(Bloomberg) -- Novartis AG was drawn into Special Counsel Robert Mueller’s probe of suspected Russian meddling in the U.S. presidential election after paying $1.2 million to a consulting firm led by Donald Trump’s lawyer.
The Swiss drugmaker said Wednesday that it had a one-year agreement with attorney Michael Cohen’s firm that began in February 2017 and was aimed at gaining insight into the administration’s health-care policy. The company quickly determined that Cohen’s firm would be unable to provide the services it anticipated and decided not to engage further, but was contractually bound to keep making monthly payments of $100,000.
Novartis said that it was contacted in November 2017 by Mueller’s office about its agreement with Cohen’s consulting firm. The disclosure comes as the company seeks to move beyond allegations of improper sales practices, stemming from gifts and payments to doctors and pharmacies, presenting a challenge to new Chief Executive Officer Vas Narasimhan.
Novartis has sought to strengthen compliance policies after the legal troubles, and elevated its top ethics and risk officer to the executive committee in March. Narasimhan, a 13-year company veteran who took the helm earlier this year, replacing Joe Jimenez, told investors in January that Novartis is “transforming our productivity, culture and reputation.”
Now he’s facing questions about an agreement with Essential Consultants, a firm founded by Cohen. Basel, Switzerland-based Novartis said in emailed statements that it provided all the information Mueller’s office requested.
Cohen initiated discussions with the drugmaker and got through to then-CEO Jimenez, according to a person familiar with the situation who asked not to be named because the matter isn’t public. After an initial meeting between Cohen and others at Novartis that Jimenez didn’t attend, the company decided not to keep talking to Cohen, according to the person.
Cohen’s lawyer, Joseph Evans, didn’t immediately respond to requests for comment. Jimenez wasn’t able to be reached for comment.
Who One Hires
The payments could pose a risk to Novartis, said Nien-he Hsieh, an associate professor of business administration at Harvard Business School. Cohen came under investigation by federal prosecutors after arranging a $130,000 payment to adult-film actress Stormy Daniels, whose real name is Stephanie Clifford, to keep her from disclosing an alleged sexual relationship with Trump.
“The question about who one hires -- and the flip side of who one’s clients are -- that is an increasing area of risk,” Hsieh said.
The scrutiny of the Novartis payments is an example of the potential consequences when information that companies expect to remain private enters the news, Hsieh said. Electronic connectivity, the potential for organized responses from groups, and a highly politicized environment all contribute to the risk, he said.
Narasimhan had no involvement in the arrangement with Cohen’s firm, Novartis said. The agreement was unrelated to a dinner the CEO had at the World Economic Forum in Davos, Switzerland, with Trump and other industry executives, Novartis said.
“Suggestions to the contrary clearly misrepresent the facts and can only be intended to further personal or political agendas as to which Novartis should not be a part,” the company said. “Novartis considers this matter closed as to itself and is not aware of any outstanding questions regarding the agreement.”
Switzerland’s top prosecutor said in an emailed statement that it is “not concerned” at present with payments made by the drugmaker.
Jimenez was among pharmaceutical company executives who met with the president in Washington in early 2017 to discuss drug pricing. Trump has repeatedly vowed to curb rising drug prices and once said that companies were “getting away with murder.”
Novartis has moved to bolster its compliance policies and team in recent months. Shannon Klinger, the top compliance and ethics officer, was appointed to the executive committee by Narasimhan.
The U.S. sued Novartis in 2013, intervening in a case filed earlier by a whistleblower alleging that the company regularly provided doctors with expensive dinners, fishing trips and fees to speak at events to boost sales of the company’s drugs. The case has been moving toward trial, and prosecutors said earlier this year that Novartis sales representatives will testify they plied doctors with lavish meals, booze and other benefits.
In 2015, the company entered into a $390 million settlement with the U.S. Department of Justice to settle allegations that it had given kickbacks to specialty pharmacies in return for recommending two of its drugs.
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