Israeli authorities investigating Teva over bribe allegations

Israeli law enforcement agencies have opened an investigation into pharmaceutical giant Teva after it reached a settlement with US authorities over charges it had bribed foreign officials to win business in Russia, Ukraine and Mexico, the company has confirmed.

The admission comes a day after the company announced that its chief executive officer Erez Vigodman has stepped down, three years after he took his post in an effort to turn around the fortunes of the drugmaker, and amid speculation of a coming split between the company’s generic and branded businesses.

Responding to reports that the police’s National Fraud Investigation Unit was looking into Teva Pharmaceutical Industries Ltd. following a $519 million payout to US authorities, the company said in a Wednesday statement that “to the best of its knowledge, an investigation is being conducted in Israel regarding the same issues which led to a settlement with American justice authorities.”

Confirming that the investigation focused on events that occurred in 2007-2012, the company said that “none of the people involved in the improper payments are currently employed at Teva.”

Israel Police would not confirm or deny whether an investigation as taking place, .

The news of the investigation comes as a further blow to the company, which is still roiling from the resignation of Vigodman, stemming from a series of management missteps that include the $40 billion acquisition of a generics company and an inability to fend off competition for its blockbuster medication for multiple sclerosis, Copaxone.

At the end of last month Teva lost a court case in which it sought to block generic versions of the drug from entering the market.

In December, Teva’s alleged violations of the US Foreign Corrupt Practices Act, which makes it a crime to bribe a foreign government official, were settled with a $283 million penalty “in a deferred prosecution agreement” with the Department of Justice and $236 million “in disgorgement and interest” to the Securities and Exchange Commission, according to Reuters.

The case included bribes by Teva Pharmaceutical Industries to a “high-ranking Russian government” official who used his authority to boost sales Copaxone, resulting in more than $200 million in profits for Teva and about $65 million for the Russian official between 2010 and 2012, the Justice Department said.

In Ukraine, Teva also admitted to paying bribes to a senior government official who agreed to promote Teva drugs. The payments to the Ukraine government official date from 2001 and 2011.

In Mexico, Teva’s subsidiary paid bribes to doctors employed by the Mexican government since at least 2005, according to the Justice Department.

Teva said that after an internal investigation into misconduct, its whole Russian leadership was replaced, no workers of the company were involved in the improper payments, and sales in the US were not involved in any improper conduct.

The company also said it commenced a probe of bribery after learning of problems from employees and the US government in early 2012.

“While the conduct that resulted in this investigation ended several years ago, it is both regrettable and unacceptable, and we are pleased to finally put this matter behind us,” said Teva chief executive Erez Vigodman at the time. “The Teva of today is a fundamentally different company.”

According to the settlement cited by Reuters, Teva will also have to retain an outside corporate monitor for at least three years.

The Israeli company has been facing a number of legal troubles in recent months, including more bribery allegations in Romania and a class-action suit by US investors as a result of a separate US Department of Justice probe into alleged price-fixing alongside a number of other companies.

On Wednesday Teva said that Yitzhak Peterburg, who has served as chairman of the Teva board of directors since January 2015, will replace Vigodman as CEO, effective immediately.

At the same time, speculation has grown that the company may have to split up its activities into separate generics and branded business. Andy Summers, a portfolio manager at Janus Capital Management, which owns shares in Teva, said in an interview with Bloomberg that he’s in favor of a split. A similar sentiment was echoed in a survey of clients at Evercore ISI, in which more than half supported Teva splitting in two, according to analyst Umer Raffat, Bloomberg reported.