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C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 000671 SIPDIS DEPT PASS TO USTR-AGAMA DEPT PASS USAID AFR/SD FOR CURTIS AND ATWOOD BAGHDAD FOR DUNDAS MCCULLOUGH TREASURY FOR PETERS, IERONIMO AND HALL DOC FOR 3317/ITA/OA/KBURRESS AND 3130/USFC/OIO/ANESA/CREED E.O. 12958: DECL: 04/20/2034 TAGS: ECON, EINV, EAID, ETRD, PGOV, NI SUBJECT: NIGERIA: PFIZER REACHES PRELIMINARY AGREEMENT FOR A $75 MILLION SETTLEMENT Classified By: Economic Counselor Robert Tansey for reasons 1.4(B&D) 1. (C) Summary. In an April 2 meeting with the Ambassador, Pfizer lawyers Joe Petrosinelli and Atiba Adams reported that Pfizer and the Kano State government had reached a preliminary settlement on lawsuits arising from medical tests conducted with Trovan (oral antibiotic) on children living in Kano during a meningitis epidemic in 1996. Petrosinelli said Pfizer has agreed to the Kano State Attorney General's (AG) settlement offer of $75 million, including a $10 million payment for legal fees, $30 million to the Kano State government, and $35 million for the participants and families. According to Adams, several final details need to be worked out on the mechanism for payment. Pfizer strongly recommends setting up a $35 million trust fund for the participants to be administered by a neutral third party and for the $30 million for the Kano State government to be used for improving health care in the state. Pfizer underscored that the Nigerian representatives wanted lump sum checks and that Pfizer is concerned with potential transparency issues. The next step is a meeting between high-level Pfizer officials and Nigerian side at a neutral location to work out the final details. End Summary. 2. (SBU) On April 2 Pfizer lawyers Joe Petrosinelli and Atiba Adams and Pfizer Nigeria Country Director Enrico Liggeri met with the Ambassador and EconDep to discuss the status of settlement negotiations. Four lawsuits were brought against Pfizer stemming from medical tests with the oral antibiotic Trovan conducted on children living in Kano during a meningitis epidemic in 1996. In Kano State Court there is one civil suit and one criminal case and in the Federal High Court there is one civil suit and one criminal case. Since 2006, Petrosinelli and Adams have been briefing the Mission on the status of the cases. Settlement Reached ------------------ 3. (C) Petrosinelli reported that Pfizer had tentatively reached "an agreement in principle" on the Kano AG's settlement offer of $75 million. Adams explained that the parties agreed that the $75 million would be broken down as follows - a $10 million payment for legal fees; $30 million to the Kano State government; and $35 million to participants and families. Petrosinelli noted, that Pfizer has worked closely with former Nigerian Head of State Yakubu Gowon and that he has played a positive mediation role with Kano State and the federal government. Petrosinelli said Gowon also spoke with Kano State Governor Mallam Ibrahim Shekarau, who directed the Kano AG to reduce the settlement demand from $150 million to $75 million. Adams reported that Gowon met with President Yar'Adua and convinced him to drop the two federal high court cases against Pfizer. (Comment: In 1966 Gowon became the head of state following a military coup that deposed Major General Johnson Aguiyi-Ironsi who had come to power via an earlier military coup. He was head of state from 1966 to 1975. He now plays an elder statesman role in Nigerian politics. End Comment.) More Discussions Needed ----------------------- 4. (C) According to Adams, details need to be worked out on the mechanism for payments to the Kano State government and participants because Pfizer is unwilling to give a lump sum payment. Pfizer is concerned with transparency issues and is pushing for a $35 million trust fund for the participants to be administered by a neutral third party and the remaining $30 million to be used for improving health care in Kano state. Pfizer underscored that the Nigerian representatives were pushing for lump sum checks and Pfizer will not agree to that. Pfizer is considering rebuilding Kano's Infectious Disease Hospital where the trial was conducted and working with health care nongovernmental organizations. Adams suggested that the trust fund for participants be administered by a neutral third party because he expects "additional" participants to come forward after they hear about the settlement. The Ambassador suggested Pfizer work with NGOs already working in Kano State and for Pfizer to consider working with local NGO implementing partners that the USG has used because of their transparency record. ABUJA 00000671 002 OF 002 EconDep provided Pfizer a copy of the U.S.-Nigeria Framework for Partnership document as a guide for existing projects and partners in Kano. Petrosinelli explained that the next step was a meeting at a neutral location between high-level Pfizer officials and the Nigerian side to work out final details and conclude the settlement. Pfizer Exposes Attorney General ------------------------------- 5. (C) In follow up to the April 2 meeting, EconDep met with Pfizer Country Manager Enrico Liggeri in Lagos on April 9. (Note: Liggeri has years of experience in Nigeria because his family operated a business in Lagos from the early 1960s to the late 1980s. He spent most of his childhood in Lagos. End Note.) Liggeri said Pfizer was not happy settling the case, but had come to the conclusion that the $75 million figure was reasonable because the suits had been ongoing for many years costing Pfizer more than $15 million a year in legal and investigative fees. According to Liggeri, Pfizer had hired investigators to uncover corruption links to Federal Attorney General Michael Aondoakaa to expose him and put pressure on him to drop the federal cases. He said Pfizer's investigators were passing this information to local media, including the website www.saharareporters.com. A series of damaging articles detailing Aondoakaa's "alleged" corruption ties were published in February and March. Liggeri contended that Pfizer had much more damaging information on Aondoakaa and that Aondoakaa's cronies were pressuring him to drop the suit for fear of further negative articles. 6. (C) Liggeri commented that the lawsuits were wholly political in nature because the NGO Doctors Without Borders administered Trovan to other children during the 1996 meningitis epidemic and the Nigerian government has taken no action. He underscored that the suit has had a "chilling effect" on international pharmaceutical companies because companies are no longer willing to conduct clinical testing in Nigeria. Liggeri opined that when another outbreak occurs no company will come to Nigeria's aid. 7. (C) Comment: Pfizer's image in Nigeria has been damaged due to this ongoing case. Pfizer's management considers Nigeria a major growth market for its products and having this case behind it will help in efforts to rebuild its image here. Final discussions on the $30 million and $35 million are likely to be tricky because the Nigerian side wants to control who gets the money, not Pfizer. The U.S. Mission will continue to advocate for transparency in settling the case and also note to GON authorities that Pfizer must abide by the U.S. Foreign Corrupt Practices Act and cannot simple hand over large sums of money to state and local officials. Petrosinelli and Adams will get back to the Mission on what further assistance may be needed. End Comment. 8. (U) This cable was coordinated with ConGen Lagos. SANDERS