The SEC charged Biomet Inc., an Indiana-based medical device company, with violating the Foreign Corrupt Practices Act. As alleged, the company’s subsidiaries and agents bribed public doctors in Argentina, Brazil, and China over an 8-year period to win business.
Biomet, which primarily sells products used by orthopedic surgeons, agreed to pay more than $22 million to settle the SEC’s charges as well as parallel criminal charges announced by the U.S. Department of Justice. The charges arise from the SEC and DOJ’s ongoing proactive global investigation into medical device companies bribing publicly-employed physicians.
Biomet consented to the entry of a court order requiring payment of $4,432,998 in disgorgement and $1,142,733 in prejudgment interest and the entry of permanent injunctions against future violations. Biomet was also ordered to retain an independent compliance consultant for 18 months to review its FCPA compliance program, and agreed to pay a $17.28 million fine to settle the criminal charges.
The SEC complaint alleged that Biomet and its four subsidiaries paid bribes from 2000 to August 2008, and employees and managers at all levels of the parent company and the subsidiaries were involved along with the distributors who sold Biomet’s products. 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’s complaint filed in federal court in Washington D.C., employees of Biomet Argentina SA paid kickbacks as high as 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 falsely 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 alleged that Biomet’s U.S. subsidiary Biomet International used a distributor to bribe publicly-employed doctors in Brazil by paying them as much as 10 to 20 percent of the value of their medical device purchases. Payments were openly discussed in communications between the distributor, Biomet International employees, and Biomet’s executives and internal auditors in the United States.
The investigation into bribery in the medical device industry is continuing.