Sanofi’s ERISA Suit Over Illegal Payments

Sanofi’s ERISA Suit Over Illegal Payments

In a putative class action filed in the federal court in Newark, the stockholders in drugmaker Sanofi’s group savings plan claimed violation of the Employee Retirement Income Security Act (ERISA) by the plan’s administrators. Plaintiffs included participants and beneficiaries in the Sanofi US Group Savings plan who invested in the company stock between March 21, 2013, and December 4, 2014. It was during this time, when as a result of the past violations of federal health-care laws, Sanofi was subject to a corporate integrity agreement with the Office of the Inspector General of the U.S. Department of Health and Human Services. This required it to comply with the federal health care laws that prescribe mandatory investigation and reporting of illegal activities by the company.

More specifically, this suit was filed keeping in mind that although the company’s stock price dropped 20 percent in December 2014, the company was able to make at least $34 million in illegal payments to induce purchases of the company’s drugs. The stockholders alleged that this violation was a result of providing misleading information about Sanofi’s alleged payment of kickbacks to health-care professionals like Walgreen Co., Rite-Aid Corp. and others, and that it contracted with consultants such as Deloitte and Accenture to illegally promote the use of the drugs.

In a whistleblower suit filed by a former company paralegal, Diane Ponte targeted one of Sanofi’s policies, which dealt with the fact that no employee could sign contracts for the company unless the contracts underwent a process of review by the finance, purchasing and legal departments. Ponte claimed that Christopher Viehbacher, the then-CEO of Sanofi, either directly or through instructions to others, ensured that such illegal payments were miscoded on the company computer system in order to be executed without undergoing the review process from all the three departments.

According to the savings plan suit, the defendants breached their fiduciary duties under ERISA for continuing to allow employees to buy company stock through the group savings plan even after they knew it had become an imprudent investment.

This class suit concentrates on the failure to manage the plan’s assets, as also to adequately monitor the plan fiduciaries and provide them with accurate information. The suit also seeks an order compelling defendants to make good to the plan all losses resulting from breaches of the defendants’ fiduciary duties, a declaration that the defendants breached ERISA fiduciary duties owed to the plan as well as its participants, and imposing a constructive trust on the unjust enrichment of the amount at the expense of the plan.