Medical Device Co. to Pay $22.2M to Resolve Alleged FCPA Violations
On February 6, 2012, the Justice Department announced that it entered into a deferred prosecution agreement with Smith & Nephew Inc., a medical device company, to resolve improper payments the company and certain of its affiliates allegedly made physicians employed by government institutions, in violation of the Foreign Corrupt Practices Act (FCPA).
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Bribed Heath Care Providers in Greece to Secure Lucrative Business
Smith & Nephew is a wholly-owned subsidiary of Smith & Nephew PLC, an English company traded on the New York Stock Exchange. The company manufactures and sells medical devices worldwide. It acknowledged responsibility for the actions of its affiliates, subsidiaries, employees, and agents who made various improper payments to publicly employed health care providers in Greece from 1998 until 2008 to secure lucrative business.
Greek Distributor Used Funds to Incentivize Purchase of Company Products
According to the criminal information, Smith & Nephew, through certain executives, employees, and affiliates, agreed to sell products at full list price to a Greek distributor based in Athens, and then pay the amount of the distributor discount to an off-shore shell company controlled by the distributor. These off-the-books funds were then used by the distributor to pay cash incentives and other things of value to publicly-employed Greek health care providers to induce the purchase of Smith & Nephew products.
Total of $9.4M Authorized for Payment to Greek Physicians thru Shell Companies
In total, from 1998 to 2008, Smith & Nephew, its affiliates, and employees authorized the payment of approximately $9.4 million to the distributor’s shell companies, some or all of which was passed on to physicians to corruptly induce them to purchase medical devices manufactured by Smith & Nephew.
$16.8M Penalty Reflects Company's Cooperation with DOJ Investigation, Etc.
The deferred prosecution agreement recognizes Smith & Nephew’s cooperation with the Justice Department’s investigation, thorough self-investigation of the underlying conduct, and the remedial efforts and compliance improvements undertaken by the company. As part of the agreement, Smith & Nephew will pay a $16.8 million penalty and is required to implement rigorous internal controls, cooperate fully with the department and retain a compliance monitor for 18 months.
Also Agreed to Pay $5.4M to Settle Related Case with SEC
In a related matter, Smith & Nephew also reached a settlement with the Securities and Exchange Commission (SEC), under which Smith & Nephew agreed to pay $5.4 million in disgorgement of profits, including pre-judgment interest.
(The Justice Department (DOJ) and the SEC jointly enforce the FCPA, generally with DOJ investigating and prosecuting the FCPA's anti-bribery violations and the SEC enforcing the accounting provisions. The anti-bribery provisions to the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, and foreign firms and persons in U.S. territory, to make a corrupt payment to a foreign official for the purpose of obtaining or retaining business. The accounting provisions require U.S. and foreign companies whose securities are listed in the U.S. to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.)
SEC press release is available here.