By C.M. Matthews
Orthopedic manufacturer Biomet Inc. agreed to pay more than $22 million in penalties Monday to settle charges that it violated a U.S. anti-bribery law.
The settlement stems from an industry-wide probe into a group of medical device companies conducted by the Department of Justice and Securities and Exchange Commission. The investigation, which is examining potential violations of the Foreign Corrupt Practices Act, has already netted more than $90 million in sanctions.
The FCPA, a 1977 law, prohibits improper payments to foreign officials in exchange for business.
Biomet agreed to pay a $17.2 million criminal penalty as part of an agreement with the Justice Department. In a separate settlement with the SEC, the Warsaw, Ind.-based company agreed to give up $5.4 million in profits that it allegedly earned from improper payments, according to court documents.
Between 2000 and 2008, Biomet and its subsidiaries made more than$1.5 million in direct and indirect corrupt payments to employees of state-owned health care providers in Argentina, Brazil and China to secure lucrative business with hospitals, according to court documents. The company then used phony invoices to disguise the payments, the documents said.
U.S. authorities frequently view publicly employed health care professionals as foreign officials under the FCPA. Some have complained this interpretation of the law can make it difficult to do business in Asia and Europe, where much of the health-care industry is state-controlled.
Johnson & Johnson agreed to pay $70 million in April 2011 to settle allegations that subsidiaries violated the FCPA by paying bribes to Greek doctors who chose the company’s surgical implants and to doctors in Poland and Romania in exchange for contracts and agreements to prescribe the company’s drugs. In February, Smith & Nephew PLC agreed to pay $22.2 million after U.S. authorities alleged its employees funneled about $9 million in improper payments to Greek health providers.
A handful of other companies, including Orthofix International NV, Stryker Corp. and Zimmer Holdings Inc., have also disclosed FCPA probes. In February 2011, electronics maker Koninklijke Philips Electronics NV revealed that it was conducting an internal probe of its medical equipment sales in Poland for possible FCPA violations.
“Biomet’s misconduct came to light because of the government’s proactive investigation of bribery within the medical device industry,” Kara Novaco Brockmeyer, chief of the SEC’s FCPA unit, said in a news release. “A company’s compliance and internal audit should be the first line of defense against corruption, not part of the problem.”
Spokeswoman for the Justice Department and the SEC declined to comment further. A spokesman for Biomet couldn’t be immediately reached for comment.
Biomet is a privately held company that sells products used by orthopedic surgeons. It was listed on the Nasdaq until 2007.
Under terms of its settlement, the Justice Department agreed to drop its charges against Biomet in three years if the company implements compliance reforms and hires an outside monitor to oversee the process. The company didn’t enter a guilty plea, but accepted responsibility for the allegations laid out in court documents. The Justice Department also said the company benefited from cooperating with ongoing investigations of other companies and individuals.
“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,” Jeffrey R. Binder, Biomet’s president and CEO, said in a news release.
The SEC settlement “permanently enjoined” Biomet from future violations of the FCPA, but didn’t require an admission of guilt from the company.