Names In the News

Pfizer Fraud Alleged

Pfizer misled consumers into using its anti-cholesterol drug Lipitor despite the absence of evidence from clinical trials that the drug or others in its class are of any benefit to large segments of the population, according to a consumer class action lawsuit filed against the world’s largest drug maker in October.

According to Steve Berman, the lead attorney for the proposed class, Pfizer promoted Lipitor by claiming it prevents heart disease in women and the elderly, even though no clinical test has established such a benefit.

The lawsuit alleges that Pfizer engaged in a massive campaign to convince both doctors and patients that Lipitor is a beneficial treatment for nearly everyone with elevated cholesterol, even though no studies have shown it to be effective for women and those over 65 years of age who do not already have heart disease or diabetes.

Lipitor is in the class of cholesterol-lowering drugs called statins and it is the best-selling drug in the world, with sales in 2004 of more than $10 billion.

“The idea that lowering cholesterol always reduces the risk of heart disease has become the conventional wisdom, which drug companies like Pfizer have taken great pains to promote,” says Dr. John Abramson, clinical instructor of ambulatory care at Harvard Medical School and author of Overdosed America: The Broken Promise of American Medicine. “But for women under 65 and people over 65 with no history of heart disease or diabetes, the evidence just isn’t there. Millions of women and seniors are spending huge sums to take Lipitor every day despite a lack of proof that it’s doing anything beneficial for them, and may actually be harming the elderly.”

Tax Breaks for Rip-Offs

Do wrong, pay a fine, take a tax deduction.

That’s the norm for companies in the United States charged with wrongdoing under civil (as opposed to criminal) statutes and settling the claims, according to a September report from the General Accountability Office (GAO), the research arm of Congress.

The GAO received responses to a survey on companies’ tax treatment of 34 civil settlements with total amounts exceeding $1 billion.

The companies reported deducting some or their entire civil settlement amount for 20 of the 34 settlements.

In two of these settlements, company representatives said they erred in deducting the civil penalty payments totaling about $1.9 million and told the GAO that they would file amended tax returns.

For five of the 15 settlements for which companies deducted some or all of their False Claims Act settlement payments, companies reported that language in their settlement agreements was a rationale for the deductions, although the Department of Justice said that such language did not pertain to tax deductibility.

The key issue is whether the settlements define fines as “penalties,” which are not tax deductible as a normal business expense.

The total amount of deductions taken by the five companies taking deductions in False Claims Act cases exceeded $100 million.

The GAO said that the Justice Department will change the language for future False Claims Act settlements.

Three companies that deducted False Claims Act settlement payments reported that they did so in whole or in part because their settlement agreements contained language stating that the company denied wrongdoing.

Azeri Oil Scam

Three individuals, including a managing director of American International Group, paid millions of dollars in bribes to senior government officials in Azerbaijan, in an effort to profit from privatization of Azerbaijan’s oil company, according to an October indictment issued by a U.S. federal grand jury.

The indictment charted Viktor Kozeny, Frederic Bourke, Jr., and David Pinkerton with conspiracy to violate the Foreign Corrupt Practices Act, and related crimes.

Federal officials alleged that Kozeny controlled two companies, Oily Rock Ltd. and Minaret Ltd., which participated in a privatization program in Azerbaijan. Bourke and American International Group (AIG), operating under supervision of Pinkerton, an AIG managing director, invested in these companies.

Under the Azerbaijan privatization program, Azeri citizens could use free government-issued vouchers to bid for shares of state-owned industries that were to be privatized. Privatization vouchers were bearer instruments that were freely tradable, and they typically were bought and sold using U.S. currency.

Foreigners could also participate in Azerbaijan’s privatization program and own vouchers, but only if they purchased a government-issued “option” for each voucher they held.

Beginning in July 1997, Kozeny directed others to purchase vouchers and options on behalf of Oily Rock and Minaret. Their purpose: to gain a controlling interest in the state oil company upon its anticipated privatization.

To ensure that Azeri officials would permit their foreign investment consortium to gain control of the national oil company, U.S. officials allege, the defendants paid massive bribes to Azeri officials. Kozeny is alleged to have promised Azeri officials that he would give them two-thirds of all profits his investment consortium made from the privatization.

— Russell Mokhiber