SAN FRANCISCO (CN) – Bio-Rad CEO Norman Schwartz testified Monday in a whistleblower retaliation trial that despite urging from his board of directors and other top executives, he was reluctant to fire his longtime general counsel Sanford Wadler.
Schwartz testified he “wanted to give [Wadler] a second chance,” although the board recommended firing Wadler for failing to advise the biotech company on how it might better comply with the Foreign Corrupt Practices Act, a law that prohibits companies from bribing foreign officials.
Wadler sued the company and Schwartz in May 2015, claiming he was suddenly fired only months after raising concerns about possible corporate bribery of Chinese public officials and other misconduct with the company’s audit committee.
But Schwartz said that there had been unrest within the company’s highest echelons for quite some time over Wadler’s performance.
“The general sense was that they had lost confidence in Sandy and felt he should be replaced,” Schwartz said of the board’s recommendation to ax Wadler after 26 years with the company.
Though Wadler was eventually fired in June 2013, Schwartz said that at the time he did not agree with the board and decided to keep Wadler on.
“I had worked directly with Sandy for many years. He had obviously been at the company a long time and had been a productive member of the team. At the end of the day I wanted to give him a second chance,” he said.
Schwartz said he’d asked Wadler about the Foreign Corrupt Practices Act and whether the company should implement a compliance program back in 2010. He said Wadler’s response was something like “this law had been on the books for many years and it wasn’t something we should worry about.”
The act had been a major concern for Bio-Rad since 2009, when violations in Russia, Thailand and Vietnam led to the company agreeing to a $55 million settlement with the Justice Department in 2014.
Bio-Rad had hired Patrick Norton from the outside law firm Steptoe and Johnson to investigate Foreign Corrupt Practices Act issues around the world. Noonan had also recommended that Wadler be fired over his handling of the issue.
Schwartz said the violations were “a tremendous embarrassment” and thought the fine could have been avoided “with a little proactivity,” writing in Wadler’s 2009-10 performance review: “The FCPA mess gave the company a real black eye and with the breadth of our international operations, legal should have been more assertive or inquisitive, making sure we were in compliance.”
Schwartz was scheduled to meet with government officials in Washington in late February 2013 to explain what Bio-Rad had been doing to fully comply with the act since 2009, and Schwartz said he thought Wadler had been acting odd.
“Wadler seemed to be fairly nervous about going to this meeting,” he said.
There were other concerns about Wadler’s behavior, too, Schwartz said, pointing to his unwillingness to file Bio-Rad’s annual report with the Securities & Exchange Commission, known as Form 10-K.
According to Schwartz, the holdup was due to Wadler’s “paranoia” about an audit by Life Tech over the amount of royalties Bio-Rad owed them for licensing their intellectual property. For two years, Bio-Rad had been unable to account for prices charged by third parties to end users in China.