Drug Maker to Pay $9M Fine for Oil-for-Food Scheme

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Danish drug maker Novo Nordisk will pay a $9 million fine for giving kickbacks to Saddam Hussein's government through the United Nations Oil-for-Food program.

The Justice Department says Novo admits that it paid $1.4 million to the Iraqi government between 2001 and 2003 to get contracts to provide insulin and other medicines.

As part of the scheme outlined in a filing Monday in U.S. District Court in Washington, Novo covered the costs by inflating the price of the contracts by 10 percent before submitting them to the United Nations. Novo then falsely recorded the kickback payments as "commissions" in its books.

The Oil-for-Food program was launched in 1996 to help Iraqis cope with U.N. sanctions imposed after Saddam's 1990 invasion of Kuwait. It allowed Saddam's regime to sell oil, provided the proceeds went primarily to buy humanitarian goods and pay war reparations.

The Justice Department said that beginning in 2000, the Iraqi government began requiring companies wishing to sell humanitarian goods to government ministries to pay a 10 percent kickback, often mischaracterized as an "after sales services fee," to the government to be granted a contract. The payments were not permitted under the program.

Novo Nordisk was among more than 2,000 companies and individuals accused in a U.N. report of paying kickbacks. The company initially denied any wrongdoing.

The $9 million payment will settle a complaint with the U.S. Securities and Exchange Commission, which has been investigating Novo's involvement.

Novo was charged with one count of conspiracy to commit wire fraud and to violate the books and records provisions of the Foreign Corrupt Practices Act. But the Justice Department has agreed to dismiss the criminal charge after three years as long as Novo abides by the terms of the agreement, which also requires the company and its subsidiaries to cooperate fully with the ongoing Oil-for-Food investigation.

The Justice Department said Novo thoroughly reviewed the illicit payments and implemented enhanced compliance policies as part of the investigation.