Medical Device Company to Pay $23 Million to Settle Foreign Corrupt Practices Act Investigation

By April 5, 2012 Blog, FCPA

Indiana-based Biomet Inc. has entered into a deferred prosecution agreement with the Department of Justice (DOJ) and Securities & Exchange Commission (SEC) to resolve improper payments by the company and its subsidiaries in violation of the Foreign Corrupt Practices Act (FCPA).

The matter is part of an investigation into bribery by medical device companies of health care providers and administrators employed by government institutions.   Previously, Johnson & Johnson and Smith & Nephew Inc. have agreed to pay criminal penalties and entered into deferred prosecution agreements related to the ongoing investigation.

Biomet, headquartered in Warsaw, Ind., manufactures and sells medical devices worldwide and is listed on the NASDAQ.   According to the criminal information filed today in U.S. District Court in the District of Columbia in connection with the agreement, Biomet, its subsidiaries, employees and agents made various improper payments from approximately 2000 to 2008 to publicly-employed health care providers in Argentina, Brazil and China to secure lucrative business with hospitals.   During this time, more than $1.5 million in direct and indirect corrupt payments were made.   In addition, at the end of each fiscal year, Biomet, its executives, employees and agents falsely recorded the payments on its books and records as “commissions,” “royalties,” “consulting fees” and “scientific incentives” to conceal the true nature of the payments.

As part of the agreement, Biomet will pay a $17.28 million criminal penalty and is required to implement rigorous internal controls, cooperate fully with the department and retain a compliance monitor for 18 months.  The agreement recognizes Biomet’s cooperation with the department’s investigation; thorough and wide-reaching self-investigation of the underlying conduct; and the remedial efforts and compliance improvements undertaken by the company.   In addition, Biomet received a reduction in its penalty as a result of its cooperation in the ongoing investigation of other companies and individuals.

In a related matter, Biomet reached a settlement today with the U.S. Securities and Exchange Commission (SEC), under which Biomet agreed to pay $5.4 million in disgorgement of profits, including pre-judgment interest.