Internal Emails: J&J Knew of Bribery “Black Hole” for Years

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Internal Emails: J & J Knew of Bribery “Black Hole†for Years

By Jim  | April 11, 2011

 & (JNJ) CEO Weldon said the $70 million in foreign

bribery settlements his company just made “are not representative of &

employees around the world who do what is honest and right every day.â€

But J & J’s internal emails, plus the U.K. Serious Fraud Office’s records,

indicate that J & J management knew as early as 1999 that it was making improper

payments to Greek sales agents, and that money was disappearing into what it

called a “black hole†in Europe.

Yet J & J later acquired the company that operated that “black hole†in order

to maintain its illegal sales relationships in Greece, according to the SEC’s

complaint. And although the SEC praised J & J’s cooperation in its probe, J & J

took eight years to initially inform the SEC of its problems.

To give you an idea of the scale of J & J’s “not representative†activities,

the violations occurred between 1998 and 2006 in Greece, Poland, Romania, and

Iraq; and involved the following units of J & J: three units of medical device

company DePuy, J & J Poland, Janssen-Cilag Europe, Cilag AG in Switzerland, and

Janssen Pharmaceutica N.V. in Belgium. J & J paid “commissions†to various

local agents of between 10 and 35 percent to do business in those countries.

Commissions or bribes?

The Greek problem came to J & J management’s attention almost immediately after

it acquired Depuy International in 1998. To comply with J & J’s anti-kickback

policies, J & J told Depuy it must stop making payments to a Greek agent who in

turn bribed doctors to buy Depuy’s medical implants. But an unnamed

“Executive A†at Depuy objected to ending the payments. The SEC’s

complaint identifies Executive A as a U.S. resident and a senior executive at

J & J.

At a January 2000 sales conference, Executive A was again told to terminate the

relationship with the Greek agent. Instead Executive A offered to buy the Greek

agent’s company and retain the agent as a consultant. The U.K. fraud office

identified the agent and the company last year as Nikolaos Karagiannis of Medec

S.A.

J & J began due diligence to acquire the company and in April 2000 a J & J executive

based in Europe sent an e-mail to Executive A describing problems in Medec’s

books. The accounts would not pass a “smell test†if audited because of all

the money going into a Greek “black hole,†the executive wrote:



No payoffs, please — we’re corporate

Worse, Medec’s Karagiannis kept putting his requests for bribes in writing. An

unnamed Depuy vice president scolded him for it in January 2001:



With Medec now renamed Depuy Helles, it was supposed to have abided by

J & J’s rules requiring employees to obey the Foreign Corrupt Practices Act,

which bans paying kickbacks to foreigners in order to make sales. But Depuy

employees ignored that. In January 2005, a new “Code of Business Practiceâ€

went into effect, sponsored by medical device lobby group Eucomed, which also

frowned upon paying kickbacks. A DPI vice president wrote the head of DePuy

Helles and his supervisor that Depuy broke “every single rule in the bookâ€:



Finally, in 2006, J & J’s internal audit team woke up to what was happening in

Greece. And then it decided to ignore it, according to the SEC’s complaint:

The issue of payments to surgeons had [also] been previously raised in an

anonymous 2003 letter to a different internal audit team concerning a related

J & J subsidiary in Greece. However, that team concentrated their investigation on

allegations about a possible conflict of interest by local management and did

not fully investigate the alleged payments to doctors.

Only after that, in 2007, did J & J disclose the issues to the SEC.

Two J & J executives have been named in connection to the probe. J & J worldwide

chairman for medical devices & diagnostics J. Dormer (pictured), who

came to the company from Depuy, resigned in 2007 after accepting “ultimate

responsibility†for the wrongdoing.

Dougall, director of marketing at DePuy was convicted of making

£4.5 million in corrupt payments. While Weldon believes the acts were “not

representative†of J & J, the judge in Dougall’s case thought otherwise. He

said:

Corruption was, in effect, a company policy pre-dating your involvement and

approved by your superiors. … it is likely to have involved the knowledge,

consent and participation of individuals with senior responsibilities in the

group of companies in which you worked. … [and the] corruption was systemic

and long-term …

The case came to light because Dougall became a whistleblower. He admitted

wrongdoing and British prosecutors asked the court to give him a suspended

sentence for helping make their case. Instead, the judge gave him 12 months in

prison. Dormer, Dougall’s boss, became chairman of JenaValve, another medical

device company.

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[Guest guest]

http://m.bnet.com/blog/drug-business/internal-emails-j-j-knew-of-bribery-8220bla\

ck-hole-8221-for-years/7911

Internal Emails: J & J Knew of Bribery “Black Hole†for Years

By Jim  | April 11, 2011

 & (JNJ) CEO Weldon said the $70 million in foreign

bribery settlements his company just made “are not representative of &

employees around the world who do what is honest and right every day.â€

But J & J’s internal emails, plus the U.K. Serious Fraud Office’s records,

indicate that J & J management knew as early as 1999 that it was making improper

payments to Greek sales agents, and that money was disappearing into what it

called a “black hole†in Europe.

Yet J & J later acquired the company that operated that “black hole†in order

to maintain its illegal sales relationships in Greece, according to the SEC’s

complaint. And although the SEC praised J & J’s cooperation in its probe, J & J

took eight years to initially inform the SEC of its problems.

To give you an idea of the scale of J & J’s “not representative†activities,

the violations occurred between 1998 and 2006 in Greece, Poland, Romania, and

Iraq; and involved the following units of J & J: three units of medical device

company DePuy, J & J Poland, Janssen-Cilag Europe, Cilag AG in Switzerland, and

Janssen Pharmaceutica N.V. in Belgium. J & J paid “commissions†to various

local agents of between 10 and 35 percent to do business in those countries.

Commissions or bribes?

The Greek problem came to J & J management’s attention almost immediately after

it acquired Depuy International in 1998. To comply with J & J’s anti-kickback

policies, J & J told Depuy it must stop making payments to a Greek agent who in

turn bribed doctors to buy Depuy’s medical implants. But an unnamed

“Executive A†at Depuy objected to ending the payments. The SEC’s

complaint identifies Executive A as a U.S. resident and a senior executive at

J & J.

At a January 2000 sales conference, Executive A was again told to terminate the

relationship with the Greek agent. Instead Executive A offered to buy the Greek

agent’s company and retain the agent as a consultant. The U.K. fraud office

identified the agent and the company last year as Nikolaos Karagiannis of Medec

S.A.

J & J began due diligence to acquire the company and in April 2000 a J & J executive

based in Europe sent an e-mail to Executive A describing problems in Medec’s

books. The accounts would not pass a “smell test†if audited because of all

the money going into a Greek “black hole,†the executive wrote:



No payoffs, please — we’re corporate

Worse, Medec’s Karagiannis kept putting his requests for bribes in writing. An

unnamed Depuy vice president scolded him for it in January 2001:



With Medec now renamed Depuy Helles, it was supposed to have abided by

J & J’s rules requiring employees to obey the Foreign Corrupt Practices Act,

which bans paying kickbacks to foreigners in order to make sales. But Depuy

employees ignored that. In January 2005, a new “Code of Business Practiceâ€

went into effect, sponsored by medical device lobby group Eucomed, which also

frowned upon paying kickbacks. A DPI vice president wrote the head of DePuy

Helles and his supervisor that Depuy broke “every single rule in the bookâ€:



Finally, in 2006, J & J’s internal audit team woke up to what was happening in

Greece. And then it decided to ignore it, according to the SEC’s complaint:

The issue of payments to surgeons had [also] been previously raised in an

anonymous 2003 letter to a different internal audit team concerning a related

J & J subsidiary in Greece. However, that team concentrated their investigation on

allegations about a possible conflict of interest by local management and did

not fully investigate the alleged payments to doctors.

Only after that, in 2007, did J & J disclose the issues to the SEC.

Two J & J executives have been named in connection to the probe. J & J worldwide

chairman for medical devices & diagnostics J. Dormer (pictured), who

came to the company from Depuy, resigned in 2007 after accepting “ultimate

responsibility†for the wrongdoing.

Dougall, director of marketing at DePuy was convicted of making

£4.5 million in corrupt payments. While Weldon believes the acts were “not

representative†of J & J, the judge in Dougall’s case thought otherwise. He

said:

Corruption was, in effect, a company policy pre-dating your involvement and

approved by your superiors. … it is likely to have involved the knowledge,

consent and participation of individuals with senior responsibilities in the

group of companies in which you worked. … [and the] corruption was systemic

and long-term …

The case came to light because Dougall became a whistleblower. He admitted

wrongdoing and British prosecutors asked the court to give him a suspended

sentence for helping make their case. Instead, the judge gave him 12 months in

prison. Dormer, Dougall’s boss, became chairman of JenaValve, another medical

device company.

Sent via BlackBerry by AT & T

[Guest guest]

http://m.bnet.com/blog/drug-business/internal-emails-j-j-knew-of-bribery-8220bla\

ck-hole-8221-for-years/7911

Internal Emails: J & J Knew of Bribery “Black Hole†for Years

By Jim  | April 11, 2011

 & (JNJ) CEO Weldon said the $70 million in foreign

bribery settlements his company just made “are not representative of &

employees around the world who do what is honest and right every day.â€

But J & J’s internal emails, plus the U.K. Serious Fraud Office’s records,

indicate that J & J management knew as early as 1999 that it was making improper

payments to Greek sales agents, and that money was disappearing into what it

called a “black hole†in Europe.

Yet J & J later acquired the company that operated that “black hole†in order

to maintain its illegal sales relationships in Greece, according to the SEC’s

complaint. And although the SEC praised J & J’s cooperation in its probe, J & J

took eight years to initially inform the SEC of its problems.

To give you an idea of the scale of J & J’s “not representative†activities,

the violations occurred between 1998 and 2006 in Greece, Poland, Romania, and

Iraq; and involved the following units of J & J: three units of medical device

company DePuy, J & J Poland, Janssen-Cilag Europe, Cilag AG in Switzerland, and

Janssen Pharmaceutica N.V. in Belgium. J & J paid “commissions†to various

local agents of between 10 and 35 percent to do business in those countries.

Commissions or bribes?

The Greek problem came to J & J management’s attention almost immediately after

it acquired Depuy International in 1998. To comply with J & J’s anti-kickback

policies, J & J told Depuy it must stop making payments to a Greek agent who in

turn bribed doctors to buy Depuy’s medical implants. But an unnamed

“Executive A†at Depuy objected to ending the payments. The SEC’s

complaint identifies Executive A as a U.S. resident and a senior executive at

J & J.

At a January 2000 sales conference, Executive A was again told to terminate the

relationship with the Greek agent. Instead Executive A offered to buy the Greek

agent’s company and retain the agent as a consultant. The U.K. fraud office

identified the agent and the company last year as Nikolaos Karagiannis of Medec

S.A.

J & J began due diligence to acquire the company and in April 2000 a J & J executive

based in Europe sent an e-mail to Executive A describing problems in Medec’s

books. The accounts would not pass a “smell test†if audited because of all

the money going into a Greek “black hole,†the executive wrote:



No payoffs, please — we’re corporate

Worse, Medec’s Karagiannis kept putting his requests for bribes in writing. An

unnamed Depuy vice president scolded him for it in January 2001:



With Medec now renamed Depuy Helles, it was supposed to have abided by

J & J’s rules requiring employees to obey the Foreign Corrupt Practices Act,

which bans paying kickbacks to foreigners in order to make sales. But Depuy

employees ignored that. In January 2005, a new “Code of Business Practiceâ€

went into effect, sponsored by medical device lobby group Eucomed, which also

frowned upon paying kickbacks. A DPI vice president wrote the head of DePuy

Helles and his supervisor that Depuy broke “every single rule in the bookâ€:



Finally, in 2006, J & J’s internal audit team woke up to what was happening in

Greece. And then it decided to ignore it, according to the SEC’s complaint:

The issue of payments to surgeons had [also] been previously raised in an

anonymous 2003 letter to a different internal audit team concerning a related

J & J subsidiary in Greece. However, that team concentrated their investigation on

allegations about a possible conflict of interest by local management and did

not fully investigate the alleged payments to doctors.

Only after that, in 2007, did J & J disclose the issues to the SEC.

Two J & J executives have been named in connection to the probe. J & J worldwide

chairman for medical devices & diagnostics J. Dormer (pictured), who

came to the company from Depuy, resigned in 2007 after accepting “ultimate

responsibility†for the wrongdoing.

Dougall, director of marketing at DePuy was convicted of making

£4.5 million in corrupt payments. While Weldon believes the acts were “not

representative†of J & J, the judge in Dougall’s case thought otherwise. He

said:

Corruption was, in effect, a company policy pre-dating your involvement and

approved by your superiors. … it is likely to have involved the knowledge,

consent and participation of individuals with senior responsibilities in the

group of companies in which you worked. … [and the] corruption was systemic

and long-term …

The case came to light because Dougall became a whistleblower. He admitted

wrongdoing and British prosecutors asked the court to give him a suspended

sentence for helping make their case. Instead, the judge gave him 12 months in

prison. Dormer, Dougall’s boss, became chairman of JenaValve, another medical

device company.

Sent via BlackBerry by AT & T

[Guest guest]

http://m.bnet.com/blog/drug-business/internal-emails-j-j-knew-of-bribery-8220bla\

ck-hole-8221-for-years/7911

Internal Emails: J & J Knew of Bribery “Black Hole†for Years

By Jim  | April 11, 2011

 & (JNJ) CEO Weldon said the $70 million in foreign

bribery settlements his company just made “are not representative of &

employees around the world who do what is honest and right every day.â€

But J & J’s internal emails, plus the U.K. Serious Fraud Office’s records,

indicate that J & J management knew as early as 1999 that it was making improper

payments to Greek sales agents, and that money was disappearing into what it

called a “black hole†in Europe.

Yet J & J later acquired the company that operated that “black hole†in order

to maintain its illegal sales relationships in Greece, according to the SEC’s

complaint. And although the SEC praised J & J’s cooperation in its probe, J & J

took eight years to initially inform the SEC of its problems.

To give you an idea of the scale of J & J’s “not representative†activities,

the violations occurred between 1998 and 2006 in Greece, Poland, Romania, and

Iraq; and involved the following units of J & J: three units of medical device

company DePuy, J & J Poland, Janssen-Cilag Europe, Cilag AG in Switzerland, and

Janssen Pharmaceutica N.V. in Belgium. J & J paid “commissions†to various

local agents of between 10 and 35 percent to do business in those countries.

Commissions or bribes?

The Greek problem came to J & J management’s attention almost immediately after

it acquired Depuy International in 1998. To comply with J & J’s anti-kickback

policies, J & J told Depuy it must stop making payments to a Greek agent who in

turn bribed doctors to buy Depuy’s medical implants. But an unnamed

“Executive A†at Depuy objected to ending the payments. The SEC’s

complaint identifies Executive A as a U.S. resident and a senior executive at

J & J.

At a January 2000 sales conference, Executive A was again told to terminate the

relationship with the Greek agent. Instead Executive A offered to buy the Greek

agent’s company and retain the agent as a consultant. The U.K. fraud office

identified the agent and the company last year as Nikolaos Karagiannis of Medec

S.A.

J & J began due diligence to acquire the company and in April 2000 a J & J executive

based in Europe sent an e-mail to Executive A describing problems in Medec’s

books. The accounts would not pass a “smell test†if audited because of all

the money going into a Greek “black hole,†the executive wrote:



No payoffs, please — we’re corporate

Worse, Medec’s Karagiannis kept putting his requests for bribes in writing. An

unnamed Depuy vice president scolded him for it in January 2001:



With Medec now renamed Depuy Helles, it was supposed to have abided by

J & J’s rules requiring employees to obey the Foreign Corrupt Practices Act,

which bans paying kickbacks to foreigners in order to make sales. But Depuy

employees ignored that. In January 2005, a new “Code of Business Practiceâ€

went into effect, sponsored by medical device lobby group Eucomed, which also

frowned upon paying kickbacks. A DPI vice president wrote the head of DePuy

Helles and his supervisor that Depuy broke “every single rule in the bookâ€:



Finally, in 2006, J & J’s internal audit team woke up to what was happening in

Greece. And then it decided to ignore it, according to the SEC’s complaint:

The issue of payments to surgeons had [also] been previously raised in an

anonymous 2003 letter to a different internal audit team concerning a related

J & J subsidiary in Greece. However, that team concentrated their investigation on

allegations about a possible conflict of interest by local management and did

not fully investigate the alleged payments to doctors.

Only after that, in 2007, did J & J disclose the issues to the SEC.

Two J & J executives have been named in connection to the probe. J & J worldwide

chairman for medical devices & diagnostics J. Dormer (pictured), who

came to the company from Depuy, resigned in 2007 after accepting “ultimate

responsibility†for the wrongdoing.

Dougall, director of marketing at DePuy was convicted of making

£4.5 million in corrupt payments. While Weldon believes the acts were “not

representative†of J & J, the judge in Dougall’s case thought otherwise. He

said:

Corruption was, in effect, a company policy pre-dating your involvement and

approved by your superiors. … it is likely to have involved the knowledge,

consent and participation of individuals with senior responsibilities in the

group of companies in which you worked. … [and the] corruption was systemic

and long-term …

The case came to light because Dougall became a whistleblower. He admitted

wrongdoing and British prosecutors asked the court to give him a suspended

sentence for helping make their case. Instead, the judge gave him 12 months in

prison. Dormer, Dougall’s boss, became chairman of JenaValve, another medical

device company.

Sent via BlackBerry by AT & T