Bio-Rad Agrees to Pay $55 Million in FCPA Settlement

Earlier this month, a California-based life sciences company agreed to pay $55 million to resolve parallel investigations by the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) related to bribery allegations in Russia, Vietnam and Thailand. The DOJ and SEC charged New York Stock Exchange-traded Bio-Rad Laboratories with violations of the Foreign Corrupt Practices Act (FCPA) in connection with $7.5 million in bribes paid to foreign officials between 2005 and 2010 to secure business opportunities.

In the company’s settlement agreement with the DOJ, Bio-Rad admitted to paying bribes to Russian officials via third-party agents. The agents, who had no legitimate workforce, were hired to encourage Russia’s Ministry of Health to award Bio-Rad lucrative contracts with the Russian government. The bribes were funneled through the agents’ off-shore bank accounts and concealed in Bio-Rad’s books as commissions for the agents. Members of Bio-Rad’s management reviewed and approved the phony commission payments and referred to them in code as “bad debts.” Bio-Rad profited approximately $35 million as a result of the bribes.

The SEC determined that Bio-Rad also used intermediaries to bribe officials in Vietnam and Thailand. Bio-Rad’s subsidiary in Singapore sold products at a steep discount to the Vietnamese government through distributors in Vietnam who used the discounted pricing to pay bribes to government officials. Similarly, Bio-Rad failed to detect that a recently acquired Thai subsidiary was engaging in a scheme to bribe Thai officials by paying phony commission to Thai sales agents.

Bio-Rad self-reported the improper payments to U.S. officials and cooperated with the resulting investigations. Through its investigation, the SEC determined that the company violated the antibribery, internal controls and books and records provisions of the Securities Exchange Act of 1934. The DOJ charged the company with violating the FCPA by failing to maintain adequate internal controls and falsifying records to conceal bribes to foreign officials.

To conclude the parallel investigations, Bio-Rad agreed to pay the SEC $40.07 million in disgorgement and prejudgment interest, and a criminal fine of $14.35 million to the DOJ. Pursuant to a deferred prosecution agreement with the DOJ, Bio-Rad also agreed to provide periodic reports to the DOJ regarding the company’s compliance efforts for two years. The DOJ credited the company’s non-prosecution agreement “in large part, to Bio-Rad’s self-disclosure of the misconduct and full cooperation with the department’s investigation.”

In the wake of the DOJ and SEC investigations, Bio-Rad now faces potential class action lawsuits. Several law firms have announced investigations of bribery and breaches of fiduciary duty in connection with possible lawsuits on behalf of Bio-Rad’s shareholders.

For more information, see the press release issued by Bio-Rad and news coverage at Reuters.  

Acquittals in Bangladesh for Engineering Firm Plagued by Corruption Charges

Canadian engineering firm SNC-Lavalin Group Inc. was cleared of wrongdoing amid allegations that members of the firm paid millions in bribes to secure a World Bank contract in Bangladesh. On October 27, 2014, a Bangladeshi court acquitted all four SNC-Lavalin defendants implicated in the suit.

SNC-Lavalin executives had been accused of bribing government officials in connection with the so-called Padma Bridge contract. Estimated to be worth approximately $3 billion, the massive contract included a $1.2 million loan from the World Bank. When allegations of impropriety regarding the contract procurement arose, the World Bank issued the company a warning and then, unsatisfied with the company’s response, terminated the loan, effectively killing the project before the contract could be awarded. The World Bank also debarred SNC-Lavalin and its 100 subsidiaries from bidding on the Bank’s projects for a period of ten years, and referred the matter to both the Royal Canadian Mounted Police (RCMP) and the Bangladeshi government.

Bangladesh’s Anti Corruption Commission had been investigating SNC-Lavalin’s conduct since 2011 and announced formal charges against the company in 2012. According to Bangladeshi officials, files uncovered by a search warrant executed by the RCMP on the company’s Oakville, Ontario, office included a diary indicating that several Bangladeshi officials were slated to receive a percentage of the multibillion-dollar contract.

The acquittals come as good news for scandal-ridden SNC-Lavalin. As we reported in our October issue, the engineering titan recently saw a former top executive plead guilty to corruption charges in Switzerland only to be extradited to Canada to face charges for additional corruption crimes. An investigation of SNC-Lavalin’s behavior in Algeria is also ongoing.

See additional news coverage at the FCPA Blog and The Daily Star.

German Courts Find Former CEO of International Bank Guilty of Bribery Charges

Late last month, German courts found the ex-CEO of Munich-based BayernLB (Bayerische Landesbank) guilty of bribing an Austrian politician to facilitate a multibillion-dollar acquisition. Werner Schmidt, the ex-CEO of BayernLB, pleaded guilty to bribing Jörg Haider, then-State Governor of the Austrian state of Carinthia during negotiations in connection with the acquisition of Austrian Banking Group Hypo Alpe-Adria Bank International Group, AG (“Alpe-Adria”).

In 2007, BayernLB, controlled by the German state of Bavaria, acquired Alpe-Adria for approximately $2.1 billion. To facilitate the deal, Schmidt arranged, via a BayernLB subsidiary, for a €2.5 million soccer team sponsorship deal and a soccer stadium for Carinthia.

BayernLB ultimately lost €3.7 billion on its investment in Alpe-Adria. In 2009, Alpe-Adria was acquired by Austria to prevent its collapse and to avoid significant repercussions for Eastern European economies.

Schmidt received a suspended 18-month sentence from the court. In lieu of serving a prison sentence, Schmidt will remain on probation for three years and was ordered to pay a €100,000 ($127,000) fine. Schmidt and his attorneys are contemplating an appeal. Seven of Schmidt’s former BayernLB colleagues were charged with embezzlement in connection with the acquisition. Though most of the charges were dismissed, a few employees were forced to pay fines to resolve the charges. Haider, who received the bribes orchestrated by Schmidt, passed away in 2008.

Read more at BBC and Reuters.