Medical device company Biomet has agreed to pay more than $22 million to settle charges by the Securities and Exchange Commission (SEC) as well as parallel criminal charges by the U.S. Department of Justice (DOJ). The charges, which arise from the ongoing global investigation by the SEC and the DOJ into medical device companies bribing publicly-employed physicians, allege that Biomet violated the Foreign Corrupt Practices Act (FCPA) when its subsidiaries and agents bribed public doctors in Argentina, Brazil and China to secure business from hospitals.
The SEC alleges that Biomet and its four subsidiaries paid bribes from 2000 to 2008, and employees and managers at all levels of the parent company and the subsidiaries were involved along with Biomet distributors. Biomet’s compliance and internal audit functions failed to stop the payments to doctors even after learning about the illegal practices.
According to the SEC complaint filed in federal court in Washington D.C., employees of Biomet Argentina SA paid kickbacks of up to 15 to 20 percent of each sale to publicly-employed doctors in Argentina. Phony invoices were used to justify the payments, and the bribes were recorded as “consulting fees” or “commissions” in Biomet’s books and records. Executives and internal auditors at Biomet’s Indiana headquarters were aware of the payments as early as 2000, but failed to stop it.
The SEC also alleges that Biomet’s U.S. subsidiary Biomet International used a distributor to bribe publicly-employed doctors in Brazil by paying them up to 10 to 20 percent of the value of their medical device purchases. The payments were openly discussed in communications between the distributor, Biomet International employees, and Biomet’s executives and internal auditors in the U.S.
According to the SEC complaint, two additional subsidiaries, Biomet China and Scandimed AB, sold medical devices through a distributor in China who provided publicly-employed doctors with money and travel in exchange for their purchases of Biomet products.
Biomet consented to the entry of a court order requiring it to pay approximately $4.4 million in disgorgement and approximately $1.1 million in pre-judgment interest. Biomet also agreed to retain an independent compliance consultant for 18 months to review its FCPA compliance program. Finally, Biomet will pay a $17.28 million fine to settle the criminal charges with the DOJ.