A London-based medical device company, Smith & Nephew PLC, has settled an FCPA matter with DOJ and SEC involving bribes to public sector doctors in Greece by U.S. and German subsidiaries of Smith & Nephew. The allegations are that the company and its subsidiaries used a distributor to create a fund to make illicit payments to public doctors employed by government hospitals or agencies in Greece. On paper, it appeared as though Smith & Nephew’s subsidiaries (including Smith & Nephew Inc.) were paying for marketing services. However, no services were actually performed. The scheme, which began in 1997 and lasted for over a decade, generated off-shore funds that were not subject to Greek taxes and were used to make improper payments to the government doctors. Employees of Smith & Nephew were alleged to have failed to act on numerous red flags of bribery. For example, in one e-mail exchange between a sales manager and the company’s distributor concerning whether to reduce the distributor’s commissions, the distributor stated, “In case it is not clear to you, please understand that I am paying cash incentives right after each surgery . . . . “ Smith & Nephew Inc. nonetheless did not reduce the commissions. Smith & Nephew PLC agreed to settle the SEC’s charges by paying more than $5.4 million in disgorgement and prejudgment interest. Smith & Nephew Inc. agreed to pay a $16.8 million fine as part of a deferred prosecution agreement with the Department of Justice. See SEC Litig. Release 2012-32, SEC Charges Three Oil Services Executives With Bribing Customs Officials in Nigeria (Feb. 24, 2012).
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Smith & Nephew PLC settlement illustrates pitfalls of ignoring red flags
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