On April 8, Johnson & Johnson (J&J) entered into a Deferred Prosecution Agreement (DPA) with the U.S. Department of Justice (DOJ) to resolve issues arising from improper payments made by wholly owned subsidiaries to various government officials in Greece, Poland and Romania. Settlements were also entered into with the U.S. Securities and Exchange Commission (SEC), the UK Serious Fraud Office (SFO) and the Government of Greece. The agreements evidence a high level of international cooperation and coordination among the governments and investigative and prosecutorial agencies, and include separate but significant penalties.
In 1998 J&J acquired DePuy Inc., which in turn owned a UK subsidiary, DePuy International Ltd. J&J, through its subsidiaries, allegedly made commission payments to intermediaries in Greece, Poland and Romania. They then made payments in those countries to medical professionals in the public health systems to induce the purchase of J&J/DePuy surgical implants and other orthopedic products. Pursuant to the DPA, which addressed violations of the U.S. Foreign Corrupt Practices Act (FCPA) and other matters, J&J agreed to maintain a corporate compliance program for all its related companies, to enforce enhanced compliance measures, to report periodically to the DOJ regarding its adherence to such measures, and to pay a penalty in the amount of $21,400,000. In addition to its agreement with the DOJ, J&J entered into a settlement with the SEC relating to the FCPA violations entailing a total payment of $48,666,316.
At the same time the company agreed to pay a £4.829 million Civil Recovery Order (CRO) requested by the SFO in the United Kingdom to resolve such issues with respect to one of its implicated subsidiaries: DePuy International Ltd. As explained in an SFO press release, its investigation into DePuy’s financial activities relating to the sale of orthopedic products was commenced in October 2007 following a referral from the U.S. DOJ. J&J has also negotiated with Greek authorities, who seized its corporate assets valued at €5.785 million to redress the payment improprieties. The Polish and Romanian responses are not presently known.
As the DOJ referral makes clear, the transnational response to the J&J/DePuy episode represented a significant collaboration between American and British government agencies in their investigative and prosecutorial decisions. The DPA, for instance, cites as a “relevant consideration” the fact that J&J “has also agreed to resolve related cases being investigated by the SEC and the United Kingdom [SFO]” and notes that the company “agrees to cooperate fully with the Department, the SEC and any other authority or agency, domestic or foreign, designated by the Department [emphasis added].”
This global collaborative approach to enforcement is also addressed by Richard Alderman, Director of the SFO, in his discussion of the CRO:
“We worked with the DOJ to find a solution that served both the interests of justice and the company's desire to put illegal activity behind it and move on. I believe the order approved in the High Court today will illustrate to other companies how the SFO works closely with organizations across the world in enforcing the highest ethical standards.”
He goes on to explain that while criminal prosecution had been ruled out by the SFO in view of the terms of the DPA, it nevertheless was able to impose a significant civil forfeiture order under the Proceeds of Crime Act, and without use of the additional tools that will be at SFO’s disposal once the Bribery Act comes into force on July 1, 2011.
Ultimately, the actions taken (or not taken) by American and British enforcement agencies highlight the international and cooperative dimension of financial regulation and the importance of remaining abreast of differing requirements imposed across jurisdictions. While a particular activity might pose no difficulty under the FCPA, for example, it could nonetheless prove problematic under the UK’s recently enacted Bribery Act. In addition, cooperation with the DOJ or the SFO is viewed as a significant factor in the decisions made by those agencies, and occurs in an environment where they are speaking to each other and coordinating their courses of action. For any company conducting business in multiple countries, a knowledge of the local rules and an equally coordinated approach to compliance will only become more critical in this age of increasing globalization.
On April 20, 2011, Deloitte Financial Advisory Services LLP reported that 78 percent of business professionals polled during a recent webcast anticipated greater global anti-corruption enforcement within the next year. Yet, 73 percent of the more than 1,000 business professionals surveyed said they are not familiar with the UK's sweeping anti-bribery legislation that comes into force on July 1, 2011. Even beyond the current legal framework faced by J&J, the new Bribery Act will present additional challenges for companies that carry on business connected to the UK, with requirements for due diligence on third parties and accounting for corruption levels from region to region. If your company does any business through the UK and you are among the 73 percent not yet familiar with the Bribery Act, and your employees or agents are working in high-corruption areas, it is imperative that you have an anti-corruption compliance program in place.