Top lawyer exits as Novartis seeks to quell Cohen backlash
Novartis wants to put more distance between itself and Donald Trump’s
beleaguered personal attorney, Michael Cohen.
To that end, it’s parting ways with one of its top lawyers, Felix R. Ehrat,
a key player in the drug maker’s $1.2 million deal with Trump’s longtime
fixer. That arrangement is being scrutinized by special counsel Robert
“Yesterday was not a good day for Novartis,” wrote [CEO] Vasant Narasimhan,
a physician and former McKinsey consultant, who joined the drug maker more
than a decade ago and oversaw global drug development before being promoted
to chief executive this past February.
“Many of you have seen media reports regarding the Novartis relationship
with Essential Consultants in the U.S. and many of you will feel
disappointed and frustrated,” according to the email, which was shared with
STAT by a Novartis employee.
The company announced the move
in a statement, which read in part:
Novartis announced today that Felix R. Ehrat, Group General Counsel of
Novartis, has decided to retire from the company. Shannon Thyme Klinger,
currently Chief Ethics, Risk and Compliance Officer, will be appointed
Group General Counsel, effective June 1, 2018.
Mr. Ehrat, who has been Group General Counsel and Member of the Executive
Committee of Novartis since 2011, has decided to retire from his position
in the context of discussions surrounding Novartis’ former agreement with
Essential Consultants, owned by Michael Cohen.
Mr. Ehrat said: “Although the contract was legally in order, it was an
error. As a co-signatory with our former CEO, I take personal
responsibility to bring the public debate on this matter to an end.”
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CEO Vas Narasimhan reinforced the company’s message to stockholders.
In the meeting with investors, Narasimhan cited a number of steps the
company is taking in the wake of a series of legal troubles in recent
years. Those include putting in place an independent ethics board that
looks at access and patient issues, tightening controls and plans to deploy
a big data analytics system to monitor email traffic, he said. Ehrat will
be replaced by Shannon Thyme Klinger, currently the chief ethics, risk and
compliance officer, according to the statement.
“We’ve been taking strong actions, but now I want to take those strong
actions even further,” Narasimhan said in the meeting. “Let me be
absolutely clear: I never want Novartis to achieve our financial
performance or objectives because we compromised on ethical standards or
Shackled by history
Narasimhan has an uphill battle in convincing the public that Novartis’
activities are aboveboard. The company has a long history of investigations
for government kickbacks and bribes, making its deal with Cohen more
Since 2015, Novartis has paid out hundreds of millions in settlements and
fines as a result of kickback allegations in South Korea, the United States
and China and faces an investigation of alleged bribery in Greece. A trial
for another U.S. kickbacks case is scheduled for 2019.
Although cleaning house seems necessary for Novartis’ short-term crisis
response, the company is holding on to Narasimhan for now. The company
hopes the CEO can create a new culture free of corruption.
Narasimhan called the contract a major mistake at a meeting with investors
in Basel and said Novartis is developing a principles-, not rules-based
system to avert corruption.
“There will always be a way around the rule, whereas if you ask the
question, ‘Is this the right thing to do, are you comfortable with this
being on the front page of the newspaper?’… that’s going to help get us
to a better place.”
The effort to restore public trust
Novartis asserts it received nothing from Cohen in exchange for the
payments, yet the company’s timeline leaves questions for skeptics.
Novartis admitted last week it was paying Cohen $100,000 a month. It said
it believed that Cohen could advise the company on the Trump
administration’s approach to healthcare policies, including the Affordable
Novartis said its representatives met with Cohen in March 2017. After that
meeting, the company determined he wouldn’t be useful and decided not to
engage with him further.
However, Novartis also said it continued to pay Cohen $100,000 a month
until February 2018. It said the payments continued because the contract
could not have been terminated.
The company seems to be working to make amends.
Narasimhan, who’s meeting with investors Wednesday in Basel, conducted a
conference call Monday for 5,000 managers in which he said the company
needs to rebuild trust and rethink its approach to the use of consultants
and lobbying firms, according to a person familiar with the situation.
What do you think of Novartis’ announcement,
readers? Is the drug maker doing enough to begin to repair its reputation?