Bribery and corruption risks in acquisitions

Amid a surge in global mergers and acquisitions, regulators are increasingly holding organizations responsible for the bribery, corruption and fraud found at the entities they purchase. Data analytics is becoming an important tool in a due diligence process that’s more important than ever for companies seeking to avoid such risks.

When a well-known pharmaceutical company acquired a competitor in the late 2000s, it created a global health care powerhouse by expanding its operations, product lines and manufacturing capabilities. Little did it know, however, that it had also inherited significant bribery risk that would ultimately cost the company millions of dollars.

Soon after the pharmaceutical firm had closed the acquisition, a due diligence review of the acquired company’s operations revealed evidence of illicit activity, which was ultimately reported to the Securities and Exchange Commission (SEC). Several years later, the SEC alleged that subsidiaries of the acquired company had been bribing government doctors across multiple countries in Asia well before the acquisition. In the scheme, doctors promoted products to patients in exchange for cash and other incentives, which were concealed using fake invoices. The two companies eventually agreed to separate settlements amounting to tens of millions of dollars in disgorgement and prejudgment interest to the SEC.