. Since the accusations, Olympus has lost half its stock market value as many questioned the company’s governance.

Olympus, which is based here in Tokyo, had categorically denied any wrongdoing over the deals, made from 2006 to 2008. Just last week, the company appointed a panel of outside experts to investigate, a measure Olympus said was aimed at assuaging investor fears.

But in an extraordinary statement issued Tuesday, the company said the panel found that the money for mergers had in fact been used to mask heavy losses on investments racked up since about 1990.

The panel found that Olympus channeled money through several investment funds to “eliminate latent losses,” the company said in the statement, without elaborating. The revelations came as a surprise because the panel had not been expected to reach any conclusions for at least several more weeks.

The payouts in question involve $687 million in fees Olympus paid to an obscure financial adviser over its acquisition of the British medical equipment maker Gyrus in 2008. That fee amounted to roughly a third of the $2 billion acquisition price, a fee amount more than 30 times the norm.

The Federal Bureau of Investigation and the Securities and Exchange Commission in the United States are also investigating the Gyrus deal, according to people familiar with the matter.

Olympus also acquired three small companies in Japan for a total of $773 million, only to write down most of their value within the same fiscal year. Those companies — Altis, a medical waste recycling company, Humalabo, a facial cream maker, and News Chef, which makes plastic containers — had little in common with Olympus’s main line of business of producing cameras and other electronics. Those businesses had not made money before being acquired, according to the credit ratings agency Tokyo Shoko Research.

At a news conference, the company’s new president, Shuichi Takayama, bowed deeply in apology. “It is true that there were inappropriate dealings,” he said. “Our previous statements were in error.” But he stopped short of acknowledging fraud at the company, and said that no money had flowed out of the company. He said Olympus was still investigating the case and was still unprepared to reveal the scale of past losses.

Mr. Takayama also said that Hisashi Mori, an executive vice president, had been fired over his involvement in the cover-up. Hideo Yamada, who is also implicated, has offered his resignation, he said. He reiterated the company’s position that Mr. Woodford’s departure had to do with his aggressive Western-style management style rather than his inquiries into the acquisitions. Mr. Takayama said that despite the disclosure, he hoped to keep Olympus’s shares listed on the Tokyo Stock Exchange. Its shares were down nearly 30 percent Tuesday afternoon.

Mr. Woodford, who worked at Olympus for 30 years, had begun to look into those payouts after a Japanese financial magazine, Facta, published an exposé on the deals. In September, Mr. Woodford commissioned a report by PricewaterhouseCoopers into the Gyrus deal that raised concern over actions taken by Olympus management, including a lack of due diligence.

Based on the report, Mr. Woodford called for a full investigation in a letter dated Oct. 11. He urged the company’s chairman at the time, Tsuyoshi Kikukawa, and other members of the board to resign, accusing them of “calamitous errors and exceptionally poor judgment” and comparing them to rogue traders.

But the next day, the Olympus board unanimously voted to oust Mr. Woodford. He said he was not permitted to speak at the board meeting, and was advised to leave the country immediately.

Mr. Kikukawa resigned in late October. In a statement at the time, he denied wrongdoing.

Questions remain over Olympus’s links to the obscure investment and advisory companies that facilitated those acquisitions, including an investment fund incorporated in the Cayman Islands, as well as Axes, a company that oversaw those funds from the United States and Japan.

The Global Company, an investment advisory firm based in Tokyo, was closely involved in setting up the three companies as well as facilitating their sale to Olympus, according to a New York Times investigation. Executives at those companies have not been available for comment.

Article source: http://feeds.nytimes.com/click.phdo?i=f1f06c310eb87355acd0480a97c540bb

Filed Under: Business News Tagged With: , ,

Swiss Near Tax Treaties With Germany and Britain

August 10, 2011 by Leave a Comment

The deals are another step in Swiss efforts to clean up the country’s image, under pressure from American prosecutors as well as European countries that have been willing to pay for lists of client names that were stolen by bank employees.

“Being surrounded by the E.U. and a significant wealth management center, Switzerland has chosen to make this move earlier rather than later,” said Luc Thévenoz, a law professor at the University of Geneva.

The treaty with Germany is likely to be signed first, possibly as early as Wednesday, followed by a similar deal with Britain.

Both agreements should have broad effects, analysts and lawyers say. Clients will be able to retain secrecy, but at a price, and some may choose to move to other offshore locales.

Britain and Germany will win billions in needed revenue and, in return, will no longer pursue Swiss banks in criminal cases related to a lack of compliance with tax rules. And the Swiss banking model will shift further from reliance on managing undeclared money. That will particularly affect smaller banks.

Banking secrecy was enshrined in law in Switzerland in the 1930s and has been used to protect anonymity as well as to evade taxes, which is not in itself a crime under Swiss law. But under increasing international pressure, Switzerland agreed in 2009 to apply new standards in bilateral tax treaties, allowing for an exchange of information in tax evasion as well as fraud cases. It has since incorporated those rules into some 30 bilateral double-taxation agreements.

“The whole structure of Swiss banking secrecy has already changed,” said Pietro Sansonetti, a partner at the Geneva offices of the law firm Schellenberg Wittmer. “Secrecy can still protect privacy for personal reasons but no longer for simple tax avoidance.”

The new treaties will be much more sophisticated and broader than existing accords with the European Union, in force since 2005, which charge a withholding tax on interest income on savings. That levy is then returned anonymously to the home country, but it is easy for depositors to mask their identities.

After the deals are ratified by legislatures, German and British clients would pay a one-time retroactive sum on their capital, as well as an annual tax on capital gains and dividend payments rather than just on interest income.

Germany and Britain will consider the withholding tax as final and their citizens will no longer have the legal obligation to declare their Swiss income to their home authorities.

Mario Tuor, a Swiss government spokesman for finance, said negotiations with Germany were in their “final phase” and talks with Britain were moving “in a parallel track.” He declined to provide further details.

A German official, who was not permitted to speak publicly, said an agreement was “very close.” The British Revenue and Customs department said “constructive discussions are continuing with the Swiss authorities, and we hope to conclude these as soon as possible.”

The Swiss newspaper SonntagsZeitung reported last weekend that a deal with Germany could be announced Wednesday, and would include a one-time payment of 2 billion Swiss francs, or $2.7 billion, to cover the last 10 years, and a future withholding tax of 26 percent. Swiss banks would make the initial payment and then recoup it from their German clients.

The figures could be higher in the deal with Britain, where similar income would be taxed at progressive and probably higher rates.

If successful, the agreements might then be replicated by other European countries like France, Italy and even struggling Greece.

Washington has followed a different path. American clients are obliged to inform United States tax collectors of their Swiss assets. And the authorities have been conducting investigations involving Americans with undeclared funds in Switzerland since a landmark case in 2009 against UBS. The Swiss bank was forced to identify some of its American clients and was fined $780 million for helping tax evasion. The Swiss government agreed that further client names could be provided if it were shown that other banks acted like UBS.

This article has been revised to reflect the following correction:

Correction: August 10, 2011

An earlier version of this article paraphrased incorrectly an assessment by Louise Somerset, tax director at RBC International Wealth Planning in Britain. She said the agreements might put the onus on Singapore and Hong Kong to enact similar deals to clamp down on tax evasion, not tax avoidance.

Article source: http://feeds.nytimes.com/click.phdo?i=40a6beaff0c9b3019024c64301b5861c

Filed Under: Economy News Tagged With: , ,

UBS Settles Fraud Cases Over Munis

May 5, 2011 by Leave a Comment

The Justice Department, the Securities and Exchange Commission, the Internal Revenue Service and 25 state attorneys general entered into the agreement with UBS, which admitted that, from 2001 through 2006, several of its former employees repeatedly manipulated the bidding process when local governmental entities or nonprofit organizations sought to invest the proceeds of municipal bond offerings.

The conduct of UBS and its employees “corrupted the competitive process and harmed municipalities, and ultimately taxpayers, nationwide,” said Assistant Attorney General Christine A. Varney, who oversees the federal antitrust division. “Today’s agreements with UBS ensure that restitution is paid to the victims of the anticompetitive conduct, that UBS pays penalties and disgorges its ill-gotten gains.”

UBS said in a statement that it was pleased to have resolved the matter. “The underlying transactions were entered into in a business that no longer exists at UBS, and involved employees who are not longer with the firm,” the statement said. The company also said that it had made provisions for the settlement in prior quarters and it therefore “will have no effect on the firm’s future financial results or on any current business of UBS.”

UBS is the second big banking institution to settle accusations of bid-rigging in the municipal bond derivatives market. In December, Bank of America agreed to pay $137 million in restitution after voluntarily disclosing its anticompetitive conduct and agreeing to cooperate with authorities in further investigations.

As part of the broader investigation of bid-rigging in the municipal securities market, the Justice Department has brought criminal charges against 18 former executives of various financial services companies. Nine of the 18 have pleaded guilty, including one former UBS employee. Three other UBS employees also have been charged with criminal activities related to the municipal market.

Most of the $160 million to be paid by UBS will go to municipalities that were affected by the conduct, officials said, which involved more than 100 transactions. According to an outline of the charges by the S.E.C., the company played various roles in the illegal bidding scheme, sometimes obtaining advance information about competing bids for financial products, and in other cases facilitating illegal activity by submitting sham bids for services.

“Our complaint against UBS reads like a ‘how to’ primer for bid-rigging and securities fraud,” Elaine C. Greenberg, chief of the S.E.C.’s municipal securities and public pensions unit, said at a press conference announcing the settlement.

UBS, which acquired the American investment bank
PaineWebber in 2000, was at the time of its conduct one of the largest underwriters of municipal securities in the nation. UBS closed its municipal reinvestment and derivatives desk in 2008.

State and local governments often sell bonds to raise money to pay for projects like roads, schools and hospitals. Until they are ready to spend the money, the entities invest the proceeds in contracts that are often tailored to meet specific needs in terms of the timing of spending and required collateral to insure their debts.

Investment firms offer to sell those contracts at given prices, and bidding for the right to provide the service is supposed to be conducted at arm’s length. But UBS often conspired with the party overseeing the bidding to guarantee that it bid just enough to win the contract, thereby maximizing its own profit.

Of the $160 million to be paid by UBS, $91 million will be routed through the Justice Department and the states to the municipalities and other customers affected. UBS will also pay $47 million through the S.E.C. to the customers affected, and $22 million through the I.R.S.

Under I.R.S. regulations, the proceeds of tax-exempt municipal securities offerings must be invested at fair market value. Because of the fraudulent conduct by UBS, the tax-exempt status of billions of dollars of securities was jeopardized, officials said. That status was reaffirmed by the I.R.S. as part of its settlement with the company.

Article source: http://www.nytimes.com/2011/05/05/business/05muni.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,