Novartis general counsel departs in wake of deal with Trump lawyer

Novartis announced Wednesday that general counsel Felix Ehrat will retire in the wake of recent controversy over an agreement the company made with President Donald Trump's private lawyer Michael Cohen in a bid to gain insight into US healthcare policy under the new administration. Ehrat, who has held the position since 2011, 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."

The drugmaker said that it has "the greatest respect" for Ehrat's decision to step down in the context of discussions surrounding the former agreement with Cohen's firm Essential Consultants. Novartis indicated that Shannon Thyme Klinger, who currently serves as chief ethics, risk and compliance officer, will be appointed general counsel effective June 1. CEO Vas Narasimhan remarked "I have no doubt that the company will benefit from [Klinger's] judgment and expertise."

Narasimhan recently told staff in an internal email that Novartis "made a mistake" in entering into the $1.2-million agreement with Essential Consultants. The company previously distanced its current chief executive from the matter, noting that the contract predated Narasimhan becoming CEO at the end of January this year.

Meanwhile, in an interview with Bloomberg, Joe Jimenez, who was chief executive of Novartis at the time the agreement was signed with Cohen, revealed that a "third party" recommended the lawyer to the company, adding "he was unknown to us, but he was said to be somebody who could help." However, Jimenez noted that "after my team met with him individually, it was clear that he oversold his abilities," conceding that the drugmaker should have done more due diligence.

According to Jimenez, Cohen claimed he could bring "his expertise in terms of knowing the personalities that were in the administration," and "how would the administration react to certain proposals. That's where he was not able to deliver." Jimenez explained that the contract with Cohen was negotiated with Novartis' legal team after the two sides made contact, and although the former CEO wanted to terminate the deal, this would likelier have been costlier than letting the agreement expire because of "almost certain litigation."

Since the matter became public, Narasimhan reportedly held a conference call with 5000 top managers to discuss how Novartis can regain public trust and rethink the drugmaker's relationships with consultants and lobbyists. Narasimhan added Wednesday, at a meeting with investors, that the company 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," Narasimhan remarked.

Narasimhan also highlighted a number of other steps that the company is taking, including forming an independent ethics board to review access and patient issues, tightening controls and plans to deploy a big data analytics system to monitor email traffic. "We've been taking strong actions, but now I want to take those strong actions even further," Narasimhan said, adding "let me be absolutely clear: I never want Novartis to achieve our financial performance or objectives because we compromised on ethical standards or our values."

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