Biomet Pays to Defer Bribery Prosecution (Walter Eisner @ OTW)
The U.S. Department of Justice’s Criminal Division (DOJ) announced on March 26, that Biomet Inc. has entered into a deferred prosecution agreement (DPA) with the government to, “resolve improper payments by the company and its subsidiaries in violation of the Foreign Corrupt Practices Act (FCPA).
Biomet agreed to pay over $22 million to avoid prosecution and resolve charges brought by the DOJ under the FCPA.
Bribery Investigation
According to the announcement, the matter is part of an investigation into bribery by medical device companies of health care providers and administrators employed by government institutions. Previously, Johnson & Johnson and Smith & Nephew Inc. have agreed to pay criminal penalties and entered into deferred prosecution agreements related to the ongoing investigation. The resolution was reached after the company agreed to enter into a Deferred Prosecution Agreement (DPA).
According to the criminal information filed on March 26 in U.S. District Court in the District of Columbia, Biomet, its subsidiaries, employees and agents, “made various improper payments from approximately 2000 to 2008 to publicly-employed health care providers in Argentina, Brazil and China to secure lucrative business with hospitals. During this time, more than $1.5 million in direct and indirect corrupt payments were made. In addition, at the end of each fiscal year, Biomet, its executives, employees and agents falsely recorded the payments on its books and records as ‘commissions,’ ‘royalties,’ ‘consulting fees’ and ‘scientific incentives’ to conceal the true nature of the payments.
In China, a “Kind Word”
Sales in China, according to published reports, were made through a distributor who was known to provide publicly-employed doctors with money and travel. In 2001, he sent an e-mail to Biomet that said:
“[Doctor] is the department head of [public hospital]. [Doctor] uses about 10 hips and knees a month and it’s on an uptrend, as he told us over dinner a week ago. …Many key surgeons in Shanghai are buddies of his. A kind word on Biomet from him goes a long way for us. Dinner has been set for the evening of the 24th. It will be nice. But dinner aside, I’ve got to send him to Switzerland to visit his daughter.”
Compliance Monitor
Under the DPA, the DOJ agrees not to prosecute Biomet, provided the company satisfies its obligations under the agreement over the next three years. The DPA calls for the appointment of an independent external compliance monitor to review the company’s compliance with the DPA, particularly in relation to Biomet’s international sales practices, for at least the first 18 months of the three year term of the DPA.
Biomet agrees to pay a $17,280,000 penalty to resolve the DOJ charges. The company also agreed in a Consent Agreement to “disgorge profits and pay prejudgment interest” in the aggregate amount of $5,575,731 to settle civil claims with the SEC.
Biomet’s President and Chief Executive Officer, Jeff Binder, stated: “Biomet has long been committed to upholding the highest standards of ethical and legal conduct both in the United States and abroad. Over the past several years, we have significantly enhanced our global compliance procedures and financial controls, and we fully intend to work with the independent monitor and the Department of Justice and Securities and Exchange Commission to bolster our FCPA compliance practices and procedures. Moving forward, we intend to continue to adhere to our enhanced global compliance procedures, and to promote the Company’s commitment to the highest ethical standards in all the markets that we serve.”
Biomet Cooperation
The DOJ press release stated the agreement, “recognizes Biomet’s cooperation with the department’s investigation; thorough and wide-reaching self-investigation of the underlying conduct; and the remedial efforts and compliance improvements undertaken by the company. In addition, Biomet received a reduction in its penalty as a result of its cooperation in the ongoing investigation of other companies and individuals.”