The general counsel of pharmaceutical giant Pfizer, which recently agreed to pay a record US$2.3 billion fine in relation to charges that it illegally marketed a number of drugs, will no longer oversee the firm’s compliance function, according to a report.

Under the terms of its recently announced corporate integrity agreement with the office of the inspector general of the US Department of Health and Human Services, that role will be taken over by the firm’s chief compliance officer, according to the report which appeared in Corporate Counsel.

The agreement formed part of Pfizer’s settlement with the government, after it pleaded guilty to having illegally marketed the painkiller Bextra, as well as other drugs.

According to Lewis Morris, chief counsel for the inspector general’s office, the move is aimed at eliminating conflicts of interest. Another purpose is to prevent the pharmaceutical giant’s lawyers from reading or changing the reports the company must submit as part of the agreement.

"The lawyers tell you whether you can do something, and compliance tells you whether you should. We think upper management should hear both arguments," he said, according to the report. Pfizer did not comment.

Despite the controls being put in place as part of the agreement, Mr Morris added that there is no guarantee that Pfizer will not illegally market drugs again. However, he said that the settlement does put additional measures to track how drugs are marketed, and this is expected to reduce the risk of mischief.

"We think we’ve done an even better job than before, although I would have to acknowledge it’s a contract. There is some level of faith we have to put in the opposite party in the agreement. But we’re not just sitting back and hoping Pfizer will behave themselves," he added.

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A Hong Kong judge has slammed US investment bank Morgan Stanley for its inadequate compliance controls, after one of its former employees was found guilty of wrongdoing in what has been called the city’s most high profile insider trading cases to date.

Du Jun, a former managing director in Morgan Stanley, was found guilty of nine counts of insider trading by Hong Kong’s District Court. In delivering the verdict, District Court Judge Andrew Chan criticised the New York-based investment bank for poor compliance, which led to the infractions taking place, according to reports.

He said that the bank approved of purchases made by Du when he bought US$11 million in shares of Citic Resources Holdings. This was at the same time he was advising the company on the purchases of oil field assets in Kazakhstan and China. Around half of these shares were then sold off in July 2007, after the deals were announced. Du reportedly made around US$4.3 million in the process.

The bank also brokered Du’s trades and lend him money to make the purchases, according to the Wall Street Journal. Judge Chan said that the bank should have been alarmed if it had examined Du’s internal trading records.

He said that the bank had insufficiently staffed its compliance department, and there was inadequate communication between it, and the bank’s fixed income division. Only two people raised concerns over Du’s trades in Citic Resources, and the bank did not take any action in response, Judge Chan said.

A Hong Kong spokesman for Morgan Stanley, Nick Footit, told Bloomberg: “Morgan Stanley expects all of our employees to uphold the highest ethical standards. The wrongdoing by a former employee of our firm was a violation of Morgan Stanley’s values and policies.” He added that the bank fired Du shortly after his misconduct was identified.

Du was also convicted on one count of advising his wife to trade in Citic Resources. He now faces up to seven years in prison, and a maximum fine of HK$10 million.

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