Pfizer Finance Executive Blows the Whistle - Part One
On November 17, 2005 Pfizer’s CEO Jeff Kindler, who was then Pfizer’s General Counsel, received and read a highly unusual e-mail, according to the internal read receipt on that mail.
In this e-mail an executive in Pfizer’s finance department in India accused local managers of taking kick-backs in connection with selling off company assets, including selling Pfizer’s manufacturing facility in Hyderabad, at 60% of market value.
But that was an optimistic calculation.
Recently, the finance executive petitioned the Indian government in Hyderabad and received documents which showed that he was wrong - the plant was actually sold for less than 10% of the market value assessed by the government.
The executive also claimed in his e-mail that Pfizer was engaged in unfair accounting practices.
The man behind this e-mail was Mr. Ashok S. Idnani, who has spent 28 years working for Pfizer and his e-mail was the culmination of three years of struggle.
(Click on thumbnails to read his entire e-mail. Certain information identifying Pfizer employees has been redacted.)
It all started in 2002, a year when Idnani's career with Pfizer would take a dramatic turn for the worse.
His formal title was Deputy Manager, Pfizer's Finance Division, and he spent his days in Mumbai, India. One fateful day he met one of Pfizer India’s senior executives in the Pfizer lobby. In a casual conversation the senior executive asked him if the Arthur Andersen people had approached Idnani, since they were working on the integration of Pfizer and Warner-Lambert/Parke-Davis; a company Pfizer had acquired.
Idnani mustered the courage then and there to inform this senior executive that rumors were circulating about kick-backs from Arthur Andersen. Idnani says: “I was curious as well as wanted to inform him what colleagues were saying and to see his reaction”
He thought the executive might take this as a friendly warning, but that is not how things worked out. During the four years that followed, Idnani alleges his salary was frozen, Pfizer withheld his bonuses and many other acts of retaliation took place.
Finally, after three years of increasing concern about numerous dubious transactions that Idnani could monitor in his centrally placed position in the finance department, Idnani finally gave up on achieving change locally. On November 17, 2005 Idnani contacted Pfizer’s leadership team; Hank McKinnell, CEO, Jeff Kindler, General Counsel, Karen Katen, President Pharmaceuticals, and David Shedlarz, CFO, with his allegations. At that point he was close to desperation and his letter clearly indicates his state of mind.
Pfizer's senior management had every reason to take Idnani’s allegations seriously, both based on his long tenure with Pfizer and his central position within the company. So Jeff Kindler ordered an investigation.
We know this because on December 2, 2005 Ms. Indrani Franchini from Pfizer Corporate Compliance and Ms. Sarah Alper, Corporate Audit in New York, conducted a two hour conference call with Idnani, requesting documents supporting his allegations. Idnani also claims that Ms. Franchini assured him there would be no retaliation.
Of particular interest to Pfizer was a “Memorandum of Understanding” (MOU) for sale of the Hyderabad plant, signed with the buyer, Nuziveedu Seeds Ltd, in 2004. The sale to Topnotch Infrastructure Ltd (a fully owned subsidiary of Nuziveedu seeds Ltd) was finalized in 2006.
The original MOU was for Rs.137 million ($3.4 million), however, ultimately Pfizer sold the plant for Rs.122.10 million ($3.0 million). Click on thumbnail to see scanned page from Pfizer India’s Annual Report confirming this amount.
There was only one problem with this agreed upon sale price: The fair market value for the property was more than ten times higher.
Government authorities in India in 2006 requested a tax called “Stamp Duty” payable on the market value of the sale of land and buildings, from the buyer, Topnotch Infrastructure Ltd. The valuation of the property was now Rs.1801 million ($44.4 million). Click on thumbnails below to view this valuation from 2006.
And, says Idnani, even if the Indian government valuation from year 2004 is used, the assessed land value was Rs.7630/ per Sq.Yard (instead of Rs.10000/ per Sq. Yard in year 2006) which adds up to Rs.1388 million ($34.2 million).
Idnani doesn’t have any proof that anyone took kick-backs to sell the plant at a 90% discount, but he has suspicions and he voiced those concerns loud and clear to Pfizer not just once, but several times. And, perhaps his suspicions aren’t surprising when $30 to $40 million in value vanishes into thin air.
Idnani notes that Transparency International ranked India #74 on their Corruption Index in 2006, (Scandinavian countries ranked in the top, and the US ranked #23)
“It doesn't help,” says Idnani, “that Pfizer is a signatory to the United Nations Global Compact or that Pfizer has its own grand in-house ethics and values – these are just decorations on their web site.”
So how did Pfizer resolve this situation?
On January 17, 2006, Pfizer dispatched a two-member team; Ms. Indrani Franchini from Pfizer Corporate Compliance, and Ms. Sarah Alper, Corporate Audit traveled to Mumbai, India, to meet with Idnani and they questioned him at length about the documents he sent to them.
Idnani claims that at this meeting it was agreed that he would be informed of the findings and actions to be taken by line management in New York. In the end, however, he was not given any information of such decisions. Instead, on March 13, 2006 Ms. Franchini sent an e-mail informing Idnani that the investigation was concluded, the matter closed and the details regarding specific steps taken or outcomes would not be provided to him.
Then, on August 28, 2006, Idnani’s employment was abruptly terminated, after 28 years with Pfizer.
Idnani is now 54 and unemployed, in spite of a science degree and a master of law degree. Recently he registered as a lawyer, a profession he resents. He is contemplating approaching what he calls the “corrupt courts in India” about Pfizer's retaliation and the undervaluation of the Hyderabad plant and the loss to Pfizer shareholders. But money is an issue; Idnani did not get rich on his Pfizer salary and he doesn’t even own a computer; he accesses his e-mails in an Internet cafe.
What is also noteworthy is that the retaliation against Idnani didn’t stop when he was fired. Pfizer India also withheld a number of payments due to Idnani after he was terminated.
In an April 30, 2007 e-mail, Ryan Trierweiler Pfizer Worldwide Pharmaceutical Operations (WPO) Japan/Asia HR, writes to Idnani, “As you can see by receipt of various checks over the past couple of weeks I have been working on your behalf to sort out any issues related to your dues. I've also been working with the India site to figure out why these dues were not paid to you sooner.”
So seven months after his termination, Idnani finally got paid. He has a suspicion about why this took so long; he stepped on some mighty big toes within Pfizer.
I asked him what could be the reason for Pfizer to fire the whistleblower and then do nothing if someone dumped corporate assets at 90% discount; that would hardly seem to be in Pfizer’s best interest.
Idnani responded that “by the time Pfizer was informed by me in November 2005 and they completed the investigation in March 2006 the transaction was nearing completion.” He also doesn’t think the Pfizer brass in New York worries too much about whistleblowers in India.
He adds, “In 2004 the company signed the Memorandum of Understanding with the purchaser, and therefore it was not easy to rescind the arrangement.”
Idnani also claims that Pfizer did, in fact, take some action: “When the next plant was sold at Chandigarh, in 2006-2007, they sent in a person, who I understand was Rick Davis from Pfizer N.Y, to personally interview all bidders and overlook the negotiation. For the first time local managers did not have full authority and control of negotiation for sale of a major manufacturing plant.”
But that doesn’t end the story about the plant sale, because Idnani didn’t give up.
In a September 12, 2006 e-mail to Jeff Kindler, who was now CEO of Pfizer, Karen Katen, Vice Chairman, David Shedlarz, Vice Chairman, Alan Levin, CFO, and Sylvia Montero, Senior Vice President, Human Resources, and copied to Pfizer’s Board of Directors, Idnani repeated his many allegations in great detail
And, suddenly, in March 2007, John S. Hong, Pfizer Corporate Counsel, International Investigations and Programs in Pfizer’s Legal Division/Corporate Compliance group wrote an e-mail to Idnani: “Regarding the documentation you reference related to the Hyderabad Plant allegation please forward any relevant documents to my attention. You may send them electronically, by mail or via fax, whichever is most convenient, and we will review them accordingly.”
So clearly Pfizer’s review of the sale of the Hyderabad plant isn’t completed yet.
Over the coming days I will disclose many more of Idnani’s allegations with associated documents, including how Pfizer hired detectives to follow shareholders and a former executive, and documents that show, according to Idnani, how Pfizer bribed government officials and tax authorities. But the story doesn’t stop there; he also tells a detailed tale about voodoo in the Indian finance department and a mysterious guru receiving checks from local Pfizer employees.
Idnani’s final words to me were, “The lesson I have learned - don't be smart - if seniors are defrauding the company, look away.”
PART TWO FOLLOWS TOMORROW: Pfizer's private investigators, their surveillance reports, and whom they followed.
PART THREE ON FRIDAY: Allegations of bribes to tax officials and voodoo practice in Pfizer's finance department.
Update - don't miss the other parts of this story:
1. Pfizer Finance Executive Blows the Whistle - Part One
2. Pfizer Finance Executive Blows the Whistle – Part Two
3. Pfizer Finance Executive Blows the Whistle – Part Three
4. PFIZER CFO RESIGNS after PFE finance executive blows the whistle
5. Will Pfizer CEO Mr. Kindler also resign?