January 23, 2019

Top lawyer at Novartis to step down amid Michael Cohen scandal

16 May 2018, 09:50 | Cameron Gross

Michael Cohen

Michael Cohen

Michael Avenatti, the lawyer representing the adult-film star Stormy Daniels, alleged in May that a Novartis unit had paid Essential Consulting, a firm linked to Cohen, almost $400,000 in late 2017 and early 2018.

As the Swiss pharma company's group general counsel, Ehrat was the co-signatory, along with then-CEO Joe Jimenez, on the contract to hire Cohen's firm to provide consultancy services - a decision which has blown up in Novartis' face since it came to light last week.

"Although the contract was legally in order, it was an error", Ehrat said in a statement.

"I take personal responsibility to bring the public debate on this matter to an end", Ehrat said in a statement on the Novartis website.

That's the same firm Cohen used to pay adult film star Stormy Daniels to keep quiet about her alleged affair with Trump.

Novartis has said that Ehrat will retire as general counsel in the aftermath of the scandal, and will be replaced by Shannon Thyme Klinger, now chief ethics, risk, and compliance officer, effective June 1. Novartis stock, which trades through American Depositary Receipts on the New York Stock Exchange, has moved less 1% since news of the payments broke.

"After my team met with him individually, it was clear that he oversold his abilities", Jimenez told Bloomberg.

Since revelations about the relationship last Tuesday, Novartis has sought to distance its new chief executive, Vas Narasimhan, from the controversy, saying that the decision to hire Mr. Cohen had been made by Mr. Jimenez and that Mr. Narasimhan had played no role.

After a much-publicized series of scandals and legal actions in Japan, Novartis has fielded bribery and kickback allegations in multiple countries-twice, in China's case-and paid at least two related fines: A $50 million penatly to South Korean authorities previous year in a doctor kickbacks case and $25 million to the USA government to settle charges of illegal doctor payments in China.

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.

"That was a mistake", said Jimenez who admitted the firm should have "parted ways" with Cohen as soon as it became apparent he could not help.

A USA probe into whistleblower allegations that the company offered kickbacks to doctors via fancy dinners shamming as educational events. He maintained that Novartis never acted on any of Cohen's advice or tried to gain access to anyone in the administration.

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