The Securities and Exchange Commission (SEC) announced that it has reached a settlement with London-based medical device company Smith & Nephew PLC to resolve charges that the company violated the Foreign Corrupt Practices Act (FCPA) when its U.S. and German subsidiaries bribed public doctors in Greece for over a decade in order to win business.
The company has agreed to pay more than $5.4 million in disgorgement and prejudgment interest to settle the SEC’s charges. In addition, the Department of Justice (DOJ) announced that the company’s U.S. subsidiary, Smith & Nephew Inc., agreed to pay a $16.8 million fine as part of a deferred prosecution agreement.
The SEC alleged that from 1997 to June 2008, two of Smith & Nephew PLC’s subsidiaries, Smith & Nephew Inc. and Smith & Nephew Orthopaedics GmbH, employed a distributor to create a “slush fund” to make payments to doctors employed by government hospitals or agencies in Greece. Under Greece’s national health care system, most Greek hospitals are publicly-owned and operated, and doctors who work at those hospitals are government employees and “foreign officials” as defined in the FCPA.
The SEC complaint alleges that the subsidiaries developed a scheme to create an offshore fund to pay the doctors to purchase products from the two subsidiaries. According to the SEC complaint, the subsidiaries made payments to three shell entities in the United Kingdom controlled by the distributor that were used to pay the bribes. The payments were disguised as payments for marketing services which were never performed.
The complaint also alleges that Smith & Nephew PLC failed to respond to numerous red flags of bribery and that employees of the company and its subsidiaries were aware of the bribes.